December 20th, 2012 | by Wes Rivers
The District continues to prove that it is a national leader in health reform. Last week, the Federal government granted the DC Health Benefits Exchange conditional approval to begin operations in January 2014. This makes DC one of just nine states considered on track for delivering quality and affordable health insurance through the online portal within the year.
That is great news, but the celebration should not last too long. There is a lot of work to be done soon to ensure that the Exchange offers a solid set of health plans and that DC residents know how to use it to access affordable health insurance.
The heart of the Exchange is an online platform for offering health plans that meet certain quality standards. This will allow consumers to make true side-by-side, apples-to-apples comparisons of available health insurance options. Also through the Exchange, small businesses and individuals will be able to claim tax credits and other subsidies to help pay for premiums and out-of-pocket costs, essential steps to making plans more affordable.
Now that DC’s Exchange has been approved, its governing board must soon set the quality standards for health plans that will be sold on the Exchange. The board will need to address network adequacy — making sure plans have an adequate number of providers — an issue that many consumer groups have flagged. The board also will need to set limits in the variation of co-pays and deductibles for plans on the Exchange and set standards for annual caps on certain services. Getting these standards right is critical to ensuring that residents can afford and have access to needed care.
The District also will need to design programs that help consumers select the plan that best meets their needs and enroll in applicable subsidies. This includes creating a robust “Navigator” program — a network of community assisters that provide outreach, education, and guidance on purchasing insurance through the Exchange. The District will soon have to select a vendor to build the information technology required for the Exchange portal to work. Finally, many District officials believe the DC Council will need to approve the Exchange’s proposal this spring to consolidate the insurance market for individual and small business health insurance plans under the Exchange.
Receiving federal approval for DC’s Exchange is commendable, and the Exchange’s staff and leadership should be congratulated for their efforts. With that said, the next few months will be a critical period in determining if the Exchange will be a viable market place for high-quality, affordable health insurance options that District residents and small employers need.
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December 18th, 2012 | by Jenny Reed
Last week, DCFPI and several other organizations submitted recommendations to Chairman Mendelson on ways to improve the transparency of the DC Council’s operations and to improve public access to information on actions of the Council. From requiring five days’ notice before a legislative mark-up is held , to improving the accessibility of the Wilson Building, to adding greater detail to the legislative information online, we hope the Chairman and the rest of the Council will take these recommendations into consideration as they set the Council Rules for Council Period 20 starting in January.
The recommendations focus on eight major areas: hearing/roundtable procedures, hearing/meeting logistics, the budget process, the legislative process, John A. Wilson building access and use, public access to information, open meetings, and Council structure. Some examples include:
- Require five days’ public notice for Council committee mark-ups or roundtables. Too often, mark-ups and roundtables are held with very little public notice, which limits public participation. Requiring five days’ notice would give the public time to weigh in on critical issues at roundtables and on potential changes to legislation in a mark-up.
- Require that the final Council budget proposal be available to the public at least two working days prior to the vote. The annual budget is one of the most important pieces of legislation the Council must complete. Yet, the budget often is not released until very close to the vote — sometimes just a matter of hours. This gives Council members, Council staff, and the public very little time to analyze and comment on the substantial budget changes that often show up in the final proposal. The Council’s budget office has made significant improvements over the past couple of years in getting the budget out the day before the budget vote, but releasing the final proposal at least two working days before the scheduled vote would give the public and Council a better chance to weigh in.
- Improve transparency and use of amendments. While amendments can make significant changes to legislation, they are not included in the legislative record on the DC Council website (LIMS) and often are not available to the public. We recommend that all proposed amendments be read aloud at Council committee mark-ups and legislative meetings so that the public can understand the proposed change. We also recommend that all proposed amendments, and the resulting vote and outcome, be included as part of the LIMS record.
The full memo with all of the recommendations and organizations that signed on can be found here. We look forward to the Council’s January 2nd organizational meeting when they will vote on the DC Council Rules, and we hope that the Council is able take steps to improve the transparency of its operations and the accessibility of its information.
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December 17th, 2012 | by Ed Lazere
Housing is often the biggest cost families face, and with rents rising and the cost of homes getting out of reach for many in the District, affordable housing is in short supply. This is an issue we need to grapple with as a city. A bill before the DC Council this week will help address this critical issue in a novel way, by providing up to $1,000 each year to lower-income residents with high property tax bills or rents. There’s just one problem: the Council will pass the bill subject to appropriation—which means that there’s no money to pay for it right now.
The bill — the Schedule H Property Tax Relief Act — was introduced by Councilmembers Jack Evans, Phil Mendelson and Michael Brown, and it has been shepherded through the Finance and Revenue Committee by Chairman Evans this fall. The bill updates a property tax credit for low-income homeowners and renters that currently works very poorly, going to only 12 percent of eligible households because it hasn’t been modified in 35 years.
The credit is based on both a family’s income and its property taxes. The credit amount is greatest for very low income families with high housing costs, which means it is targeted on those who need it the most. The credit applies to rents as well as homeowners, because it assumes that a share of monthly rent payments is for property taxes passed on by the landlord.
Here are some of the things the new bill would do:
- Raise the income eligibility level. The bill would raise the income eligibility level to $50,000 from $20,000. The last time the eligibility level was set was 1977, when the cost of housing in DC was much, much less. Raising the income eligibility would make about half of all DC households potentially eligible and would include the vast majority of those with severe housing cost burdens.
- Increase the maximum credit. The current bill would increase the maximum credit to $1,000 from $750, or about $60 a month. Once again, that amount was set in the mid-1970s.
- Make it easier for eligible families to apply. The current Schedule H rules are complex, and that contributes to the very low participation rate. The new bill would eliminate many cumbersome rules, such as the requirement that people sharing housing file for Schedule H using combined income, even if they otherwise file taxes separately.
While the price tag for these reforms – about $11 million per year — is not insignificant, the changes would update a program that has not been updated for 35 years. And the reforms would help thousands of DC families and individuals, most of who have very high housing costs and have limited opportunities to access housing assistance program, given enormous waiting lists.
The Council’s adoption of Schedule H reforms is a great step forward to helping residents pressured by DC’s high and rising housing costs. The next step is to make these reforms real by funding them, in the budget for fiscal year 2014 or sooner.
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December 14th, 2012 | by Ed Lazere
Next week, the DC Council will hold a second and final vote on an $11 million tax break — for the Howard Town Center housing and retail development — that the Chief Financial Officer concluded was not needed to make the project viable. Although DCFPI thinks the best approach would be to hold off on the tax break and let the developer work on alternate financing, there are ways the tax abatement could be improved even if the Council approves it. And we hope the discussion around this tax abatement will help inform future discussions among the DC Council to ensure it is pursuing responsible economic development with DC’s limited tax dollars.
Until recently, the DC Council typically had very little information that it could use to assess the merits of proposed commercial tax abatements. But last year, the Council set new requirements to analyze the costs and benefits of every proposed tax abatement to better understand whether any given project really needs special tax treatment.
The proposed Howard Town Center property tax abatement is the first time the DC Chief Financial Officer unequivocally concluded that a proposed tax break is not needed for a project to proceed, because the developer could seek financing from federal low-income housing tax credits, charge higher rents or defer a portion of the fee paid to the developer. Despite this information, the tax break passed on first reading by an 8-4 vote.
Given what the CFO found, there are some ways that the Howard Town Center abatement could be changed that ensure the project can move forward but also ensure a tax break is granted only if it is really needed. It is important to note that the Council approved the tax break but did not fund it, and that funding is unlikely to occur before the 2014 budget is adopted in June. That means there is time to tweak the tax break without jeopardizing it. More specifically, the Council could:
- Amend the legislation to require the developer to apply for low-income housing tax credits before the DC tax abatement goes into effect. If the tax credits come through, a DC tax break may not be needed.
- Require the developer to commission an independent market study on the rents that can be charged when the housing is completed. If the project can charge higher rents, that may provide the income needed to make the project financially viable.
Beyond that, we hope that the “Tax Abatement Financial Analysis” that now accompanies each proposed tax abatement becomes a vital part of the discussion over each proposed tax break. If the CFO raises questions about a project’s need for special tax treatment for the city, the developer could be asked to provide their own detailed response. Depending on the response, the Council could direct the developer to take additional steps to seek financing other than from the city, before the tax break is voted on. This kind of process would help make sure that DC’s economic development subsidies are offered only when needed to help an important project move forward.
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December 13th, 2012 | by Wes Rivers
Another big decision happened this week regarding the District’s implementation of federal health reform: last night, the governing board of DC’s Health Benefits Exchange voted unanimously to appoint Mila Kofman as its Executive Director. Kofman’s experience and knowledge in private insurance markets make her well-suited to guide the Exchange through the District’s particular circumstances and challenges, such as having a small population, network adequacy problems, and health disparities. DCFPI is equally impressed with her work as a consumer advocate.
Kofman most recently worked at Georgetown University’s Health Policy Institute, where she assisted other states in implementing national health reform or what’s now known as Obamacare. Before that, she served as Superintendent of Insurance for the state of Maine, overseeing a large state agency that regulates Maine’s entire insurance market. Among her accomplishments, she created a unit specifically for enforcing insurer compliance with market regulations, and she set up improved channels for customer service delivery.
While at Georgetown, she provided guidance to states as they implemented health insurance reforms. This includes helping coalitions of employers to improve their purchasing power — allowing small businesses buy more affordable and quality plans for their employees. At the national level, she has worked on a host of patient protection initiatives and research including implementing health information privacy laws, documenting health insurance scams, and working on the Patient’s Bill of Rights legislation in the early 2000s.
DCFPI looks forward to working with Kofman and her staff on improving the quality and affordability of health insurance offered in the District.
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December 11th, 2012 | by Wes Rivers
The board governing DC’s implementation of federal health reform will soon decide how individuals will purchase insurance plans from what’s known as the DC Health Benefits Exchange. The Affordable Care Act mandates that individuals must have the option of paying their premiums directly to insurers, but DC is also considering allowing individuals to make payments to the Exchange. With this approach, the Exchange could become a one-stop shop for a family’s health insurance needs—and streamline the payment process. Currently, the Exchange board is taking public comment on how to collect payments, with a formal proposal forthcoming.
Payment to the Exchange is known as “individual premium aggregation” — in which the Exchange would collect premiums from consumers, aggregate them, and then forward them to the plan issuer. For small employers in the Exchange, proposed federal regulations already require the Exchange to collect all payments, so the premium aggregation decision only will affect individual consumers.
Allowing consumers to choose payment through the Exchange could add additional convenience. After shopping and enrolling in a plan, the online portal would offer a consistent and streamlined billing process. Individuals could go to the same place for all health insurance functions. The Exchange’s customer service system would be available to answer questions on an array of topics spanning from initial enrollment to late payment fees.
There are costs, however, to adding this option. The board will have to weigh the benefits to consumers against the costs associated with monthly billing, tracking payments, and contracting with a vendor who will aggregate and forward premiums to insurers. However, the Exchange will face these costs and administrative burdens for small employers no matter what they decide for individuals, which suggests that applying it to individuals may not add much to these costs. Moreover, the additional costs of enhancing the payment options could substantially increase individuals’ ability to maintain coverage on the Exchange, especially among those who are new to the private insurance market.
DCFPI encourages the Exchange board to consider adding this option. Unless there is evidence that allowing individuals to pay for their insurance through the Exchange is overly costly or burdensome, we believe this is the approach DC should take. Public comment on individual premium payments ends at 5:00 pm on Friday, December 14th. To send comments, contact Rekha Ayalur at Rekha.ayalur@dc.gov.
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December 10th, 2012 | by Soumya Bhat
With everyone focused on Chancellor Kaya Henderson’s school closures proposal, you might not be aware that a new study is just getting started to help answer a critical education policy question: Are we spending enough on public schools in the District?
The year-long study—funded by the DC Deputy Mayor for Education—will analyze the cost of providing an “adequate” public education in the District. Interested in learning more about the study? There will be a public information and discussion session on the study this Wednesday night from 6:00 to 8:00 pm at the Charles Sumner School Museum and Archives, 1201 17th St. NW.
The idea for the adequacy study stems from the DC Public Education Finance Reform Commission. The independent commission, which was created by DC Council legislation in 2010 and issued its recommendations this past February, mainly tackled the issue of “equity” of school funding between DC Public Schools and DC Public Charter Schools. But it also looked at broader issues of adequacy, affordability, and transparency in public education in DC. The Commission recommended that a full-scale study be completed to analyze the full costs of an adequate education in DC.
DCFPI thinks the study is a good opportunity for the District to see if we are spending the right amount per student to meet our city’s educational needs. For example, the study might recommend revisions to the Uniform Per Student Funding Formula, which has not been updated since 2008, and offer a template for a working group to update the formula on a regular basis in the future. In addition, the adequacy study may make recommendations to change the way the needs of certain students are “weighted” or given additional funds because of greater levels of need, like we do now for English language learners and students in special education. One of the Commission’s recommendations was that additional funding be considered for schools based on the number of students who are both low-income and academically behind. The adequacy study is also going to analyze the way DC finances and manages capital investments, maintenance, utilities and custodial services for school buildings and facilities.
Again, the public information and discussion session on the study will be this Wednesday from 6:00 to 8:00 pm at the Charles Sumner School Museum and Archives, 1201 17th St. NW.
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December 7th, 2012 | by Elissa Silverman and Ed Lazere
District’s Dime readers, our monthly column in the Capital Community newspapers is out!
A preview:
Going over the “fiscal cliff” is the talk of Washington right now, but what will stepping over that brink mean for local DC?
The term is shorthand for the payroll and income tax cuts that are set to expire at the end of the year combined with automatic cuts in federal spending that were put into law by Congress during the debt ceiling debate, known as sequestration. Many economists say that the scenario is less a cliff than a slope or hill, because the economic impact likely will not be immediately calamitous. It is more likely to be gradual, and many predict that a compromise will be reached that would stave off more severe consequences such as a recession. Yet the issue is a good reminder that what’s decided within the hallways of Capitol Hill can be felt on the streets of Capitol Hill—as well as Congress Heights, Cleveland Park and Chinatown.
In fact, the folks in DC government who look into the crystal ball and tell us how many dollars we have to spend have been thinking about the impact of the fiscal cliff for some time now. Any policy that broadly influences the size and scope of the federal government will be felt here in DC, since we are the seat of government and many federal workers are located here. A reduction of staff or decrease in federal contracting translates into a reduction in local income taxes, since some residents might lose their jobs, as well as a drop in sales taxes, because residents will have less money to spend, fewer workers will be eating lunches at local restaurants and food trucks, and so on.
This impacts the District’s revenue projections, and how much we can budget for various programs and services. Therefore, it is important that we consider the most likely scenarios and forecast accordingly.
The Federal Factor
There are more than 200,000 federal jobs in the District, according to the U.S. Department of Labor, but only about one in five, or a little more than 45,000, are held by District residents. Yet there are many other jobs that rely on the federal government and federal workers. This would include contractors that do work for federal agencies or companies that supply products for the federal government or even restaurants, dry cleaners or clothing stores that have federal workers as customers.
According to some projections, full sequestration could result in the loss of up to 127,000 DC jobs over the next decade. This number includes 35,000 federal jobs, 34,000 federal contracting and subcontracting jobs, and 58,000 jobs that would be impacted due to the decline in the federal payroll.
Yet there are few who believe full sequestration will happen. Most likely, say many economists and Congressional experts, a compromise will emerge and the automatic reductions will not all take place. Nevertheless, the economists in the revenue analysis division of DC’s Office of the Chief Financial Officer have to make some assumptions about the federal budget and what impact this will have on both the national and regional economy to calculate how much money the city can expect to have in its coffers. CFO Gandhi and his deputies have said that it would be irresponsible not to show an impact from sequestration even if it is not fully implemented. “Despite the recent District job market strength and stronger than expected revenue, the continued uncertainty regarding post-election federal budget actions poses a real risk to the District’s finances,” Gandhi wrote in the September quarterly forecast. He calls the impact of the local cuts and a possible national economic impact a “double-whammy” for the District.
Economic indicators continue to show that the District is on the rise. Income and sales taxes remain strong and growing. Yet this was not reflected in an uptick projected future revenues in September’s revenue forecast because Gandhi said there was too much uncertainty about the fiscal cliff and how Congress would handle it. The murkiness led Gandhi to be cautious, and therefore despite strong revenue trends, the CFO declined to make any new projections for tax collections in 2013 and beyond.
Yet, the CFO wrote, if the fiscal cliff is largely avoided, “the revenue picture for the District would improve significantly” from what the CFO projected in his September revenue forecast.
Why The Cliff is Not a Cliff
Economists like Mark Zandi of Moody’s Analytics say that the most likely scenario is that the fiscal cliff will be avoided, and that a budget deal will likely keep many of the tax cuts in place and avert the automatic spending cuts, while coming up with another long-term plan for reducing spending. Therefore, the fiscal cliff is really not a cliff.
Thus, it seems likely that there will be some impact on economic growth, but DC will not end up seeing huge federal workforce cutbacks right away. This is very important, because it means that the impact on income and sales tax revenues will not likely be as severe as the CFO has projected. It also means that the city’s leaders will have a number of years to adjust to the downsizing of the federal government.
And this has a very direct impact on how the District can allocate its resources this budget year.
Once the specter of the fiscal cliff is lifted, the revenue forecast likely will show we have more money right now. That would almost certainly mean that Gandhi and his fellow economists would project an uptick in revenue in the December forecast.
In most years, the September and December revenue forecasts would not be a major issue, since the most important forecast for the budget is issued in February. But for this year’s budget, the Mayor and DC Council anticipated that revenues might rise, factored that into its budget plan, and created a contingency budget on how to spend those dollars. For example, the approved homeless services budget is $7 million shy of what is needed just to maintain current services. That means that choosing not to adjust the 2013 forecast until February or later could mean that many basic services will go unfunded.
Revenue Forecasting With and Without The Cliff
Revenue forecasting is not an exact science. Economists use economic data to make assumptions about what will happen, but it is worth making sure those assumptions are based on the most likely scenarios. Given that most economists believe that the cliff will be averted and sequestration will likely not take effect, our city’s revenues should reflect those likely assumptions.
For that reason, we’re hopeful that the next revenue forecast reflects the expectation that the fiscal cliff will likely be avoided. But the CFO may feel the need to be cautious until a federal budget deal is fully worked out, which may not occur before the next DC revenue forecast is due. One idea would be for the next revenue forecast in December to reflect revenues if the fiscal cliff should occur—as well as if it should not.
There are several advantages to this approach. First, it will make the calculated impact of the federal cliff scenario more transparent. And the Mayor and DC Council would have an idea of what revenues might be available if a compromise happens.
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December 5th, 2012 | by Wes Rivers
The District has taken another step forward in implementing health care reform — aka Obamacare — by taking initial votes on the program that will help residents and small businesses understand and purchase insurance plans under the Affordable Care Act. Last week, the board charged with governing the DC Health Care Exchange unanimously approved recommendations for the Navigator Program, which set the broad structure and core functions of the program. While the initial recommendations are promising, the next design phase of the program will need to flesh out more details as to ensure that the program will be an effective tool for consumers seeking affordable health insurance.
Navigators will be a network of consumer assisters, contracted and trained by the DC exchange authority, to provide outreach, education, and guidance on purchasing insurance through the Exchange. The Exchange Board voted to limit a Navigator’s role to five functions defined in the Affordable Care Act: providing education and outreach to consumers on health plans offered on the Exchange; distributing impartial information on plan enrollment and eligibility for premium subsidies and other public programs; helping consumers and businesses select and enroll in a plan; referring consumers with complaints or concerns to District regulatory agencies; and presenting information in a ways that are culturally and linguistically appropriate for all DC consumers.
Due to the barriers many District residents face, the city may need to provide more help than the basics required by the federal law to connect residents buying health insurance for the first time with the plan that best fits their needs. The District should not limit itself to federal regulations, since many of the Navigators will be community-based organizations, chosen because of their long-standing understanding and relationships with our city’s vulnerable and hard-to-reach populations. These community-based organizations may have the capacity to provide more intensive assistance that will decrease the barriers between consumers and the health insurance option that best meets their needs.
The board also voiced the need for all Navigators to go through training and certification — including testing requirements — to ensure that they understand and can share with consumers the full range of the Exchange’s functions. Lastly, the board voted to have the Exchange pay Navigators set amounts as opposed to on a fee-for-enrollment basis. This will incentivize Navigators to provide the wide range of services above, rather than focusing mainly on enrollment.
The board’s approval of the Navigator recommendations only sets the broad program structure and core functions. We hope that the board revisits several of these areas in the design phase, especially with respect to clarifying the limits on services provided by Navigators. With continued development, the program could be a key driver in helping DC residents and small business find the health plan that best meets their needs and pocket books.
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December 4th, 2012 | by Ed Lazere
Mayor Gray’s recently released five-year economic plan makes many good choices for the city: laying out a vision, focusing on sector-specific approaches, and identifying key measures of success. But there is one choice that isn’t in the best interest of the District—removing Tax Increment Financing (TIF) from the city’s debt cap.
Here’s why: doing that will bring less scrutiny and accountability to how we spend our critical public dollars toward development. Keeping TIF dollars within the debt cap forces us to make choices about which projects should get priority, which is a good thing.
Under TIF, the city borrows funds that then go toward commercial development projects. Rather than having the developers of these projects pay back the city directly, the loans are repaid using sales taxes and property taxes generated by the completed project. For example, the District paid $42 million to support the parking garage at the DC USA mall in Columbia Heights. Another example is the nearly $40 million the District put toward the O Street Market development in Shaw, which will include a re-built Giant grocery store, new housing, and more.
Under this design, DC’s TIF projects are considered self-financing, with no net fiscal impact to the District. However, the borrowed funds are counted as part of the city’s debt, which is subject to a cap. Because the city also borrows money for public projects – such as renovating schools or building new libraries the debt cap requires the District to make choices over which economic development projects to subsidize.
The mayor’s economic development plan, however, proposes not counting TIF subsidies toward the debt cap, presumably so the city could support more of them.
That would be a bad move. If all TIF projects were treated as both self-financing and debt-free, the District’s economic development officials would have no incentive to scrutinize proposed TIF projects to see if they are well designed and important for the city. They could just approve them all.
It would be like eating pumpkin pie and pecan pie – and maybe some chocolate cake, too. That might be okay one day a year at Thanksgiving, but it’s an unhealthy year-round diet.
And it would be an unhealthy diet for the District, too. An unchecked expansion of TIF-subsidized projects could lead to large “tax holes” throughout the city, areas where property taxes and sales taxes would be diverted to pay off TIF loans, rather than going into the city’s coffers and being available to support city services, such as police or schools.
The mayor’s five-year development plan creates an ambitious vision for strengthening and diversifying DC’s economy, from high-tech to health care to retail. The plan is so wide-ranging that DC’s leaders will need to make lots of choices over which parts to prioritize and pursue first. They will need to make smart choices. And those smart choices should include which projects to subsidize under the TIF program. That can only occur if the money borrowed to pay off TIF subsidies is counted as part of the city’s tax-supported debt.
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December 3rd, 2012 | by Ed Lazere
A smart shopper never pays more for something than they need to. That applies to holiday gift-buying, but also to the DC government. No one wants the city to pay more than it has to for the services it provides. Efficient use of DC resources helps stretch our dollars and make the city as strong as possible.
In the case of economic development, being a smart consumer means holding off on subsidies for certain developments when it is not clear they are needed. The Howard Town Center — a housing and retail development near Howard University — falls into this category. An independent financial analysis found that the developer does not need the ten-year property tax abatement it has requested from the District. The project should be able to move forward on its own.
Nevertheless, the $11 million tax break for this development will be before the DC Council this Tuesday, and the position the Council takes on this bill is important. Just last year, the Council set new requirements to analyze the costs and benefits of every proposed tax abatement — because it wanted to better understand whether a given project really needed special tax treatment. The proposed property Howard Town Center abatement is the first time the DC Chief Financial Officer has unequivocally concluded that a proposed tax break is not needed for a project to proceed. The CFO found that the developer should be able to re-arrange financing by:
- Seeking Low-Income Housing Tax Credits for the development’s affordable housing component;
- Charging higher rents than currently planned, given the project’s location in one of the most rapidly developing parts of the city; and
- Deferring a portion of the developer’s fee from the project.
If those steps are taken, the project should be able to move forward — without getting special tax assistance from the city. Setting aside the proposed tax break does not mean the District doesn’t support the Howard Town Center. It would just mean DC is being a more responsible consumer when it comes to economic development. And the District could continue to help the project in other ways, such as helping the developer seek federal Low-income Housing Tax Credits.
We hope that the DC Council will take into account the financial advice it asked for — and set aside this tax abatement.
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November 30th, 2012 | by Soumya Bhat and Wes Rivers
This fall, the DC Department of Health (DOH) was one of six applicants nationwide to win a competitive federal grant to expand DC’s Home Visitation Program, which serves at-risk families with young children. The grant, $2.25 million per year for two years, provides the District with many opportunities, and it will be critical for DOH to adopt long-term strategies to make sure the system is sustained past the two-year grant cycle.
Due to limited funding, the current home visiting program only serves at-risk families in Wards 5, 7 and 8. The new funds will allow DC to provide home visitation services to such families, no matter what part of the city they live in. High-priority families who may be eligible for home visitation services include those that are low-income, have a history of child abuse or neglect, have children with developmental delays or disabilities, and pregnant teenagers.
The new funds also will enhance DC’s ability to connect high-risk families to needed home visitation programs and other services, by building a centralized intake and referral system, a hotline for families seeking help, and a universal screening tool for groups that work with high-risk families who are pregnant or already parents of young children.
The new grant will also boost the capacity of the Home Visitation Program through professional development. Currently, the District does not have any coordinated professional training in place to make sure all providers have the necessary skills to deliver high-quality home visitation services to families.
Finally, DOH is partnering with Georgetown University Center for Child and Human Development to study the implementation and impact of the expansion through a formal program evaluation. This process will help identify what is working and what is not to create a more effective delivery system.
As DC DOH begins the hard work of implementing these plans with the new funding, DCFPI would like to offer a few considerations:
- Fiscal sustainability is key to ensuring the long-term success of the expansion. Specifically, this means the need to secure investments by District agencies to maintain the universal screening and assessment mechanism that is being developed. Without an integrated approach, the additional services being provided to families in need may have to be dropped once the funding cycle ends.
- Similarly, initial investments in data and professional development infrastructure could benefit several other initiatives that fall under the Mayor’s Early Success Framework, an initiative to improve city-wide coordination to better serve families with young children.
- Finally, the investment can continue to build communication and collaboration across District agencies, and put service provision in the hands of community-based organizations that are familiar with the people and needs of the communities served.
A copy of the final home visitation grant application can be found here.
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November 28th, 2012 | by Elissa Silverman
District’s Dime readers, this is a special time of year for us at DCFPI. The week after Thanksgiving is when we host our colleagues from around the country at the State Fiscal Analysis Initiative conference here at the Washington Hilton. That’s right, there’s a DCFPI-like group in approximately 40 states including places like Arkansas, Oklahoma and Mississippi! We not only meet and greet, but we also attend interesting workshops and seminars on budgeting, tax policy, and how not to let Council member David Catania (I-At-Large) get the best of us.
Actually, the writer of this blog went to a communications session yesterday on how not to cross the line in blogging–and we apparently didn’t pay attention enough.
So in order to keep our attention on these great workshops, we’re going to be blogging a little less these next few days. However, we wanted to let you know of an important public meeting of the D.C. Tax Revision Commission on December 3rd at 4 pm in Room 412 of the John A. Wilson Building.
