A Needed Boost

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                                                  the N U M B 3 R S                       3327 906

                                                                A Needed Boost:
                                How DC Can Make the Most Out of the Federal Stimulus Package
                                                                 by Jenny Reed and Ed Lazere

           I   t seems that everywhere we turn lately,
               the bad news about the economy keeps
           getting worse. In DC’s case, we see rapidly
                                                                 The District should do everything it can
                                                             to get the most out of the stimulus. That
                                                             means applying for every possible penny in
                                                                                                                Funding Boosts to Specific Programs
                                                                                                                    The stimulus plan offers additional fund-
                                                                                                                ing for transportation, affordable housing,
           rising unemployment and a budget gap that         competitive funds. It means using the funds        education, workforce development, public
           continues to widen as tax collections con-        creatively to maintain important services. It      safety and other programs. The total amount
           tinue to fall.                                    means that all DC agencies must be pre-            for the District is not clear yet but could ex-
                Thanks to President Obama and Con-           pared to use the money coming to them.             ceed $500 million. This will help DC agen-
           gress, though, it’s not all bad news. The         And it means that spending choices should          cies avoid cuts to services and could support
           federal stimulus plan passed last month           be made in the open with public input.             targeted new investments. Quick think-
           will bring needed relief to states and cities                                                        ing will be needed about how to spend this
           — for DC, it will mean hundreds of mil-           What’s in the Stimulus Package?                    money well, and public input on ways to use
           lions of dollars — which can help us avoid            The stimulus package is complex, but           this unexpected windfall should be sought.
           severe cuts to services, meet rising caseloads    its many pieces can be broken into four
           for safety net programs, and even support         broad areas — all of them intended to in-          Competitive Grants
           targeted new investments that create jobs         ject money into the economy and keep the               The stimulus includes a number of fund-
           and lay the foundation for an economic re-        downturn from worsening. Most important            ing sources grants that DC will get only if it
           covery.                                           for DC, some funds are very flexible and can        applies for them and makes a solid case. This
                The big challenge ahead is that Mayor        go straight to closing our budget gap. Other       includes money for public housing rehabili-
           Fenty and the DC Council have a very short        funds will boost existing programs in ways         tation, energy efficiency improvements and
           amount of time to figure out how to spend          that stimulate the economy and create jobs,        education innovation.
           this massive infusion. The mayor’s budget         like housing construction.                             Increases to Safety Net Programs
           proposal comes out in mid-March and then                                                                 Lastly, the stimulus will directly help DC
           the council has just two months to finalize        Basic Budget Relief for Ailing States              residents hit hardest by the economic down-
           it. Making sure the stimulus money is spent           For the next two years, the federal gov-       turn, through increases in food stamps and
           wisely is the most important issues facing        ernment will increase the share of Medicaid        unemployment insurance benefits, to name
           our elected officials right now.                    costs it covers, resulting in at least $300 mil-   a few.
                Already, lots of questions are being         lion for DC. This means the District can re-
           raised. Some say we shouldn’t use the stimu-      duce what it spends on Medicaid, even with         Making the Most Out of the Stimulus
           lus to fill DC’s budget hole because the fed-      rising caseloads, and use those savings in oth-        An important question, then, is how
           eral funds are short-term and will run out        er tight budget areas. The stimulus package        should the District think about spending the
           in a year or so. While this is a legitimate       also created a “state fiscal stabilization fund”    stimulus funding? We propose four main
           concern, it goes against a key goal of the        that will provide $90 million to the District,     themes:
           stimulus plan — which is to help states and       some of it funneled through schools. Funds             Get as much of the stimulus funding as
           cities so they don’t have to cut services. May-   not needed to fill education funding gaps can       possible. Everyone talks about the need to
           or Fenty has asked every agency to prepare        go for services that otherwise might be cut.       maximize federal funds DC receives. That is
           for big budget cuts. Should he really follow      This level of general federal aid is unprec-       more important now than ever. DC should
           through with those now that federal funds         edented and remarkable — it could go a long        use all of the funding it has been allocated
           are pouring in?                                   way to covering DC’s revenue shortfall.            and apply for any competitive grant funding

24 ★ DC NORTH | March 2009
it may be eligible for.
    Use federal funding to
close DC’s budget gap. The
stimulus money can help
support services that other-
wise might have to be cut due
to falling revenues. While the
federal money is temporary
— and normally shouldn’t be
used to cover ongoing servic-
es — it makes sense in these
unique circumstances to use
the stimulus money this way.
DC’s finances hopefully will
have started to improve by
the time the stimulus funds
start to fade away. Even if
we’re not fully recovered by
then, the stimulus funds give
us time to adjust to our new
budget realities, to find the
smartest budget savings.
    Make targeted invest-
ment in DC’s economy. The
stimulus package can allow
the District to address areas
where DC has long struggled
to provide adequate support
— like affordable housing,
adult literacy, job training and
the environment — which
will boost the economy now
and improve our quality of
life and competitiveness in
the long term.
    Involve the public. This
unprecedented infusion of
federal funding to the Dis-
trict will be spent with a speed
few of us have seen. But this
should not come at the ex-
pense of public input. Mayor
Fenty and the DC Council
should make sure that the
public are both informed and
able to provide feedback on
stimulus choices.
    The economic stimulus is
a way to help DC take steps
to preserve and ultimately re-
build the economy. Not tak-
ing advantage of every dollar
of the stimulus will leave us
playing a great deal of catch
up in the years to come.

Reed and Lazere are staff of
the DC Fiscal Policy Institute
(www.dcfpi.org), which con-
ducts research on tax and bud-
get issues that affect low- and
moderate-income DC residents.

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