Ward 3 Update: Getting Back to Business

Dear Neighbors,

In the past month, we have experienced an insurrection, inauguration, a challenging vaccine rollout, the region's first significant winter storm, and the first day of in-person learning for thousands of local students. Ward 3 newsletters of the past year have largely focused on coronavirus resources and response efforts, but this update will focus on some of the other regular government operations that residents should be aware of for the upcoming year. One such operation has been the release of the District's annual financial audit, the Comprehensive Annual Financial Report (CAFR), which presents a summary of the District's financial standing and identifies current economic indicators that signal future fiscal challenges.

The 2020 CAFR demonstrates that the District is, overall, and despite the many setbacks of the pandemic, financially healthy. The District received $133 million more in revenue last year than was anticipated (with the majority of that amount coming from tax revenue) and maintained its AAA bond rating. Combined with spending reductions across the government that were made in anticipation of a financial setback, the District actually ended Fiscal Year 2020 with over $550 million in surplus funds. While it is good news that the District is in a strong economic position to recover from the pandemic, it is undeniable that this significant surplus confirms that more money could have gone toward enhancing essential services and critical supports for our struggling residents and business community.

The other central conclusion of the 2020 CAFR is that the economic recession has significantly exacerbated economic disparities between District residents. While the income of our highest earners actually increased in the past year (individual income tax revenue increased by 3.4% and corporate franchise tax revenue increased by 13.3%), unemployment has risen to 8.7% with unemployment claims rising by 309% in the past year. During this time, the hospitality industry lost over 43% of the sector’s jobs. Sales tax revenues have also decreased by 22%. And yet still the District ended the fiscal year with the largest surplus of recent memory. If the CAFR serves as a reflection of what's happening in the District's economy, it is telling us that the disparity between our highest and lowest earners is vast and that our highest earners are doing very well, such that they are able to offset the tax revenue losses of multiple sectors, even during a recession.

Ultimately, the reality of the District's strong finances is at odds with the projections made by the Office of the Chief Financial Officer (OCFO) last year. At the time, and without knowledge of how much the District would receive in federal assistance, it would have been impossible to accurately project the financial outcome of the past year. However, we depend on these projections when allocating the District's budget, and surplus funds should never sit idle when we have great needs to be met. The results of the 2020 CAFR will help influence the District's budget priorities for the upcoming year, and I will keep residents updated as that process moves forward and the District moves toward true economic recovery—for everyone.

Regards,

Mary