This will be your chance to provide comment and input on the commission’s research agenda, which will guide its work and ultimate recommendations to the mayor and DC Council. The proposed research agenda is available on the Commission’s website (http://www.dctaxrevisioncommission.org/). You can also access all materials and resources the Commission has considered and studied—including presentations and reports provided at previous Commission meetings—on the website’s resource page (http://www.dctaxrevisioncommission.org/#!documents/cp9p).
Those wishing to testify before the Commission on Dec. 3 should contact Ashley Lee by email at ashley.lee@dc.gov. Public testimony will be limited to three minutes. The Commission also welcomes written testimony, which can be submitted via email to Ms. Lee or presented to Commissioner members in person on December 3.
Sign up!
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November 26th, 2012 | by Ed Lazere
It’s a common practice in DC: A developer, with plans in hand to build housing or office space or retail or a mixed-use combo, says a tax break is needed to make the project work. A logical set of next questions would be: “Does this project really need a tax break to go forward? And what is the District getting in return?”
Until recently, these questions were hard to answer because there was little information to help policymakers get to the bottom of these vital questions. The tax breaks typically were approved, although sometimes with misgivings.
That all changed last year, when the DC Council adopted new requirements to assess the costs and benefits of all proposed economic development tax breaks. The Council made it clear that they do not want to approve these tax breaks in a vacuum.
Now, for the first time, the new system is being put to the test. The developers of the proposed Howard Town Center — a housing and retail development in Shaw-LeDroit Park — are seeking a ten-year, 100 percent property tax abatement. In other words, the developers don’t want to pay property taxes for a decade. But an analysis from DC’s Chief Financial Officer (CFO) concluded the $11 million tax break “is not necessary for the site to be developed” for the following reasons:
- The project, which includes an affordable housing component, should be able to get funding using Low-Income Housing Tax Credits. The developer hasn’t been able to get a tax credit investor yet, but the CFO thinks that will change soon.
- The project should be able to charge higher rents than the developer is claiming.
- The developer can save money by deferring a portion of the developer’s fee from the project, a common practice with developments that include affordable housing.
Now the real test comes of whether the District is serious about greater accountability for economic development subsidies. The CFO’s analysis is purely advisory, which means the DC Council could move ahead and approve the proposed tax break as is. That would be unfortunate.
Instead, Mayor Gray and the Council should tell the developer to go back to the drawing board and to push a little harder to make the numbers work without a subsidy. This doesn’t necessarily mean the tax break should be rejected outright. If, for example, the developer demonstrates sincere but unsuccessful efforts to secure low income housing tax credits, the Council could decide that some subsidy is needed, though perhaps less than a full tax break for ten years.
In the end, the District should push to get the most bang for its economic development buck. That means directing resources to projects that will move the city forward — such as projects that will create jobs or promote development in under-served areas. But it also means only offering public subsidies when it’s clear that help is needed to move the project along.
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November 21st, 2012 | by By Jessica Fulton
Happy Thanksgiving from the District’s Dime!
Families and friends across the country will join together to appreciate their good fortune over the past year. We here at DCFPI have quite a few things to be grateful for as well. So tomorrow, while we’re all taking the time to eat, rest, and be thankful, here’s what DCFPI will be celebrating:
- DC’s Local Rent Supplement Program (LRSP): This year, the District took action to allow 17 LRSP vouchers to be used instead of sitting on a shelf collecting dust. That’s 17 District families who will now have a place to call home.
- Steps Taken Toward Increased Transparency at DCPS: While there is more to be done on making the schools budget more accessible and transparent, the release of a new budget guide outlining the funding breakdown of the DCPS budget, including how the program is described in the CFO’s budget book, is a step in the right direction.
- Increased Funding for Affordable Housing Programs: Nearly $22 million of additional funds were added for critical affordable housing programs in the FY 2013 budget: $15 million to the Housing Production Trust Fund to largely help offset a $20 million proposed cut; $2.5 million to the Home Purchase Assistance Program; and $4 million for the Local Rent Supplement Program to help move families out of emergency shelter and into stable housing.
- Groundbreaking health care reform: DCFPI is happy that DC has aggressively pushed forward on federal health care reform, earning the District $73 million from the U.S. Department of Health and Human Services.
- New Federal Funds for Home Visiting Programs: The DC Department of Health partnered with the Home Visiting Council to successfully compete for federal funding to expand evidence-based home visiting programs in the city. The department will receive $2.25 million per year for the next two years to build up DC’s Home Visitation program, which will benefit at-risk families with young children across our community.
- Acceleration of TANF Redesign: The District reprogrammed funds to ensure that all families receiving TANF will receive an assessment in time to allow them time to access employment services before their benefits are cut.
- Innovative Approaches to Workforce Development: A newly reinvigorated Workforce Investment Council is developing a pilot workforce intermediary for the District, a job matching approach that has been successful in other cities.
- DC Following the Buffett Rule, Not Breaking It: The DC Council rejected the cut on capital gains taxes for tech investors, ensuring that they would not pay a lower tax rate on their returns than DC residents pay on their incomes.
- Timely Information: The CFO released the Current Services Funding Level nearly three months earlier than last year! We’re so excited!
So, that’s our list. What are you thankful for?
Happy Thanksgiving, and we will be back on Monday!
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November 20th, 2012 | by Soumya Bhat
Last night, the DC Council concluded its second round of public oversight hearings on Chancellor Kaya Henderson’s plan to close 20 public schools across the District. DCFPI was one of more than 100 public witnesses signed up to testify before the Council about the issue. Final decisions about school closings are expected to be made by the Chancellor and Mayor Gray around mid-January.
Much of the hearing focused on the cost ineffectiveness of operating small, under-enrolled DCPS schools, many of which appear on the closure list. Currently, schools that are under-enrolled are often subsidized, or offered additional funding beyond what they are initially allocated in the school budget, to help them have adequate staffing during the school year. However, DCPS has not yet quantified what it expects to save in total from school closures or what the transition costs may be. Without that information, it is hard to assess whether school closures make financial sense.
Yesterday, the Chancellor alluded to some savings that could provide for additional staffing positions in newly consolidated schools. She said, on average, a school receiving students from a closed school could expect to be able to afford a full-time librarian and five additional teachers. The Chancellor cited a potential $20 million in savings across the school system if DCPS no longer has to subsidize 20 small schools in this way.
DCFPI urges the Chancellor to clearly identify what cost savings may be seen by closing these 20 schools. After those numbers are released there should be a public discussion if this amount is enough to justify closure, particularly if some schools are located in areas where there may be a population boom in school-age children only a few years down the road. If savings are seen, DCPS should also be transparent about how the funds will be used to support individual schools or the overall system. This will give residents a better understanding of how school closure savings will translate into greater academic investments. You can read the entire testimony from DCFPI here.
If you were not able to testify, there will still be opportunities to offer feedback. DCPS will be holding community meetings to discuss the proposed closures in the following wards starting next week:
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Meetings
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Location
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Date
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Time
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Ward 8 Community Dialogue
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Savoy ES
2400 Shannon Place, SE
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November 27
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6-8 pm
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Ward 7 Community Dialogue
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Sousa MS
3650 Ely Place, SE
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November 28
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6-8 pm
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Ward 5 Community Dialogue
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Langley EC
101 T Street, NE
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November 29
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6-8 pm
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Wards 1-4 and 6
Community Dialogue
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Brightwood EC
1300 Nicholson Street, NW
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December 5
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6-8 pm
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November 16th, 2012 | by Jenny Reed
Setting ambitious policy goals is not something DC shies away from. In fact, earlier this week, Mayor Gray announced a five-year economic plan for the city that would create 100,000 jobs and generate $1 billion in revenue. We’re still working our way through the plan, but we’re glad that Mayor Gray isn’t afraid to set the bar high because that is exactly what DCFPI encouraged Mayor Gray’s Comprehensive Housing Strategy Task Force to do in testimony submitted earlier this week.
It’s no secret that housing costs have risen rapidly in DC over the last decade. Rents have risen by 50 percent beyond inflation and home values have nearly doubled. These large jumps in housing costs have lead to a substantial loss of low-cost housing. DC has lost 50 percent of its low-cost rental units and more than two-thirds of its low-value homes over the last ten years. And while home prices have skyrocketed, the incomes of DC households haven’t kept pace. In fact, for the bottom 40 percent of DC households, incomes haven’t risen beyond inflation over the last ten years.
With housing costs outpacing the growth in incomes, it’s no surprise that more and more DC households are paying more than 50 percent of their income on housing—a severe housing burden. This is especially tough for DC’s low- and moderate-income families for whom severe housing burdens mean that they have less—and spend less—on food, medicine, transportation and retirement savings. In 2010, more than 51,000 DC households have severe housing burdens. Nearly three out of four of these households had incomes less than 30 percent of the area median income—roughly equal to $31,000 for a family of four.
With Mayor Gray’s plan for 100,000 new jobs will come even greater demand for housing. So without an equally ambitious plan to create housing in DC, housing prices are only going to keep growing faster and farther out reach for many DC residents—especially low- and moderate-income residents.
That is why DCFPI encouraged the Mayor’s task force to adopt a comprehensive housing housing strategy that plans for the housing needs of current and future DC residents—at all income levels—but that also recognizes that the private market just doesn’t build affordable housing to low- and moderate-income DC residents on its own. The task force should include in its plan an ambitious set of numerical goals that would address a substantial share of the current and future need for affordable housing for low- and moderate-income residents.
It is important the task force set numeric targets for the production and preservation of affordable housing. The 2006 task force, for example, set goals of creating 34,000 new units of affordable housing and to preserve 30,000 of existing affordable housing over 14 years. Setting numeric targets allows the District to measure, track and evaluate its progress toward meeting those goals on annual basis and alter policy or resources as needed to stay on track.
DCFPI’s testimony also talked about where DC should target affordable housing resources, what current programs we have in place that should be key components of a comprehensive plan and discussed the need for more resources—like using our public land—to achieve the ambitious goals we hope the task force will recommend. You can read our entire testimony here.
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November 15th, 2012 | by Jessica Fulton
The gap between the rich and poor in DC has widened in the past few decades according to a new report from the Center on Budget and Policy Priorities. The report, “Pulling Apart,” is a state-by-state analysis of growing income inequality over the last several decades. Its findings are particularly disturbing because the report takes into consideration supports like federal housing subsidies and TANF which ease strain on the lowest earning DC residents.
Most notably, the Center’s report finds that this growing inequality was caused largely by both declining incomes and the bottom and rising incomes at the top both the short term (since the late 1990’s/mid 2000s) and the long term (since the 1970s). Since the late 1990s/early 2000s, incomes for the poorest fifth of DC households have declined by more than 18 percent. Over the same period, households in the richest fifth have seen increases of over 16 percent. The report also found that while incomes were declining since the seventies, incomes at the top have actually doubled, heightening the inequality between the groups. 
This data echoes findings in a DCFPI report released earlier this year, which showed DC ranks third among the nation’s largest cities in the gap between richest and poorest residents. In 2010, for example, the income of the top fifth of households in our city was 29 times the income of the bottom fifth.
What can we do about this? The District can put in place policies and programs that create opportunities for our lowest-income residents. Education and job training are two key factors that help low-income workers move up the career and income ladder. By funding policy changes that help workers prepare for living wage jobs, find affordable housing, and receive better pay, the District can help close the gap. Here are several ways to do that:
TANF Job Training
One in 11 DC residents wants to work but cannot find a job. DC has an opportunity to invest in these individuals to help them gain skills that will allow them to compete in DC’s job market and pull themselves out of poverty through the job assessment and training component of TANF, Temporary Assistance for Needy Families. One out of three DC families receives TANF assistance. DC has revamped its assessment process and heads of households are now getting the help they need to enter and reenter the workplace. In addition to continuing to focus on the training components of TANF, DC has to take into consideration that some families may need longer periods to reach the point of self-sufficiency. By including certain exemptions, DC can insure that these families have enough time to find work.
Workforce Intermediary
Implementing a workforce intermediary is yet another option that DC has for matching residents with viable employment. Mayor Gray appointed a task force to create an intermediary that gave its recommendations earlier this year. The District’s Workforce Investment Council is currently hiring a director. An intermediary would be an innovative approach to matching qualified employees to appropriate positions around the District.
Enforcing DC’s Living Wage
The District’s living wage law requires DC government contractors and recipients of government assistance (in grants, loans, or tax increment financing in the amount of $100,000 or more) to pay its affiliate employees at least $12.50 an hour. By strictly enforcing and expanding the already existing living wage law, many low wage workers will fare better in the current system. For low earners not covered by this law, the District should consider raising the minimum wage. Raising wages of low-income workers is one of the most effective ways to lift households out of poverty.
Investing in Affordable Housing
Expanding affordable housing will also help to pull the lowest income families up the ladder. Initiatives like the Local Rent Supplement Program (LRSP), which provides monthly rental subsidies to help families afford their homes, increase income for those at the bottom of the income scale. Expanding this program will allow more families in the District to escape poverty through rental subsidies.
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November 14th, 2012 | by Ed Lazere
It’s one of the best kept secrets that DC’s property taxes are the lowest in the Washington region. Over the past decade, the District has set the residential rate to 85 cents per $100 of assessed value, increased the homestead deduction, and set a ten percent cap on how much a home’s assessment can grow each year for tax purposes.
Sounds like things are working pretty well. And they are for most homeowners. Which is why it’s puzzling that a bill before the DC Council would cut property taxes broadly for homeowners even more. DCFPI favors another bill before the Council, which would offer targeted help to owners who face the greatest struggle paying their bills. We think that is the right approach at a time we should use our civic resources to meet the greatest needs. 
The blanket property tax cut would reduce the annual cap on assessments from ten percent to just five percent per year. It’s unclear why this relief is needed, since property tax bills for DC homeowners already are lower than in surrounding jurisdictions. The average property tax for a DC home worth $500,000 stood at $2,718 in 2012, compared with $3,525 in Arlington County, $4,653 in Fairfax County, $4,688 in Montgomery County, and $5,393 in Prince George’s County.
Moreover, the typical DC homeowner pays tax on just 73 percent of their home’s value, thanks to the 10 percent cap and the homestead deduction. This suggests that the current cap is working well to limit increases in homeowner property taxes. Once again, it is not clear why further reductions in homeowner property taxes should be a legislative priority.
The biggest argument against a blanket tax cut is that it would disproportionately help those who need it the least. A DCFPI economic analysis of the city’s property tax database shows the benefits of slashing the cap to five percent would largely go to owners of high value homes and to residents in the city’s highest-income wards:
- Some 64 percent of the benefits of a five percent cap would go to homes worth more than $550,000, even though they represent just 31 percent of DC homes. By contrast, homes worth under $275,000 would get only eight percent of the benefits, even though they make up 29 percent of DC homes.
- Homes in Ward 3 would claim 33 percent of the benefits of a five percent cap, while homes in Wards 7 and 8 combined would receive just four percent of the benefit. This is because the homeownership rate is low in Wards 7 and 8, so that few households benefit at all, and because home values are far lower there.
DCFPI strongly supports an alternative property tax reduction bill that is before the DC Council, the Schedule H Property Tax Relief Act of 2012. Schedule H is a property tax credit targeted to households for whom property taxes are high relative to income. It is limited to lower-income households, but it applies to renters in addition to homeowners.
Support for this targeted tax relief is strong, but the credit has been neglected since it was created 35 years ago. The income eligibility level is just $20,000, and the application rules are complex. This reform bill would update this important tax credit and give tax relief to thousands of households who face pressure paying their tax bill.
DC’s overall homeowner property tax system is not broken, but our tax credit to help low-income homeowners needs to be updated and strengthened. Let’s put our repair efforts where they are needed and give targeted tax help to our neighbors who really need it.
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November 14th, 2012 | by Jessica Fulton
Recently, the U.S. Census Bureau released data that gives a broader picture of economic trends in our city. Not surprisingly, poverty increased over the course of the recent recession. More unexpectedly, however, the data also shows that median income in DC also has been on the rise since 2007.
This tells us that while many DC residents weathered the recession pretty well, our neighbors at the low end of the economic spectrum got hit and hit hard. This creates an ever widening wealth and opportunity gap in our city. Tomorrow, the Center on Budget and Policy Priorities will be releasing its “Pulling Apart” report, which is a state-by-state analysis of income trends. DCFPI will be looking at the conclusions reached about DC in tomorrow’s blog.
Here is some information to get you started:
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November 13th, 2012 | by Soumya Bhat
The much-anticipated school closure announcement finally happened today, with 20 DCPS schools on the list. The ultimate decision on which will be shuttered at the end of the 2012-2013 school year is left up to Chancellor Kaya Henderson, and she has said that a final verdict will come by January. If implemented, this will be the first mass school closing in the District since former Chancellor Michelle Rhee closed 23 schools in 2008. Many residents are absorbing what factors went into this decision and how it will impact student enrollment across the city’s neighborhood schools.
The Chancellor has listed under-enrollment, under-utilization of facility space, and lack of modernization as factors in their consolidation decisions. The schools on the closure list are primarily in wards 5, 7, 8, and mostly are elementary schools, though one high school is included. Two of the schools on the list serve primarily children with disabilities and will move into the former building for River Terrace, a DCPS school closed last year.
The announcement was not unexpected, as residents spent the summer and fall participating in a series of community meetings on school quality held by the DC Deputy Mayor for Education. Unfortunately, the report summarizing these conversations has not yet been released to the public and may or may not have been incorporated into Chancellor Henderson’s rationale to close these particular schools.
In several ward conversations, there was strong pushback on the Illinois Facilities Fund (IFF) study’s methodology and recommendations. Commissioned by the Deputy Mayor for Education, IFF released a highly controversial report last February, citing the need for the District to close or turnaround over 30 schools. The report also recommended the schools be replaced with charter schools ranked as high-performing in their analysis. The table below shows that 7 of the 20 proposed DCPS school closures were identified in the IFF report as “Tier 4” or “Tier 3” schools, as the lowest quality in their ranking. Other key characteristics of the school’s student population are also listed below, with projections of how many students are enrolled this school year, percent that are low-income, and percent that are attending within their designated school boundary.
The question remains: Will closing these schools make the DCPS system more effective and cost-efficient? Where will the savings, if any, be allocated, and how will the buildings be used? One study cites that DCPS lost $5 million in per-pupil funding in 2009 due to decreased citywide enrollment following closures – will the proposed closures lead to a significant drop in enrollment and funding again? In the coming weeks, DCFPI will examine the costs of operating a small DC school, and the potential implications of the school closure list on the larger system.
The D.C. Council will hold hearings on school closures Nov. 15th and 19th. Today is the deadline to sign up for the witness list, and District residents can do that here.
Proposed DCPS School Closure List
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November 12th, 2012 | by Soumya Bhat
It’s shaping up to be a pretty big week for DC public education. DC Public Schools is expected to announce the highly anticipated list of school closures tomorrow. But before we go there, DCFPI wants to highlight an opportunity to comment on whether or not DC should have a neighborhood preference for admission to the city’s public charter schools. A task force that was charged with exploring the possibility of creating neighborhood preferences for public charter schools has decided that there is no strong case for doing so, but it wants to hear what the public thinks.
First, a little background. Right now, if a DC charter school has more applications than available space, students are selected through a random lottery (after preference for siblings of enrolled students and children of the school’s board members/founders). There is no geographic preference for students who live in the surrounding area.
The Council, in the FY 2013 Budget Support Act of 2012, asked the Chairman of the DC Public Charter School Board (PCSB) to convene a task force to research and examine neighborhood preference for charter school admissions in the District of Columbia. Since then, two meetings were held by the task force to study charter student enrollment patterns, discuss what other cities have done, and what options for a preference are feasible for DC’s charter school community. You can find the background materials for the meetings here on the PCSB website.
So, what could this mean for DC parents? A neighborhood preference for a charter school would give some level of priority enrollment to families living inside a set geographic boundary around the school. But, how these boundaries are drawn and what factors go into actually applying the preference could be decided in very different ways. In the case of New Orleans, for example, the neighborhood preference is only applied from Kindergarten through 8th grade. The actual percentage of seats that are reserved for this purpose also varies, with some cities choosing to reserve 100% of seats for neighborhood students while others reserve less.
The task force deliberated several options, but has concluded preliminarily that a neighborhood preference is not needed. According to the PCSB, “35% of public charter school students go to school within one mile of their home and 49% go to school within their ward.” The task force feels that if a neighborhood preference is applied, it should be a voluntary option for each charter school.
Do you agree? The final task of this process is to hear whether the public feels a preference is needed, and if so, what options should be considered. It may be that some parents living close to a public charter school may feel that they should get an admission preference. At the same time, others point out that an admissions preference really is a matter of re-arranging the deck chairs (or school desks in this case), and that it does not address the true need for the city to have a systemic approach to improving all schools.
The task force is asking for public comment this Thursday evening (unfortunately directly overlapping with the Council’s first hearing on DCPS school closures). Your feedback will be used to help inform their final recommendations to the Council, due by December 15th.For more information on the task force, see here.
Public Comment Session to be held November 15th, 2012 5:30-7:30pm at Achievement Prep Public Charter School (908 Wahler Pl SE, Washington, DC 20032)
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November 9th, 2012 | by Ed Lazere
The recent debate over how much the District should fine drivers for speeding certainly hits home for many of us. My family has gotten six $125 tickets this year—five of them being earned by our newest and youngest driver within his first weeks of vehicular freedom.
The fines impact our household budgets, and they also impact the District’s budget—and that’s why we need to consider both types of budgets as we make decisions as a city about whether and how to lower them. Last week, Mayor Gray announced that he would use $25 million of unexpected revenue to lower speeding fines. This means that this money cannot be used for other things. Given the fact that using this revenue for this purpose impacts all residents—lead-footed and light-footed, teenagers and irked parents, drivers and even non-drivers alike—the plan shouldn’t be implemented until it is thoroughly vetted, which should include at least a public hearing, a discussion of the fiscal impact, and DC Council approval.
I’ll admit, due process for the Lazere family on this household budget issue was a bit fast-tracked: My wife and I told our son to pay for some of the fines, we figured out how to shift expenses for a month or two to pay the rest, and then we happily drove our son to college and left him there without a car. Family budget problem solved!
Mayor Gray kind of took a similar approach, by just lowering the fines and announcing he’d use additional revenue the District is receiving to pay for it. Being chief executive and executing the District’s budget, however, is a bit different than being chief executive and executing the family budget. Despite the fact that being Mayor gives you the power to do lots of cool things, Mayor Gray still needs to follow a process in spending and redirecting the allocation of District dollars.
Every year, the mayor and DC Council pass a budget that becomes law. The FY 2013 Budget Support Act, agreed upon by the mayor and DC Council and signed by Mayor Gray, listed programs in a specific order that would receive funding if additional monies became available to the District due to unexpected additional revenue. Lowering traffic fines wasn’t on that list. Number one was homeless services. Other programs included the trust fund to build affordable housing, mental health services for children, and additional monies for literacy and adult education.
The DC Council also has a proposal to lower fines, and both should go through the proper process. The Council’s proposal would reduce fines even more and have an even larger price tag than the mayor’s — $60 million – raising more questions about its impact on other services.
There’s good reason to question whether our fines are set at the correct amount. That question should be asked at a public hearing, along with others:
- What is the appropriate level for fines to serve as a deterrent to speeding?
- To what extent are current fines paid by non-residents? If it is a lot, is this a reason to maintain them?
- Are there ways to replace the lost revenue, perhaps by adding cameras to other intersections with speeding problems?
- Can the reductions be phased in over time to limit the impact on DC’s budget?
- Can the reduction in fines be placed after other pressing priorities on the budget wish list that the mayor and Council adopted?
Reducing traffic fines may be an important issue. But because it is also a budget issue, its impact on the budget needs to be considered, and cutting traffic fines needs to be weighed against all the other important needs in the city.
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November 8th, 2012 | by Wes Rivers
DCFPI is excited about the District acquiring a new Navigator.
No, not a Lincoln Navigator, the SUV of DC controversy: The Navigator we’re talking about refers to the city’s plan to contract with and train a network of consumer advocates who will help DC residents and businesses shop—or navigate—the options offered through the new health insurance exchange.
As the District’s Dime has written previously, the District is aggressively moving forward with implementation of the Affordable Care Act, known to many as Obamacare. Next week the people in DC charged with governing the District’s health insurance exchange will take important action on the design of such a consumer tool.
The purpose of the Navigator is to provide outreach, education, and guidance to consumers. Those chosen to serve as a Navigator will perform the following:
- Provide education and outreach to consumers on the available health insurance options in the exchange — also known as qualified health plans.
- Distribute fair and impartial information about enrollment, eligibility, and possible subsidies and tax credits available for qualified health plans, and about public programs such as Medicaid and DC Alliance.
- Help businesses or individuals select and enroll in a qualified plan.
- Refer consumers with questions or complaints about their plan to District agencies that provide consumer assistance and oversight.
Navigators will be required to present information in a way that is culturally and linguistically suitable for DC residents and that is accessible to people with disabilities.
By performing these duties, Navigators help to ensure that the exchange has “no wrong door” to accessing health coverage. They will provide services for both individuals and small employers, but planners envision that Navigators will primarily serve individuals seeking health insurance. This is especially true in the case of navigators that are community-based organizations with deep ties to vulnerable and hard-to reach populations. They will exist alongside brokers and agents, with the latter groups likely using their experience and expertise to serve small employers. The District’s small employers can opt to use a Navigator or a broker.
Finally, several consumer protections are built into the proposed structure of the Navigator program. First, Navigators will have to complete training and accreditation requirements to be certified. They will be paid a set amount as opposed to working on a fee-for-enrollment basis. This will incentivize Navigators to provide the wide range of services above instead of just enrollment. Conflict of interest standards will help ensure that Navigators act in the consumer’s best interest and present information in a fair, impartial manner. Lastly, they cannot be paid by a commercial health insurer and must demonstrate an existing or readily obtainable relationship with likely consumers of exchange plans.
The proposed Navigator Program is only in the early stages of design, and more specific requirements for participating entities will come at a later date. However, the exchange board’s decision about the broader program structure will influence how consumers interact with the DC Exchange. We applaud their efforts and we hope they fully consider consumer protections as they continue forward. The District’s analysis of available Navigator options can be found here.
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November 6th, 2012 |
One last reminder from the District’s Dime: Polls are open until 8 p.m. in the District, and as long as you are in line by that time you can vote! A list of polling places is here.
Today is the day the issues we care about are represented in the candidates we vote for! Tomorrow we’ll resume writing about those issues!
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November 5th, 2012 | by Elissa Silverman
Tomorrow is Election Day! DCFPI encourages all DC registered voters to vote tomorrow, if you haven’t voted by absentee ballot or used the District’s early voting option already! Polls open at 7 a.m. and close at 8 p.m. You can find your polling place here. The offices, candidates and questions on the ballot are listed here.
Given our thoughts are focused on the election and polls today, the District’s Dime would like to call attention to two important questions that were part of the local poll recently conducted by Washington City Paper and the Kojo Nnamdi Show. The entire poll can be found here.
First, it was great to see that more than one-out-of-two respondents attended a neighborhood meeting in the last year! We make good decisions as a community when we are educated about the issues we face.
On to the other questions: One question asked about tax abatements.
City leaders are trying to diversify the District’s economy by attracting businesses that are not directly tied to the federal government, like technology companies. As you may know, recently the District gave the daily deal company LivingSocial a $32 million tax abatement in exchange for a promise to keep its offices downtown. I am going to read three statements. After I read them, please tell me which comes closest to summarizing your feelings on attracting and retaining businesses with tax incentives.
