DC Revenues Down Due To Coronavirus; Spending Cuts Needed

WASHINGTON, DC — Chief Financial Officer Jeffrey S. Dewitt released his April 2020 Revised Revenue Estimate on Friday and his numbers reflected the impact the coronavirus pandemic has had on the District economy. D.C. elected officials will have to slash spending over the next five years to maintain a balanced budget, including possible cuts to some programs as well as reductions in staffing.

"I go into the budgeting process thinking that everybody has to give something," said Mayor Muriel Bowser, during DeWitt's briefing with the mayor and D.C. Council Friday afternoon. "When I think of all our constituencies as my employees, as my agency directors, as our residents, as members of the Council, the advocacy groups who work with us on the budget every single budget year, and we're going to ask each of those groups to recognize that we won't be able to do every single thing just the way we did it before."

While all things were on the table, the mayor did not think raising taxes would solve the District's revenue problem.

"I know that we can't make up these deficits with raising taxes on our residents or businesses," she said. "The tax increases would be so enormous, nobody would be able to afford to live here."

DeWitt told Bowser and members of the D.C. Council he was lowering his revenue estimates for Fiscal Year 2020 by $721.8 million. In February, he estimated a total revenue for the District $8,452.0 million. Now he was predicting $7,730.2 million in total revenue for the current fiscal year, which ends in September. He also predicted lower revenues through the next four fiscal years.

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"That's what a recession looks like," he said. "It takes out your base, and it takes the growth that you had previously forecasted. That's about a 7 percent drop in the 2020 revenue, and on average across the entire five-year plan it's about 7 percent that you have to reduce your spending by to get back to a balanced budget and financial plan."

Back in February, DeWitt had based the projected growth in revenues on the $8,314.9 million the District took in in FY 2019. With the new, lower projections, he predicted the District's base revenue wouldn't return to FY 2019 levels until at least FY 2022.

"Functionally, the 2022 revenue is equal to the 2019 revenue," he said. "So you're losing two years of revenue growth because of the health emergency we're facing and its impacts on the economy."

DeWitt's projections are based on a number of assumptions, including that some businesses would be reopening with social distancing and other restrictions would be lifted in the summer.

"We're assuming recovery begins in the fall of 2020, and we get to what I'm calling 'a new normal,' whatever that looks like, by the spring and summer of 2021, where we're in recovery mode and we're starting again, going forward," DeWitt said.

Much of the revenue loss the District is experiencing in the current fiscal year is due to a decline in sales tax collected from restaurants, parking, and the hospitality industry. Many of those businesses are either closed or functioning on a reduced level due to the public health emergency, which Bowser recently extended to May 15.

The sales tax typically accounts for 18 percent of the District's revenues, or about $1.6 billion. According to DeWitt, about 56 percent of that is shut down due to the emergency.

DeWitt's estimates will help inform Bowser's revised FY 2021 Budget Proposal, which she will be submitting to the D.C. Council on May 12. The Council will solicit public comment and continue to meet virtually through the budget process, and take its first budget vote at the end of June.

Also see ...

• Bowser Lays Out Criteria For Reopening DC After Coronavirus
• Trump Announces Guidelines For Reopening; Timing Up To Governors
• Coronavirus: DC Mayor Extends Public Health Emergency By 3 Weeks
• Coronavirus: DC Mayor Orders District Residents To Stay Home
• All Non-Essential DC Businesses Ordered To Close Over Coronavirus