Chairman Vincent C.

Gray Opening Statement for COMMITTEE OF THE WHOLE –

PUBLIC HEARING

November 30, 2010

I call to order today’s Committee of the Whole public hearing on two bills: Bill 18-1101, the
“Fiscal Year 2011 Revised Budget Request Act of 2010” and Bill 18-1100, the “Fiscal Year
2011 Supplemental Budget Support Act of 2010”…

I am going to strictly enforce the time limits to ensure that every one of the approximately 150
public witnesses has a fair opportunity to testify…
At the end of the hearing we will receive executive branch testimony from the City
Administrator and the CFO’s Office of Budget and Planning.

In the aftermath of today’s public hearing we will consider the budget at two upcoming
legislative meetings. Since we only received the Mayor’s budget proposal last Wednesday, the
Council has less than two weeks to consider and vote on a revised budget gap-closing plan. This
requires us to move forward with a compressed budget process that is by no means ideal.

On December 7th, the Council will have its first and only vote on the Budget Request Act and the
first of two required votes on the Budget Support Act. Then, on December 21st, at the final
legislative meeting of this session, the Council will vote on the Budget Support Act a second
time…

As everyone knows, the District of Columbia currently faces a $188 million gap in its operating
budget for Fiscal Year 2011. I would like to start by thanking everyone who has come out to
testify at today’s public hearing. As you advance ideas today, please let it be more than don’t cut
this or that, without offering ideas to balance the budget. The District of Columbia is required to
maintain a balanced budget, so if we put something back in that the Mayor cut, we must replace
it with something else.

No one wants to return to the control board and let me be clear, we won’t let that happen.

In addition to the $188 million gap that we have to close, I have set a goal of preserving $50
million out of the $186 million in fund balance we are spending to balance this year’s budget, by
placing these funds in a reserve account – just as the Council did in Fiscal Year 2009. The $50
million cash reserve might have to be made available if revenue is revised downward further or if
additional spending pressures emerge. But if we are fortunate enough to avoid additional
revenue declines and new spending pressures, this $50 million can be used to help offset the
severe structural budget gap we will face in Fiscal Year 2012 when the baseline budget is
released. This is where we face our most daunting challenges.

Even after solving the $188 million gap, we will still face a huge structural budget gap in Fiscal
Year 2012 when the baseline budget is released.
While the District has certainly made many serious cuts to its operating budget and found some
ways to increase revenue, the District’s expenditures will have exceeded its revenues four years
in a row. Fiscal Year 2012 will represent the first time in four years that we are forced to live
within the revenue we raise.

The challenges in the District’s capital budget are perhaps even more serious. With recent
reductions in revenue, about $120 million will need to be reduced each year from the District’s
annual capital improvements plan to stay within the debt cap by Fiscal Year 2014. To fix this,
the District of Columbia needs to do a better job of setting priorities and making tough choices
about which capital projects it decides to finance by distinguishing between the projects we need
versus the projects that we want.

I have discussed placing a freeze on all capital projects not yet underway. I then intend to
establish a Blue Ribbon Panel of capital experts to make recommendations on prioritizing our
capital needs within the confines of the 12% debt cap. Exceptions to the freeze will be
considered on a case-by-case basis.

After the Blue Ribbon Panel releases its findings, capital projects that are consistent with the
panel’s report may be unfrozen with little or no delay to the project’s timetable.

In conclusion, the fiscal challenges we face are daunting. And the decisions we are about to
make are tough. I commit to addressing these challenges head on. Many of these decisions are
going to be painful. And let me be clear up front – everyone is going to have to take a hit and
share in the sacrifice. That’s the only way we’re going to be able to keep our city on sound
financial footing in both the short and long term.