Respondents answered:
59%: They can be useful, but D.C. should insist on more promises from the companies that get them
18%: The subsidies are a powerful tool to attract jobs, and they should continue
13%: D.C. should not offer incentives
10%: Not sure
DCFPI counts itself among the 59% percent of DC residents who answered that abatements can be a useful economic development tool, but it is important to know why the abatement is needed. That’s why DCFPI supported the Exemptions and Abatements Information Act, which is now law. This requires abatements to come under the same financial scrutiny as TIFs, so we make sure we are incentivizing where incentive are needed.
The second question involved public funds for building a soccer stadium:
As you may know, the District paid for the more than $600 million cost of the Washington Nationals baseball stadium in 2007. Soccer team D.C. United wants a new stadium here, too. Under one possible scenario, the team would pay to construct the stadium, but would get significant incentives and investment from the local government worth tens of millions of dollars. I am going to read three statements. After I read them, please tell me which comes closest to summarizing your feelings on how the District should keep D.C. United in town.
Respondents answered:
62%: The team should pay, but the city should cover infrastructure costs
21%: The team should pay the cost, even if it has to move out of D.C.
11%: Not sure
6%: The city should pay for the stadium and all associated costs
So just what comes under the heading infrastructure costs? That’s an important thing to consider and the District’s Dime will be writing about this very soon.
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November 2nd, 2012 | by Jenny Reed and Kate Coventry
The D.C. Council took two important steps this week to give opportunities to families in our city who need them the most. One step was passing an important piece of legislation that keeps a critical housing program working at full capacity and will immediately help 17 families currently living in shelter. The other was approval of a reprogramming that moved critical funds into DC’s Temporary Assistance for Needy Families (TANF) program, which will help parents enter or reenter the workforce.
Both steps help move the District forward by putting vulnerable families on a path of stability and independence. DC’s Local Rent Supplement Program (LRSP) is one of the city’s best tools to help create affordable housing for very low-income residents, but in recent months its impact was limited due to a mayoral directive that kept families from accessing the program. Thanks to a bill introduced by Council member Michael Brown (I-At Large) and passed by the Council at yesterday’s legislative session, 17 slots in DC’s LRSP program that have been held unused will now go to help families living in emergency shelter secure affordable housing.
In another important move, $10 million of unspent funds from other agencies was reprogrammed to TANF, DC’s welfare-to-work program. These monies, along with an additional $1 million moved to the program earlier this month, will support critical TANF reforms that were not funded when the fiscal year 2013 budget was passed. All TANF parents will receive a one-on-one assessment by April 1st, six months earlier than the Department of Human Services anticipated. These assessments identify each parent’s strengths and barriers to employment, such as low literacy or math skills, and outline a plan to address these barriers. The funds will also expand the capacity of employment service providers from 3,000 to 3,900 slots.
Finally, these funds also delay a 25 percent benefit reduction that many families would have experienced before they have even had a chance to access the District’s new, improved TANF employment services. This reduction, which was scheduled to begin this month, has been delayed until April 1st, giving parents some time to access the services they need to successfully transition to self-sufficiency.
DCFPI thanks Mayor Gray and the Council for supporting critical TANF reforms and encourages them to work together to identify the funding needed to implement the other critical TANF reforms included in the FY 2013 budget. By working together, they can keep families on a path of progress and independence.
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November 1st, 2012 | by Elissa Silverman
This morning via Twitter, it seemed like Christmas came early to the Wilson Building: The Gray administration informed DC Council members at a pre-legislative session breakfast that the District had millions in unspent funds from fiscal year 2012 that needed to be spent—pronto. In fact, the Mayor had asked Chairman Mendelson to move an emergency bill at today’s legislative session that would allocate $6.9 million to charter schools, $6.9 million to DC public schools, $6.5 million to Metro, $1.5 million to parks and recreation and $1.2 million to the Oak Hill youth detention facility.
You might be asking: Where did this money come from? Why did we learn about it now? Do we need to spend it right now? Can it be spent for other things?
You ask, the District’s Dime answers…
Where did this money come from?
It is very hard as a government to spend the budget right down to the penny, so as the end of the fiscal year approaches in September, some agencies have unspent dollars. If the money is not spent at all, it ends up in the city’s savings account, known in wonk-speak as the “fund balance.” But there’s a bit of a grace period after the fiscal year ends September 30 to do what’s called a “reprogramming,” which is shifting funds from one agency to another. The deadline to reprogram monies is today, November 1. The funds discussed today are unspent dollars that the mayor proposes to reprogram.
Why did we learn about it now?
The executive has the ability to reprogram dollars throughout the fiscal year, and due process is that the mayor gives notice to the Council, the notice is published in the D.C. Register, and the money is passively approved unless there is an objection. In the last 45 days or so, the Gray administration has reprogrammed about $30 million in unspent funds in this way. Those funds went to parks and recreation ($13 million), Temporary Assistance for Needy Families ($11 million), Department of Health Care Finance ($2.5 million), the Metropolitan Police Department ($1.6 million) and a few other places in smaller designations. There also has been a number of reprogramming of funds within agencies, from one line to another.
Today’s reprogramming did not have the proper time for a passive approval, so Mayor Gray and his administration are seeking an active approval from the Council so it can be done today, via emergency legislation.
Do we need to spend it right now?
There are options, depending on circumstances. One situation where the city would need to reprogram immediately is if money needs to be moved to agencies that have obligated more than their budget, so the District is not found to be anti-deficient. There also maybe other obligations under the law in which we need to spend the money. Right now, it is unclear whether all of the five designations—DC Public Charter Schools, DCPS, Metro, DPR and Oak Hill—meet either of these criteria, although it appears that some may.
A case can also be made to wait in those instances where the funds do not have to be reprogrammed now. The money could be placed in our reserves for designation at a later time. That way the Council could have a discussion of how best to spend these funds.
Can it be spent on other things?
An important thing to keep in mind is that these unspent funds cannot be budgeted in a way that using them in fiscal year 2013 would create funding holes in fiscal year 2014 and beyond. These are what is known as “one-time” funds and can be used for programs or activities that are finite.
That said, there were items included in the “wish list” for fiscal year 2013 that have not yet been funded but could be funded on a one-time basis, including using reprogrammed funds from FY 2012. An example is the Housing Production Trust Fund.
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October 31st, 2012 | by Corinna Zarek, D.C. Open Government Coalition
If a D.C. government official conducts public business using a non-governmental email account such as Gmail or Hotmail, are these emails subject to disclosure under the D.C. Freedom of Information Act?
According to the D.C. Council, they’re not. But many other states—like New York, Alaska and Florida, as well as neighboring Maryland—have decided that the Freedom of Information Act (FOIA) applies to any email (including Gmail, Hotmail, AOL, etc.) that involves communication about the public business, regardless of whether it is a from a government account or a private account.
The Council’s position— which makes it an outlier among public bodies across the country to address the issue— is now being challenged in a lawsuit by the D.C. Open Government Coalition. The Coalition is made up of media outlets, nonprofit organizations (including the DC Fiscal Policy Institute), law firms and individuals.
On October 16, the Coalition sued the Council of the District of Columbia after being denied access to email correspondence in which Council members transacted public business through personal, non-governmental email accounts during a 60-day period in early 2012. When government employees do their job—working on behalf of the public and taking action in our name—we have a legal right to see what they’re up to. The Coalition’s lawsuit wants to ensure that no matter whether a Council member emails about city business from an AOL account or sends a message from a personal BlackBerry, the public gets to see it.
If the Council’s position were adopted, it would mean that government officials could easily evade FOIA by simply doing their work on a non-governmental email account. This isn’t a hypothetical scenario—press reports over the past year have indicated that some D.C. officials routinely engage in that practice.
The District’s open meetings and open records laws provide the public with a broad right of access to information about government activity (with limited exceptions). In response to the Coalition’s FOIA request, however, the Council argued that emails generated on a personal account are not within the “possession or control” of the Council, and need not be collected or produced—even while conceding that such emails are “public records” under FOIA.
In July, Mayor Vincent Gray directed D.C. employees to use their government email accounts for government business, and if business should occur on personal email, to file those messages with the D.C. Government. As a legislative body, the Council is not bound by the Mayor’s order, and it has not adopted a similar policy.
In response to the lawsuit, D.C. Council Chairman Phil Mendelson told The Washington Post that the D.C. government “has got to get a more clear policy” on government email sent from personal accounts. He said he agrees that “government business should be conducted on government accounts,” and that the Council may look into a new policy as early as the next Council period, starting in January. The Coalition agrees, and we hope Chairman Mendelson will act with urgency on making the Council compliant with FOIA law.
The Coalition is represented by Chad Bowman of Levine Sullivan Koch & Schulz. The complaint is available on the Coalition’s website. An initial scheduling conference is set for Jan. 18, 2013, before D.C. Superior Court Judge Laura Cordero.
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October 30th, 2012 | by Wes Rivers
DC small business owners who want to provide health insurance to their workers often face a dilemma: limited choices of insurance plans, few doctors within those plans, and skyrocketing premiums, even for high-deductible options.
In Sunday’s Washington Post, Jill Thorpe explained how implementation of federal health reform in DC – particularly the creation of the DC’s health insurance exchange — will make it much easier for her husband’s small architecture firm to offer quality health insurance to its employees. The company currently pays $18,000 annually for a worker’s family health plan that has a $5,000 deductible. Premiums have jumped 22 percent year recently.
Thorpe writes that the exchange will create more predictable and affordable health insurance options for small businesses, allowing them to do the right thing and compete with larger firms for good workers. Thorpe’s column is eye-opening given the recent uproar over DC’s xxchange plans from some small business groups, who warn of dire consequences and gloss over the realities of the current dysfunctional small group insurance market.
Thorpe notes that the DC exchange offers many mechanisms to address the needs of small employers. Creating a unified market with an online portal will allow consumers to compare all health plans in the exchange side-by-side, with information on out-of-pocket expenses, network of doctors, and quality ratings. The exchange will set minimum quality standards, which will ensure that small employers have access to plans with an adequate level of services and a robust network of doctors and specialists. Right now, the only plans affordable to small businesses offer bare-bones networks and services.
Finally, DC’s plan to merge the individual and small group risk-pools could decrease the high variation in premiums from year-to-year and slow their growth over time. While there may be short-term price increases for small businesses, from adding in the individual market, this will be offset by tax credits that will cover as much as 50 percent of premium costs for small businesses.
Families USA and the DC Fiscal Policy Institute have created a fact sheet that offers more information on DC’s health care exchange and how it will benefit small businesses and their employees. With time, the exchange should bring a more competitive and vibrant market that provides a robust offering of quality and affordable health plans for District workers.
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October 26th, 2012 | by Walter Smith and Brooke DeRenzis, DC Appleseed
Editor’s Note: Some District’s Dime readers did not get this blog on Wednesday so we are sending again! Thanks to authors Walter Smith and Brooke DeRenzis of DC Appleseed.
What should the future of public higher education look like for DC?
That is a question that the leadership of the University of the District of Columbia (UDC), our city’s elected officials, and community members have been wrestling with these past few months—and it was the topic of a D.C. Council hearing this past Monday. One thing is certain: UDC needs to make significant changes to respond to financial pressures, to changing enrollment at the newly created community college and flagship university and to the needs of students who rely on the school to provide higher education that is both intellectually challenging and vital preparation for their careers.
UDC has undergone a major reorganization over the past three years into a “university system” consisting of a higher-tuition flagship university with admissions standards and a lower-tuition open-admissions community college. As a result, UDC now houses two similarly-sized academic divisions – the flagship and the community college –which share a legal identity, accreditation, key administrative functions, and resources. Because these two schools have different missions, programs, faculty, and staff, UDC’s leadership and elected officials are looking to make the community college an independent institution while also strengthening the flagship university.
For both schools to succeed and fulfill their academic missions, UDC’s serious financial challenges need to be addressed—and soon. UDC’s cost per full-time student is 66 percent higher than its peers – a figure that reflects the fact that the university’s faculty, staff, administrative systems, and facilities are too large for the size of its student body. In fact, its staff size is 88 percent higher than the national average, and its administrative, executive, and managerial staff size is 315 percent higher than the national average. Unless UDC addresses this high cost structure, it will continue to face operating deficits and dwindling reserves, and it will not be able to achieve the dual goals of a strong flagship university and an independent community college.
That’s why an advisory board chaired by DC Appleseed, which was tasked with developing a plan to transition the community college to independence, recommended that UDC create a right-sizing plan, and why the D.C. Council passed legislation setting an October 1st deadline for the completion of such a plan. Both the flagship university and the community college are critical to providing our city with a skilled workforce, and the District needs a realistic and fiscally responsible plan for a higher education system that benefits students, employers and the community in general.
The right-sizing effort is intended to put UDC as a whole on sound financial footing, to strengthen the flagship, and to ensure that UDC can move the community college to independence. UDC’s board has taken a first step toward developing a plan to bring its costs more in-line with those of its peers. On Monday, at the hearing before the D.C. Council’s Committee on Jobs and Workforce Development, UDC board chair Elaine Crider and UDC president Allen Sessoms testified about changes they are planning, including eliminating 110 positions and consolidating the community college operations to one location on the UDC campus in Van Ness.
But, as UDC’s leaders also explained Monday, there is more work to do to complete the right-sizing plan required by the D.C. Council. In particular, UDC must still finalize plans to eliminate and restructure programs, determine how to use existing facilities and where to locate community college programs, complete a compensation analysis, and conduct an internal review of senior management staffing. UDC testified that they will need several more months to complete such a plan. However, the university’s immediate financial challenges, including an anticipated operating shortfall this fiscal year, make it critical to pursue this effort with urgency.
We urge the UDC board to include the following steps in its path forward:
- A timeline that explains when it will complete each of the outstanding elements of the plan required by the Council’s legislation.
- A list of changes that can be made immediately in addition to the 110 position reductions already contemplated; this should include an assessment of changes that might be made in the use of existing facilities.
- A plan for successfully moving the community college to independence as right-sizing occurs; this should include an explanation for how the proposal to relocate the community college to UDC’s campus fits with the plan for independence.
The writers work for D.C. Appleseed, which conducts public policy research and analysis on issues impacting the District of Columbia. Walter Smith is executive director of DC Appleseed and chaired the advisory board tasked with developing a transition plan for an independent community college for DC. Brooke DeRenzis is a project director at the organization.
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October 25th, 2012 | by Ed Lazere
Affordable housing in DC is in short supply, especially for DC residents with very low incomes. Yet a key tool that DC government has to help these families—the Local Rent Supplement Program (LRSP)—has slots that are empty due to a mayoral directive to keep them unfilled. That simply doesn’t make sense, and the D.C. Council should support a bill calling for this critical housing tool to be fully maximized so that parents and kids in need of housing can have an affordable roof over their heads. The bill will be discussed in a Council roundtable on LRSP tomorrow.
LRSP helps make housing affordable to people with very low-incomes — which means households who earn less than 30 percent of area median income, or $32,250 for a family of four. The program makes up the difference between the market rate cost of an apartment and what a low-income family can afford to pay—usually no more than 30 percent of their total income. This helps families not only gain stability by putting a roof over their heads, but it also helps ensure that they have enough left over each month for other basic necessities. Research has shown that low-income households who spend more than 50 percent of their income on housing spend less each month on food, health care, transportation, and retirement savings than unburdened households. Right now, almost two-thirds of low-income DC families spend more than 50 percent of their income on housing.
Since its creation in fiscal year 2007, the District has funded approximately 1,900 LRSP slots. The program was created from a recommendation from the District’s 2006 Comprehensive Housing Strategy Task Force that called for the creation of nearly 15,000 rental assistance subsidies for very low-income families. With just over 1,900 slots funded, the District is roughly 5,000 units behind where we should be in 2013 — 6,900 units — to be on pace with the Task Force’s goal. With the Mayor now directing that any slots in the voucher component of the program not get refilled after a family leaves, the District will fall even further behind its goal of 15,000 rental assistance subsidies in 15 years.
Given how far behind the District is, it is troubling that the Mayor is not using all of the resources currently available to help meet affordable housing challenges facing so many DC residents. The number of slots in the program that are being held unused this year is small, just 17, but the fact that 37,800 very low-income households are currently spending more than half of their income on housing indicates that there is a pressing need for even these few slots. The Mayor has attempted for the past two years to phase out the voucher component of LRSP, something the Council has rejected each time. We hope to hear more clarity from the Mayor’s office as to why they do not want to fully utilize a program with so many benefits at tomorrow’s Council roundtable.
The bill to fully use the Local Rent Supplement Program., introduced by Councilmember Michael Brown (I-At-Large), would require that slots are re-filled as families leave the program, and that critical housing resources do not sit unused. DCFPI supports this bill, and we urge Mayor Gray to allow families to use LRSP and maximize our affordable housing resources.
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October 24th, 2012 | by Walter Smith and Brooke DeRenzis, D.C. Appleseed
What should the future of public higher education look like for DC?
That is a question that the leadership of the University of the District of Columbia (UDC), our city’s elected officials, and community members have been wrestling with these past few months—and it was the topic of a D.C. Council hearing this past Monday. One thing is certain: UDC needs to make significant changes to respond to financial pressures, to changing enrollment at the newly created community college and flagship university and to the needs of students who rely on the school to provide higher education that is both intellectually challenging and vital preparation for their careers.
UDC has undergone a major reorganization over the past three years into a “university system” consisting of a higher-tuition flagship university with admissions standards and a lower-tuition open-admissions community college. As a result, UDC now houses two similarly-sized academic divisions – the flagship and the community college –which share a legal identity, accreditation, key administrative functions, and resources. Because these two schools have different missions, programs, faculty, and staff, UDC’s leadership and elected officials are looking to make the community college an independent institution while also strengthening the flagship university.
For both schools to succeed and fulfill their academic missions, UDC’s serious financial challenges need to be addressed—and soon. UDC’s cost per full-time student is 66 percent higher than its peers – a figure that reflects the fact that the university’s faculty, staff, administrative systems, and facilities are too large for the size of its student body. In fact, its staff size is 88 percent higher than the national average, and its administrative, executive, and managerial staff size is 315 percent higher than the national average. Unless UDC addresses this high cost structure, it will continue to face operating deficits and dwindling reserves, and it will not be able to achieve the dual goals of a strong flagship university and an independent community college.
That’s why an advisory board chaired by DC Appleseed, which was tasked with developing a plan to transition the community college to independence, recommended that UDC create a right-sizing plan, and why the D.C. Council passed legislation setting an October 1st deadline for the completion of such a plan. Both the flagship university and the community college are critical to providing our city with a skilled workforce, and the District needs a realistic and fiscally responsible plan for a higher education system that benefits students, employers and the community in general.
The right-sizing effort is intended to put UDC as a whole on sound financial footing, to strengthen the flagship, and to ensure that UDC can move the community college to independence. UDC’s board has taken a first step toward developing a plan to bring its costs more in-line with those of its peers. On Monday, at the hearing before the D.C. Council’s Committee on Jobs and Workforce Development, UDC board chair Elaine Crider and UDC president Allen Sessoms testified about changes they are planning, including eliminating 110 positions and consolidating the community college operations to one location on the UDC campus in Van Ness.
But, as UDC’s leaders also explained Monday, there is more work to do to complete the right-sizing plan required by the D.C. Council. In particular, UDC must still finalize plans to eliminate and restructure programs, determine how to use existing facilities and where to locate community college programs, complete a compensation analysis, and conduct an internal review of senior management staffing. UDC testified that they will need several more months to complete such a plan. However, the university’s immediate financial challenges, including an anticipated operating shortfall this fiscal year, make it critical to pursue this effort with urgency.
We urge the UDC board to include the following steps in its path forward:
- A timeline that explains when it will complete each of the outstanding elements of the plan required by the Council’s legislation.
- A list of changes that can be made immediately in addition to the 110 position reductions already contemplated; this should include an assessment of changes that might be made in the use of existing facilities.
- A plan for successfully moving the community college to independence as right-sizing occurs; this should include an explanation for how the proposal to relocate the community college to UDC’s campus fits with the plan for independence.
The writers work for D.C. Appleseed, which conducts public policy research and analysis on issues impacting the District of Columbia. Walter Smith is executive director of DC Appleseed and chaired the advisory board tasked with developing a transition plan for an independent community college for DC. Brooke DeRenzis is a project director at the organization.
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October 23rd, 2012 | by Elissa Silverman
Now is a time in which we pay a lot of attention to polls. A staple of almost every poll are questions about jobs and the economy, and whether our elected officials are doing enough to create jobs and direct our economy toward a prosperous, sustainable future. These questions loom large for many District residents, particularly for the 32,000 of our neighbors currently looking for work but who can’t get employment.
What can Mayor Gray and the D.C. Council do about jobs? What have they done? These are good questions to ask. There is much debate about the role of government as job creator, yet here at DCFPI we think a focus should also be on the role of government as job enabler. What can DC government do to help residents get jobs both in the public and private sector? How do we use resources to train our residents for jobs for the future, and how do we determine what those jobs are and what training is needed? How do we know what are the most strategic investments to make and what will help our businesses the most?
It might come as a surprise to some residents that there are people tasked with coming up to the answers to these precise questions. That group of people makes up DC’s Workforce Investment Council, or WIC, as it is known. Their work might be under the radar, however, because the WIC was dormant for a long time, even though federal law requires us to have one. Mayor Gray revived the WIC last year, and the quasi-governmental body made up of business leaders, non-profit executives and government officials in workforce development have been working on setting a strategic vision for the District in this important area.
Last week, WIC executive director Allison Gerber gave a progress report on the WIC to the DC Council, and a copy of her presentation can be seen here.
DCFPI testified as a public witness before DC Council members Michael A. Brown (I-At-Large) and Kenyan McDuffie (D-Ward 5), who chair the committees on economic development and workforce development respectively. The remarks of policy analyst Elissa Silverman are below:
I am happy to be here to speak about the progress of the Workforce Investment Council. First—and I think this is no small accomplishment—the District now has a fully constituted Workforce Investment Council (WIC) as is mandated by the federal Workforce Investment Act. The WIC is staffed, has been meeting regularly and is developing a strategic vision for how we put our residents to work and keep them employed, how we help our businesses thrive by providing them with well-trained workers and resources, and how we all work together to make this sustainable and make our local economy the envy of cities across the country. Given that this was not the case for several years, I think this is a major accomplishment that should be recognized. I want to thank Mayor Gray for his leadership on this, as well as key members of the Mayor’s cabinet including Deputy Mayor Victor Hoskins and Department of Employment Services Director Lisa Mallory, as well as you, Chairman Brown, and your staff, for reviving this public-private entity that I think is vital to the health and welfare of our city.
Over the last year—in concert with the executive and legislative branches of DC government—WIC Executive Director Allison Gerber has laid a good foundation for the work ahead. My observation from attending WIC meetings and speaking with a few members is that she has given WIC members a clear mission and focus, she has hired qualified staff to provide the research and education needed to fulfill that mission, and she has worked collaboratively with the U.S. Department of Labor to move us toward compliance with federal laws. This is no small feat.
So where do we go from here? Again, I am happy to say that another major accomplishment of the WIC in the past year was to put together a five-year strategic plan that gives all of us a framework to think about how to maximize our city’s sizable competitive advantages as well as how to bolster areas where we have not been so strong. DCFPI is eager to be a partner with the WIC on these goals. I’d like to speak about our aspirations for the WIC and DC’s efforts in workforce development within this framework:
First, improving and integrating programs and systems to create a more streamlined and seamless network of services for job seekers and businesses. At the beginning of this year, DCFPI—as a result of a grant from the Greater Washington Workforce Development Collaborative, a project of the Community Foundation for the National Capital Region—released what we called a resource map of workforce development programs in DC. The map comprised more than a dozen city agencies which do some type of workforce development. When I presented the map to WIC members, several expressed surprise at how many agencies provide services and asked how these agencies can work better together and maximize our resources to move our city forward. I think these are good questions, and though I know the WIC is charged with oversight over federal funds, I think we need to look at how we use federal funds to maximize our local funds.
One statistic in the map was participants, and by far the biggest workforce development program is our one-stop centers. DCFPI is happy to see that one of the strategic goals is to improve the services at our one-stops, and we are lending our research expertise to this. Once again, with funding from the Community Foundation’s workforce development collaborative, DCFPI has partnered with DC Appleseed to write a policy brief on how DC can put a certification process in place for our one-stop centers. A certification process is part of federal WIA law, but the District has not had one yet. A certification process can help standardize operations at one-stops to guarantee that residents and businesses get a consistent level of service no matter if they go to the Reeves Center or Minnesota Avenue or Bertie Backus, three of our one-stop locations.
DCFPI believes another key part of integrating systems is taking innovative approaches to job matching, and we are excited that the WIC is working toward putting a workforce intermediary into place in DC. DCFPI was the co-author of a policy brief in 2011, along with DC Appleseed and the DC Employment Justice Center, on examples of how a workforce intermediary can work and has worked in other cities. The WIC convened a task force that issued recommendations on implementation, funding is set for fiscal year 2013, and my understanding is the WIC is hiring an intermediary director. We hope that will happen soon. Innovation has been a key driver for DC in other areas of economic development, such as planning and transportation, and DCFPI believes the workforce intermediary could have a similar return on investment.
Another goal for the upcoming year is ensuring District businesses can access a skilled workforce to meet current and future needs. In doing our research on one-stop best practices, I’ve found that other cities and states have struggled with how to provide business services at one-stop centers. My observation is that this has been a weakness for us too, in that one-stops have focused on job-seekers but of course you can’t get a job without a business or non-profit to hire you. Again, I think that the workforce intermediary can also be helpful in fulfilling this goal, by matching employers with trainers who can provide the skills necessary for the workforce that is needed.
A third goal is promoting the development of workforce skills and credentials to train DC residents for jobs that are available now and will be into the future. As I mentioned earlier, our one-stop centers are the major entry point for our job seekers. Working on providing better assessments of skills and connecting job seekers with training either through intensive services at one-stop centers, individual training accounts focused on training for specific skills and using our growing community college and its workforce development programs will be key.
Finally, the WIC has a goal of providing supports for job seekers to help them be able to stay focused on getting a job and keeping it. Again, from our map, the largest expenditure of adult local money in workforce development is on TEP, the Transitional Employment Program, formerly and sometimes still referred to as Project Employment. Once again, DCFPI is a willing partner with the WIC to help figure out what might be the best practices on subsidized employment. We are embarking on research to look at subsidized employment and we will have a policy brief completed next year.
Thanks so much for the opportunity to testify. I am happy to answer any questions.
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October 22nd, 2012 | by Ed Lazere
In yesterday’s Washington Post, leaders of the Good Faith Communities Coalition urged Mayor Gray and the D.C. Council to use DC’s unexpected $140 million surplus for fiscal year 2012 toward some of our city’s biggest needs: affordable housing, homeless services and job training for low-skill workers. Read what Esther Lederman and Leo Murry had to say. We encourage you to call and e-mail Mayor Gray and the D.C. Council if you agree.
The Oct. 8 Metro article “As winter approaches, hundreds of families have nowhere to go” told a painful story of mothers and babies sleeping in Metro stations. As a rabbi and a priest, our jobs are often to serve the religious needs of our congregations. But the jobs of our faith traditions are much greater than that — to hear the pain of those we live among and to respond to them. Like Moses, who answered the suffering of the Israelite slaves, and Jesus, who had special concern for the poor, our traditions demand of us that we be our brother’s keepers.
