Natwar Gandhi, CFO, Plans for Closing $75 Million Budget Gap, July 24, 2002

TO: The Honorable Anthony A. Williams, Mayor of the District of Columbia
The Honorable Linda W. Cropp, Chairman, Council of the District of Columbia

Summary

Following a very productive process in which savings targets were set and agency directors retained maximum flexibility in identifying spending cuts, final decisions were made on July 22, 2002, for closing the $75 million budget gap for the remainder of FY 2002.

Transfer of "O" type revenue to local funds will require Council approval (passive) and will be submitted to the Council accordingly.

We will report weekly on the status of the plan, and an updated revenue estimate will be available in mid August. If it appears that the gap might not be closed, we will take additional steps as necessary. It is imperative that the District’s continued financial viability be ensured by a balanced budget for FY 2002, and these savings will help us as we plan for probable reductions in the FY 2003 budget.

Background

In my July 2, 2002, memorandum, I presented these same three sources of funds for closing the entire $75 million budget gap. On July 9, 2002, City Administrator Koskinen issued a memorandum to agency directors outlining a process for achieving the targets and making final decisions. Agency directors and their staffs worked hard to identify the spending reductions they could make to achieve balance by the end of FY 2002. The deadline was met, and final decisions were made on July 22, 2002. The details were presented to agencies at the Cabinet meeting on July 23, 2002.

"O"-type revenues are charges and fees that are dedicated to and collected and spent by the collecting agency. The Council approved legislation on July 2, 2002, to convert FY 2002 collections of "O"-type revenues to local funds.

The $47 million of "O"-type revenue available for closing the gap is composed of two major components – $25 million in proceeds from the sale of the Department of Employment Services (DOES) building to the Freedom Forum in December 2000 and $22 million from a variety of other accounts (see Attachment 1). In place of the $25 million, planned capital funds will be used to construct the new DOES headquarters.

In addition to the $47 million above, $10 million is available from net reimbursements to the District from the U.S. Marshals Service to cover the DOC’s cost for housing federal prisoners. The transfer of felons sentenced pursuant to the D.C. code from the custody of the District to the federal Bureau of Prisons following the closing of Lorton Correction Complex is a provision of the National Capital Revitalization and Self-Improvement Act of 1997.

The remaining $18 million in savings to offset the revenue shortfall will come from reduced local funds spending (see Attachment 2).

As I stated in my June 27, 2002 memorandum, these will be difficult budget measures for the remaining months of FY 2002, but we expect the gap can be handled without harsher measures such as furlough days and reductions-in-force. Agency directors must adhere strictly to the plan to ensure the District’s overall financial viability. We will monitor progress weekly and will recommend additional measures as deemed necessary.

To ensure the continued financial viability of the District, we expect that the District will need to make revisions to the FY 2003 budget plan. We will know the magnitude of the revisions when the updated revenue estimates become available in mid-August. Therefore, agencies should be cautious when making spending commitments over the next two months.

cc: Members of the Council of the District of Columbia
John A. Koskinen, Deputy Mayor/City Administrator
Julia Friedman, Deputy Chief Financial Officer, Office of Research and Analysis
Bert Molina, Deputy Chief Financial Officer, Office of Budget and Planning
Artie Blitzstein, Budget Director, Council of the District of Columbia
Agency CFO’s

ATTACHMENT 1

Agency	(1) Original Estimate	(2) Adjusted Estimate Coll.-Exp. Q1-Q3	(3) Adjusted Estimate Coll.-Exp. Q4	(4) Updated General Fund Transfer
Office of Property Management	1,600,601	1,075,235	(575,235)	500,000
Office of Finance and Resource Management	227,133	0	0	0
Office of the Chief Financial Officer	237,805	(3,673,443)	3,911,248	237,805
D.C. Office of the Secretary	511,053	0	0	0
D.C. Office of Personnel	611,293	9,757	0	9,757
Commission on the Arts and Humanities	141,433	0	0	0
Office of the Corporation Counsel	717,292	0	0	0
District of Columbia Public Library	6,805	0	0	0
Dept. of Consumer and Reg. Affairs	4,184,801	4,354,182	181,695	4,535,877
Dept. of Housing and Com. Development	5,861,032	5,861,032	0	5,861,032
Business Svcs and Economic Devlpmt	4,604,737	590,045	1,000,000	1,590,045
Metropolitan Police Department	3,928,169	2,398,546	(1,035,565)	1,362,981
Fire and Emergency Medical Svcs Dept	4,102,434	4,104,102	0	4,104,102
Department of Corrections	(198,238)	0	0	0
Office of the Chief Medical Examiner	49,849	0	0	0
D.C. Public Schools	3,589,061	0	0	0
State Education Office	23,821	0	0	0
Department of Parks and Recreation	161,245	(78,462)	239,707	161,245
Department of Health	4,717,254	5,792,578	(3,291,359)	2,501,219
Department of Human Services	335,257	173,699	39,328	213,027
Department of Public Works	574,689	371,136	(370,899)	237
Department of Motor Vehicles	404,747	284,726	120,021	404,747
Alcoholic Beverage Regulation Admin.	1,674,069	1,674,069	(1,124,069)	550,000
Child and Family Services Agency	(48,635)	0	0	0
Department of Mental Health	(1,011)	0	0	0
Office of the Chief Technology Officer	(1,085)	0	0	0
Adjustment for Exp's in Process/Emergency/Unavailable	(16,000,000)			0
Grand Total	22,015,610	22,937,203	(905,129)	22,032,074

Natwar Gandhi, Chief Financial Officer
Memorandum on Plans for Closing $75 Million Budget Gap
July 24, 2002

MEMORANDUM

Summary

Background

ATTACHMENT 1

ATTACHMENT 2: Local Funds Savings Targets ($ in thousands)

Natwar Gandhi, Chief Financial Officer Memorandum on Plans for Closing $75 Million Budget Gap July 24, 2002

MEMORANDUM

Summary

Background

ATTACHMENT 1

ATTACHMENT 2: Local Funds Savings Targets ($ in thousands)

Natwar Gandhi, Chief Financial Officer
Memorandum on Plans for Closing $75 Million Budget Gap
July 24, 2002