District officials announce $240 million budget surplus

January 30, 2012

The District has a whopping $240 million surplus — an amount that prompted some council members to ask whether Mayor Vincent C. Gray and the D.C. Council overshot when they instituted emergency furloughs and increased income taxes last year.

Gray (D) and Chief Financial Officer Natwar M. Gandhi announced the surplus Monday and attributed the windfall to underspending, particularly on tuition to private schools for special-education students.

“The obvious question is, ‘How did we not anticipate this?’ ” Gandhi said at a news conference.

The answer is that the city did, Gandhi said. But officials were conservative with their projections. In an interview, Gandhi said he revised his budget estimate in June to show a $107 million surplus. In September, he said the District netted an additional $89 million surplus.

“I told them this money is available, but we have to be very cautious because the economy is still very uncertain,” he said he told the Gray administration.

Eric Goulet, the administration’s budget director, said that in June the city was still grappling with an estimated $111 million in spending pressures and uncertainty remained in September. “We can’t account for good news that may come in the future when we’re budgeting,” Goulet said.

In a 7 to 6 vote in September, the council approved an increase in the income tax from 8.5 percent to 8.95 percent on residents earning $350,000 a year, affecting about 6,000 residents. The increase is to generate an estimated $160 million over four years and then be sunset.

“All around the executive branch . . . the administration and the CFO’s office, we really missed the mark on this one,” said Council member Jack Evans (D-Ward 2), chairman of the Committee on Finance and Revenue. “We never should have raised taxes. . . . We took money from people under the pretense that we needed it,” he said.

Evans, who voted against increasing taxes, said he wants an immediate sunset of the income tax increase.

Council Chairman Kwame R. Brown (D) also said that city leaders should rethink increases in taxes and fees made to close budget gaps over the past year. “If there are things we should roll back or reduce, we should do that,” he said at the news conference.

But Gray, who has made fiscal responsibility one of his top priorities, and others warned that such moves would not be prudent.

About $130 million of the $240 million surplus is in “special purpose” revenue, meaning the money is already dedicated, Goulet said. That leaves about $110 million in surplus that could be used for general purposes.

Earlier in the year, the council unanimously approved emergency legislation that implemented four furlough days for employees to help save more than $19 million. Goulet said legislation was introduced in December 2010 when Gray was mayor-elect and still council chairman.

Gray said he “pored over” the furlough decision when he learned of the surplus. “It was the best option we thought we had at the time,” he said.

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