How could these funds help our most vulnerable residents?
Cuts in this year’s budget mean that half of all shelter beds for single residents will close come April, possibly forcing 1,200 residents into the streets and onto our steps. The District has empty shelter beds for families, but it says it does not have money to operate them. Using some of the surplus to house families and keep singles shelters open can help D.C. residents escape unstable and unsafe conditions and get back on their feet.
Some of the money could also be used to build and preserve affordable housing. Budget cuts have led to significant drops in funding for the District’s Housing Production Trust Fund — the city’s main tool for preserving and creating new affordable housing. Directing some of the surplus toward affordable housing will provide a second chance to residents who have not been as fortunate as so many others in the District.
Lastly, the surplus could help struggling parents get the help they need to return to work. Tight budgets have left many parents waiting for job training and case-management services. Worse, thousands of these families face drastic cuts in cash assistance before they have had a chance to access improved supports recently put in place by the city. Some of the surplus should be directed to expanding job training and case management and to delay cuts in assistance that help vulnerable families stay off the street.
These critical needs were identified by the mayor and council on a “wish list” they hoped to see funded if the District’s revenue picture brightened, as it has. But basic human needs — shelter, housing, job training and assistance — do not belong on a wish list and cannot wait. The District’s $140 million surplus provides an excellent opportunity to address these critical issues. We urge Mayor Gray and the council to use some of the funds to help those in need.
Esther Lederman is a rabbi at Temple Micah. Leo Murray is associate pastor at Holy Trinity Church.
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October 18th, 2012 | by Wes Rivers
Starting in 2014, the DC health insurance exchange will improve the quality and affordability of health plans offered to individuals and small employers, groups that traditionally have had difficulty finding plans that covered what they wanted with a reasonable price. The exchange will make it easier to find a quality health plan and to compare plan options with regard to both services and price. The exchange also will create new entities with the sole purpose of helping consumers navigate the process for identifying a health plan.
While the District has been a national leader in health coverage and innovative health policies for lower-income residents, efforts to ensure consumer choice for individuals and small businesses who must buy health insurance in the private market have not kept up. Small employers in DC often have few health insurance choices, with a couple of major insurance companies dominating the market and offering plans that have shrinking coverage but are increasingly expensive. Moreover, individuals and small businesses lack detailed information about plans’ provider networks, fees, and limitations, making comparisons across plans difficult, if not impossible.
The District’s mission for the health insurance exchange is to provide a robust set of quality options to consumers. To ensure quality, the District will impose minimum standards on plans sold through the exchange – requiring plans to have an adequate number of doctors and specialists and imposing reporting and disclosure requirements for a plan’s services, quality measures, and costs. All insurers in the exchange will have to play by the same rules.
The exchange also will create an online shopping portal where plan information will be available in a standardized, user-friendly format. By increasing the standards and transparency of what is offered on the exchange, consumers will be able to compare plans side-by-side and know exactly what to expect with their purchase. This will increase competition and create incentives for innovative products to emerge in the market, leading to higher levels of quality and a greater number of plan options at more affordable prices.
The District’s exchange also provides new options for individuals in poorer health and small employers – two groups whose choices are particularly limited. First, the exchange will ensure that individuals and small business employees who are in poorer health have more affordable plan options that meet their higher health care needs. Secondly, small businesses can choose to offer their employees multiple health insurance options through the exchange and not face additional expenses or administrative red-tape.
On top of these features, brokers, agents, and other assisters will be available to help individuals and small businesses make choices. The exchange will create new entities – known as “navigators” that will be paid by the exchange to provide unbiased information on all plans available and guide residents through the exchange’s enrollment process. Navigators will also help families determine if they are eligible for programs such as Medicaid or for other subsidies to help pay premiums or reduce co-pays and deductibles.
Overall, the District exchange will offer a greater selection of quality plans that meet the needs and pocketbooks of DC’s residents and small businesses.
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October 17th, 2012 | by Ed Lazere
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.
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October 15th, 2012 | by Jenny Reed
Next Monday, DC’s Comprehensive Housing Strategy Task Force will hold the first of two public hearings to gather public input on what a comprehensive housing strategy should look like for the District. The task force is charged with updating the work of the District’s 2006 task force, concentrating this go-round on how to maintain and build more affordable housing in DC. (DCFPI’s Jenny Reed and Ed Lazere are both advisory members of the task force’s ‘Rethinking Local Funding’ work group.) While there will undoubtedly be new recommendations made in the current report, the task force should take the 2006 report recommendations — many of which have not been implemented as the Brookings Institution noted— into serious consideration.
Some of the major recommendations in the 2006 report included:
- ‘Doubling the Effort’ The 2006 report called on the District to double its annual expenditures on housing. While DC did increase annual expenditures through 2008, the recession has led to a significant drop in the resources for affordable housing, limiting the progress of the District in increasing the overall supply of affordable housing in DC.
- Preservation of Affordable Housing Preservation of existing affordable housing is an important component of maintaining affordable housing in DC. The 2006 task force called for the District to preserve 30,000 affordable housing units. While a lack of data prevent us from knowing how many units the District has preserved since 2006, without sufficient resources it is unlikely that DC is on its way to meet the goal of preservation of 30,000 units by 2020.
- Production of Affordable Housing In addition to preserving the affordable housing already in place, the task force also recommended that 55,000 new housing units be produced, of which about one-third should be affordable. Significant reductions in funding for the Housing Production Trust Fund — DC’s main source for affordable housing production and preservation — have limited the amount of new affordable housing the District has been able to support.
- Supporting Extremely Low Income Renters The previous task force noted the importance of helping the significant portion of DC households with unaffordable housing burdens and noted that with a projected decrease in federal rental assistance, the District should create a local rent supplement program and assist 14,600 low-income rental households by 2020. While DC did create the program, a lack of funding has meant that the District has funded approximately 1,900 units and is now nearly 5,000 units behind in achieving its goal of nearly 15,000 households helped with rental assistance.
The full set of recommendations from the 2006 task force can be found here. The first public hearing will be Monday, Oct. 22, from 6-9pm at DC Housing Finance Agency. More details and ways to sign up to testify can be found here.
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October 12th, 2012 | by Ed Lazere
Late last month, as fiscal year 2012 drew to a close, DC found out it had $140 million more in the city’s coffers than we had expected. This was not left over or unspent monies at the end of the year, but an uptick in our revenue that we hadn’t anticipated getting.
Where did this surplus come from? Can we spend it?
A few answers:
Where did this money come from? About $75 million comes from higher income and sales taxes. DC’s unemployment rate is declining, which means more residents are earning wages, and those wages are also rising. Another $23 million comes from higher automatic traffic enforcement collections. The final chunk is about $50 million from DC’s estate tax, which is money that comes from the settling of at least one very wealthy person’s assets after their death.
Can the $140 million be spent? The short answer is yes—but there are a few asterisks.
The new revenues were collected in fiscal year 2012, and we are now in fiscal year 2013. But the books for 2012 have not been shut yet, so funding could be added to certain line items that are not closed out at the end of the fiscal year—so-called “non-lapsing funds.”
A second option would be to spend some of the $140 million surplus once it is officially certified in January. That’s when we know exactly how much year-end surplus we have, because it will combine the unexpected $140 million with dollars that were budgeted for 2012 and simply not spent. So there’s a good chance the certified surplus will be greater than $140 million, because it’s very hard to spend money down to the very last penny.
Here’s where some other asterisks come in. Under current law, half of any fiscal year-end surplus must be set aside in a budget reserve, and the other half must be placed in a “working capital fund” to help build DC’s cash-on-hand. A few things to keep in mind: In 2011, DC ended up with a surplus of $240 million that followed these rules. So if the District ends up with another large surplus, let’s say more than $200 million, there are legitimate questions about whether 100 percent of those funds should be saved rather than using some to meet pressing needs, like providing funds to house families who right now have no place to sleep.
That’s why groups such as the Fair Budget Coalition are urging the Mayor and DC Council to use some of these additional revenues to address gaps in funding for homeless services, housing, and TANF cash assistance and job training. DCFPI agrees. These are services that were put on the Fiscal Year 2013 budget wish list, because there was not enough funding when the budget was set. The Fair Budget Coalition argues that these should be funded now that revenues are growing, even though the added revenues came in 2012.
Shouldn’t these revenue increases spill over into the forecast for fiscal year 2013? A bump in the estate tax is unpredictable. Yet the increases in sales, income and traffic enforcement revenues are likely to continue in 2013. But the Chief Financial Officer’s recent revenue forecast did not make any adjustments for 2013.
Why not?
Because of tremendous uncertainty over the federal budget and “sequestration,” the budget cuts that may—or may not—go into effect next year. The CFO declined to make any predictions until the federal budget picture becomes clearer. If a federal “fiscal cliff” is avoided, as most observers assume will happen regardless of who wins the presidential election, we can expect a substantial increase in revenue projections for 2013 and beyond.
With combined surplus over the last two years expected to top $400 million, this is a reasonable point that should be considered.
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October 11th, 2012 | by Wes Rivers
As we’ve noted before in the District’s Dime, DC has been a leader in healthcare reform, subscribing to the belief that having healthy residents leads to healthy outcomes in other areas such as school performance and work participation. Recently, the board in charge of local implementation of federal health reform—known as the Affordable Care Act or Obamacare—made some key decisions about insurance options in DC.
A few small businesses have expressed concerns about these decisions, and today we will explain why the board’s actions actually are beneficial for small businesses and their employees.
Starting in 2014, the District’s health benefits exchange will be the sole marketplace for health insurance plans purchased by individuals and small businesses with fewer than 50 employees. Keep in mind, under the Affordable Care Act, these types of small businesses are exempt from the so-called “employer mandate” to provide insurance, but this decision will be good for these businesses and workers for several reasons. First, the exchange will combine risk pools, meaning insurers will no longer differentiate between small businesses and individuals when calculating premiums. Also, District regulators will set minimum quality standards for all insurance products sold on the exchange – such as providing an adequate number of physicians and offering plans that meet higher levels of need—so we can all count on an expected level of care.
Some small businesses have questioned whether mandating this level of care may be too limiting and hurt their bottom line, but the concerns often ignore key provisions that also help businesses and their employees. Here’s why the District’s decision is a good move.
Reason #1: Choice for the sake of choice does not necessarily give small businesses and employees better, more affordable health care.
The entire purpose of the District’s exchange is to provide individuals and small employers with a robust selection of quality and affordable plans. Some small businesses have expressed concern that limiting choice to the exchange and its minimum quality standards will reduce plan options for small employers and raise costs, but by making the health exchange the sole marketplace for insurance, insurers will have to play by the same rules and truly compete for consumers. Such competition will lead to more choice and hopefully lower costs. The minimum quality standards — otherwise known as the Qualified Health Plan criteria – should ensure that the choices available to small businesses actually provide essential services and adequate options among doctors and specialists. This also gives individual employees who work for businesses with fewer than 50 workers the chance to buy quality health care on their own.
Reason #2: Small employers will be able to keep a long-term, trusted insurance plan if they feel it is best for their business and employees.
All new insurance sold must go through the exchange, but the Affordable Care Act allows small businesses to keep or “grandfather” their current plans if they were purchased before March 2010 and do not change premiums or coverage drastically. While businesses can keep true long-term plans, it is expected that many businesses will opt for the exchange due to incentives or a better deal.
Reason #3: Combining risk pools in the end should keep health insurance affordable.
Early estimates indicate that District small employers will see a slight increase in premiums, perhaps 3 percent. However, for the first couple of years, most small businesses with fewer than 25 employees will be eligible for tax credits that cover up to 50 percent of their premium costs. This will help tremendously with small business operating expenses.
Once again, the so-called “employer mandate” will fine businesses that do not offer minimum coverage to low-and-moderate income employees, but businesses with under 50 employees are exempt. This means that small businesses have options – hold off on coverage without penalty or take advantage of incentives on the exchange. And individuals who work for these businesses will have options to purchase affordable insurance through the exchange.
Overall, the design of the DC health exchange and provisions of the Affordable Care Act should alleviate many of the fears in the small business community. The District kept employers in mind when they designed the exchange: Help small businesses get more for what they pay and ensure plans on the exchange produce a healthier and more productive workforce.
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October 10th, 2012 | by Ed Lazere
One of the oddest aspects of federal oversight of the District of Columbia is the way Congress deals with DC’s budget. Although our city’s programs and services are funded almost entirely from locally raised taxes or federal funds that all states and cities receive — and the Mayor and DC Council spend months each year developing a spending plan— it is Congress that gives the ultimate stamp of approval because DC’s budget is wrapped up in the federal appropriation.
But maybe not for much longer: A referendum introduced by Chairman Phil Mendelson last week would change the city’s Home Rule Charter to let DC’s budget go into effect after a 30-day congressional review period. It would be a passive approval, so the budget would go into effect as adopted unless Congress took action to modify it.
This would be a tremendous step toward budget autonomy.
To be clear, the issue isn’t that Congress makes too many changes to the DC budget. In fact, it typically makes no modifications to the spending plans adopted by the Mayor and DC Council each year, although Congress sometimes says where the city cannot spend funds, such as publicly-funded abortions. The limited oversight reflects a respect for DC’s ability to manage its own affairs and is a sign that Congress does not really want to get into the details of city spending.
No, the real problems stemming from federal oversight of the DC budget are more about process. There are several issues. First, the Council is able to vote on the budget only once, while most bills in DC have two votes, offering a chance to review and improve upon initial votes. Also, the DC budget has to be approved in May, even though the fiscal year starts in October, meaning that a lot can change between the time the budget is adopted and implemented. Both of these rules stem from the need to give Congress time to review the approved budget.
Beyond that, every time Congress and the President face challenges to approving the federal budget, there is always the risk that DC’s budget will get held up unnecessarily, too.
The referendum, which likely will go before voters in 2013, would turn things around a bit. Rather than requiring an active Congressional review and approval, Congress would have a passive approval, with 30 legislative days to review and modify the DC budget. But if they did not act in that time, the budget would be allowed to go into effect. The referendum maintains a healthy federal role in DC’s budget, while also being a better reflection of the actual congressional role in the city’s budget in recent years.
Budget autonomy would bring greater certainty to DC budget planning and other benefits as well. It would allow, for example, DC to start its fiscal year in July, closer to the time the budget is adopted, and let the budget for each school year to fall into one fiscal year rather than two.
DCFPI thanks Chairman Mendelson, DC Vote, and DC Appleseed for their efforts to promote DC budget autonomy.
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October 9th, 2012 | by Jenny Reed
Last Friday, DCFPI testified in support of two major changes that are being proposed to DC’s zoning code: removing minimum parking requirements and making it easier for accessory dwelling units to be built in some parts of DC. These changes, which could help reduce the costs of building housing as well as increase the supply, might ultimately help build more affordable housing and lessen the pressure on the rapidly rising rents in DC.
DC’s zoning code is currently going through a significant revision and changes to some key areas are being proposed. These include changes to how much parking needs to accompany development, how many accessory dwelling units can be built and how much commercial development can be alongside residential areas. Initiated by the Office of Planning, the changes will ultimately be decided by DC’s Zoning Commission. An overview of the proposed changes and process can be found here: http://www.dczoningupdate.org/default.asp
One of the proposed changes is to remove parking minimums from developments in transit-rich areas. In a city with multiple transportation options, removing these parking minimums could help lower the costs of building housing, which, in turn, means that builders can charge less for housing. For affordable housing developers, lowering total development costs can make it easier to build low- and moderate-income housing in transit rich areas.
Another change proposed is to make it easier to build, or convert, accessory dwelling units in certain residential areas of DC. This could help increase DC’s supply of moderately priced housing, since many of these accessory dwelling units are likely to have a smaller footprint and rents are likely to be more modest. This change could also help increase the supply of housing and help to less the pressure on rental prices in the District.
While both of these changes can help contribute to a diverse housing stock affordable to people at all income levels, it is important to note that these changes alone are not likely to meet DC’s significant affordable housing needs. For many low- and moderate income families, new developments will be out of reach even without parking minimums. In addition, accessory dwelling units, even though they will likely have more modest rents would likely still be out of reach for a low-wage worker and are likely not suitable for low-income families. To tackle DC’s significant affordable housing needs, the District will need to combine these changes with robust public investments in housing tools like the Housing Production Trust Fund and Local Rent Supplement Program which can help build and preserve affordable housing for DC’s low- and moderate income households.
A complete copy of DCFPI’s testimony can be found here.
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October 5th, 2012 | by Wes Rivers
DC took a big step this week toward improving the affordability and quality of health insurance plans sold in the District. On Wednesday night, the board tasked with implementing federal health reform voted to make the city’s health insurance exchange the sole marketplace for all individual and small business insurance plans.
What does this mean? Starting in 2014, any insurer who wants to operate in the District must do so through the exchange. Among other things, this will guarantee that individuals and small businesses can fully participate in subsidies that improve the affordability of insurance. Most low-and-moderate income individuals will be able to receive tax credits and upfront payments for premiums and out-of-pocket costs. Some small businesses will access tax credits that offset up to 50 percent of their employees’ premium costs.
The exchange design also allows for regulators to make sure that health care plans meet minimum quality standards. For example, insurers on the exchange will have to offer plans that meet higher levels of need and provide an adequate number of physicians in a given area. The specific standards will be decided at a later date, but to improve plan quality, DC must consider higher standards than the minimum guidelines set by the federal government.
The health exchange board also approved a measure to standardize costs within the exchange. Currently, the premium people pay varies depending on whether they purchased the insurance directly or received a plan through an employer. In general, those receiving an employer-provided plan pay less. Starting in 2014, the exchange will combine individuals and small businesses for purposes of premium calculation — meaning everyone should pay the same prices for plans similar in quality.
Overall, Wednesday night’s vote was a step in the right direction for DC’s health insurance market. But this was only the first step in a long process that will continue through the fall. Now that a foundation is laid for the market design, board members and staff must produce detailed plans about the administration, management, and financing of the exchange. They must also consider higher quality standards for insurance plans offered. Without higher standards, DC risks an opportunity to build a health insurance market that truly meets the needs of all residents.
DCFPI applauds the board’s efforts, and we hope they approach future decisions with the same dedication shown over the past few months.
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October 3rd, 2012 | by Soumya Bhat
It’s no division title, but DC definitely got some winning news in early childhood programs last week. The DC Department of Health learned that they were one of six applicants nationwide to receive federal funding as a result of a competitive grant application completed in August. The District will receive $2.25 million per year for the next two years to build up DC’s Home Visitation program, which will benefit at-risk families with young children across our community.
The new funding comes from the U.S. Department of Health and Human Services’ Maternal, Infant, and Early Childhood Home Visiting program (MIECHV). Nationwide, evidence-based home visiting programs are increasingly seen as an essential part of a city or state’s comprehensive early childhood system. By definition, these types of programs are family-focused and use home visiting as a main way to deliver services to expectant parents and families with children under age five. These services are aimed at improving maternal and child health, parenting practices, and access to community resources. Quality home visiting programs also contribute to the prevention of child abuse and injuries, increased school readiness, and reductions in family violence.
Several things contributed to DC’s successful grant process. The fact that the Department of Health collaborated with the Home Visiting Council, a group of home visiting providers and government representatives, to develop the grant application likely presented a strong sense of coordination and shared vision for implementation once the funding comes through. The final grant application is not yet publicly available, but DCFPI is eager to watch the implementation process begin at the Department of Health over the next several months.
You can see all 2012 MIECHV grant winners here.
And let’s go Nats!
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October 2nd, 2012 | by Jenny Reed
Yesterday, DC’s Tax Revision Commission met for the third time, and much of the discussion was focused on setting the framework for future analysis and decision making. The commission approved a set of guiding principles, as well as discussed what research the commission would undertake over the next nine months. Finally, the commission heard presentations from the Office of the Financial Officer on DC’s governance structure, revenue system, and operating and capital budgets.
Guiding Principles for Judging a Revenue System
While a good portion of the commission’s work over the next year will be devoted to research and education on the various components of a revenue system and how they work in DC, when it comes time to recommend changes to DC’s tax system the commission adopted a set of guiding principles that they’ll use in their deliberations. Briefly, those principles are:
- Certainty: A revenue system should produce enough revenue to support a set of agreed upon public services. This means that the system should include the right mix of revenue sources that will respond to DC’s changing economy but also a sufficient set of stable revenue resources that do not rise and fall drastically with changes in the economy. Relying too much on volatile revenue sources is not wise.
- Neutrality: Taxes and fees should be designed to minimize unintended impacts on private economic decision-making in the real world. There are times when a tax is used to influence behavior–for example, many states levy high taxes on cigarettes to discourage smoking–but the general goal is to levy taxes in a way that does not affect economic activity.
- Competitiveness: The commission should examine DC’s revenue system against our surrounding jurisdictions and look at the impact it may have on DC’s economy. At yesterday’s meeting, commission members stated that DC’s competitiveness is not based solely on our tax rates, but that taxes should be examined where they may have some impact on competitiveness.
- Equity: This principle refers to how to allocate the impact of the revenue system across the District. There are two main sub-principles here: horizontal equity, i.e. two people or businesses under the same circumstances should be paying the same amount of tax; and vertical equity, i.e. those who have a larger slice of the economic pie have a greater ability to pay more–and should–in taxes.
- Transparency and Accountability: A tax system—and changes to it—should be understandable to the public. If the revenue system is more transparent, it can make it easier for the public to hold officials accountable on tax policy decisions.
- Simplicity of Compliance and Administration: A revenue system should be designed in way that makes it as easy and simple as possible for individuals and businesses to comply (from record keeping to filing to appeals) and the government to administer the system.
The commission also talked about its research agenda for the next nine months which will include DC’s economy, frameworks, models for evaluating the impact of tax changes, and specific reviews of sales, income, property and business taxes, to name a few. The full research agenda, which is still a draft, can be found here.
Lastly, the commission received three presentations from the CFO’s office on: DC’s Governance and Fiscal Structure, DC’s Revenue System, and DC’s Operating and Capital budgets. The presentations include a wealth of information on revenues and expenditures and their changes over time.
The Commission’s next meeting is set for November 5th where they will talk about DC’s economy. Tune into the District’s Dime for updates on the Commission’s work as they move forward.
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October 1st, 2012 | by Wes Rivers
Congratulations to DC! The District received almost $73 million from the U.S. Department of Health and Human Services, due to the progress we have made in implementing the Affordable Care Act. Specifically, the money was given for our work in creating DC’s health insurance exchange, the regulated market in which individuals and small businesses will shop for insurance beginning in 2014.
The award establishes DC as a national leader in health care reform. Only six other states received this money, known as a “Level 2” grant. The funding will help DC hire staff and consultants for the exchange’s first year and assist in the development of a sophisticated IT system – an online portal that will coordinate eligibility and enrollment functions in the exchange with other health and human service programs.
Very big congratulations to the District and all involved in the exchange’s design and implementation!
To see a state-by-state comparison of exchange funding, click here.
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September 27th, 2012 | by Kate Coventry
Across the District, families with kids are spending the night in parks, bus shelters, and emergency rooms even though shelter space and housing vouchers are available to help at least some of them. DCFPI urges Mayor Gray to reverse his decision not to use these resources and to ensure the safety and well-being of DC’s kids.
There are now 127 vacant units at DC General, but the Gray administration has chosen not to use them until legally required to do so during hypothermic weather, which typically starts in early November. The Department of Human Services reports that they lack the funding to house these families, and, indeed, the fiscal year 2013 budget for homeless services has at least a $7 million hole.
Beyond keeping shelter space unused, the mayor also has directed the DC Housing Authority to hold on to locally-funded rent vouchers as families leave the program, rather than use the vouchers to help new families. At this point, the number is small—17 vouchers–but letting these vouchers go unused is putting extra strain on the District’s shelter and affordable housing resources.
There is not a moment to waste, as some parents seeking shelter are being reported to the Child and Family Services Administration (CFSA) for investigation. CFSA has informed them that because of their lack of stable housing, their children may be placed into foster care. Foster care is extremely disruptive to the children involved and quite costly.
This urgent issue demands the mayor’s attention. Mayor Gray has taken steps in recent months to identify additional funds for other critical services for families, and the mayor could do so for homeless services as well. Mayor Gray re-directed savings from several agencies in 2012 to support the TANF program in the coming year. As the city closes out fiscal year 2012 on Sept. 30, a number of other agencies appear to have spent fewer funds than were budgeted. By using the same creativity he used to find funds needed to accelerate Temporary Aid to Needy Families (TANF) implementation, the mayor can find the funds needed to open emergency shelter now.
That’s the budget perspective. Here’s the human perspective: Each week between 10 and 12 families with no safe place to stay seek help from the Department of Human Services. Up until last year, DC provided emergency shelter to every one of these families to ensure the safety of the children. In 2011, because of increasing numbers of homeless families and limited funding, DC leaders decided to serve families only during hypothermia season when the city is legally mandated to do so. Between April and October 2011, all families seeking help were turned away no matter how urgent their situation.
To limit the number of families turned away, the DC Council allocated funds in the fiscal year 2013 budget to move 250 families out of shelter and into affordable housing. This would help families access stable housing and open up space at the DC General Family Shelter to serve families with emergency needs. Now there are empty units, but the Department of Human Services reports its lacks the funds needed to open them up to families in need.
The District is facing a homeless families crisis. Recent Census statistics confirm that poverty among DC children jumped in the recession and has not started to improve. Statistics from earlier this year show that homelessness among families with children jumped 75 percent in the last four years. This is a time to be using all available resources to address this crisis, not to let resources sit idle.
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September 26th, 2012 | by Soumya Bhat
The District has more than 30 programs across six city agencies that deliver early childhood education and development services for young children and their families. So to help DC families better understand what public resources are available to them, DCFPI released a
resource map that offers a guide to our city’s public investments in programs serving children from birth to age five. The map offers a snapshot of the District’s early childhood education and development programs, highlighting what services are offered, the target population for each program, and how much is spent.
The map looks at the resources spent in fiscal year 2011, which began October 2010 and ended September 2011. Readers can quickly find programs by budget cluster or DC agency, and then scan down the program columns for at-a-glance funding and service information. Narrative descriptions are also included for more detail on individual programs. The map can be used to identify gaps or duplication in key services or ways to improve coordination across city agencies.
DCFPI hopes the map will be helpful to parents, educators and policymakers so the District can effectively coordinate services for our youngest residents. It is now widely recognized that supports for young children are critical to their success in school and life. The early years lay an important foundation, and the programs and services offered by the District help parents support the well-being and healthy development of their children.
Please let us know of any thoughts or comments on the map. Feel free to contact Soumya Bhat at bhat@dcfpi.org.
To view the full report, click here.
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September 24th, 2012 | by Wes Rivers
Implementation of the Affordable Care Act—otherwise known as Obamacare—is fully underway in the District, which means there are a lot of important decisions to be made. One of those is what to include as “Essential Health Benefits,” the minimum floor of services that will be provided by almost all health insurance plans sold within the District. The committee charged with coming up with a proposal is considering the issue right now, and the deadline for the public to comment on the proposed plan is this Friday.
Time is of the essence, because federal health reform will take full effect starting in January 2014. While the speed and breadth of changes may be overwhelming, the importance of deciding what will be considered essential health benefits cannot be understated.
Basically, the District can model or benchmark its essential health benefits coverage with a health plan of its choice, but that plan must cover ten categories of service as outlined in the Affordable Care Act.
