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Mayor Fenty's District Budget Surplus Legislation.

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Mayor Adrian M. Fenty, joined by members of the DC Council and DCPS Chancellor Michelle Rhee, announced the administration’s plans to introduce legislation proposing that additional funding be allocated to critical District initiatives that create employment opportunities for the city’s youth and ex-offenders; focus on the District’s infrastructure needs; and target investments to restructure the District of Columbia School System’s (DCPS) operations.


“While surrounding states are making difficult spending cuts, the District of Columbia has the good fortune of having a budget surplus,” said Fenty. “It is the responsibility of this government to make sound investments in the future of this city and the proposals being laid out today start with my administration’s top priority—our public schools.”


Reviewing the numbers


Following the June 2007 transfer of public school governance to Mayor Fenty, a comprehensive, three-month review was conducted to analyze every DCPS department and more than 22,000 budget line items. The study enabled school officials to create a budget that ties to actual spending, which did not exist prior to the analysis.


Data revealed that the school system had historically created inaccurate budgets that dramatically understated the system's actual spending. The review turned up unreliable data resulting from numerous, deep-rooted structural issues and a system of insufficient checks, balances and controls. Led by Alvarez & Marsal, a consulting firm that has worked with a number of troubled public school systems, the review also revealed planned expenditures that exceed the approved budget by approximately $155 million for fiscal year 2008.


“While numerous traditional audits of DCPS have taken place, this is the first time this type of granular examination has taken place in a way that could produce a true picture of how the school system spends its money and where the breakdowns are that have contributed to a massive spending deficit,” said DCPS Chancellor Rhee. “Clearly we are facing a situation far worse than anyone could have reasonably anticipated based on the flawed data and information that was available prior to this analysis.”


Identifying short-term cuts for long-term restructuring


Chancellor Rhee and her team have been working to identify possible areas for immediate cost savings in non-instructional areas that will not impact the classroom. With classroom spending, non-public tuition and special education transportation comprising approximately 80 percent of the DCPS budget and impossible to alter in the short term, the opportunity to immediately reduce spending without instituting draconian measures is relatively small.


Even within these tight constraints, $74 million in savings will be implemented in FY 2008. In addition, $34 million in costs associated with such things as personnel and legal counsel services will be transferred to other city agencies.


One-time restructuring costs


However, even with these significant cost-saving efforts, it is clear that DCPS cannot immediately cut its way out of the budget crisis and close a gap of this size without the risk of destabilizing the school system or adversely impacting the classroom. To do what is necessary to turn around DCPS, the system will need a one-time cash infusion of approximately $47 million as part of an overall package of $81 million to cover one-time costs to right-size the system.


“This one-time investment in DCPS’s future will not only address immediate financial challenges without taking money from classrooms, it is expected to yield long-lasting results,” said Mayor Fenty. “Equally important, it will ensure that classroom learning is not disrupted by the type of massive layoffs and other measures that would be necessary to close a budget gap of this size absent additional funding.”


This proposed restructuring plan will ensure that by 2009, more than 90 percent of the DCPS budget will be spent in schools.


Jobs and infrastructure investments


As reported by the Mayor when the surplus revenue was announced by the District’s Chief Financial Officer in, Fenty intends to request $14 million will be allocated to the Department of Employment Services to support the registration of 15,000 participants in the Summer Youth Employment Program for a duration of 10 weeks, and to expand enrollment of ex-offenders and individuals receiving public assistance in the Transitional Employment Program. In addition, $12 million will be allocated to the District Department of Transportation to support improved paving operations across the city. These funds will support a major new investment in alley paving, as well as repairs and upgrades to local streets and sidewalks.

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