Vincent Gray: $417m surplus for D.C., but no tax cuts

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Local,DC,Alan Blinder,D.C. Council,Vincent Gray

Powered by hundreds of millions of dollars in unexpected revenues, the District posted a $417 million surplus in its 2012 fiscal year, but top leaders immediately said the extra cash would go to the city's savings account and not be used to cut taxes or restore services that were trimmed in previous budget cycles.

"We lived within the means that we generated during the fiscal year," Mayor Vincent Gray said Tuesday. "We didn't go into the bank account or anywhere else to balance our budget."

Gray dismissed suggestions to lower the city's tax rates as he simultaneously rejected calls to hike the budgets of agencies that saw their spending collapse amid widespread economic malaise.But Ward 2 Councilman Jack Evans, the chairman of the council's finance panel, said residents were frustrated by high taxes followed by big surpluses."Everybody keeps asking me why are the taxes so high in the District," said Evans, who is considering a run for mayor in 2014.

Although the city underspent its budget by nearly 2 percent, the surplus was largely born of about $266 million in surprise revenues. Fines and forfeits -- most of which were tied to traffic offenses -- accounted for $27 million of the bonus income, punctuating a year in which the city endured a firestorm of criticism for its sprawling network of ticket-generating cameras. The District ultimately collected about $182 million in fines from the cameras and other enforcement methods, one year after taking in $126 million from the same sources.

Rainy day fundSClBThe District's savings account has experienced wild swings in recent years.

1996: minus-$518 million

2005: $1.6 billion

2009: $920 million
2012: $1.5 billion

The city also took in plenty of money from traditional levies: The windfall included $68 million more than expected in sales taxes and an extra $53 million in estate taxes.

A small segment of the surplus must remain with the programs that generated the revenue. But Gray said most of the money will go toward the District's savings account, which now stands at its highest level since 2005: $1.5 billion.

The account had a deficit of $518 million as recently as 1996, and Natwar Gandhi, D.C.'s chief financial officer, hailed the turnaround as "truly unprecedented."

City officials say D.C. law precludes spending the surplus funds because the District does not yet have enough of an emergency reserve to operate for two months without income. D.C. is about $286 million away

from reaching that level.

Meanwhile, outside advocates insisted that the city should spend part of the surplus on social services.

"We actually have children who are living on the streets because they have told us repeatedly they don't have enough money," said Amber Harding of the Washington Legal Clinic for the Homeless. "Nobody puts 100 percent of their money away. No responsible jurisdiction puts away 100 percent of its money when its residents are in this situation."

Gray said he was willing to bulk up agency budgets if there's additional money in upcoming revenue forecasts for the current fiscal year.But those forecasts will depend on Gandhi, a 72-year-old accountant who has previously drawn fire from Gray and other city officials who say his projections are too conservative.

Gandhi will release his outlook next month, and he has repeatedly warned that looming federal budget cuts could dampen his forecast.

But Gray said he was confident the CFO would approve increased spending for this year.

ablinder@washingtonexaminer.com

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Alan Blinder

Staff Reporter, D.C. City Hall
The Washington Examiner