After comparing ten typical plans already offered by employers in the city, the District has proposed to use the CareFirst Blue Preferred Option One as its benchmark. However, he plan does not cover pediatric oral/vision care and adult habilitative services, which are mandated by the Affordable Care Act. To address this, the District is proposing to use the Federal Employee Dental and Vision Insurance Plan as the benchmark for oral/vision services. As it stands right now, it is unclear how DC will set a benchmark for adult habilitative services – which includes speech therapy and other services for adults who lack basic motor skills and functions.
The full proposal is currently available for public comment. To comment on the essential health benefits proposal, submit comments and questions to Brendan Rose at brendan.rose@dc.gov. The public comment period ends this Friday, September 28th at 5:00 PM.
There are various issues to consider. One big concern is whether any gaps exist in services covered by the benchmark, such as whether the plan would cover medical equipment, devices, and prescription drugs. Another issue might revolve around possible restrictions in the benchmark plan. For example, CareFirst benchmark plan includes limits on duration for certain services –caps on visits or days receiving care – and the ages at which some services are available. Such limits are allowable so long as they are not discriminatory in any way and comply with mental health parity law.
Again, the deadline to comment is Friday at 5 p.m.
Now for the legislative update: The DC Council made two good decisions last week.
By an 11 to 1 vote, the Council removed a controversial provision from the “Technology Sector Enhancement Act,” which would have made the tax rate for tech investors the lowest income tax rate in the city. Instead, the Council decided to send the issue to the Tax Revision Commission for review. DCFPI thanks the many residents who contacted the Council on the issue, Ward 4 Councilmember Muriel Bowser for speaking against the provision in committee and helping persuade her colleagues to remove it from the bill, and Ward 2 Councilmember Jack Evans for introducing the amendment to strike the tax cut from the bill.
Also, the Council made the right move in passing a bill last week to delay for six months looming benefit cuts for more than 6,000 families who receive Temporary Assistance for Needy Families (TANF). Without action, these families would have seen a 25 percent benefit reduction next month, before they had a chance to access the District’s new, improved TANF employment services. Unfortunately, however, the newly identified funding is not enough to protect particularly vulnerable families who need more time to deal with serious issues that interfere with their ability to work, such as domestic violence or the care for an ill child.
Committee on Human Services Chairman Jim Graham and At-Large Councilmember Michael Brown worked with the mayor’s office to find funding to forestall the cuts. We urge Mayor Gray and the Council to work together to identify the additional $5.8 million to forestall benefit cuts for one full year and to maintain benefits for particularly vulnerable families. By working together, we can keep families on a path of progress and independence.
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September 21st, 2012 | by DCFPI
New data released today from the Census Bureau’s American Community Survey reveal that the aftermath of the Great Recession continues to hit certain groups of DC residents much harder than others, even amidst signs of economic recovery for the city as a whole. While the District continues to grow, it also is becoming more divided economically among residents.
Poverty in DC rose from 16 percent in 2007, the last year before the recession began to impact the District, to 19 percent in 2011. This means that in 2011, some 109,000 residents lived below the poverty line, or $23,021 for a family of four. Yet, at same time, median income for the District – the income of the household in the middle of the income distribution — rose nearly 8 percent, from $58,700 to $63,100, after adjusting for inflation to equal FY 2011 dollars, over the same time period (Unless otherwise noted, all figures are adjusted for inflation to equal 2011 dollars). The fact that poverty and median income grew simultaneously suggests that as the District begins to grow and recover from the recession, it is doing so in a way that is leaving many groups of residents behind. 
Differences in the poverty rate and median household income citywide between 2010 and 2011 were not statistically significant due to large margins of error with the data.
The Recession Continues to Impact Certain Groups of DC Residents
Since 2007, poverty among DC’s children has risen by one third, from nearly 23 percent in 2007 to just over 30 percent in 2011 (see Figure 1), leaving nearly 32,000 children under 18 below the poverty line. Moreover, the percentage of residents of all ages living in deep poverty, or below half of the poverty line, has risen by 21 percent since the recession hit. From 2007 to 2011, the percentage of DC residents in deep poverty (less than $11,511 for a family of four) rose from 8.5 to 10 percent. This means that in 2011 more than 60,000 people lived below half of the poverty line.
Poverty among Black District residents increased from 23 percent to 28 percent over the four year period. The poverty rate among Hispanic residents rose even more sharply, from 11 percent to 18 percent. At the same time, the income for the typical Hispanic household grew from $45,000 to more than $59,000. These findings may suggest economic disparities within the District’s Hispanic population. For example, it may indicate that while middle-income Hispanic households in DC are doing better in 2011 than in 2007, it also suggests that significant share of low-income Hispanic residents have fallen below the poverty line. Meanwhile, poverty among White, Non-Hispanics stayed relatively unchanged over the same time period and stood at 7 percent in 2011.
To read the full report, click here.
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September 19th, 2012 | by Kate Coventry
Today, the DC Council will consider a bill to delay looming benefit cuts for more than 6,000 families who receive Temporary Assistance for Needy Families (TANF). Without action, these families will experience a 25 percent benefit reduction next month, before they have even had a chance to access the District’s new, improved TANF employment services. The “Temporary Assistance to Needy Families Time Extension Emergency Amendment Act” will delay this benefit cut until April 1st to give parents some time to access the services they need to successfully transition to self-sufficiency.
This bill is the first step in implementing the Mayor’s Accelerated TANF Plan. As we outlined last month, Mayor Gray has identified $11 million in unspent dollars to fund some of the important TANF reforms that were not budgeted when the Fiscal Year 2013 budget was passed. With these funds, all TANF parents will receive a one-on-one assessment by April 1st, six months earlier than the Department of Human Services anticipated. These new assessments provide an in-depth evaluation of each parent’s strengths and barriers to employment, such as low literacy or math skills. Speeding up the assessment process will allow parents to more quickly address these issues and participate in employment services. The capacity of employment service providers will also be expanded by 900 slots, bringing total capacity to 3,900.
The funds will also delay any cuts in cash assistance until next April. But this is less than the plan adopted by the DC Council, which would delay cuts until next October recognizing that many families need more than just a few months to prepare for and find work. But the delay was placed on the Revenue Estimate Contingency Priority List, the “wish list” of items that will get funded only if the city’s revenue projections improve. The District’s Chief Financial Officer forecasted no additional revenue in his June report, due to concerns about worldwide economic conditions and the threat of federal sequestration cutbacks. These are ongoing concerns, making it likely that future revenue projections will also fail to provide additional funding, leaving these vulnerable parents and their children at-risk.
Unfortunately, the newly identified funding is not enough to protect particularly vulnerable families who need time to deal with serious issues that interfere with their ability to work, such as domestic violence or the care for an ill child. Currently, the District doesn’t require these families to be looking for employment, but each family’s 60-month time limit clock continues to run. Most states stop the clock to allow families time to deal with these issues. The Council agreed to this approach, but placed it on the wish list, dependent on improving revenue projections, leaving these vulnerable parents and their children at-risk.
DCFPI encourages the Council to support the “Temporary Assistance to Needy Families Time Extension Emergency Amendment Act” as a first step to help parents on TANF get the resources they need to be successful. We urge Mayor Gray and the Council to work together to identify $5.8 million to forestall benefit cuts for one full year and maintain benefits for particularly vulnerable families. By working together, they can keep families on a path of progress and independence.
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September 18th, 2012 | by Elissa Silverman
Will the DC Council believe in or break the Buffett Rule?
That is what’s at stake tomorrow when the Council votes on a bill that would allow some wealthy investors to pay the lowest income tax rate in the District, lower even than residents who earn the minimum wage. Warren Buffett, the billionaire graduate of DC’s Wilson High School, said he disagrees with public policy that makes his tax rate on investment income much lower than the rate paid by his secretary on her paycheck. If the Council passes Bill 19-747,the “Technology Sector Enhancement Act,” that’s exactly what will happen here: The legislation would lower taxes on investment income earnings in DC tech companies to just 3 percent.
So why might DC allow the Warren Buffetts of DC to pay lower tax rates than hard-working DC residents?
Apparently, because a few asked. According to several memos from the mayor’s office, several wealthy DC residents are planning to cash out their DC tech investments soon and have threatened to leave the city if their taxes aren’t lowered.
The Gray administration says this is also necessary to incentivize the tech industry, but clearly these investors were already motivated to put their money behind these District entrepreneurs and their products. So it’s not so much an incentive, but a favor to a select group to allow them to set their own tax rate, one that is far below what most working DC residents pay and even below what investors pay in neighboring states.
The Buffett Rule isn’t exactly a scientific equation, but it’s supported by evidence from economists, policy analysts, and tax experts that cutting taxes does not encourage investment. Take this recent study from the Congressional Research Service, which looked at 65 years of data and found that reductions in tax rates, “ have had little association with saving, investment, or productivity growth.” However, it does seem to boost one statistic: income inequality. The District already ranks very high in that category.
And as we pointed out in the District’s Dime yesterday, Mayor Gray is not telling the truth when he says the tax cut would not have a cost to the city. According to DC Chief Financial Officer Natwar Gandhi, this tax cut could create “substantial” revenue losses for the District, reducing resources for the services we have all come to appreciate: Renovated high schools like Woodson and Wilson, world-class neighborhood libraries like the ones in Fairfax Village and Tenleytown, and clean streets and parks.
Diversifying our local economy is a good thing, and we agree that we should encourage the tech sector to grow and flourish. And it is. Recently DC was named the fifth best city in the country for tech start-ups. DC has also attracted millions of dollars in investments from executives at tech giants Amazon, Google, and Twitter. This is happening not because investors expect lower tax rates, but because they believe in the entrepreneurs in the District and that their investments will pay off.
Time and again, business leaders say what attracts them to a place is having a good pool of well-trained workers, good transportation infrastructure and a supportive community. DC’s great quality of life and huge number of young college-educated residents have made this a profitable place for start-up companies. Mayor Gray’s continued focus on school reform and aggressive workforce development efforts are the kinds of things the city should be doing to strengthen our business climate—not slashing taxes that make it harder to fund these important programs.
Revenue is important, so let’s at least wait for the District’s newly up and running Tax Revision Commission to examine the issue. That’s what Ward 2 Councilmember Jack Evans told the Washington Times today. We agree.
Please click bit.ly/RS69X4 to contact DC Council Chairman Phil Mendelson, your Ward Council member, and At-Large members Michael Brown, David Catania, and Vincent Orange and tell them you want them to vote NO on Bill 19-747.
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September 17th, 2012 | by Ed Lazere
Education reform is a top priority for the Gray administration, but lately it seems the mayor wants to reform the basic rules of math itself. Usually when you perform subtraction, there is less than when you started. When taxes are cut, for example, that reduces the amount of money available for important public assets like schools, parks and transportation.
Yet the Gray administration recently claimed that cutting taxes for wealthy investors in DC tech companies, which will be before the DC Council on Wednesday, would have a “positive fiscal impact” — a fancy way of saying it would add revenue. This claim is based, they say, on the fiscal impact statement prepared by the Office of the Chief Financial Officer. A full-reading of the statement, however, clearly states that the tax cut could substantially reduce city revenues.
The Technology Sector Enhancement Act would, among other things, set a three percent tax rate for wealthy investors, which as we have noted over the past few weeks is a lower tax rate than any working DC resident pays on her or his paycheck. Turning DC’s tax system upside down — letting some of our wealthiest residents pay the lowest tax rates — could only be justified if there were clear evidence that the city as a whole would be better off.
Claiming the tax cut would raise revenues is an effort by the mayor to suggest that we will all be better off. But tax cuts result in reduced revenues—not increases. And that’s exactly what the CFO states in the fiscal impact statement. It notes that some other provisions of the bill, which have nothing to do with the investor tax cut, would modestly increase revenues. This is where the mayor’s “positive fiscal impact” claim comes from.
The CFO’s analysis of the investor tax cut, by contrast, and another provision of the bill, finds that the long-term “negative impact cannot be reliably estimated at this time, but it could be substantial.” So the CFO is conclusive that the impact will be negative, but they can’t be specific on how negative because right now, the value of the tech company holdings is unknown as the companies are still privately held and have not gone public yet.
In other words, the CFO has confirmed the most basic tenet of tax math: Reducing taxes leads to reductions in revenues. You can find the fiscal impact statement here.
Click bit.ly/RS69X4 to tell the Council that DC cannot afford tax cuts for tech millionaires!
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September 14th, 2012 | by Elissa Silverman
What attracts businesses to a city?
Time and again, business leaders say the best incentives are having a pool of well-trained workers, good transportation infrastructure and a vibrant, supportive community. That’s what executives at Siemens told the Washington Post recently. And what about tax cuts?
It’s not a factor. “You don’t hire people just because there’s a tax credit there,” the president of Siemens U.S. told the Post.
This is very important to keep in mind next week, when the DC Council votes on a bill that would allow some wealthy investors to pay the lowest income tax rate in the District. The legislation would lower taxes on investment income from DC tech companies to just 3 percent, lower than even the rate paid by residents who earn the minimum wage. At a time when our city is growing, this tax cut would take the District in the wrong direction, substantially lowering our resources for years to come.
Diversifying our local economy is a good thing, and we agree that we should encourage the tech sector to grow and flourish. And it is. Recently DC was named the fifth best city in the country for tech start-ups. DC has also attracted millions of dollars in investments from executives at tech giants Amazon, Google, and Twitter. This is happening not because investors expect lower tax rates when they cash out, but because they believe in the entrepreneurs in the District and that their investments will pay off.
DC’s great quality of life and huge number of young college-educated residents have made this a profitable place for start-up companies. Mayor Gray’s continued focus on school reform, innovative transportation alternatives and aggressive workforce development efforts are the kinds of things the city should be doing to strengthen our business climate—not slashing taxes that make it harder to fund these important programs.
Warren Buffett, the billionaire graduate of DC’s Alice Deal and Wilson High Schools, said that he disagrees with federal tax preferences for investment income that let him pay a lower tax rate than his secretary. So why might DC allow a few Warren Buffetts of DC to pay lower tax rates than hard-working DC residents?
Apparently, because a few of them asked. According to a memo from the Gray Administration, several wealthy DC residents are planning to cash out their DC tech investments soon and have threatened to leave the city if their taxes aren’t lowered. It makes no sense for the District to respond to such threats by allowing these tech millionaires to in essence set their own tax rate. Beyond that, such a drastic change in tax policy could be justified only if it were going to benefit all DC residents and businesses, through job creation or an improved economy. But evidence from economists, policy analysts, and tax experts simply does not show that tax cuts like these encourage investment.
Meanwhile, the rest of the city would pay the price. According to DC Chief Financial Officer Natwar Gandhi, this tax cut could create “substantial” revenue losses for the District, reducing resources for the services we have all come to appreciate: Renovated high schools like Woodson, world-class neighborhood libraries like the ones in Petworth and Tenleytown, and clean streets and parks.
Please contact DC Council Chairman Phil Mendelson, your ward council lmember, and At-Large members Michael Brown, David Catania, and Vincent Orange and tell them you want them to vote NO on Bill 19-764.
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September 12th, 2012 | by Ed Lazere and Wes Rivers
One-in-five DC residents—approximately 123,000–live in poverty, according to U.S. Census Bureau data released today. The Census also found that poverty has grown notably in DC in recent years, as median income for the District has remained relatively flat. The rise in poverty partly reflects the fact that unemployment in the city continued to rise after the official end of the recession and continues to remain high for some groups of residents. The poverty line is $17,900 for a family of three and $23,000 for a family of four. 
The new findings are based on Census data that is best used to describe income and poverty changes at the national level. More detailed and reliable data for DC and the states will be released by the Census Bureau next Thursday, Sept. 20.
Today’s Census Bureau data also show that the number of DC residents lacking health insurance — about 12 percent of residents under age 65 — has not changed and remains one of the lower rates in the nation, especially among children. However, the share of residents getting health insurance from an employer has fallen significantly, which could be due both to falling employment and a reduction in the number of employers providing it. However, this decline has been offset, by a substantial increase in Medicaid coverage—government-sponsored healthcare that is jointly paid for with state and federal dollars.
The District’s 19.7 percent poverty rate for 2010-2011 returns the city to its highest level over the past decade, a 2.5 percentage point increase over 2008-2009[1]. This means 19,000 more DC residents came below the federal poverty line in these two years. After falling in the mid-2000s, DC’s poverty rate has been on the rise for the last several years and has almost returned to the high point of the last decade in 2005-06 (See Figure).
The jump in poverty largely reflects unemployment that remains stubbornly high for some groups of DC residents. Unemployment among District residents with a high school diploma reached 25 percent at the end of 2011, compared with a 10 percent rate in 2007. Similarly, unemployment among Black residents is twice as high today than before the recession started, while the unemployment rate for whites has nearly returned to pre-recession levels.
Median household income in the District was $57,000 in 2010-2011, compared with $54,600 in 2005-2006 before the recession. However, this increase was not statistically significant.
The new Census data show that approximately 63,000 non-elderly DC residents have no health insurance, a number that has remained the same since 2008-2009 but is significantly lower than in 2000-2001. The District’s uninsured rate of 11.8 percent is the 8th lowest rate among states, and it is well below the national uninsured rate of 18.2 percent. Notably, just 4.8 percent of DC’s children are uninsured, which is just half the rate in the country as a whole.
One other notable statistic is that while overall health insurance coverage has remained stable in recent years and improved since 2000, the share of DC residents with employer-sponsored insurance has fallen dramatically. Since 2008-2009, the percent of non-elderly DC residents receiving insurance from their employer fell from 60 percent to 56.6 percent. The proportion of DC children participating in an employer-provided insurance fell from 54 percent to 44 percent over the decade. This could reflect a drop in the number of employed residents, but also a decline in the share of employers providing coverage.
Significant growth in Medicaid over the past decade helped to stabilize coverage. Medicaid covered 49 percent of children in the District in 2010-2011, an increase from 38 percent since the beginning of the decade. Medicaid coverage for non-elderly DC residents was 25.1 percent, an increase from 22 percent since pre-recession 2006-2007.
The Census will release data from the American Community Survey (ACS) on September 20. The ACS has a larger sample size for the 50 states and the District, which will provide a more detailed and accurate look at poverty and income trends, including changes in poverty and income by race and ethnicity, educational attainment, geographic area, and age.
[1] The DC data are averaged together over 2009 and 2010 because the Census Bureau recommends that CPS state-level data be averaged across two-year periods to compensate for the survey’s small sample sizes at the state level.
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September 11th, 2012 | by Soumya Bhat
A new national report confirms what most DC parents already know: Child care in the District is expensive, especially compared to the rest of the nation. So as Mayor Gray and the DC Council look to reduce unemployment and get more moms and dads back to work, our leaders also need to factor in how to make child care affordable and accessible to low-and-moderate income parents.
One important way to do that in to DC is to update the reimbursement rates for the city’s child care subsidy program s to better reflect our competitive child care market. The current low reimbursement rates mean that parents sometimes have a hard time finding a child care center that will accept their child care voucher and that many centers that rely on children with vouchers are struggling to keep their doors open and provide quality services. A better reimbursement rate would allow parents of all income levels to have the opportunity to put their children in a safe, healthy and productive facility.
The report by Child Care Aware of America, a national source of child care information for parents and providers, highlights some of the financial struggles that many DC parents face. For example, in 2011, the average cost of full-time care for an infant in a DC child care center was more than $20,000 a year. That is roughly 80 percent of median income for a single mother in DC. If she has two children in child care, expenses can be as much $35,000, which is nearly twice the annual income for a family of three at the poverty line.[1]
In the District, a major barrier to providing high-quality child care to infants and toddlers is the extremely low reimbursement rates paid to child care providers in the city’s child care program. Unfortunately, DC child care reimbursement rates are pegged to 2004 child care costs. Without adequate reimbursement, providers are unable to keep up with their rising costs and continue to offer quality child care in DC. The fiscal year 2013 budget did not increase reimbursement rates for child care providers, many of which offer primarily infant and toddler care and faced financial challenges in recent years.
Another factor is that the city has put fewer resources into child care as the public education system has moved toward universal pre-kindergarten. Since the District began implementing universal pre-K in 2009, parents can choose to send three- and four-year old children to pre-K in public schools. While this was a good move for DC education, an unfortunate side effect has been a steady decline in local funding for the child care subsidy program.
As a result, several child care providers have closed their doors. According to the 2010 DC market rate survey, about 30 percent of all family home providers and 17 percent of all child care center providers operating in 2008 were no longer in business in 2010. This leads to a shortage of child care providers for families with infants and toddlers and children with special needs.
DCFPI thinks it’s time to revisit these policies and help make quality child care more affordable for DC families.
[1] Child Care Aware of America, “Parents and the High Cost of Child Care.” 2012 Report.
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September 10th, 2012 |
District’s Dime readers, a reminder that today at 3 p.m. is the second meeting of the DC Tax Revision Commission! The meeting will be held at 1101 4th Street SW, W-250 (2nd floor). For those who haven’t been to the Office of Tax and Revenue or DCRA lately, that is right near the Waterfront Metro Station on the Metrorail green line.
On tap is a discussion of the commission’s research agenda. The public is invited to watch the proceedings. The meeting will also be taped for broadcast on DC Channel 16.
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September 7th, 2012 | by Jessica Fulton
In two weeks, the DC Council will vote on a tax break for some wealthy investors in DC tech companies that would slash the capital gains tax rate on these investments to just three percent, which would be the lowest income tax rate for DC residents. Mayor Gray and his administration say this is absolutely necessary to spur DC’s growing tech industry, but DC offers several good incentives that already give companies good reasons to be here.
These policies are targeted for what are called qualified high technology companies (QHTC). These companies must be located in the District, employ at least two people, and make the majority of their revenue from qualifying high technology activities.
If a company that meets the HQTC criteria is willing to move to DC, it can receive a five-year freeze on assessed property value. This means that for five years, property taxes will remain flat even if the value of the property increases. The District is also willing to pay a $5,000 reimbursement for each employee who relocates to DC. That amount grows to $7,500 if that employee lists a property in DC as his or her primary residence.
Wait, there’s more.
DC also offers a reduction in the corporate income tax rate from 9.75 percent to 6 percent for simply existing as a high tech company in DC. If the company locates in a High Technology Development Zone, they will pay nothing in corporate income taxes for five years. And high tech companies don’t have to pay sales tax on software, hardware, or when purchasing goods or services from “qualified companies.”
Growing tech companies in the District get yet another set of incentives. For every new person a company hires, it can receive up to $5,000 in wage reimbursements. DC also offers a ten-year abatement on qualified personal property taxes.
DC has a strong set of incentives to encourage tech companies to locate, grow, and thrive in the District. In fact, DC’s favorable climate has made us the fifth best companies for tech start-ups in the country. That’s what brings them to the District. That, combined with a qualified talent pool and proximity to other tech companies helps them to grow—not cutting taxes.
To show your opposition to tax cuts for wealthy investors, sign up here.
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September 6th, 2012 | by Jessica Fulton
Each year, the Mayor and the DC Council have to make tough choices creating the city’s budget. Just like you and me, they have to make sure expenses do not exceed revenue, which means working hard to ensure that the city has enough resources to cover the services residents need.
That’s why a tax cut for wealthy tech investors that the DC Council will vote on in less than two weeks would take our city in the wrong direction. At a time when the city has been forced to put critical services for children and families on a contingency wish list, it does not make sense to adopt a tax cut that would limit resources substantially for years to come.
The Council should vote no on Bill 19-764, the Technology Sector Enhancement Act of 2012. Here’s why: The legislation would allow investors in DC’s tech industry to pay just three percent income tax on the earnings from these investments, which would become the lowest income tax rate for the District as the chart below shows.
According to DC Chief Financial Officer Natwar Gandhi, this tax cut could add up to “substantial” losses in revenue for the District. And as we noted yesterday, there is no evidence that cutting taxes for investors would help DC’s economy.
Any discussion of tax cuts is especially disconcerting right now because revenue limitations have forced the city to put important services that help our children and families on a contingency list that is unlikely to get funded. That list includes $7 million for homeless individuals and families. So, when winter ends, the shelter capacity for individuals could be cut in half, along with other service reductions. In addition, the budget for next year does not have funding to protect particularly vulnerable families on TANF who need time to deal with serious issues that interfere with their ability to work, such as domestic violence, illness, or the demands of caring for a family member with a disability.
These are vital services for DC residents, and yet the District cannot afford to fund them. DC simply does not have enough revenue to provide for its residents. Is this really the time to offer tax cuts to wealthy investors?
As President Clinton said in his address last night, the United States is a great nation because we believe that “we are in this together” and not that “you are on your own.” The DC Council should heed President Clinton’s words and reject legislation that promotes a “you are on your own” approach.
If you believe the DC Council should vote no on tax cuts that don’t benefit all DC residents, sign on here.
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September 5th, 2012 | by Ed Lazere
Have you ever ordered something that promised to clean your home in ten minutes? Or help you lose weight without exercising or changing your diet?
It was too good to be true, right?
The same thing can be said of Mayor Gray’s effort to pump up DC’s tech sector by giving huge tax breaks to people who invest in these companies. The effort to diversify DC’s economy, take advantage of DC’s highly educated labor force, and reduce our reliance on federal jobs is laudable, but it’s not the right way to deploy our precious tax dollars.
Trying to get there by cutting tax rates dramatically for tech investors is like taking the infomercial approach. It sounds great, but in the end it’s unlikely to work. Given that the tax cuts would cost the District a lot of revenue — and turn DC’s tax system upside down by letting wealthy investors pay lower tax rates than any DC resident with a job — this is not a risk worth taking.
How do we know? The federal tax rate on investments has fluctuated a lot over the last six decades, giving economists a rich set of data to analyze. And here is what they have found:
- “Cutting capital gains taxes will not turbocharge the economy…” That’s from Len Burman, Syracuse University tax professor and former director of the Urban-Brookings Tax Policy Center (TPC).
- “[T]here is no evidence that links aggregate economic performance to capital gains tax rates,” according to University of Michigan tax economist Joel Slemrod.
- A federal capital gains tax cuts adopted in 2003 “was a dud when it came to boosting the stock market,” according to a Wall Street Journal summary of a Federal Reserve study.
If cutting the tax on investment income has no effect for the nation as a whole, there is no reason to think a steep tax cut for tech investors in DC would make a difference, either.
Investment decisions are driven by whether an investment looks like it will pay off, not the tax rate the investor will ultimately pay. A guest columnist wrote in The Wall Street Journal this year: “[T]ax credits won’t make angels invest in a company that they wouldn’t invest in without the credit…. most [investors] aren’t so foolish as to throw their money away because someone waves an incentive in front of them.”
Efforts to boost DC’s tech sector will not come from a miracle fix but instead from doing the hard work to make DC an attractive place for companies to flourish. Just today, the Washington Post pointed out that manufacturer Siemens chose to build a plant in North Carolina — rather than overseas — because of the area’s great transportation infrastructure and effective public education system. Here in DC, Mayor Gray’s continued focus on school reform and aggressive workforce development efforts — including creating a new intermediary to connect job trainers with employers — are the kinds of things the city should be doing to strengthen our business climate.
If you believe that smart public investments is a better approach than tax cuts for tech millionaires, join us in telling that to the Mayor and DC Council.
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September 4th, 2012 | by Jessica Fulton
Although Labor Day is a time to honor workers, today we want to honor Warren Buffett, the billionaire investor who has pointed out that the federal tax code treats him better than most workers. Buffett has brought a lot of attention to the fact that he pays a lower tax rate than his secretary.
How could that be?
Well, it’s because Buffett earns most of his income from investments, which are taxed at a lower rate than paycheck income for most workers. In other words, working people who earn almost all their income from their jobs pay more in taxes as a percent of their earnings than generally wealthy people who make most of their money from investments.
