Updated 6 p.m. with Goulet letter
Mayor Vincent C. Gray’s plan to replace the trash and recycling cans for some 75,000 city households next year is in limbo following D.C. Council objections to the money-shifting maneuvers Gray has proposed to pay for it.
The $9 million garbage can plan is the largest of 11 budget transfers delayed this week by Council Chairman Phil Mendelson (D). Others concern matters ranging from transportation for seniors ($3 million) to utility bills at city buildings ($800,000) to one employee’s salary at the Office of Veterans Affairs ($49,271).
What the transfers have in common is that they all draw from funds previously budgeted for the District’s retiree health care fund. Mendelson is questioning whether the city should be drawing cash away from its retiree obligations to be paying for anything.
The health fund is currently underfunded — as opposed to the city’s pension funds, which are mostly overfunded — and the District is now on a 30-year plan to get the fund back up to muster.
The Gray administration argues that the most recent analysis shows the city has more than enough funds to meet its obligations under that plan — only $89.9 million is needed this year, rather than the $107.8 million budgeted — and the surplus can be diverted to current needs, including new trash cans.
“Right now, there’s no reason to overpay into the account,” said Gray spokesman Pedro Ribeiro, defending the shift. “We’re not in a situation where we need to do that.”
But Mendelson said it’s a bad idea to skimp on the funding as long as the health plan remains actuarially wanting. ”Why 30 years?” he asked. “Why not 20 years or 15 years? If we’re interested in ensuring that our retirement fund is healthy, then we shouldn’t be waiting 30 years to fund it or take money out of it now.”
“This is how these retirement trust funds have gotten into trouble in other cities,” Mendelson added. “You change the assumptions to free up money for other purposes, and that’s neither prudent nor the path to fiscal good health.”
In a Friday letter to Mendelson, Gray’s budget director said changes in investment performance and retiree participation led to the lower required contribution. “Again, there is no intention to reduce the Trust Fund lower than 100 percent of the actuarially required amount,” said wrote Eric J. Goulet.
If the council disapproves the budget transfers, it could be hard for Gray to find another source of unspent funds big enough to fund the trash-can plan.
Ribeiro said Thursday he was hopeful Mendelson’s concerns could be quickly assuaged. “We think once we talk to the chairman we can move this forward,” he said. “We’re doing exactly what the District’s residents want.”