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A Deep Dive into DC Revenue Analysis Crystal Balls, Fiscal Cliffs and Other Metaphors by Elissa Silverman and Ed Lazere
n this month’s column, we’re going to talk about why the District has unexpected deficits or surpluses sometimes—such as the $140 million in bonus money announced at the end of September—and how we can best use our resources given this volatility.
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No matter what the District must balance its budget every year. While the challenge of making expenditures equal revenue in tough times is brutal, there also are tough choices to make when we bring in more money than expected, as is happening right now. Some DC leaders are suggest-
The amount of money our local government brings in—and, therefore, the amount we can spend—is varies based on many factors. Some of those factors the District has more control over— like what tax rates are set—and some the District has less control over—like whether the federal government will do a massive spending cut in a move called sequestration.
ing that we save every penny of surplus money while others are proposing tax cuts, but the most judicious path is to use the money to prepare us for the future. That can involve saving some of the surplus and spending some of it on programs that give a good return on investment, like putting money into affordable housing that stabilizes families or libraries that promote literacy.
24 H EAST OF THE RIVER MAGAZINE
| NOVEMBER 2012
Looking into the Crystal Ball of Revenue Forecasting
DC government does a lot of different things, and a few of the people who work for our city are tasked with predicting the future. No, they are not psychics or palm readers. They are economists, and they work for the Office of Revenue Analysis for our city’s Chief Financial Officer in Southwest DC. These economists analyze a range of economic indicators, including population, employment, and housing to predict how much money will come into District coffers, and, therefore, how much we can spend. During the Great Recession, the Office of Revenue Analysis delivered a lot of bad news to District leaders, but lately their forecasts have been more uplifting as the District’s population boom has meant more people living and working in the city, more houses and condos sold, and more people spending money at District businesses. There are 15,000 more working DC residents than a year ago, and wage income grew five percent. The number of new housing permits issued in the last 12 months is double the number from a year ago. Four times a year, ORA looks at all of these trends and tells us how much revenue we have to spend now and how much we might have down the road. In September, the Office of Revenue Analysis announced that tax collections at the end of fiscal year 2012 were $140 million higher than had been predicted just three months earlier. Overall tax collections for 2012 are $500 million higher than in 2011. This doesn’t mean everything is rosy, of course. While unemployment is low for college-educated DC residents, more than 20 percent of residents with a high school degree or less remain out of work, and nearly one-third of DC’s children live in poverty. For these residents, the recession is