FY 2021 Budget and Financial Plan

The FY 2021 Budget and Financial Plan reflects the District of Columbia’s progressive values and envisions a more just and equitable future by investing in policies, programs, and services that tackle the root causes of racial injustice and work to alleviate its symptoms. The District simultaneously faces the greatest public health crisis in living memory, a social reckoning on the compounded effects of generations of racial injustice, an unprecedented number of residents facing job loss, businesses everywhere on the brink of financial ruin, and declining tax revenues. The FY 2021 Budget and Financial Plan recognizes that the District has a tough road ahead, but a recovery that gets us back to “normal” is not good enough. The FY 2021 Budget and Financial Plan guides the District of Columbia towards both financial recovery and racial equity.

All draft Fiscal Year 2021 Budget and Financial Plan documents under consideration at the Committee of the Whole and Legislative Meeting on July 7, 2020 are attached to this message and posted will be posted to the Budget Office’s website, and the Council’s website.

Summary of Budget Modifications:

  • The Council expands the Housing Production Trust Fund (HPTF)’s capacity to create new units of affordable housing by unlocking $88 million in new funds from the federal Section 108 Affordable Housing Fund and increasing the District’s FY 2021 commitment to HPTF by $9 million.

  • The Council provides $50 million for critical and long overdue repairs to DCHA’s public housing complexes. This enhancement builds upon the Council’s investment of $23.5 million in FY 2020 and will allow the District to increase the number of habitable public housing units and draw families off DCHA’s waitlist.

  • The Council dedicates $6.05 million to create approximately 301 new units of housing for extremely low-income families and individuals through Local Rent Supplement Program (LRSP), including $5 million to project/sponsor based LRSP to ensure that the housing production dollars will create units that are affordable to households earning 30% of the Area Median Income (AMI).

  • The Council directs a total of $11.06 million to eviction prevention and homeless service to assist families and individuals facing homelessness and strengthen housing supports in the wake of COVID-19, including a $6.3m enhancement to the Emergency Rental Support Program (ERAP).

  • The Council dedicates $5 million to continue Events DC’s cash assistance program for undocumented workers who have lost their jobs or have had their hours cut during the public health emergency.

  • Understanding mental health care is even more important during times of crisis, the Council invests $9.5 million to reverse the Mayor’s cuts to the Behavioral Health rehabilitation program at the Department of Behavioral Health. The Council also redirects $4.1 million intended for school security guards within DCPS for investments in the social and emotional learning of students.

  • The Council continues its work to build a more just and equitable criminal justice system by reallocating $9.67 million and 50 FTEs from MPD to agencies and programs doing violence interruption and prevention, restorative justice, and victim service work, such as $3.5 million to the Office of Victims Services and Justice Grants for the Access to Justice Initiative and $1.25 million to ONSE for violence prevention and intervention contracts.

  • The Council acknowledges the need for continued efforts to address racial equity in the legislative actions it takes by allocating $1.32 million and 10 FTEs to fund the “Racial Equity Achieves Real Change Amendment Act of 2020” and $500,000 in the capital budget for the development of a racial equity tool, infrastructure system, and dashboard to track racial disparities in the District.

  • The Council provides $3.29 million to educate District employees and employers on workplace protections, including $2.19 million to implement the “Tipped Wage Worker Fairness Amendment Act of 2018” and $1.85 million to enforce the “Universal Paid Leave Act of 2016”.

  • The Council works to build a more equitable future by investing a total of $6.23 million into grants, programs, and services that support disadvantaged enterprises and foster inclusive growth.

  • The Council enhances the DC Public Library by $4.1 million with $2.7 million to restore library operating hours and $1.5 million to increase circulation.

Summary of Revenue Proposals:

  • The Council is broadening the sales tax base by adding the sale of advertisements and personal data to the list of those goods and services subject to a sales tax. In this endeavor, the District joins the City of Phoenix, AZ, the Province of Quebec, Canada, seven states, and 29 nations who have either considered or have implemented a sales tax on the sale of advertisements in their jurisdictions. The Council set the sales tax rate at 3 percent for the sale of advertisements and personal information and expects revenues to increase by $18.4 million in FY21 and $79 million over the financial plan.

  • The Qualified High Technology Company (QHTC) tax incentives program is the largest Economic Development Tax Expenditure provided by the District. The Office of the Chief Financial Officer has indicated that gains in the District’s high-tech industry and some QHTC payrolls cannot be attributed to the QHTC incentives due to their untargeted nature. Structural issues within the program also pose fiscal risks for D.C. and make administration and compliance enforcement difficult. The Council makes changes to the QHTC tax incentives program, by increasing the franchise tax rate for the first five years to 3 percent for companies currently receiving the exemption. All new QHTCs will be able to take advantage of a 6 percent while participating in the program. The Council also extends the tax exemption delay on capital gains from the sale of an investment in a QHTC to tax years beginning on and after January 1, 2025.

  • The Council is raising the District of Columbia’s motor fuel tax in FY 2021. The District’s new rate of $0.338 per gallon will to be lower than Maryland’s rate of $0.367 per gallon and equivalent to Northern Virginia’s 2021 rate. The current DC gas tax is 8% of the wholesale price with a floor of $0.235 per gallon. 

In addition to these highlights, the LBA Summary and the LBA report describe the significant changes that the Council made to the Mayor’s proposed budget and explains how these adjustments make the District a better place for its residents and businesses.

As always, my team and I are available to answer any questions you may have.

Thank you again for your assistance and support,

Jen Budoff