Warren Buffett says that he should not pay a lower tax rate than working people — implying that he should be paying more. And there are signs that DC residents understand the importance of a strong, progressive tax system. A DCFPI poll conducted last year showed that 70 percent of District residents said it was more important to maintain services than hold down taxes. And nine of 10 voters supported raising taxes on higher-income households to help maintain important services. Even most high-income voters agreed.
So why do investors in DC’s tech industry disagree?
According to a memo from the Gray administration, a vocal group of tech investors want their tax rates lowered, or they have threatened to leave the District. Now, at the behest of the Mayor, the DC Council is considering legislation that would lower the tax rate on investment income in DC technology companies to just 3 percent. That rate is lower than the rates for any other workers in DC. For example, the first $10,000 of income earned by a working District resident is taxed at 4 percent.
In just two short weeks, the DC Council will vote on whether to lower tax rates for these wealthy investors to lower than what you and I pay as workers in DC. If you believe that hard-working DC residents shouldn’t be taxed at a higher rate than tech investors, please join us in telling that to Mayor Gray and the DC Council.
And a belated Happy Labor Day!
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August 30th, 2012 | by Jessica Fulton
A bill being considered by the DC Council in September would tax income from investments in DC’s technology companies to just three percent. That’s lower than the rate paid by other working District residents.
- Tax cuts for tech millionaires would mean less revenue for services. Cutting taxes for tech millionaires could cost the city a substantial amount at a time when budget cuts have forced some DC schools to cut librarians and when homeless shelters do not have enough resources to stay open year-round.
- Tech millionaires would get a huge tax cut on their existing investments. The proposed legislation would even cut taxes for people who already own parts of tech companies. If the tax cut is supposed to create an incentive to invest, it doesn’t make sense to offer it current investors.
- Cutting investment tax rates has not proven to help the economy. Researchers find no connection between the national capital gains tax rate and economic performance. If it hasn’t worked in the entire U.S., why would it work in DC?
- The District already provides large tax incentives for the tech sector growth. Since 2000, DC has offered large tax incentives for high-tech companies, and LivingSocial just got a $32.5 million tax abatement. Why do we need to provide tax breaks to the companies and their investors?
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August 29th, 2012 | by Ed Lazere
Recessions usually pack the biggest punch to low-skill workers, and the most recent downturn — the “Great Recession” — certainly tells that story. Across the nation, the number of jobs for college-educated workers actually rose over the past five years, according to a recent national study, while jobs for workers without a college degree fell sharply and still have not come back completely.
That sounds a lot like what is happening in DC. Behind the good news of falling unemployment in the city — the latest unemployment rate of 8.9 percent is well below the recession peak of 10.5 percent from a year ago — the return to work has been much smoother for residents with higher education than those with a high school degree or less schooling.
This confirms the urgent need, in DC and the nation as a whole, for employment efforts targeted toward residents without advanced degrees.
According to the national study, The College Advantage, the number of jobs for non-college educated workers is 10 percent lower today than in 2007. For workers with some post-secondary education but not a full college degree, the number of jobs fell during the recession but has almost recovered fully. Meanwhile, jobs for college-educated workers didn’t dip in the recession and are more plentiful today than in 2007.
In DC, more than 20 percent of high school graduates who are looking for work cannot find a job. The unemployment rate for these workers has fallen in the last six months but still is double the rate of 2007. Nearly one-fourth of DC adults without a high school degree are unemployed, and the unemployment rate has not seen any steady improvement since 2008. For college-educated DC residents, by contrast, just 3.6 percent are unemployed, which is about the same as their unemployment level in 2008.
The disappointing employment recovery for DC residents without a college degree follows a long-term decline in the job prospects for this group of residents, through periods of economic growth and decline. The employment rate for DC adults with a high school diploma or GED fell from 67 percent in 1988 to 58 percent in 2000 and 48 percent in 2009, according to a DCFPI report.
Improving educational outcomes in the District is critical in the long-term to addressing our unemployment problems. But a key part of the solution also has to include helping workers compete in our job market without a college degree. That is why it is important for the city to keep making progress on welfare-to-work reforms, improving connections between job training providers and employers, and taking greater advantage of federal funds for training. DCFPI will be writing more about these important initiatives this fall.
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August 28th, 2012 | by Kate Coventry
Last week, Mayor Gray announced some good news for parents who receive Temporary Assistance for Needy Families (TANF). He has identified $11 million in unspent dollars from other city agencies to put in place important TANF reforms, which were not funded when the Fiscal Year 2013 budget was passed this spring. Pending DC Council approval, this funding will accelerate the implementation of the newly redesigned TANF employment program and delay a scheduled benefit cut for six months for some families. This is a great first step in ensuring that parents who want to do better for themselves and their kids will have access to the services they need to secure employment.
Under this “Accelerated Plan,” all TANF parents will receive a one-on-one assessment by April 1, 2013, six months earlier than the Department of Human Services anticipated. The new assessment process provides an in-depth evaluation of each parent’s strengths and barriers to employment, such as lack of child care or low literacy skills. Speeding up the assessment process will allow these parents to more quickly address barriers and participate in employment services. The $11 million in newly identified funds also will allow the Department of Human Services to add 900 slots to the existing 3,000-person capacity for parents to receive services with TANF employment services providers.
Mayor Gray also found $2.9 million in funding to forestall any cuts in cash assistance for families until next April, preserving critical dollars for more than 6,000 families who would have had their benefits cut before they even have a chance to access employment services. But this is less than the plan adopted by the DC Council, which would delay cuts until next October recognizing that many families need more than just a few months to prepare for work. Funding for this delay was not included within the budget for fiscal year 2013, but instead was placed on the top of the Revenue Estimate Contingency Priority List, the “wish list” of items that will get funded only if the city’s revenue projections improve. The District’s Chief Financial Officer forecasted no additional revenue in his June report, due to concerns about worldwide economic conditions and the threat of federal sequestration cutbacks. These are ongoing concerns, making it likely that the revenue projections in September and December also will fail to provide additional funding to help these families.
Unfortunately, Mayor Gray’s newly identified funding is not enough to protect particularly vulnerable families who need time to deal with serious issues that interfere with their ability to work, such as domestic violence, illness, or the demands of caring for a family member with a disability. Under current rules, the District doesn’t require families in these circumstances to be looking for work, but each family’s 60-month time limit clock continues to run. In most states, the time clock stops when a parent faces a temporary problem that limits their ability to work. This past spring, the DC Council agreed with this approach taken by other states, that these families should receive a time limit break to give them sufficient time to access job services. But maintaining benefits is on the wish list, dependent on improving revenue projections leaving these vulnerable parents and their children at-risk.
DCFPI thanks the Mayor for his hard work in helping the more than 31,000 children and their parents on TANF get the resources they need to be successful. But there is more work to be done. We urge Mayor Gray to work with the DC Council to identify $5.8 million to forestall benefit cuts for one full year and maintain benefits for particularly vulnerable families. By working together, they can keep families on a path of progress and independence.
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August 27th, 2012 | by Soumya Bhat
Children across the city return to the classroom today as DC Public Schools — and many public charter schools — kick off the 2012-2013 school year. New routines always take a little getting used to – so, what are some of the changes we can expect to see in DCPS schools this year?
“Proving What’s Possible” Grants in Action: In June, DCPS announced that grants (from an unidentified source within the DCPS budget) would go to 59 schools, with amounts ranging from $10,000 to $490,000 to implement innovative programming this coming school year. About 85 percent of the $10.4 million went to the 40 lowest performing schools in the DCPS system.
This targeted investment is meant to help meet one of the bold goals found in the Chancellor’s five-year strategic plan – to increase proficiency rates in struggling schools by 40 percentage points by 2017. This would require a significant increase in reading and math scores over a short time period, an increase from 23 percent to 63 percent, on average.
Schools geared their “Proving What’s Possible” applications to improving academic achievement through changes such as extending the school day, using technology in novel ways, and increasing the capacity of their staff. The majority of schools are planning to either extend the school day or offer out-of-school time programs with their grant dollars, and several schools are hiring personnel or partnering with community based organizations like City Year to increase their staff capacity. The full list of grant awards can be found here; see below for a quick summary of how funds will be used:
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“Proving What’s Possible” Grants for 2012-2013 School Year
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59 schools received grant awards
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41 schools received targeted grants ($50,000–$100,000)
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18 schools received major grants ($250,000–$400,000)
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37 schools will incorporate technology in their programming
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33 schools will extend the school day or offer out-of-school time programs
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18 schools will offer some sort of professional development
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7 schools will hire full or part-time staff
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29 schools will focus on both math/literacy achievement
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15 schools will specifically focus on improving literacy
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2 schools will specifically focus on improving math
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2 schools will specifically focus on children with special needs
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Community Engaged on School Quality – Now What? Many DC residents are concerned the recommendations in the IFF (Illinois Facilities Fund) report, which recommends the closure or turnaround of 37 DCPS schools, will lead to unchecked charter expansion in a city struggling to balance two separate school systems. (See DCFPI’s take here.)The Deputy Mayor for Education is wrapping up a series of community engagement meetings to address school quality in the same wards of the city where the IFF report suggests closing schools. DCPS is expected to share news on school closures sometime in the fall.
So, what’s next? The Deputy Mayor for Education will release a summary document of the residents’ priorities in each ward where a meeting was held for the city as a whole. The question remains, how will these recommendations be taken into account by DCPS officials as they decide how many and which schools to close?
Coming Soon from DCFPI: We are working on a few products that will be released this fall, including a resource map of funding for early childhood services and a tool to help you better understand the way schools are financed in the District. Stay tuned to the District’s Dime for more information!
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August 23rd, 2012 | by Jessica Fulton
DC’s emerging tech sector got some good news last week with the announcement that tech executives from around the country — including Amazon’s CEO, Google’s Chairman, and Twitter’s co-founder — recently invested $10 million in DC-based EverFi. Along with major companies like LivingSocial, smaller start-ups are attracting wealthy investors from across the country, a nod to DC’s favorable business climate and its highly educated workforce. EverFi offers online lessons in life skills for colleges and high schools.
The District government rightly wants to play a role in promoting the tech sector here. But there are signs that these efforts may be going too far. The District for years has offered a very generous set of tax incentives to high-tech companies, and just last month the city approved a $32.5 million package for LivingSocial. Now this September, the District Council will vote on yet another bill aimed at the tech sector, this one to offer a huge tax cut for investors in tech companies, including some very wealthy executives.
The proposal would allow tech millionaires to pay a lower tax rate on their investment income — just three percent — than the income tax rates paid by working District residents on their paycheck. If this happens, the District would be creating its own version of the national problem pointed out by Warren Buffett, with wealthy individuals paying lower rates that most District citizens.
And to what end? Investment groups and individuals from across the country have invested millions in DC, not because they expect lower tax rates when they cash out, but because they believe in entrepreneurs in the District. In fact, there is no evidence nationally that cutting investment tax rates leads to more business investment or better economic outcomes. The District does not need to cut taxes to get wealthy individuals and investment groups to invest in the District tech industry; they already are.
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August 21st, 2012 | by Ed Lazere
Welcome Wes Rivers!
The DC Fiscal Policy Institute is excited to announce the addition of Wes Rivers to our “rapid response wonk team.” Wes started this week as a Policy Analyst, as part of a fellowship program focused on state-level fiscal policy. Wes will be working a range of issues with DCFPI, including health care policy, taxation, and TANF. He just got his Master’s degree from the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin, and his prior work experience includes stints at a Texas housing advocacy group and the Urban Institute.
Lend Your Voice to Greater Budget Transparency!
There are two efforts underway to make the DC budget more transparent, and your input is badly needed. Susie Cambria, of the famed Susie’s Budget and Policy Corner, is helping with both. We hope you will participate.
A Better “Children’s Budget”: The District government is required by law each year to publish a “children’s budget,” a document that culls information on DC programs and services for children from across the DC budget. While the goal is to provide user-friendly information on these critical parts of our local budget, it is always a challenge to present budget information in a transparent and well-organized way.
The Deputy Mayor for Health and Human Services has put together a survey to gather ideas for improving the next version of the DC Children’s Budget. You can find it and fill it out here.
What Do You Want to Know about the DC Budget Process?: If you are a District Dime reader, you probably have many questions about how the DC budget is put together and implemented each year. Susie has put together a survey to learn what you want to know more about when it comes to the DC budget process. You can find it here.
Thanks for doing your part to make the DC budget more accessible and informative.
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August 16th, 2012 | by Jessica Fulton
Earlier this week, the Washington Post reported on the growing tech economy in the District. The article highlighted a few companies that have taken advantage of the DC’s competitive advantage in policy and problem solving and applied it to technology. The District should look for smart ways to incubate and grow these businesses, but cutting taxes on wealthy investors who look to profit from this sector isn’t one of them.
A proposal currently before the DC Council would slash the tax rate on profits made from technology investments to just three percent, the lowest income tax rate in the city. It is one percent lower than the tax rate paid by DC households who make between $10,000 and $40,000 annually. The three percent rate is also significantly lower than the rates in Maryland and Virginia.
Research shows that cutting taxes on so-called capital gains does not spur investment. In fact, a Center on Budget and Policy Priorities report shows that cutting taxes on capital gains does not increase economic growth. According to the Congressional Research Service, most economists have found that reductions in capital gains taxes have small and possibly even negative impacts on savings and investment.
What is clearer is the potential impact on District revenues. If a company like LivingSocial had an initial public offering, the revenue loss in lowering the capital gains rate to three percent could be substantial, according to the city’s Chief Financial Officer. That’s less money the District will have for schools, parks and other important city services.
By cutting tax rates for wealthy investors, the District is neither effectively growing the industry, nor using revenues for much needed District services. Instead of cutting capital gains taxes, the District should find effective ways to grow the industries that it wants to promote.
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August 14th, 2012 | by Caitlin Biegler
The District continues to see a drop in the unemployment rate in 2012. As of June 2012, the city’s unemployment rate stood at 9.1 percent, down from 10.1 percent in December. While unemployment fell for many groups of DC residents— especially young workers — others continue to face much higher unemployment rates than they did at the start of the recession. And while the District’s unemployment rate has fallen since its peak in August 2011, unemployment remains far higher than pre-recession levels.
The DC Fiscal Policy Institute is tracking changes in the city’s unemployment rate on a quarterly basis. This analysis of data from the Census Bureau’s Current Population Survey reveals DC’s uneven recovery from the recession.
Highlights from the report include:
- Unemployment fell more for DC’s White, non-Hispanic residents than it did for Black residents, and more for college educated residents than for those with lower levels of education.
- Unemployment only moderately improved this past quarter for Black workers and workers without a high school diploma. At the current rate of decline since the end of 2011, it will take until 2015 for unemployment among these groups to reach pre-recession levels.
- Unemployment fell fairly significantly for low-wage workers and single parents in the last quarter but is still far above pre-recession levels. The decline since the peak has offset only 33 percent of the recession-led increase for low-wage workers. For single parents, the decline has offset half of the recession-led increase in households without children but only 15 percent of the recession-led increase in households with children.
This analysis looks at unemployment by education, race/ethnicity, age, household type, and occupation and focuses on unemployment in the second quarter of 2012 (April to June), the most recent three months for which data are available.
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August 9th, 2012 | by Jessica Fulton
At its last legislative session, the D.C. Council made a smart move by delaying a vote on a bill that would create a new tax rate of 3 percent for investors who sell their shares in high-tech companies. In fact, the Council should delay a vote on the bill not just until September when the Council returns from recess, but until the District’s Tax Revision Commission has completed its assessment and recommendations on our tax system. DCFPI urges Council Chairman Mendelson to let the body complete its comprehensive review of our tax policy before making additional changes.
Bill 19-747, the “Technology Sector Enhancement Act” would allow investors in DC tech companies to pay just 3 percent in income tax when they sell their stake in these companies for profit. This special new tax rate for tech investors would be lower than the income tax rates paid by all other DC residents, which start at 4 percent. The rate would be just one-third of the top rate that Maryland residents pay, and about one-half the top income tax rate Virginia residents pay. The rate cut would apply not only to individuals, but to venture capital companies as well.
The Gray administration supports this proposed steep break from DC’s top tax rate of 8.95 percent because it claims in a document circulated to Council members that “high-value tech employee stock-holders” are considering “relocating to Virginia to shelter themselves” from paying taxes to the District. The bill is aimed at helping a special class of DC residents—wealthy investors and tech executives—to pay very low taxes on potentially substantial income gains. Such a dramatic tax cut raises several concerns:
- There is no evidence that cutting capital gains tax rates is effective in encouraging investment or in growing the economy. Instead, Mayor Gray and the District Council should work towards proven techniques for growing the tech sector.
- This tax cut applies to past investments. If the legislation were really geared towards future investments, it would not allow people who already own parts of tech companies to take advantage of the new tax rate. These individuals have already invested in companies, meaning that they thought it would profitable without a tax cut.
- The legislation does not exclude venture capital companies. Venture capital companies are in the business of investing in other companies. We don’t need to give them a tax cut just for doing their job.
- The District provides other tax incentives aimed towards tech sector growth. In fact, the District already has laws offering benefits to high tech companies. For example, the District just gave Living Social a $32.5 million tax abatement.
- The District cannot afford to risk deep loss in revenues. Revenue projections have been flat, meaning that items on the budget “wishlist” will likely not be funded in the coming year. The loss in revenue from this tax cut could potentially decrease revenue even further.
Last year, DCFPI conducted a poll that showed that a majority of residents—including high-income residents—wanted our government to invest in services and programs rather than cut taxes. Business owners know that smart spending in capital projects, such as schools, public transit, and public spaces like libraries and recreation centers, as well as in human capital, such as teachers and job training, bring a good return on investment.
The health of the city is a collective endeavor, in which all should contribute. The Council should delay a vote on this bill until the Tax Revision Commission recommends what that contribution should be for high-tech investors.
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August 7th, 2012 | by Jenny Reed
Yesterday, members of DC’s Tax Revision Commission met to kick-off their work. The 11 member body, chaired by former Mayor Anthony Williams, is charged with examining the efficiency, stability, equity and ease of administration of DC’s tax system. (DCFPI Executive Director Ed Lazere is a commission member.) In addition, the Commission is charged with examining ways the District could broaden its tax base, improve the transparency and fairness of the tax code and make DC’s tax system more competitive with surrounding jurisdictions.
Mayor Vince Gray, Chairman Phil Mendelson, and Chief Financial Officer Natwar Gandhi offered their remarks yesterday about their priorities for the Commission. Among topics he discussed, Mayor Gray said he wants the commission to examine the commercial property tax rate and whether the District should tax municipal bonds. Chairman Mendelson mentioned that one of his priorities would be to have the Commission look at reducing inequities in DC’s tax system. And lastly, Dr. Gandhi said that some of his priorities include having the Commission look at simplifying tax administration and broadening DC’s tax base.
During the meeting, the Commission discussed the very important role that public engagement would play in their work, starting with a set of public hearings that will be held in each quadrant of the DC in September and October. These hearings will give the public a change to voice their thoughts and recommendations. As well, the Commission discussed the possibility of a public workshop to help residents and businesses learn the mechanics of DC’s tax system.
But the hearings and forum are not the only way that the public can engage in the Commission’s work; a website will be set up with ways to give feedback, and each meeting of the Commission is open to the public. The next meeting is set for September 10th when the Commission will discuss the research agenda, guiding principles for judging a revenue system, and the schedule for public hearings.
Stay tuned to the District’s Dime for important updates on the Commission’s progress and ways that you can be engaged.
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August 3rd, 2012 | by Elissa Silverman
It’s August, and we assume many of The District’s Dime readers are headed on vacation (or at least a Tom Sherwood-style staycation) and looking for some good reading. The District’s newly released Unified Economic Development Report isn’t likely to make the New York Times bestseller list or Oprah’s Book Club anytime soon, but if you’re a DC resident interested in how and where the city is using its economic development toolkit it’s worth a look.
The annual report, which is mandated by law and prepared by the District’s Chief Financial Officer, details the economic incentives that Mayor Gray proposes to implement through next year’s budget. (The report looks at the proposed budget and does not include any possible changes made by the DC Council in May and early June.) The report includes grants and contracts as well as tax abatements and exemptions—and this year the report also includes capital spending on libraries and schools.
The report parses the information in several ways. Overall, the report concludes the city will spend approximately $790 million on economic development incentives in fiscal year 2013, a 28 percent increase from the current fiscal year. (The report factors in capital spending for schools and libraries for fiscal year 2012.) The information is broken down by incentive type, as well as by District agency and ward.
The bar graph on ward spending is particularly striking. The tallest bar—totaling $211 million—is not classified by ward. The largest spending within a ward is projected to happen in Ward 8, due to two massive projects: the redevelopment of the East Campus of the former St. Elizabeths Hospital site ($53 million) and the modernization of Ballou Senior High School ($58 million). The amount is almost evenly split between traditional economic development incentives and school and library capital spending.
The second highest spending by ward is in ward 5, in which a majority of the spending is on capital projects for schools and libraries. The school projects include modernization of Dunbar Senior High School ($57.4 million) and Brookland Middle School ($34.5 million), as well as $11 million on McKinley Technology High School, which had a $75 million renovation completed in 2004. Third on the list is Ward 6, in which a majority of money is being spent on more traditional economic development incentives.
A copy of the report can be found here.
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August 1st, 2012 | by Kate Coventry
Moving families from public assistance to self-sufficiency involves several interlocking factors: thorough assessments of the barriers to work, skills training, job coaching, and the resources to support these adequately. The District has made major improvements in the first three categories, but it all might come to a halt if Mayor Gray and the DC Council do not ensure the fourth: that money is available to continue helping eligible parents get back to work in the upcoming year.
Funding for these improvements was not included within the budget for fiscal year 2013, but instead was placed on the top of a budget wish list formally known as the Revenue Estimate Contingency Priority List. Items from the wish list will get funded only if the city’s revenue projections improve. Yet the District’s Chief Financial Officer forecasted no additional revenue in his June report, due to concerns about worldwide economic conditions and the threat of federal sequestration cutbacks. These concerns are ongoing, which means it is likely that the revenue projections in September and December also will fail to provide additional funding to help these families who need assistance.
What will happen without additional funding? Millions of dollars will not be available to help parents who want to do better for themselves and their kids. In addition, over 6,000 families, many facing significant hardships, will have their benefits cut in October.
This is especially disappointing because the District just embarked this year on a new effort to improve welfare-to-work services. As regular District’s Dime readers know, DC is in the process of implementing improved, targeted employment services for TANF parents. The results of this approach have been very promising, with parents in the pilot program increasing work participation ten-fold. But not unexpectedly, it takes time to implement these changes. Without funding for the employment program or to delay benefit cuts, thousands of families face a reduction in benefits before they even have a chance to access these improved services. The Council agreed that families should not be punished for implementation delays and pushed to postpone this cut by one year — expecting that growing revenues would address this need.
The Council also voted to protect particularly vulnerable families who need time to deal with serious issues that interfere with their ability to work, such as domestic violence, illness, or caring for a family member with a disability. Prior to this change, DC exempted these parents from work activity requirements during affected months, with the understanding that they would access services to deal with these issues. But unlike 36 other states, DC counted these months towards a family’s time limit, meaning that parents dealing with the biggest issues had little time remaining to prepare for and train for work. The Council agreed that these families should receive full benefits and a time limit break to give them sufficient time to access job services.
It is not a recipe for success to improve services but not fund them. Mayor Gray and the DC Council should continue the progress in our TANF employment program by identifying funding for this important work in the upcoming year. If the wish list will not work, it is time to develop a Plan B.
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July 31st, 2012 | by Soumya Bhat
In his recently released One City Action Plan, Mayor Gray refers to recommendations within a DC schools consultant report. The IFF report, as it is known, has been controversial for several reasons, most notably, that it suggests the District should close or reinvent 38 traditional DC public schools and three DC public charter schools. The report argues a turnaround in many of these schools could occur by having high-performing charter school operators replace low-performing DC public schools.
Just who is the IFF? IFF, formerly known as the Illinois Facilities Fund, is a nonprofit financial institution in the business of providing loans and real estate consulting to charter schools, private schools, and other educational organizations. They work very closely with major charter school operators, who often are looking to use public school buildings for facilities. The DC report was also partly funded by the Walton Family Foundation—of Walmart fame—which supports charter school expansion.
The report’s heavy reliance on test score data has also raised many concerns about its usefulness. The Mayor’s One City Action Plan includes direct reference to the study’s focus on availability of high-performing or “quality academic seats” under its education strategy. The report’s use of the term “performing seats” implies the only problem is with the school, which would lead to school closure as the only policy option. In reality, the varying levels of educational outcomes across DC neighborhoods can be more linked to a host of other challenges preventing a child’s academic success, and there are a number of community-driven solutions that could be explored beyond school closure. But the implementation of the IFF report recommendations will not lie with the mayor but with the DC public schools. To that end, Chancellor Kaya Henderson continues to say schools will be closed this fall while assuring concerned DC parents that the study is “a report, not a plan.” She has, however, also discussed the possibility of DCPS becoming its own charter school authorizer.
The source of the IFF report’s recommendations are important to keep in mind as DC’s Deputy Mayor of Education holds a series of community conversations on school quality in July and August, including one this evening. The discussions take place in the wake of the IFF report and are only taking place in five wards in the city (1, 4, 5, 7, and 8–essentially the same areas of the city where the IFF report suggests closing schools), but all education stakeholders are welcome to participate in the meetings and offer input. As the city continues to support two education systems, it is important that the community is actively involved in these conversations on access and school quality.
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July 27th, 2012 | by Jessica Fulton
We all love living in the District, but rising home values and rental rates are making it harder and harder for many people to make ends meet. It’s great when our homes are worth more, but it also means a larger property tax bill that can be tough for many with stagnant or fixed incomes. The DC Council is considering revamping the city’s property tax credit to help low-income home owners and renters, and now is a great time to do it.
The District, like many states around the country, offers a tax credit for low-income home owners and renters. The credit (known as “Schedule H” in tax jargon) attempts to help to those District residents who are spending a significant portion of their income on property taxes. And because landlords often pass their property tax burden on to their tenants, it allows renters to claim the credit as well. Unfortunately, as it exists today, the credit does little to help the residents whose property taxes take a large chunk of income.
How does it work? It’s a bit complicated, and that’s part of the problem. Residents qualify for the tax credit if they earn less than $20,000 per year and spend higher than a certain percentage of their income on property taxes. This percentage threshold varies from 1.5 to four percent depending on income and senior status. If eligible, the resident can claim a credit of up to $750, and equivalent to a percentage of the property tax (for renters, the property tax is computed as 15 percent of the rental amount).
Though a step in the right direction, this credit needs revision if it is going to provide real help for today’s District residents. The credit is outdated, complex, and difficult to qualify for, which limit the help it offers. The DC Council currently is considering Bill 19-164, the “Schedule H Property Tax Relief Act of 2011,” to make the necessary adjustments to the tax credit.
Changes include:
- Raising the income limit from $20,000 to $50,000 and including a cost of living adjustment. The maximum income limit has never been adjusted for inflation and should be raised to reflect the realities of today’s economy.
- Increasing the maximum benefit from $750 to $1,000 and including a cost of living adjustment. The benefit amount has not been adjusted for inflation since the credit came into existence in the 1970s.
- Simplifying unnecessarily complex rules that limit participation. Most importantly, the rules require people or families sharing a home to apply together even if they do not share income or file tax returns together. This often makes it impossible for many people to qualify.
