DC’s $140 Million Year-End Bonus: Spend Some on Critical Programs, Save Some for the Future
Some of you may be starting to wonder if you’ll get a year-end bonus this December. If you do, will you spend it? Will you save it? Or will you spend some and save some?
Most people would say a reasonable move is the balanced approach: spending some now to help with bills or a special treat and saving some for the future. We at DCFPI agree, and we think the same logic applies to DC’s recently announced $140 million year-end revenue boost in fiscal year 2012, which ended Sept. 30th. The $140 million, which came as a result of an unexpected uptick in tax collections, is a bonus of sorts for the city.
Some people think that the District cannot spend any of that money. That’s actually not true.
And some people think the District should not spend any of that money. That is a judgment call. As we noted above, we believe a balanced approach is best: spend some on critical programs that can help DC families move forward, and save the rest for the future.
DC Can Spend Some of the $140 Million
Some DC government officials have been saying that the District cannot spend any year-end surpluses — which become part of the city’s “fund balance” — because of the Home Rule Charter or requirements to set aside funds for debt payments.
That’s not quite right. The Home Rule Act of 1973 didn’t instruct all year-end balances to go into savings; a law enacted by the Council two years ago did that, with a goal of adding about $700 million to two new reserves. In other words, it is a policy choice that can be changed. If the Mayor and Council agree that there are pressing needs, they could set aside the requirement to save 100 percent of surpluses, perhaps temporarily, to allow some portion to be used now.
Why It’s OK to Spend Some of the Bonus
It is important to have money in the bank, whether you’re an individual family or a government. But it also makes sense to spend savings sometimes, particularly if you have a decent amount set aside and the expenditures would serve an important purpose.
The 2010 plan to start rebuilding DC’s fund balance had merit, because our city leaders had smartly used some of the money in our savings account to stabilize the local economy through the recession. But our savings account — the city’s fund balance — has grown since then to $1.1 billion, which is equivalent to 17 percent of DC’s total budget. That is larger than in all but eight states. If some of the $140 million is spent and some saved, the fund balance would grow even larger.
It’s worth remembering that the city has spent some of its built-up savings for some very important purposes in the past. In 2006, Mayor Williams proposed using nearly $300 million in fund balance to pay for capital construction projects, limiting the need to borrow. More recently, the city used its fund balance to ensure that we had set enough aside for health benefits for retired government employees.
The city faces many challenges now that could be addressed by responsible use of some of the $140 million revenue surplus. The approved fiscal year 2013 budget did not have adequate funding for basics such as homeless services, TANF, or the Housing Production Trust Fund, for example.
There is an important catch. Since the surplus is a one-time occurrence, any funds used should be spent on one-time expenses or other things that will not create future obligations.
That still leaves many options: in addition to homeless shelters, TANF, and the Housing Production Trust Fund, the surplus could be used for things like building up collections at libraries, including school libraries; providing down-payment assistance to first-time homebuyers; helping tenant groups buy and renovate their buildings before they become luxury condos.
Investing our bonus in these kinds of programs would bring the city good returns. Send us your ideas to tell city leaders how you would spend $70 million, half of the $140 million revenue surplus.