D.C. weighs whether to save, spend $400m budget bonus

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Local,DC,Eric P. Newcomer,D.C. Council

The District has accumulated $1.2 billion in cash reserves, and that number could soon climb considerably, prompting some to worry that the District might want to save too much while others talk about how to spend the new windfall.

An expected $400 million budget surplus could get added to a rainy-day fund that already would place D.C. among the top 10 in the nation if it were a state.

"Is that a little high? Probably in normal times," said Norton Francis, a senior research associate at the Urban-Brookings Tax Policy Institute. "If you think there's serious risk to your revenue, maybe not."

And the calls already are coming for the city to increase its financial reserves.

"Any surplus, no matter what it is, should go to our fund balance to build it toward the $1.6 billion," said Ward 2 D.C. Councilman Jack Evans.

The city has more money in its reserve funds than many states already. Compared with its budget, the District's reserve funds sit at about 16.5 percent.

Those reserves can help protect the city if there is a sudden drop in revenue or increase in costs. Given the continued debate over the debt ceiling in Congress and the potential for significant cuts to federal spending, some local leaders believe that the District is best served with a more fiscally restrained approach.

"Even though the economy is going really well, it's still a federal town," Francis said. "What happens with the federal government is a real risk."

Still, building the fund balance isn't without consequences. It's money that could otherwise be sent back to taxpayers, used to supplement existing government programs or go toward capital improvement projects.

For example, the council has endorsed an extensive "wish list" with a number of spending priorities, including $7 million for homelessness services, $14.7 million to support welfare programs and $9.5 million to support education in the District.

Ed Lazere, director of the DC Fiscal Policy Institute, said that funding many of the programs on the wish list should be the council's priority over saving. However, he said, if the city continues to see its revenues grow in 2013, the city might be able to do both.

"If the mayor says, 'I'm going to save the surplus but use the next revenue as an opportunity to fund these important services,' then the goal has still been accomplished and that's fine," Lazere said.

More details about the District's surplus will be made public Tuesday when Chief Financial Officer Natwar Gandhi releases the city's Comprehensive Annual Financial Report.

enewcomer@washingtonexaminer.com

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