- Increase the property tax rent equivalent from 15 to 20 percent. The District assumes that about 15 percent of the rent paid by a renter is for property tax, this bill will increase that amount to 20 percent.
The DC Council has the power to offer some help to people who live in the District and are struggling to make ends meet. Improving the low-income property tax credit is one way to reach seniors and others living on fixed incomes, as well as working District residents who feel the economic strain caused by rising property taxes. When the Council returns from recess, DCFPI hopes the low-income tax credit will be on top of the legislative agenda.
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July 26th, 2012 | by Jenny Reed
Last week, Rep. Darrell Issa (R-California) made news when he said that he thought there should be a discussion about DC’s inability to tax the earnings of people who work in the District but live outside of it. States have the right to tax economic activity within their borders, including income earned by non-residents who work in the state—and states do. DC is a special case, however, because of the role of the U.S. Congress in our lawmaking and taxing authority.
Why do we talk about a “commuter tax”?
DC performs the functions of a city, state and county, running everything from police and fire services—to a Medicaid program and public school system. Yet in its unique role as the nation’s capital, the District is constrained in its ability to raise revenue to support all of the functions it performs for two main reasons. One, much of DC’s land—approximately 40 percent—is not taxable because it’s occupied by the federal government, non-profits, or other tax-exempt institutions. Two, federal law denies DC the power that every state has to tax the incomes of people who work within their borders but live elsewhere.
In 2003, the Government Accountability Office did a study that found that because of the District’s limited ability to raise revenues and that the costs to provide basic services were higher in DC, it had a structural budget gap between $470 million and $1.1 billion, depending on which set of assumptions were used. A paper co-authored by DCFPI and the Brookings Institution estimated that the most reasonable estimate of this gap was somewhere between $900 million and $1.1 billion a year. And while the GAO pointed out that other states had structural deficits as well, DC had the largest structural deficit per capita.
What could the fiscal impact be?
IF DC were able to tax the income of non-residents who worked and earned money in the city, it was estimated that in 2009 that DC could have brought in an additional $2 billion that year in income taxes. That level of funding would certainly help to close DC’s estimated structural budget gap, but it also would likely face fierce opposition from Maryland and Virginia elected representatives both in Congress and in their respective statehouses. That’s because these residents would get a credit against their state income taxes for the taxes they pay to the District, which means less revenue for Maryland and Virginia.
Alternative Proposals
One proposal to address DC’s structural deficit outside of a non-resident income tax was proposed in 2004 by DC congressional delegate Eleanor Holmes Norton. It would create a federal contribution to support DC’s infrastructure. The bill, the “District of Columbia Fair Federal Compensation Act of 2004,” that was introduced by Norton would have established an account of $800 million for DC’s infrastructure that would be adjusted each year. At the time, the funds were proposed to be used for transportation, IT improvements, debt service, and school maintenance and construction.
Another approach raised by DCFPI and Brookings in a 2005 paper, was to tie a federal payment to the costs of state-like services that the District provides. Currently, the federal government provides and pays for the court system and adult felony prisoners for the District. The federal government could provide an additional payment to cover the District’s costs of DC running the other state-like services it provides such as Medicaid, mental health, college, motor vehicle and child and family services.
According to the Washington Post, Rep. Issa feels that the District’s inability to tax non-residents who work in the city is worth a closer look and we agree. DC’s inability to tax non-resident income certainly limits the District’s ability to raise revenue. Exploring if a commuter tax or an updated and restructured federal payment are needed is welcome news.
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July 25th, 2012 | by Elissa Silverman
The recent Washington Post poll offered a mixed picture of how DC residents feel the city’s doing when it comes to jobs and the local DC economy. Many felt good about Mayor Gray’s efforts to attract new businesses to the city, but many also felt enough wasn’t being done to make sure DC residents get hired for any new jobs created out of this growth. Strengthening the connection between employers and job seekers is a task that’s been taken on by the District’s Workforce Investment Council, especially in its efforts to start the District’s first workforce intermediary, and its success is critical to closing DC’s employment gap.
Mayor Gray deserves credit for reinvigorating DC’s Workforce Investment Council. The WIC, as it is known, is made up of business, government and nonprofit leaders and is tasked with oversight over the city’s federally-funded job training programs. This includes the city’s one-stop employment centers, as well as other programs targeted at apprenticeships, seniors and employers. WIC executive director Allison Gerber has both hands-on experience running job training programs as well as analytical expertise as a researcher with the nationally-known Aspen Institute, and she has hired experienced staffers in job training and skills development to help her reinvent the District’s approach to workforce development.
One of the most innovative efforts the WIC is engaged in is creating a pilot workforce intermediary. DCFPI, along with DC Appleseed, the DC Employment Justice Center and other groups interested in workforce development, worked with the Gray administration and the DC Council to bring this successful model to the District. Connecting employers with job seekers is a multi-pronged process with numerous entities involved. The intermediary acts as a broker—understanding the needs of employers in terms of skills and training, the role of government agencies and nonprofits in providing training and resources and the needs of job seekers themselves to make a good match for all.
A task force on the intermediary has presented its recommendations and now it is in the implementation phase. The intermediary has received the support of DC Council members, and we hope the Council and mayor will work together with the WIC to get the intermediary up and running soon.
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July 19th, 2012 | by Soumya Bhat
Even though school is out, and thoughts are probably turning to swimming and summer camp, there’s news about what’s happening in our public schools. Chancellor Kaya Henderson is wrapping up a series of “State of the Schools” meetings across the city, meant to create dialogue between community members, school leaders, and DCPS officials. The events also give the Chancellor an opportunity discuss her new five-year strategic plan, A Capital Commitment, and highlight a few neighborhood schools that won “Proving What’s Possible” grants this summer. DCFPI attended the Ward 1 meeting held this Tuesday.
So what can DC residents glean from the State of the Schools meetings? Often when DCFPI talks about the need for more budget transparency, it can seem like a vague concept. But two examples of how transparency could help folks better understand DCPS decisions came up during Tuesday’s question-and-answer session.
One question was about the schools that eliminated librarian positions for the upcoming school year. Individual schools cut about 29 librarian staff positions from the fiscal year 2013 budget, due to a DCPS decision to reduce funding allocations to smaller schools for librarians, leaving a total of 57 schools without a librarian. When asked about these staff cuts, Chancellor Henderson referred to the collective bargaining agreement with the Washington Teachers Union. It allows these librarians to work at DCPS one more year in another position if they received an “effective” or “highly effective” rating on their evaluations, among other conditions. The loss of librarians is a great concern to many parents and advocates, and it is unclear why DCPS would choose to put a high-performing librarian in another position.
Another issue is cuts to afterschool programs. Chancellor Henderson hinted that DCPS has located some new funding sources to supplement aftercare services — after such services were cut earlier this year — and will make a detailed announcement in the next few weeks. Right now, it is unclear the source of this new funding. We hope the Chancellor will give a detailed answer soon.
Both of these examples highlight the importance for DC residents to have access to a common-sense education budget and understand the rationale behind funding decisions in their schools. If retaining quality staff is important for DCPS, the cuts to highly effective staff do not seem to make sense. Similarly, if there are funds available to supplement some programs even before the school year begins, the public should be able to see where the resources are coming from.
On another note, with many residents concerned about the school closure announcement expected sometime in late 2012, it will be important to participate in the upcoming community conversations being held by the Office of the Deputy Mayor for Education. These meetings will inform a list of recommendations to DCPS and the Public Charter School Board on how to improve school quality across the city. Please see below for a partial list of meeting dates; more information will be posted on the DME website: http://dme.dc.gov/DC/DME/.
- Ward 1: Thursday July 26th, 6-9pm at CentroNía, 2900 14th St. NW
- Ward 4: Saturday August 18th, 10am-2pm at Emery Rec Center, 5701 Georgia Ave. NW (Location awaiting confirmation)
- Ward 5: Tuesday July 31st, 6:30 – 9pm at St. Catherine’s Hall (Location awaiting confirmation)
- Ward 7: Saturday August 11th, 10am – 2pm at HD Woodson High School, 540 55th St. NE
- Ward 8: TBA
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July 17th, 2012 | by Ed Lazere
The U.S. Supreme Court upheld what has come to be known as “Obamacare,” opining that the Affordable Care Act’s individual mandate is constitutional — but making an important distinction that the law’s planned expansion of Medicaid is optional for states. You might be wondering how this ruling impacts the District. While many states are now scrambling to decide how to respond, DC has been a leader in expanding health insurance for its residents for years – and that has continued full-force as the city has aggressively moved forward in implementing the President’s health care law.
These efforts include taking up the Affordable Care Act’s option to expand Medicaid — government health coverage that is jointly paid for by federal and state government — sooner than the 2014 start date. DC is also one of several states far along in setting up a required new insurance marketplace called a “health exchange.” This is great because it will not only expand access to health insurance for working DC residents, but it will actually save the District money.
While the federal law calls on states to set Medicaid eligibility at 133 percent of the federal poverty level by January 1, 2014, the District already raised Medicaid eligibility to 200 percent in 2010, four years early. That eligibility level translates to $22,000 for an individual and $30,000 for a married couple with no children. This move was financially advantageous for the District, because DC has operated the locally-funded DC HealthCare Alliance for uninsured residents under 200 percent of poverty for over a decade. DC was able to move more than 30,000 residents from the Alliance to Medicaid, in which the federal government picks up 70 percent of the tab (DC’s federal Medicaid matching rate). This move also provided these residents with a broader set of health benefits offered by Medicaid as compared to the Alliance.
Things will change and get more complicated starting January 1, 2014, the date all states are expected to start implementing many of the coverage expansion and insurance market reforms under the Affordable Care Act. Here’s what it will mean for DC:
- For everyone who was Medicaid-eligible before the District implemented the expansion, coverage will remain largely the same with a few exceptions. This includes children and pregnant women with incomes up to 300 percent of poverty and parents with incomes up to 200 percent of poverty.
- For everyone else, Medicaid eligibility levels would drop to 133 percent of poverty (although the District has the option of keeping parents and some others in Medicaid above this 133 percent mark if it chooses). The federal government will pick up 100 percent of the costs for people in this group who became eligible as a result of the federal health care law, instead of the normal 70 percent. This will save the District money. The federal share will gradually step down to 90 percent over several years, but overall, still provides a financial savings for the city over that period.
- Residents above 133 percent of poverty won’t lose coverage, because they will be able to purchase coverage through the DC Health Insurance Exchange, the new insurance marketplace of standardized, high-quality plans made affordable through insurance reforms. Families with incomes up to 400 percent of the federal poverty level will qualify for tax credits to help subsidize the cost of the premiums, and families below 250 percent of poverty will qualify for additional “cost sharing” to help them pay deductibles and co-pays. Small businesses will be able to purchase insurance through the exchange, with some eligible for a small business tax credit to help defray the cost of coverage for their employees.
- DC also has the option to establish a Basic Health Program, which would provide a more affordable coverage option for people who fall between 133 percent and 200 percent of the federal poverty level and are not eligible for Medicaid. Such an option is currently under consideration by city leadership.
While some states dragged their feet on implementing the Affordable Care Act, hoping that the Supreme Court would invalidate health reform entirely, the District has been moving ahead. DC passed reforms to the private insurance market and enacted a law to set up its exchange in 2012. The DC Council approved the Mayor’s nominees for the Exchange’s governing board last week, and the District has invested in a major new computer system that will allow residents a streamlined and seamless experience in applying for insurance coverage and other benefits in DC. This will help keep DC healthy—physically and fiscally.
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July 13th, 2012 | by Soumya Bhat
Today, DCFPI education analyst Soumya Bhat testified at an education roundtable. Here are her remarks:
I am here today to ask the Council to renew its commitment to improving the transparency of public education funding in the District of Columbia and to provide some suggestions on how to do this. A transparent education budget — one that provides accurate, clear, and timely information — is critical to allowing the DC Council to fulfill its agency oversight functions, and to empowering parents and other residents to hold public officials accountable for the delivery of public services.
This past budget season, DC Public Schools (DCPS) released a new budget guide that included valuable information in a user-friendly format on the distribution of DCPS funding by funding type (central, school support, and school), school type, revenue source, and administrative office. This was a big step in the right direction. But, DCFPI believes there are several other transparency issues with the DCPS budget that the Council could address: 1) continue to press for a common sense budget for DCPS, 2) get clear answers for the fiscal year 2013 special education budget, 3) better engage stakeholders in funding decisions, 4) reinstate a Council committee on education, and 5) launch a community stakeholder group to get their input on how to improve school budget transparency.
Continue to Press for a Common Sense Budget for DCPS: A major obstacle to transparency is the fact that the numbers in the Chief Financial Officer’s (CFO) Budget Book do not seem to really reflect how DCPS is organized or how its spends funds. The figures in the budget book are vastly different from the DCPS Budget Guide, including the fact that the budget book suggests the DCPS budget for fiscal year 2013 is $17 million more than what DCPS reports in its Budget Guide. Also, each year the proposed budget for the upcoming year is also hard to assess, because the budget figures for the current year reflect the initial approved budget and not any of the many revisions made by DCPS after the budget is adopted. This leads to inaccurate comparisons of how funding for particular divisions is changing from year to year. The budget document for DCPS — and for every DC agency for that matter — should include the revised current-year budget in addition to the proposed budget for the upcoming year. Notably, DCPS did not offer a budget briefing during the FY 2013 budget season, leaving DC residents even more confused about how dollars were being spent in education.
Get Clear Answers for Special Education Budget: DCFPI and other partner organizations are concerned that the school year is less than two months away and the public does not yet have a clear answer on the actual special education funding and staff allocations for fiscal year 2013. This is particularly alarming when DCPS is expecting a 13 percent increase in special education enrollment as a result of the Mayor’s effort to reduce the number of non-public placements.
Once again, the Budget Book and DCPS Budget offer two different stories on the funding levels. The special education budget under DCPS in the Budget Book shows reductions from 2012 to 2013 of 222 full-time equivalent staff positions and a $209,000 decrease in funds. According to DCPS, the problem stems because some staff positions that were shifted to central administration were still reported in the special education budget in fiscal year 2012 (social workers and dedicated aides). This apparent overstatement of staffing in 2012 makes it appear that funding and staffing will fall in fiscal year 2013. But this error accounts for only a portion of the apparent decline in staffing. Even correcting this error, it appears that DCPS will have 92 fewer special education positions for fiscal year 2013 instead of 222. DCPS maintains that they have adequate resources to handle the influx of students.
Better Engage Stakeholders in Funding Decisions: Too often, DC residents feel shut out of the important policy decisions that affect our schools. One example of this is the short timeframe (less than a week) that school leaders and Local School Advisory Teams are given between the time they receive initial school allocations from DCPS and when they must submit their final budgets for the next school year. And, in a fiscal year when DC schools are facing significant cuts to staffing, including school librarians and special education coordinators, DCPS released $10 million in grants from general education funding without explaining where these funds came from. These “Proving What’s Possible” grants are certainly welcomed by the schools who won the awards, but if the funds were reallocated from ineffective programming, as DCPS officials say, the public deserves to know what specific programs were not effective and are losing funding.
Reinstate a Council Committee on Education: Despite education being one of the largest areas of the DC budget, the Council’s education committee currently resides within the Committee of the Whole. While assigning the responsibility of keeping our education system accountable to all council members sounds good in theory, in reality, the sporadic attendance by council members and staff at key budget oversight hearings covering $1.6 billion in funding and hours of public testimony is concerning. Many education advocates have expressed the need for DC to return to the pre-2007 structure of having an education committee separate from the Committee of the Whole and DCFPI agrees. Not only will this realignment allow the Council to give the agencies that deal with education funding and policies the focused attention and oversight they deserve, it can also help the Council articulate a clear vision and convey to the public a sense that the Council makes education a true priority.
Launch Community Stakeholder Group to Improve Transparency: Earlier this year, the Public Education Finance Reform Commission (PEFRC), chaired by DCFPI’s executive director Ed Lazere, released its final equity and recommendations report. The independent commission, established under 2010 legislation, was charged with examining the issue of “equity” of school funding for DCPS and public charter schools, but also examined broader issues, including the “adequacy,” “affordability,” and “transparency” of DC’s education finance. One of the PEFRC’s final recommendations called for creation of a new panel, made up of parents, school officials, advocates, and local researchers, to review and advise DCPS and public charter schools on outreach and public information related to school funding and the allocation of public resources.[1] DCFPI encourages the Council to implement this recommendation to help improve transparency while utilizing community stakeholder input. We believe that active engagement of a group like this would address many of the issues I have raised.
Chairman Mendelson and members of the Council, we at DCFPI urge you to take these recommendations under consideration and enforce best practices of fiscal transparency for DC public education for the remainder of the Council Period and beyond. While this testimony did not go into transparency recommendations for the Office of the State Superintendent of Education or the Public Charter School Board, we also focus on these agencies at DCFPI and would welcome conversations on ways to improve their transparency as well.
[1] See page 34 of final PEFRC report: http://pefrc.org/wp-content/uploads/2012/02/pefrc_finalreport.pdf.
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July 11th, 2012 | by DCFPI staff
Yesterday, the DC Council decided to delay a first vote on a bill that would create a special low tax rate for investors in high tech companies. DCFPI wants to thank The District’s Dime readers who emailed and called Chairman Phil Mendelson and his colleagues to say that you disagree with this provision. The “Technology Sector Enhancement Act of 2012” will now come before the Council in September, when our city’s legislative body returns from summer recess. DCFPI will continue to urge the Council to strike the three percent tax rate from the bill.
As it is currently written, the bill would create a special tax rate for investors in qualified high technology companies. The three percent capital gains rate would be DC’s lowest income tax rate—even lower than the four percent income tax rate paid by residents who earn the minimum wage. The rate is not only the lowest in DC but far lower than the income tax rates in Virginia and Maryland.
DCFPI supports policies to grow the tech sector, but this provision does not accomplish that. Studies show that cutting the capital gains tax does not incentivize investment. As well, the three percent rate would apply to current investments and would provide big tax savings to tech investors who might be looking to cash out soon. This might be true for investors in LivingSocial, which got final approval from the Council yesterday on $32.5 million in income and property tax breaks. Press reports say that the company might have an initial public offering of stock as early as next year.
A tax break for these investors will be an additional boost on top of the millions they will gain, but it will be the District that will lose a lot in terms of resources for schools, libraries, and all the other services provided by taxpayer dollars. A document circulated by the Gray administration claimed that “a number of high-value tech employee stockholders” are considering “relocating to Virginia” to avoid District taxes.
DCFPI hopes that the Council—as well as these individuals—will follow the Buffett Rule, not break it. Billionaire Warren Buffett—an Alice Deal and Wilson High School graduate—has said that he thinks it is wrong that he pays a lower tax rate than his secretary. DC’s Chief Financial Officer was not able to estimate the financial impact on the District but said it could be substantial.
Some have referred to this as the “angel investor” bill, but it’s important to remember that the goal of these investors is not divine–it is to make money. So-called angel investors tend to be high-income and invest for a high-return. But this bill isn’t just limited to individuals, it also applies to venture capital firms. The mayor and council should look for good ways to build DC’s tech sector, but slashing the capital gains tax isn’t the right method.
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July 9th, 2012 | by Ed Lazere
A bill before the DC Council tomorrow would help wealthy investors and tech executives pay very low taxes on substantial income gains when they sell their investments in tech companies. The Technology Sector Enhancement Act would set a new three percent tax rate just for tech investors, a deep cut from DC’s top income tax rate of 8.95 percent — which is lower than the income tax rates paid by all other working DC residents.
TELL THE DC COUNCIL: DC Should Follow the Buffett Rule, Not Break It.
Billionaire Warren Buffett—a Wilson Senior High School graduate—has famously pointed out that he pays a lower tax rate on his investments than his secretary pays on her salary, and he supports raising taxes on investment income to address this inequity. Yet DC’s legislation would go against the Buffett Rule, by taxing tech investors and owners at a lower rate than the income tax rate for all working DC residents. (DC’s basic tax rates are four percent, six percent and 8.95 percent, depending on the income level.)
The Gray administration acknowledges they are promoting this because “high-worth” tech employees in DC are expecting to cash out soon and make a lot, and some of them have told the Mayor they will move to Virginia to avoid paying DC taxes. Yet these wealthy company owners are likely to be benefiting already from District tax subsidies given to all high tech companies, such as the $32.5 million in tax breaks for LivingSocial. Why should DC reward wealthy tech executives who are threatening to leave DC by offering them incredibly low tax rates on their significant stock gains?
At a time when DC has no revenues to fund any critical programs on the budget “wish list,” it simply does not make sense to risk a large loss of DC tax revenues to wealthy tech investors.
CONTACT THE DC COUNCIL to say that you support the Buffett Rule and the Council should listen to the Sage of Alice Deal and Wilson High School!
Entire Council membersonly@dccouncil.us
Phil Mendelson, Chairman, 724-8064 or pmendelson@dccouncil.us
Jim Graham (Ward 1) 724-8181 or jgraham@dccouncil.us
Jack Evans (Ward 2) 724-8058 or Jacjevans@dccouncil.us
Mary Cheh (Ward 3) 724-8062 or mcheh@dccouncil.us
Muriel Bowser (Ward 4) 724-8052 or mbowser@dccouncil.us
Kenyan McDuffie (Ward 5) 724-8028 or kmcduffie@dccouncil.us
Tommy Wells (Ward 6) 724-8072 or twells@dccouncil.us
Yvette Alexander (Ward 7) 724-8068 or yalexander@dccouncil.us
Marion Barry (Ward 8 ) 724-8045 or mbarry@dccouncil.us
At-Large
Michael Brown 724-8105 or mbrown@dccouncil.us
David Catania 724-7772 or dcatania@dccouncil.us
Vincent Orange 724-8174 or vorange@dccouncil.us
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July 3rd, 2012 | by Ed Lazere
A bill before the DC Council on July 10th — the Technology Sector Enhancement Act — would allow investors in DC tech companies to pay just three percent in income tax when they sell their stake in these companies for profit. This special new tax rate for tech investors would be lower than the income tax rates paid by all other DC residents, which start at four percent. The rate would be just one-third of the top rate that Maryland residents pay, and about one-half the top income tax rate Virginia residents pay. The rate cut would apply not only to individuals, but to venture capital companies as well.
The Gray Administration supports this proposed steep break from DC’s top tax rate of 8.95 percent because it claims in a document circulated to Council members that “high-value tech employee stock-holders” are considering “relocating to Virginia to shelter themselves” from paying taxes to the District. The bill is aimed at helping a special class of DC residents—wealthy investors and tech executives—to pay very low taxes on potentially substantial income gains. Such a dramatic tax cut raises several concerns:
Why Should DC Create Its Own “Warren Buffett Problem?” The billionaire Warren Buffett—a Wilson High School graduate—has noted that he pays a lower tax rate than his secretary due to low federal tax rates for investment income. He supports raising taxes on investment income to address this inequity. DC’s legislation would create a local “Warren Buffett problem,” by taxing high-income residents with tech investment income at a lower rate than working DC residents. Instead, the Council should follow the “Buffett Rule” by asking our highest earners to contribute fairly. The average income of the top five percent of DC residents is higher than in any major U.S. city, strong evidence that the District does not have a problem attracting high-income residents and does not need to reduce tax rates to retain residents.
DC Already Provides Substantial Tax Incentives to High-Tech Companies. Why Should We Also Subsidize High-Tech Executives? When asked why the tax cut would not be limited to new investments, the Gray Administration notes that there are high-tech company owners who stand to make substantial gains on prior investments and have said they will leave DC without a tax break. It is very likely that these company owners already have benefited from District tax subsidies, since the city offers multiple tax breaks to tech companies and just approved $32.5 million in tax breaks for LivingSocial. Providing deep tax cuts for investment gains, on top of breaks already received by their companies, would mean unusually large subsidies to tech companies and owners.
Why Should Venture Capital Companies Get A Steep Tax Cut? It does not make sense to cut taxes for companies that are in the business of investing in other companies and are likely to be making such investments, anyway.
Is Now a Good Time to Risk a Deep Loss of DC Revenues? DC’s Chief Financial Officer notes that the impact of the proposed three percent investment tax rate could be “substantial” but cannot be predicted reliably. The tax cut could affect DC revenues negatively at a time of global economic shakiness and when the District has no revenues to fund critical items on its budget “wish list.”
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July 2nd, 2012 | by Jenny Reed
Welcome to the July 4th week, District’s Dime readers. DCFPI hopes you made it through the derecho with power, and we wish you a speedy restoration if not. Independence Day is a time in which we reflect upon our democracy (as well as dust off the grill, watch fireworks and attend our local Capitol Hill and Palisades July 4th parades), so we’ll focus today’s blog on ways we can improve civic engagement in DC government.
As District’s Dime readers know, government transparency is critical to giving residents the ability to hold elected officials accountable for their decisions. Under DC law, most legislation requires proper public notice, a public hearing and two full votes before becoming law. This process gives the public a chance to participate in decisions that will impact their everyday lives. However, some legislation gets fast-tracked through the process, and this is where transparency and public participation can break down.
There are two areas of the legislative process that occur too often with little transparency—amendments to legislation and emergency legislation. Here are the issues, and solutions to make the process better and more transparent:
- Amendments to Legislation: During debate on a bill before the Council, members sometimes offer amendments that can create substantial changes. Yet often, the public has very little information about these amendments. Unless the amendment is made “in the nature of a substitute”—in which it is a replacement for underlying bill—amendments are not required to be circulated (and even amendments in the nature of a substitute are only required to be circulated to members) or publicly posted prior to a vote on the legislation.
The Council could improve the transparency and notice of amendments by requiring members to submit amendments in writing to the Council Secretary prior to a full vote by the Council on the measure. The written amendment could be read aloud by the Council Secretary prior to the vote, so members as well as the public are aware of the amendment being voted upon.
- Emergency Legislation: Emergency legislation can be necessary when going through the timeline of the normal legislative process would cause hardship for residents or the District. Emergency legislation needs a two-thirds majority rather than a simple majority, but it is immediately put into effect with the mayor’s approval. Right now, Councilmembers are required to circulate among themselves the notice and full text of an emergency bill three and two business days before the emergency is being considered, respectively, for a vote. The public is only required to receive notice that an emergency action is being taken, but not the text of the legislation itself.
The Council should require that the text of emergencies be posted in their entirety on the Council’s website for the public at the time the draft of the bill is circulated to the members of the Council. That way the need to provide transparency to the emergency legislative process can be balanced with the Council’s need to act quickly on an emergency.
These ideas were part of a larger set of transparency suggestions given to the transition team for former Chairman Kwame Brown by a number of organizations, including DCFPI. We hope Chairman Phil Mendelson will consider making these critical changes.
Happy July 4th!
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June 29th, 2012 | by Ed Lazere
Should so-called “angel investors” in technology companies pay the lowest income tax rate in the city? Today, the DC Council’s Committee on Finance and Revenue marked up a bill that would do exactly that. Bill 19-764, the “Technology Sector Enhancement Act of 2012,” would lower the income tax rate for gains on such investments to three percent. DCFPI testified against this provision of the bill. Our testimony follows:
This proposal represents a dramatic change in tax policy. It would set the income tax rate for gains on such investments at 3 percent, a reduction of two-thirds from the existing 8.95 percent top income tax rate on such gains. This would set a tax rate on investment income even below the 4 percent income tax rate paid by workers in the lowest tax bracket. It would create DC’s version of the “Warren Buffet Problem,” with low-paid workers in the city paying a higher income tax rate than some of the highest-income investors.
