July 20, 2009

Please see Chairman Vincent C. Gray’s entire statement following some key
excerpts below:

“This year, we will have to make some incredibly difficult decisions that will impact people in
some way, no matter what we decide upon…because this round of cuts will directly impact
people and government services, not just this year and next, but also in the years ahead.
However, I am confident that this Council will address this financial gap in the most
compassionate way possible…

I am concerned that we are continuing to spend down fund balance in fiscal year 2010 and
do not balance the Fiscal Year 2010 expenditures with the revenue we are collecting…

I am concerned that we do not appear to have accounted for other Post-Retirement

Benefits…The District simply cannot fall behind on its retirement contributions…so
I have accounted for this $23 million in FY 2010….

I am concerned that the [Mayor’s] proposal continues to identify items as one-time

funds that have traditionally been recurring expenses. This amount…equals
approximately $135 million in programs…such as the Summer Youth Employment Program,
Emergency Rental Assistance, and the Low-Income Home Energy Assistance Program…and
to zero them out in the financial plan just builds in inherent deficits.

I am concerned about the large unspecified cuts the Executive proposes beginning
in Fiscal Year 2011 to balance the out-years of the budget. This includes an
additional $198 million in Fiscal Year 2011, which is on top of the $80.3 million that is
already proposed in local cuts, on top of the $31.3 million in special purpose revenue
conversion, and does not include the restoration of any of the $135 million in one-time
funds. This amounts to roughly $445 million in cuts to Fiscal Year 2011, of which almost all
have yet to be identified. That is a huge sum of money.

I am proposing a different approach that responsibly addresses the problem now.

This proposal would solve the Fiscal Year 2009 gap using local and special purpose
revenue fund balances. The proposal would then balance Fiscal Year 2010, going
forward without the use of fund balance.

My plan matches Fiscal Year 2010 recurring revenues with recurring expenditures and does
not use fund balance. It fully funds our post-employment benefit obligations. It does not
designate traditionally recurring expenses as one-time and it does not rely upon unspecified
future out year cuts. This plan will require the Council and the Mayor to make tougher
choices now. We will have to close a $337 million gap now, and the plan put
forward by the Executive only gets us about half way to that goal. For me,
everything is on the table. I intend to look at both revenue enhancements and
expenditure cuts. I intend to work with my colleagues, the Executive, and the public to
solve our budget gap in a way that has the least impact on people and important District
services.”
 Opening Statement of Council Chairman Vincent C. Gray
COMMITTEE OF THE WHOLE
FISCAL YEAR 2009 and 2010 BUDGET GAP-CLOSING BRIEFING
JULY 20, 2009

Good afternoon, I would like to welcome everyone, and hereby call to order today’s
Committee of the Whole public briefing on the Mayor’s proposed gap-closing plans for fiscal
years 2009 and 2010. Today is Monday, July 20, 2009…We will hear testimony from City
Administrator, Neil Albert, and Dr. Natwar Gandhi, our Chief Financial Officer…The public,
after hearing from the Executive today, will be able to testify at a hearing on
Friday, July 24 at 10 AM in the Council Chamber/Room 500.

With leave of my colleagues, I would like to take additional time to present for the public
watching this briefing a synopsis of how we reached this point and what I believe to be the
responsible approach to moving forward. Certainly, no one is happy to be here today.
However, the nation is in the midst of its deepest recession since the Great Depression, and
it would be naïve to think that we have seen the light at the end of the tunnel yet. The
District has weathered the economic storm better than many jurisdictions; however, we are
in no way immune from the slowdown. The quarterly revenue estimates from the Office of
the Chief Financial Officer, which customarily provide eagerly anticipated surpluses, have
instead reduced revenue projections every quarter this year, reducing revenue $584 million
or 10.5 percent from a year ago.

Unemployment in the District continues to rise and is now close to 11%. I see, on a daily
basis, the impact of the economic downturn on our residents. For many it has become a
daily struggle to make ends meet. This year, we will have to make some incredibly difficult
decisions that will impact people in some way, no matter what we decide upon. We will not
enter into this gap-closing exercise lightly, because this round of cuts will directly impact
people and government services, not just this year and next, but also in the years ahead.
However, I am confident that this Council will address this financial gap in the most
compassionate way possible.

In November, I proposed an additional $46 million in cuts to the FY09 local funds budget
enhancements out of concern that revenues would decline further. The Council came
together and took the responsible action that was necessary to set aside the funds. This
reserve coupled with the federal Stimulus funding allowed us to weather subsequent
revenue declines, to some extent.

Soon after Dr. Gandhi revised revenue downward in June, my colleagues and I met to
discuss mutual goals. All of my colleagues in the meeting agreed that it was prudent to
address the problem now, not push the problem off until a later date, especially given the
uncertainty of the future.

It goes with out saying, I have enormous respect for my colleagues, because this Council
has learned from past mistakes, when deficits were pushed off into the future, hoping
against reason, that things would somehow get better. They did not.

At this point in fiscal year 2009, the District will have to use fund balance to solve the $190
million revenue gap we face. It is not possible to cut our way out of that problem nearly ten
months into the fiscal year. However, I do have many concerns:
(1) First, I am concerned that we are continuing to spend down fund balance in fiscal
year 2010 and do not balance the Fiscal Year 2010 expenditures with the revenue we are
collecting.
(2) I am concerned that we do not appear to have accounted for Other Post-Retirement
Benefits. The Office of the Attorney General committed to providing rulemaking before
October 1, 2009 that would produce $23 million in savings, but later, it is my
understanding, changed its mind and said the legislation must be approved by Act. The
District simply cannot fall behind on its retirement contributions, because this will be
reported in the CAFR, so I have accounted for this $23 million in FY 2010.

