Government of the District of Columbia Office of the Chief Financial Officer wa aS, ‘Natwar M. Gandhi a (Chet Financial Offer May 24, 2011 ‘The Honorable Vincent C. Gray Mayor Government of the District of Columbia 1350 Pennsylvania Avenue, NW — 6" Floor ‘Washington, DC 20004 The Honorable Kwame R. Brown Chairman Council of the District of Columbia 1350 Pennsylvania Avenue, NW ~ Suite 504 Washington, DC 20004 Dear Mayor Gray and Chairman Brown: Ithas come to my attention that there is a provision for the Fiscal Year 2012 Budget Request Act (BRA), proposed by both of your offices, which would cutomatically trigger certain increases in appropriations, or reductions in revenue initiatives, tased on revised June and September revenue estimates, This provision would be outside of the District’s traditional budget formulation and amendment process. Although we have concluded that the Council has legal authority to provide for this form of contingent budgeting, we caution that while certain signs indicate that the national and local economies are improving, the economic outlook remains uncertain. ‘The strong revenue growth shown in recent District cash reports is a result of the remarkable performance of the national economy over the past year. However, economic growth has slowed more recently. After a strong growth in the last half of calendar year 2010, U.S. real GDP growth slowed to 1.8 percent in the first quarter of 2011. This is likely to slow revenue growth going forward. We note that this legislation could limit the District’s budget flexibility in an uncertain economic environment, Furthermore, by virtue of the fact that this provision would be a part of the BRA submitted to and adopted by the U.S. Congress, if circurnstances and priorities change it cannot be amended without another act of Congress, which as you know can take a considerable amount of time. I recommend the Council consider waiting until the September 2011 revenue estimates are issued, at which time there will be a clearer picture of the District’s financial situation going into the next fiscal year. At that time, the Mayor and Council Chairman could send an amendment 598 Fess he 1 fe 3, egos DE ROA GH EP ‘waw.cfo.degovletter to the Congress, with a request that the Continuing Resolution and Appropriations Act incorporate the amendment letter into the District’s approved budget. Finally, this proposed provision of the BRA would have to be interpreted in light of the recent PAYGO capital budget legislation that requires the District to dedicate 25 percent of revenue increases to PAYGO capital starting in FY 2013, if the Mayor's April 1 proposal is accepted, or FY 2012, if that proposal is not accepted. If you have any questions, please feel free to contact me at (202) 727-2476. a jandhi Sincerely, cc: All Councilmembers Allen Lew, City Administrator Erie Goulet, EOM Budget Director