As the District’s legislative auditor, I am already wringing my hands in worry over the rough time that Councilmembers are going to have in fashioning a Fiscal Year 2020 budget later this spring. They’ll be working without a windfall in new revenue to spread around—like the windfalls that elected officials have gotten accustomed to having in every budget cycle since the District’s financial crisis in the mid-1990s.
What got the District out of that perilous near-bankruptcy state was severe budget-cutting and other belt-tightening in which the Council of the District of Columbia took the lead. I know from personal experience, having participated behind closed doors in the budget debates of that era which included the federally-appointed financial control board. The tough proposals and the tough votes came from Councilmembers.
But what to do; what to do? Chief Financial Officer Jeffrey DeWitt announced February 28 that the 35-day federal shutdown had a serious financial impact on the District’s revenues, such that there will be no new money in the next fiscal year that begins October 1. This contrasts with the last one-year budget jump that saw the gross funds budget (everything from local revenue to federal grants) increase 3.8% from FY 2018 to FY 2019.
It’s a good thing that when coming out of the financial crisis in the early 2000s the District adopted a budget methodology that would help ensure that we did not overspend our resources and provides policymakers with an extraordinary level of detail about where each dollar goes so that each year’s budget can be built from the ground up and not simply from last year’s expenditures.
Oops! Nevermind. It turns out we aren’t using that budget methodology.
The methodology, Performance-Based Budgeting, is still in the law, but policymakers over the last decade-plus have abandoned its requirements that were put into the D.C. Code in 2001. Instead of designing and implementing a zero-based budget each year, the elected and appointed officials build from current year spending levels. And that means that, now, with no growth in revenue, the growth in spending based on cost of living adjustments and other built-in inflationary pressures mean actual spending CUTS from current year expenditures in order to have the balanced budget that is required.
What happened? In a recent Management Alert, the Office of the D.C. Auditor notified the Executive Branch, the Legislative branch, and our third branch of government—the independent Office of the Chief Financial Officer (OCFO)—that we are not obeying our own budget law.
As of January 30, every agency was required to submit to the Council a “strategic business plan” that spelled out in three levels of detail where the money goes—every program, every activity, every service. The last time all the government’s “services” were counted up, that I can find, there were more than 12,000 of them. No such plans were submitted this year.
Or last year.
Or the year before.
The District moved away from the PBB requirement during the Fenty Administration, which means that the promise of budget discipline written into the Performance Based Budget law never came to fruition. When it comes to how our budgets are built and implemented, the lessons of the 1990s were not permitted to take root.
The budget structure remains, at least in part. The District’s budget books, available online show two levels of detail for most mayoral agencies (not D.C. Public Schools, which is another and separate budget execution and another budget transparency issue entirely) so that you can know, sort of, where the money goes. But there’s not much detail and it certainly doesn’t tell you where every dollar goes. And that third level of detail required by the Performance Based Budget law is not there at all.
How we structure the District’s budget and the information’s accessibility are key questions at the moment, and not just because it’s budget season at the Wilson Building. There also is an effort afoot to replace the city’s very creaky financial management system, known as SOAR for System of Accounting and Reporting. The OCFO issued a request for proposals for a new “enterprise financial system” last fall, with proposals due in late November. No decisions have been made and no contract awarded, while the matter awaits the allocation of sufficient funds to actually make it happen. It will be a multi-year and multi-million-dollar effort.
And as an “enterprise” system, i.e. sufficiently comprehensive to encompass our entire government, it will include a budget module. In addition to specifying the module, the RFP also describes early stages of the implementation for the winning bidder to:
It seems very likely that Councilmembers struggling with the FY 2020 budget will seek to identify specific budget savings in order to allocate funds to new or existing priorities. Should they decide that they need a greater level of granularity in their budget based on their experience this year looking for budget savings, they might want to weigh in sooner rather than later on the planning for the new enterprise financial system.
And since that new system will take not just oodles of cash but several years to implement, they might want to revert to what’s in the law today and require agencies and the OCFO to present a real, true-to-the-law Performance Based Budget. With detailed Strategic Business Plans, agency by agency. And spending totals for every program, every activity, and every service. This year and every year.