(3) I am concerned that the proposal continues to identify items as one-time funds that
have traditionally been recurring expenses. This amount, although a subjective number
admittedly, equals approximately $135 million in programs traditionally supported by the
District. Programs such as the Summer Youth Employment Program, Emergency Rental
Assistance, and the Low-Income Home Energy Assistance Program have been funded year-
after-year and to zero them out in the financial plan just builds in inherent deficits.

ONE-TIME FUNDS (in millions), THAT SHOULD BE RECURRING

Supporting District Agency Moving Costs from Commodity
OPM $7,646
Cost Reserve
Access to Justice Initiative and Poverty Lawyer Load
OAG $2,600
Assistance Fund
DOES $20,827 Summer Youth Employment
DCHA $9,000 Housing Authority Subsidy
Charter Schools $12,846 Facilities Allotment
Dept. of Ed. $2,297 Conversion of ICSIC to one-time funding
Interim Disability Assistance to cover projected
DHS $7,599
expenditures
DHS $8,693 Emergency Rent Assistance
Unemployment Additional funding to cover expected increases in
$6,295
Comp Fund contributions to the Unemployment Insurance Trust Fund
CYITC $5,200 Competitive Grants
CYITC $3,920 Entire agency converted to one-time funding
DOE $7,107 Support for LIHEAP
Mass Trans $12,417 Circulator, Streetcar and Bus Rapid Transit
Fixed costs at 225 Virginia Ave; $9,230 rent and $3,466
Non-Depart $12,697
other utilities
Misc. $15,784 Other miscellaneous local funds
TOTAL $134,928

(4) Finally, I am concerned about the large unspecified cuts the Executive proposes
beginning in Fiscal Year 2011 to balance the out-years of the budget. This includes an
additional $198 million in Fiscal Year 2011, which is on top of the $80.3 million that is
already proposed in local cuts, on top of the $31.3 million in special purpose revenue
conversion, and does not include the restoration of any of the $135 million in one-time
funds. This amounts to roughly $445 million in cuts to Fiscal Year 2011, of which almost all
have yet to be identified. That is a huge sum of money.

I am proposing a different approach that responsibly addresses the problem now. This
proposal would solve the Fiscal Year 2009 gap using local and special purpose revenue fund
balances. The proposal would then balance Fiscal Year 2010, going forward without the use
of fund balance. The following is my proposal for balancing Fiscal Year 2010 and the
financial plan on an ongoing basis:

Balancing the Budget: Fiscal Year 2010 to Fiscal Year 2013

FY 2010 FY 2011 FY 2012 FY 2013

May 2009 Local Fund Revenue 5,029,523 5,131,970 5,298,828 5,540,029
June 2009 Revenue Reduction (150,200) (211,500) (223,200) (251,400)
June 2009 Revised Revenue
4,879,323 4,920,470 5,075,628 5,288,629
Estimate
Bond Proceeds for Issuance Costs 15,000 15,000 15,000 15,000
Transfer from Federal and Private
3,497 3,497 3,497 3,497
Resources
Recurring Revenue Proposals 185,489 188,858 202,236 208,609
One-Time Revenue Initiatives 20,000 0 0 0
Total Local Fund Resources 5,103,309 5,127,825 5,296,361 5,515,735

Total Local Fund Expenditures and

5,128,035 5,235,241 5,399,797 5,569,200
Transfers (Recurring)
Workforce Investments 0 8,300 8,300 8,300
Transfer to Trust Fund for Post-
111,700 94,700 101,200 108,200
Employment Benefits
Total Local Fund Expenditures and
191,217 0 0 0
Transfers (One-Time)
One-Time Local Funds that are
0 134,928 134,928 134,928
Traditionally Recurring
Total Local Fund Expenditures
5,430,952 5,473,169 5,644,225 5,820,628
and Transfers

Plus May 2009 Operating Margin

0 584 9,764 80,935
above $500,000
BUDGET GAP (327,643) (344,760) (338,100) (223,958)

Fund Balance Carryover from FY

(9,191) 7,926 1,266 0
2010 Additional Cuts
Cuts Necessary to Balance
(336,834) (336,834) (336,834) (223,958)
Budget
This plan matches Fiscal Year 2010 recurring revenues with recurring expenditures and does
not use fund balance. It fully funds our post-employment benefit obligations. It does not
designate traditionally recurring expenses as one-time and it does not rely upon unspecified
future out year cuts. This plan will require the Council and the Mayor to make tougher
choices now. We will have to close a $337 million gap now, and the plan put forward by the
Executive only gets us about half way to that goal. For me, everything is on the table. I
intend to look at both revenue enhancements and expenditure cuts. I intend to work with
my colleagues, the Executive, and the public to solve our budget gap in a way that has the
least impact on people and important District services.

I am committed to passing a budget that is responsible and will keep the District financially
secure. I want to make sure that we have a budget with sustainable spending, which
protects important District services for its residents. Tough choices will have to be made,
and we will have to choose between many competing priorities. I am confident that this
Council is up to meeting the challenges that are before us in a responsible way.

I would like to thank the City Administrator for joining us here today and for submitting a
budget in a compressed time frame. Mr. Albert, the City Administrator, CFO Dr. Gandhi,
and their budget staffs have spent a great deal of time and energy in putting this budget
together. Although may we differ on when is the appropriate time to solve this growing
budget gap, I can appreciate their efforts to protect many shared priorities.

I look forward to working with my colleagues, the Executive, the CFO, and the public over
the next two weeks, as we hold a hearing on Friday, consider revisions to the proposed
budget, and ultimately expect to vote on a balanced budget on July 31st that preserves
critical services for our residents and protects those in need.