Days after announcing a budget surplus and near-record levels of reserves, Mayor Vincent C. Gray said he wants to discuss changing a key element of the District’s two-decade fiscal turnaround: its independent chief financial officer.
To a degree unheard of in most cities, the District’s CFO is structurally insulated from political pressure. Appointed by the mayor and confirmed by the council, the chief financial officer can be fired only for cause and has total control of the city’s financial operations.
But, in an interview, Gray (D) said returning direct control of city finances to its elected leaders should be considered.
“I think the financial operations should be an inherent part of the government — that is, the executive [branch] with oversight by the legislative,” he told Washington Post reporters and editors Thursday.
Gray, who recently entered his third year as mayor, discussed his thoughts on the CFO’s role as part of a discussion on the search to replace Natwar M. Gandhi, who announced this month that he would retire in June after more than 13 years as chief financial officer.
The mayor said he has been in talks with a person whom he’d like to lead a “wide search” for Gandhi’s replacement. He declined to identify the person.
“One of the questions that should be asked is, how do the candidates feel about this essentially being outside of the government?” he said. “There are some days — lots of days — when I look at it and say, it just shouldn’t be this way. And then there are other days where we go, I’m glad that’s over there with him.”
Gray is publicly broaching a discussion of CFO independence at a fiscally opportune time. The city booked a $417 million surplus in fiscal 2012, pushing its budget reserves to $1.5 billion. Some city bond issues carry top ratings, and officials are expecting a flood of revenue to continue for some time.
“Our financial responsibility has been equal to or superior to virtually every jurisdiction in America,” Gray said.
He also placed the CFO discussion in the context of his administration’s recent success in winning back control of various government functions that have operated under court oversight. Last year, for instance, the city concluded a 37-year federal lawsuit concerning the District’s treatment of the mentally ill. Another long-running suit, over the child welfare system, has seen significant progress in recent months.
But mayoral control of financial operations was seized not by the courts but by Congress, which established the independent financial office in 1995. Under Mayors Sharon Pratt and Marion Barry, the city ran up budget deficits that eventually swelled to $722 million and tanked the city’s bond ratings.
The chief financial officer was given extraordinary powers in tandem with a temporary financial control board to get the city on track. “There is more responsibility given to the chief financial officer than I have now,” Barry said at the time.
Any attempt to soften the CFO’s independence is certain to be met by Capitol Hill and Wall Street with skepticism bordering on disbelief, observers said.
Tom Davis, who as a Republican representative from Northern Virginia shepherded the independent CFO legislation through Congress, said the system has been a “disciplining force” that has “worked in spades” and it will be a hard sell to change it.
“It’s important for the city to have a CFO that calls the balls and strikes fairly. And you’ve been able to rely on that, Congress has been able to rely on that, the public has been able to rely on that,” Davis said. “Independence is a huge deal.”
Davis said it’s not inconceivable that Congress could revisit the CFO’s role. But right now, he said, “I just don’t see it.”
But Gray said he was keeping an open mind. He cited Rep. Darrell Issa’s surprising enthusiasm for legislation that could give the city more spending autonomy from Congress. Issa (R-Calif.), chairman of the House committee overseeing District matters, could not be reached Friday to comment.
If deficits or bad financial practices were to recur, Gray said, Congress could reauthorize an independent chief financial officer. Alternatively, he said, federal lawmakers “could grant the authority to us to retake the financial operations under certain conditions. That’s the way we got out of having the control board: under certain conditions.”
Gandhi, meanwhile, has become something of an evangelist for the independent CFO structure, repeatedly telling interviewers, politicians and fellow government finance officials that the District is “the only place where you can disagree with the mayor in the morning and still have a job in the afternoon.”
And Gray and Gandhi have indeed disagreed at times, mainly over Gandhi’s projections of tax revenue, which the mayor openly questioned as “unrealistically low” last year. The ability to make binding estimates of revenue and expenditures is among the most substantial of the CFO’s powers, creating a de facto limit on city spending.
Officials familiar with conversations between the two said Gray asked Gandhi last year to join him in approaching key Capitol Hill lawmakers to broach a reassessment of the CFO’s independence. He was rebuffed, the officials said.
Gandhi was not available Friday to respond to Gray’s comments.
After the Thursday interview, Gray spokesman Pedro Ribeiro stressed that the mayor’s comments were preliminary and did not reflect a pending course of action.
“It’s not something he wants to do tomorrow, the day after or next week,” he said. “But as the District moves forward in its quest for statehood, this is a conversation we need to have.”
Nikita Stewart contributed to this report.