Gray says he won’t spend District’s $417 million budget surplus


D.C. Mayor Vincent Gray, left, yields the podium to D.C. Chief Financial Officer Natwar M. Gandhi at a press conference announcing a surplus in the District of Columbia's budget at the Wilson building on Jan. 29. (John McDonnell/The Washington Post)
January 29, 2013

Mayor Vincent C. Gray (D) said Tuesday that he plans to use an expected boost in future District revenue to pay for affordable-housing initiatives and long-delayed raises for city employees. But he said he will not spend a budget surplus from the city’s past fiscal year, disappointing advocates who wanted an immediate infusion into social service programs.

Gray announced that keeping the $417 million surplus in the District government’s savings account will build the city’s reserves to $1.5 billion — the highest level since 2005 and the second-highest total since the city gained limited independence from Congress.

Despite the windfall, Gray said he will not propose any new spending until Chief Financial Officer Natwar M. Gandhi issues new revenue projections in mid-February for the current and upcoming fiscal years.

Gandhi has been reluctant in the past year to revise revenue upward while the federal budget situation is unsettled. “The federal government will no doubt continue to anchor the District’s economy, but given the current budget scenarios, it can no longer be counted on as a source of real growth,” he wrote as recently as September.

But Gandhi said Tuesday that cash reports he has reviewed look “far better than we had originally anticipated.”

“I’m not backing away from my concerns about the ‘fiscal cliff’ and the federal budget,” he said. But “we are adding about 1,100 new people to the city every month. These are people, young people mostly . . . a lot of disposable income. I like them coming to the city. They pay a lot of taxes.”

With the exception of property taxes, every major District revenue source outperformed projections, adding $300 million in locally generated tax dollars, according to city finance data. Business taxes brought in $78 million more than expected, sales taxes overperformed by $68 million and estate taxes by $53 million. A single, unidentified estate brought city coffers $50 million.

In total, revenue came in 2 percent higher than expected.

Meanwhile, city agencies underspent a combined $117 million in their 2012 budgets. The District’s child-welfare agency, for instance, served fewer children than anticipated and thus spent $3.2 million less than expected.

Gray said keeping the surplus banked will improve the District’s balance sheet, helping to build reserves back to pre-recession levels and closer to an informal target of enough cash on hand to cover two months’ expenditures.

But some social service advocates decried Gray’s stance. They said it is callous to save the surplus to satisfy Wall Street bond raters while housing and welfare programs are underfunded. “DC should be a just community that is committed to the inclusion and well-being of all District residents, not one that fills its coffers with unprecedented riches while leaving its residents in harm’s way,” read a posting on the Web site of the Washington Legal Clinic for the Homeless.

At a news conference and at a later luncheon interview taped for city cable TV, Gray intimated that he is prepared to propose significant new spending when the new revenue projections are released. He could send lawmakers a supplemental budget for the rest of fiscal 2013, which ends in September.

“We think we’ll have an opportunity to make important and significant new investments in social programs that I have certainly wanted to be able to make for a long time,” the mayor said.

D.C. Council member Jack Evans (D-Ward 2), finance committee chairman, said the revenue upgrades could total $200 million a year.

Gray said he is “not at a position” to propose reducing taxes on city residents or businesses: “We’ve still got a lot of needs that have to be met in the District of Columbia. And I don’t know that we’ve gotten to a place of certainty yet where I would feel comfortable doing that.”

At the luncheon, the mayor said he is ready to propose new efforts to build and preserve affordable housing. He added that concluding new collective-bargaining agreements for city employees is also a priority.

“We’ve got a workforce that hasn’t had a raise in years, and I think we’ve got to look at that,” Gray said. “These are the people who get the snow off the streets, pick up the leaves, pick up the trash, make sure that our streets are paved.”

“You can’t give it to everybody,” interviewer Carol Joynt suggested.

“Well, maybe we will be able to support everybody,” Gray said. “We’re in active discussions with all of them. . . . We want to be able to do something for all the people who work in all those areas.”

Mike DeBonis covers local politics and government for The Washington Post. He also writes a blog and a political analysis column that runs on Fridays.
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