Out of Control: Threat of DC Control Board Return Is Misleading and Counterproductive

February 1st, 2011 | by Ed Lazere

Is a federal financial control board lurking around the corner?

“That’s absolute nonsense,” according to Alice Rivlin, former chair of the DC control board and a noted expert on DC fiscal policy.  The control board threat, raised again in a Monday Washington Post story, has been used by some elected officials to justify draconian cuts to solve our budget gap.  But as Rivlin notes, it is a false choice.

The fact is that the things that would trigger the return of the control board are unlikely to happen.  Will Mayor Gray and the DC Council adopt a budget that spends more than we have?  Will they stop paying the city’s bondholders?  Of course not.

As Rivlin said last month, “In no way do we look like the city that the control board had to take over.” (See her remarks here, starting at minute three.)  Here’s how the DC of 1995 is much different than the DC of 2011:

  • Money in the Bank:  In 1995, DC’s fund balance (our municipal savings account) had gone below zero. In 2011, the city currently has $800 million in the bank, which as a percent of our budget is a larger fund balance than in 43 states.
  • Financial Controls in Place: As a result of the control board era, DC has an independent Chief Financial Officer to keep the Mayor and Council honest, every new piece of legislation must be paid for, and the city’s budget has to be balanced over a four-year period. We’ve balanced the budget 15 years in a row.
  • An “A” Bond Rating:  In 1995, DC was in a financial freefall and at junk-bond status.  Today, we have an “A” rating and have been credited with a “stable outlook.”  In fact, as Rivlin noted, DC is in better shape than elsewhere. “There’s hardly any other city you would rather be right now,” Rivlin said.

That’s why Rivlin recently asserted: “I don’t think the city is in any danger of the return of a control board.”

Some argue that the only solution to DC’s $600 million budget gap is to cut spending, which undoubtedly would hurt a wide array of services. Councilmember Jack Evans, for example, says that Congress and Wall Street would frown upon tax increases.  Yet that would be true only if the city’s financial troubles were self-inflicted rather than recession-driven.

Instead, the federal government and bond rating agencies want to see the city manage its finances responsibly and balance its budget without gimmicks. In the face of a huge drop in tax collections, a budget plan that includes both new revenues and cuts in spending would maintain fiscal balance while helping ensure that the city remains on a forward-moving path.  (Illinois recently received a bond rating increase when it raised taxes, because it signaled an end to budget gimmickry.)

So, rather than looking over our shoulder at a control board that isn’t there, Mayor Gray and the DC  Council should look at the vibrant city around them and do what it takes to keep it vibrant in the future.  The issue this spring will not be about whether to raise taxes, but the right way to raise taxes.

Interested in learning more? These issues will be raised by DCFPI’s Ed Lazere when he talks about DC’s budget along with Councilmember Evans at the monthly meeting of the Tenants Advocacy Coalition (TENAC) tomorrow.  The meeting will be at 6:30 p.m. at Sumner School (17th and M Streets, NW).

One Response to “Out of Control: Threat of DC Control Board Return Is Misleading and Counterproductive”

  1. Ted Grammer says:

    Ed:

    Please feel free to pay more taxes so the likes of Peaceoholics and lifetime welfare recipients can continue to rake it in while my family and I already pay the highest taxes in the region.

    Evans is right on this one – there is plenty of “fat” to cut out of this budget. No more tax increases! Enough is enough!