March 19, 2013 | by Mark Lee
Hands out of D.C.’s empty cookie jar

There’s no way to sugarcoat it – D.C. surplus revenue projections beginning in October and beyond are gone. The city is suddenly, and again, facing deficits absent upwardly revised future estimates.

The revelation — coupled with resident, consumer and business taxes already among the highest in the nation and at such ignominious levels that further rate increases are a political non-starter — requires elected officials to focus on balancing budgets.

District officials announced only days ago that a projected FY 2014 revenue upgrade is more than completely spent prior to any new initiatives. This sudden status change in local government finances is primarily the result of what is characterized as the naturally rising cost of providing current government services, adding $107 million to expenditures in the coming annual budget period.

Subtract additional public and charter school costs resulting from increased enrollment, monies required to keep public employee retirement funds solvent and low-income assistance payments not covered by federal funds for which local government reform has again been postponed, and the District is reported to be more than $40 million in the hole.

The outlook through 2016 is equally glum, based on these considerations and a continued reduction in surplus levels enjoyed for the past two years.

This deficit calculation exists prior to D.C. Mayor Vincent Gray’s commitment to make a one-time expenditure of $100 million to develop affordable housing units, $15 million in nonprofit grants and an unspecified amount expected to total in the tens of millions to fund pay raises for the city’s more than 30,000 employees.

When Gray presents his 2014 fiscal year budget plan on March 28, he may have adequate wiggle room for some or all of these priorities by utilizing excess funds from the current period. Reoccurring costs in future years affecting pay raises for city workers, for example, complicate and could reduce or preclude the allocation. In addition, little will be left for the D.C. Council to expend on its additional priorities.

Unless, of course, the mayor reverses his prudent and popular decision to exclusively designate last year’s largess for adequately strengthening the city’s reserve fund. He has not indicated any intention to reduce the allotment. Nor should he, given the need to both protect the District’s bond rating and hedge against potential economic downturns.

Deferred spending objectives of D.C. Council members also compete for available funds, along with a litany of newer spending proposals advanced by individual legislators in recent days. The list is long, and expensive.

Despite the budget challenges confronting city leaders, special interest groups advocating more spending have been slow to adapt. Calls for increasing program budgets and initiating new project expenditures have been rendered distinctly dissonant in light of recent revisions to future balance sheets.

Giddiness over a growing population, robust development and talk of being a city of “boomtown” status during tough times elsewhere has evaporated along with the money. While the local government’s financial situation is stable, the expectations of only a few months ago that continuing surpluses would fuel opportunities for more disbursements have dissipated.

Although those we elect may not relish the role, their task for the foreseeable future will be determining spending priorities and disappointing some constituencies. Correcting a shamefully inadequate record of effective oversight and ferreting out waste and inefficiencies will be paramount. If they hope to do more they will have to do better with what they’ve got.

Like the rest of us, their job will increasingly involve counting the coins, deciding what to spend them on – all while avoiding misspending our money.

Mark Lee is a long-time entrepreneur and community business advocate. Follow on Twitter: @MarkLeeDC. Reach him at OurBusinessMatters@gmail.com.

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