Such a dramatic change in tax policy – setting a tax rate on investment income that is lower than even the lowest tax rate on employment income — can be justified only if there is clear evidence that it will have positive effects. Yet there is no such evidence, and in fact there are several reasons to suggest that this tax break would not be effective. Beyond that, there are significant problems with the design of this tax break. For these reasons, the DC Council should reject this tax change, or at most refer it to the Tax Revision Commission for review.
This proposal is unlikely to lead to substantial new investment in high-tech companies. Investors make decisions to invest in a particular company based on the riskiness of the investment and the possible rate of return, not the tax rate. Lowering the tax rate will not turn a bad investment into a good one. Consider being offered a chance to invest tax-free in a risky company with a modest expected rate of return, or to make a taxable investment in a less-risky company with a higher expected rate of return. Paying taxes on a substantial gain is much better than paying no tax on a small gain.
Beyond that, this tax break only applies to DC residents who invest in DC high-tech firms. Yet any company looking for venture capital will need to look far and wide. The likelihood that a DC start-up company would be able to have its entire capital needs met by DC residents is slim. This means that the proposed tax break, even if you believe it will act as an incentive, will probably not do much to meet the overall capital needs of high-technology companies.
These are the main reasons that this proposed steep reduction in taxes on investment income would be unlikely to have a marked impact on DC’s high-tech sector. These are strong reasons to reject this bill.
Beyond these concerns, there are significant flaws in the design of this legislation. First, the bill seems to offer the low capital gains tax rate to both individuals and businesses, including venture capital companies. Given that such companies already exist knowing that they have to pay taxes on their gains, there is no reason to provide a steep tax break to venture capital firms.
Second, the bill would offer the tax break to investments that have already been made. If the goal is to incentivize new investments, the tax reduction should be limited to new investments made after passage of the law, by individuals who have not invested in the same company in the past.
Third, describing this legislation as “angel investor” incentives is a misnomer, because tax breaks would not be limited to investments in young firms that are trying to grow. Instead, the bill would provide a steep tax break for investing in any high-tech company, regardless of how large or well established it is.
Fourth, the bill would provide much deeper tax breaks than angel investor tax breaks offered in many states. A review of a nine “angel investor” laws shows that none offers a two-thirds tax break. Instead, it is more common to offer a tax break of 25 percent, which in DC would translate into a rate cut of 2.25 percent instead of nearly 6 percent as is proposed in the DC bill. Moreover, many states place a cap on the total amount of tax benefits, but the DC bill has no such cap.
Finally, it is important to note, as we have been discussing today, the District already provides very substantial tax subsidies to new high-technology companies, and it is negotiating a subsidy deal with LivingSocial. Heavy subsidies to both the technology companies themselves and to the investors in these companies seem excessive.
We urge the Council to reject this portion of the bill 19-764.
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June 28th, 2012 | by Ed Lazere
DCFPI testified today before the DC Council in support of the nomination of Dr. Natwar Gandhi for a third 5-year term as the District’s Chief Financial Officer. We used the opportunity to highlight Dr. Gandhi’s policy accomplishments – and to point out some things we hope will be accomplished by the CFO in the next five years.
Under Dr. Gandhi, the District has developed a sophisticated and financial management system, with a team of highly competent fiscal stewards who show a great devotion to the future of the District of Columbia and have accomplished a lot:
- Long-term cost projections for proposed legislation: The CFO’s Office of Revenue Analysis produces fiscal impact statements that extend beyond DC’s four-year financial plan window, giving policy makers and residents the full long-term picture of the costs of proposed legislation. This is important because our four-year scoring window creates a natural incentive for policymakers to design bills to push costs beyond four years.
- Access to Better Budget Information: The Office of Budget and Planning has developed a new online tool, CFO Info, to help the public access budget information quickly and serves as a platform for providing more detailed budget information than was previously available.
- A Firm Cap on Debt: Dr. Gandhi encouraged the DC Council to adopt a 12 percent cap on the portion of the city’s budget that can be used for debt service. Before then, policymakers faced very little constraints when approving debt-financed projects, especially economic development projects. Now, policymakers must make choices and set priorities over the use of economic development resources.
DCFPI also laid out what we consider priorities for the District’s financial management over the next five years.
- Enhanced Budget Transparency: DC’s online budget tool should be modified to be easier to navigate and to include more detailed information, such as breakdowns of the use of federal and local funds for all line items. The CFO also should work with community stakeholders and DC government agencies to restructure agency budgets to better align budget line items with actual programs and services. It took many years just to get a separate budget line item for the Summer Youth Employment Program, and many other programs remain hidden in obscurely named budget line items like “program performance monitoring.”
- Addressing Federal Restrictions on Use of DC Resources: Dr. Gandhi should work closely with the Mayor and DC Council leadership to promote greater budget autonomy, starting with the overly restrictive federal rules governing DC’s local rainy day reserves. Now is a good time to promote better flexibility over the reserves, since there are no plans to use them, which means DC leaders could not be accused of changing rainy day funds to raid them.
- Focus on improving the working relationships of Agency Directors and Agency Fiscal Officers: The independent CFO structure in DC is fairly unique and resulted in a situation where agency directors generally report to the Mayor and agency fiscal staff generally report to the CFO. While this does not preclude a good working relationship between the agency director and financial staff, it has at times led to confusion and inefficiency. Dr. Gandhi could explore ways to give agency fiscal staff more encouragement and flexibility to work cooperatively with agency directors.
DCFPI’s testimony can be found here.
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June 27th, 2012 | by Soumya Bhat
The recent change in DC Council leadership has sparked an important issue for fiscal oversight: Will the Council return to a stand-alone education committee?
Despite education being one of the largest areas of the DC budget—agencies include the Office of the State Superintendent of Education, DC Public Schools, and the Public Charter School Board–the Council’s education committee has resided within the Committee of the Whole since 2007. Sure, assigning the responsibility of keeping our education system accountable to all council members sounds good in theory. But, in reality, only a few council members and staff actually show up at budget oversight hearings covering $1.6 billion in funding and hours of public testimony.
Many education advocates, including DC VOICE, SHAPPE, 21st Century School Fund, and Empower DC have expressed the need for DC to have an education committee separate from the Committee of the Whole. DCFPI agrees. Not only will this realignment allow the Council to give the agencies that deal with education funding and policies the focused attention and oversight they deserve, it can also help the Council articulate a clear vision and give the public a sense that the Council truly makes education a priority.
An education committee also could help shepherd a number of initiatives adopted this year by the DC Council. DC’s budget for next year includes funding for four new pilot initiatives, such as incentivizing highly effective teachers to work in under-performing schools, putting in place tools to identify students at risk of falling behind, and creating “community schools” that provide broader services to their community. All of these were championed by former DC Council Chair Kwame Brown. With the change in leadership at the Council, these pilot programs may or may not be sustained over time without adequate political will and community support — the kind of support that a DC Council education committee could provide.
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June 26th, 2012 | by DCFPI Staff
Today, the DC Council gave preliminary approval to a $32.5 million tax break for daily deal coupon company LivingSocial. The legislation will come up for a second and final vote on July 10th. Chairman Phil Mendelson made a few additions to the tax break deal sent down by Mayor Gray, but the Council can strengthen the bill more on July 10th to get an even better deal for our city.
The Chairman added in two provisions. First, the bill passed today clarified that the hiring requirements LivingSocial must meet will be certified by the DC Department of Employment Services. A second provision requires the mayor to put together a business development and learning partnership strategy with LivingSocial that would be sent to the DC Council for approval. (The strategy will be approved unless the Council acts to reject it.) These are steps in the right direction.
LivingSocial currently employs more than 1,000 people in its DC offices, and half of these workers live in the city. The company says they plan to expand to 2,000 employees in DC in the next few years. That’s great, and LivingSocial should be incentivized to keep doing what they are doing. DCFPI suggested several amendments that would do exactly that: Tie the subsidy to the number of additional positions added and the percentage of DC residents in those new jobs. We believe that would bring the multiplier effect of additional residents, tax revenue, and creative resources for our city.
During today’s debate, a few councilmember mentioned the city’s unemployment rate. Yet LivingSocial’s ambitious business plan to expand in the next few years will create few opportunities for low-skill workers because a bachelor’s degree is the minimum credential needed for jobs at the company. That’s why outlining partnerships between LivingSocial and the District is so important. Both Mayor Gray and LivingSocial have said that the social media and marketing company might be a catalyst to develop an innovative high tech sector. It would be even better if LivingSocial could help develop a farm team, so to speak, from McKinley high school, the University of District Columbia and the city’s nascent community college to employ homegrown talent.
Finally, LivingSocial should be expected to pay DC back if they break the terms of the deal. Some councilmembers mentioned the fact that if LivingSocial leaves DC or falls below 1,000 employees here, subsidies would be cancelled moving forward. But the deal would not address the subsidies that LivingSocial would have already received. The Council should include a money-back guarantee into the legislation so that that if LivingSocial leaves DC early or falls below 1,000 employees, it must repay the subsidies it received from the District.
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June 25th, 2012 | by Kwame Boadi
Tomorrow, the DC Council will consider legislation that would give LivingSocial up to $17.5 million in corporate income tax breaks and $15 million in property tax breaks for keeping its headquarters in the District. District leaders need to make sure it is beneficial to both LivingSocial and the District.
The Council has two options: Keep the deal as it was sent from Mayor Gray with little guarantees for the District. A better deal would be for the Council to strengthen the bill with amendments in three areas: tying the level of subsidy to company growth and DC hires, adding clawbacks so if agreed upon targets are not met the District has a money-back guarantee, and creating mentoring and learning partnerships for DC businesses and youth so they benefit from LivingSocial’s tech expertise.
Which LivingSocial deal will our elected leaders buy? Click to view the deals.
Also, last Friday Chief Financial Officer Natwar Gandhi reported that there is no change in the revenue forecast since February. That means there is no additional revenue to add to the budget. Dr. Gandhi’s letter can be found here: http://newsroom.dc.gov/show.aspx?agency=cfo§ion=2&release=23485&year=2012&file=file.aspx%2frelease%2f23485%2fRevenue%2520Estimates%2520Letter_June%25202012.pdf
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June 22nd, 2012 | by Jessica Fulton and Elissa Silverman
On Tuesday, the DC Council will consider legislation that would give LivingSocial up to $17.5 million in corporate income tax breaks and $15 million in property tax breaks for keeping its headquarters in the District. The $32.5 million tax break is on a fast track, and District leaders need to make sure it is beneficial to both LivingSocial and the District.
The Council has two options: Keep the deal as it was sent from Mayor Gray with little guarantees for the District. Or the Council can strengthen the bill with amendments in three areas: tying the level of subsidy to company growth and DC hires, adding clawbacks so if agreed upon targets are not met the District has a money-back guarantee, and creating mentoring and learning partnerships for DC businesses and youth so they benefit from LivingSocial’s tech expertise.
Which LivingSocial deal will our elected leaders buy? Click to view the deals.
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June 21st, 2012 | by Kwame Boadi
On Tuesday, the DC Council will vote on legislation that would give LivingSocial a $32.5 million tax break to encourage the daily-deal company to stay in the District. Keeping such a dynamic, large employer is a good thing, and it is important that the Council craft the legislation so that the interests of both LivingSocial and DC are met. DCFPI suggests several amendments to strengthen the bill:
Amend the bill to tie LivingSocial’s growth to job opportunities for DC residents.
Right now, LivingSocial could earn half of the $32.5 million tax break without hiring one new District resident. That’s not a great way to use tax dollars to incentivize job growth for our residents and our city. As well, the “new hire” requirements currently in the bill do not specify that jobs need to be added but a new hire can simply replace a vacant position.
Instead, the Council could amend the legislation so that the tax break truly incentivizes the company to hire District residents and add new positions. The Council should restructure the bill so that both the property tax and corporate income tax breaks are based on two elements: the percentage of LivingSocial employees that are DC residents and the number of new positions LivingSocial adds in the District. This approach would reward LivingSocial for maintaining what it is already doing in DC, but the company would be ineligible for the subsidy if employment falls below it current level of 1,000 employees or if fewer than 35 percent of employees are DC residents. This improvement to the bill would allow LivingSocial to claim the full $32.5 million in subsidies if it hits the projected target of 2,000 employees, including 50 percent DC residents.
Amend the bill so that if LivingSocial fails to meet requirements, DC has a money-back guarantee.
A clawback is the economic development equivalent of a money back guarantee. The bill currently requires LivingSocial to keep 1,000 employees and occupy a building of at least 200,000 square feet. But there is nothing in the deal that would enable the District to get back money it already paid if LivingSocial does not meet requirements down the road. The Council can improve the legislation by including a provision that either LivingSocial or any company that purchases LivingSocial should be required to repay a portion of the subsidies it receives if employment in DC falls below 1,000 employees, its current level, or if the company fails to occupy a building of at least 200,000 square feet.
If one of these violations occurs within the first five years of the abatement, LivingSocial should repay 100 percent of any subsidies they received. If one of these violations occurs between five and ten years of the abatement, LivingSocial should repay 50 percent of any subsidies they received.
Amend the bill so that LivingSocial will be a tech catalyst for young DC workers interested in IT.
The DC Council can improve the bill by stipulating specific community benefits. First, the Council can improve the legislation by setting a goal for the minimum number of individuals that will be trained in software development and computer science each year. The bill should incentivize LivingSocial to establish a product development apprenticeship program with one or more educational institutions in the District, such as UDC or the Community College of the District of Columbia. The bill should also outline yearly hiring goals for the Summer Youth Employment Program, each year during the abatement period.
Accountability is also critical. The legislation should also specify which District agency will be responsible for verifying that LivingSocial meets its job creation and residency requirements. For previous tax breaks, such as the property tax abatement awarded to CoStar, the Department of Employment Services was responsible for verifying that a company has hired the required number of DC residents and reporting that information to the Office of Tax and Revenue to determine the company’s tax liability.
In order for the Council to maximize the benefits to the District as well as to LivingSocial, it should make goals transparent, clear, and identifiable. If so, the Council will see that with a few critical amendments to the legislation, the deal can be redeemed in a way that provide real benefits to District residents while adequately protecting the city’s interests.
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June 19th, 2012 | by Kate Coventry
DC’s Interim Disability Assistance (IDA) program provides $270 a month – or about $9 a day – to DC residents with disabilities who are unable to work. These residents are in limbo waiting to qualify for federally-funded assistance, which can take a year or two, if not longer. IDA is critical to help those with disabilities meet basic needs and prevent them from falling into homelessness and greater financial hardship. DC should keep this program adequately funded and stop dipping into IDA funds for other purposes.
Despite the benefits of IDA to residents and the city, local funding for the program has been slashed. It has gone from $5.6 million in fiscal year 2008 to just $1.5 million in the current fiscal year. Additionally, in the past two years, the District has used $4 million of reimbursements DC receives when recipients qualify for federal assistance, known as Supplemental Security Income (SSI), and put it into the general fund rather than reinvesting it back into IDA. As a result, only 646 residents are currently receiving assistance each month compared to 2,900 in previous years. Nearly 470 residents are on the waiting list with no other means of supporting themselves.
Even with this caseload reduction, fiscal year 2012 program costs are expected to exceed the budget by more than $400,000. DCFPI urges the Mayor and the DC Council to work together to restore some of the SSI reimbursement funds that have been removed from the program to ensure that current recipients will not be cut off and to serve residents languishing on the waitlist.
Although $270 may not seem like a lot, recipients depend on this money for rent (often rent shared with others), prescriptions, and necessities like toothpaste. Without IDA, many people with disabilities– who cannot work and have no other income – are forced to rely on more costly emergency services, such as emergency rooms and shelters, thus costing the District more.
This small monthly payment has a real impact on the residents who receive it. One of these residents is Mr. R, a native Washingtonian who used to be a street vendor until a rotator cuff injury left him without the use of his right arm. Lacking a strong support system, he became homeless. With the support of a pro bono team of lawyers, he eventually got federal assistance. But while he was waiting for his application to get approved, Mr. R used his IDA benefits on basic human needs, like washing clothes, food, and transportation. He eventually was able to move from homelessness to permanent supportive housing. (For more stories about IDA, please see here).
Furthermore, if the SSI application is approved, the federal government reimburses the District for IDA assistance paid during the application period, thus helping to fund assistance for other residents in need. IDA has been a good investment in the wellbeing of recipients and for the city as a whole. Restoring funds will continue this investment and offer a needed lifeline to our most vulnerable residents.
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June 18th, 2012 | by Ed Lazere
Real estate development is a gamble, but in DC lately, the odds certainly seem in your favor when you build on top of a Metrorail station. So it was a bit surprising to see legislation sent to the Council from the Gray administration recently to give the developers of Progression Place — an almost-completed project that will feature office, retail and housing right on top of the Shaw-Howard University Metro—a $2.7 million loan from the Housing Production Trust Fund. The loan needs DC Council approval, and DCFPI urges council members to make sure the loan is necessary.
Progression Place includes affordable housing; one-fourth of the units will be priced for low- and moderate-income families. Early on in the project’s development, plans were put in place for Progression Place to use the trust fund, which provides financing for affordable housing. But the application for trust fund dollars was withdrawn in 2009.
The proposal to bring back the DC loan to Progression Place should be scrutinized carefully to make sure the project really needs it, and that this is the best use of the city’s limited affordable housing resources. The Housing Production Trust Fund is DC’s main tool for building or renovating low-cost housing. Funding has declined in recent years due to budget cuts and a steep drop in its source of dedicated revenue — DC’s deed taxes, which are tied to the housing market. The trust fund received just $18 million this year, compared with $68 million in 2007. Administrative expenses and other funding commitments reduced new funds to around $13 million this year, which will support only about 100-200 new housing units.
The loan to Progression Place was first approved in fiscal year 2007, but a lot has happened since then. The District has become an increasingly popular city – with a growing population and demand for housing, especially in the heart of the city. In 2010, the District provided subsidies of nearly $5 million to encourage the United Negro College Fund to move to Progression Place, and the project’s construction was started. And the request for funding from the trust fund was withdrawn because other funding sources were identified, according to reports from the city.
The loan for Progression Place is now before the DC Council for approval, and the Council should ask some hard questions about why the subsidy to the developer is being revisited: Why is the loan necessary? How has the financial picture of the project changed? What happened to the other resources identified for the project? Can the developer get more private funding instead of relying on the city?
The housing trust fund needs more resources if it is going to make meaningful progress in stemming the loss of low-cost housing in the private market. But it also means that every penny of the fund should be spent as wisely as possible. That includes a careful look at the proposed loan for Progression Place.
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June 14th, 2012 | by Jenny Reed
Now that the numbers and legalese have been finalized, it appears that the budget passed by the DC Council for next year will include nearly $22 million in NEW funding for affordable housing programs. This is very good news.
As a recent DCPFI report showed, affordable housing is the District is vanishing. Since 2000, DC has lost more than half of its low cost rental units, and more than 70 percent of its low-value homes. With housing prices skyrocketing and the incomes of most DC households not keeping pace, more and more DC households now pay more than 50 percent of their income on rent—a severe housing burden that leaves some families with little left over each month for other basic necessities. And since the recession hit, funding for affordable housing has fallen significantly.
But this year, the Council recognized affordable housing as a top priority. The additional funding for affordable housing programs in the FY 2013 budget included:
- $15 million for DC’s Housing Production Trust Fund The Council was able to restore $15 million of the proposed $20 million cut in the mayor’s budget by directing resources from the sale of DC owned property in the NoMa neighborhood. This was the second year in a row the mayor proposed a large cut to the trust fund, which is DC’s main source to maintain and build affordable units.
- $4 million for funding the Local Rent Supplement Program DC’s local rent supplement program helps make homes affordable to residents with very low-incomes. The fiscal year 2013 budget adds $4 million to the tenant-based side of the program and will be specifically geared to help move 250 families out of shelters and motels and into stable housing. These additional funds also mark the first time since fiscal year 2008 that the rent supplement program has seen a significant expansion of funds to allow for the creation of new affordable units.
- $2.5 million for the Home Purchase Assistance Program The DC Council also added $2.5 million to restore part of a $5 million cut to DC’s Home Purchase Assistance Program, a program that provide low-interest loans to first-time low-income homebuyers.
Is that all?
There’s more. The Council also added another $2 million to the Local Rent Supplement Program starting in fiscal year 2014 for the project-and-sponsor-based side of local rent supplement program. This part of the program ties housing subsidies to specific projects or non-profit housing providers or landlords to help make units affordable to very low-income DC households. This part of rent supplement has also not seen a significant expansion of the program since fiscal year 2008 and could help create between 200 and 250 units of affordable housing starting in fiscal year 2014.
Lastly, the Council also made housing a priority for future revenue by keeping several important restorations for housing on the contingency revenue list that Mayor Gray had proposed. This includes an important provision that allows $18 million for the housing trust fund to be restored if revenues come in before the District has been able to sell the building in the NoMa neighborhood and $2.5 million for DC’s Home Purchase Assistance program that would completely restore the $5 million cut to the program in FY 2013.
The Council made a good decision prioritizing affordable housing. Without stable housing, it’s hard to pay attention in school, keep a job, and live a healthy life.
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June 13th, 2012 | by Kwame Boadi
Today, the DC Council’s Committee on Finance and Revenue marked-up legislation that would give $32.5 million in tax breaks to LivingSocial. This major taxpayer subsidy was given the green light with less than 10 minutes of discussion and no changes were made despite shortcomings in the bill that leave the District’s interests unprotected. As the bill moves to the full Council for consideration, DCFPI urges the Council to strengthen this LivingSocial “deal” by putting in some money-back guarantees so that it is mutually beneficial for both DC and LivingSocial.
One way to do that is by putting a clawback in place which would require LivingSocial to repay some or all of the subsidy if it falls below employment targets or leaves DC before the end of the ten-year abatement period. As the bill is written now, LivingSocial could potentially claim of its tax subsidies fairly quickly and then be free of any obligation to maintain workers in DC or to hire DC residents.
A clawback is the economic development subsidy equivalent of a money-back guarantee. The LivingSocial tax break package includes provisions to discontinue the subsidy if the company doesn’t meet certain requirements, but nothing that would require the company to repay any subsidies it has already received. A clawback would give District residents reassurance that their economic development dollars will not have gone to waste if LivingSocial fails to increase employment among DC residents, to maintain its product development headquarters in DC, or to provide substantive community benefits such as providing training to individuals and businesses and partnering with DC educational institutions.
The clawback issue is important for other reasons, too. In such a dynamic and volatile industry, LivingSocial could be purchased by one of its competitors, just as LivingSocial has purchased several e-commerce companies from around the world in recent years. If LivingSocial is purchased, there is nothing in the legislation that would require the buyer to follow the same requirements or repay the subsidies already paid out to LivingSocial. A clawback should require any future buyer of LivingSocial to pay back the subsidies if it decides not to uphold the standards set forth in the legislation.
LivingSocial could prove to be a significant boost to the District’s economy, but the District shouldn’t buy this $32.5 million deal, unless it comes with a money-back guarantee.
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June 12th, 2012 | by Kwame Boadi
Mayor Gray and LivingSocial executives say that it’s worthwhile to give the daily deal company $32.5 million in tax breaks because LivingSocial will be a catalyst for a new high technology sector in DC. The legislation authorizing this deal is currently before the DC Council. How can DC make the most out of this deal to ensure this will happen?
First, the DC Council should improve the legislation by requiring LivingSocial to maintain its product development headquarters in the District. LivingSocial is a relatively new and dynamic company, so it is unclear how successfully the company will grow, much less how it will impact the growth of other tech-related ventures. However, what is clear is that one way to help create the conditions that would catalyze the development of a high-tech hub would be to require LivingSocial to keep producing software development and IT-related jobs in DC.
But spurring a high-tech hub goes beyond simply having LivingSocial make DC its product development headquarters, because a headquarters can be a headquarters in name alone. So legislation should also require LivingSocial to certify that at least 15 percent of its DC-based employees work in software development and IT — the current share of DC employees in these positions. Without such a benchmark, the current legislation would allow LivingSocial to grow in DC while shifting its tech-related divisions to other offices outside the District. This would hamper the goal of building a tech-hub.
The makeup of LivingSocial’s workforce highlights a key distinction between companies that develop and innovate technological products and those that simply use technology to further their underlying business activities. While LivingSocial employs software engineers, web developers, and other technologically-engaged workers, the majority of its employees are engaged in work that is not technological in nature. LivingSocial executives have indicated that about 15 percent of their DC-based workforce is made up of high-tech jobs. Beyond that, LivingSocial employs many copywriters and individuals that are engaged in business and marketing activities. If the District’s goal is to catalyze a high-tech hub, it makes sense to incentivize high-tech jobs. It does not make sense to allow those jobs to leave — as the legislation currently would — while subsidizing sales and administrative positions.
As well, the community benefits in the legislation should have verifiable benchmarks. The District and LivingSocial should outline specifics, such as the number of businesses and individuals that will receive technical training in software development and social media. Moreover, LivingSocial should enter into formal partnerships with District educational institutions to ensure that DC students studying computer science and engineering can be put on a pathway towards future employment with the company.
Neither the District nor LivingSocial can guarantee that LivingSocial’s presence will catalyze a high-tech hub in the city. Nevertheless, the legislation can do a better job of promoting a high-tech hub by ensuring that LivingSocial continues to add tech-related jobs in the District and commits to training and working with DC students and businesses.
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June 11th, 2012 | by Kwame Boadi
Should the District buy Living Social’s tax break deal?
Legislation before the DC Council right now would give daily-deal company $32.5 million in tax breaks for keeping its headquarters in the District. The deal is on a fast track, and District leaders need to make sure it is mutually beneficial to both LivingSocial and the District. One important way to do that is to make sure that as LivingSocial grows, the number of jobs for District residents grows as well.
As DCFPI testified last week, the legislation should be strengthened to directly tie the subsidy to more jobs for DC residents. For example, the legislation could stipulate that in order to receive this generous tax subsidy, LivingSocial should certify that at least 40 percent of its employees are DC residents. The current deal would allow LivingSocial to claim large tax breaks even if they hire no DC residents.The company also should be incentivized to grow the number of District residents it hires. The company has an ambitious growth plan, but right now Living Social can get most of the tax breaks without increasing the number of District residents hired.
Although the subsidy increases as the percentage of DC resident employees increases, there is no minimum requirement for the percentage of DC resident employees. Currently, the legislation would allow LivingSocial to claim $16.5 million in tax breaks – more than half of the full subsidy package – even if it does not hire a single District resident. The subsidy does require Living Social to hire new employees but this requirement can be met through turnover – with new employees replacing departing ones. In other words, it could result in no increase in employment in the District. Rather than tying the subsidy to new hires, it should be tied to the number of positions added, with the full subsidy available only once LivingSocial reaches 2,000 DC-based employees.
Beyond that, Mayor Gray and Living Social have made a good case that the company can be a catalyst to grow a dynamic, innovative high-tech sector, and the community benefits package in the legislation should reflect that role.
LivingSocial intends to offer a host of community benefits. Yet there are no verifiable benchmarks to go along with these commitments. The legislation should include specific figures for the planned benefits: the number of youth that will be hired as part of the Summer Youth Employment Program, the number of DC businesses in disrupted corridors that LivingSocial will work with, and the number of businesses and individuals that will receive technical training in software development and social media. Additionally, LivingSocial should enter into formal partnerships with District educational institutions, such as McKinley High School, the University of the District of Columbia, or the Community College of the District of Columbia, to ensure that DC students studying computer science and engineering can be put on a pathway towards employment with the company.
If the Gray Administration is willing to guarantee up to $32.5 million in subsidies to LivingSocial, LivingSocial should make some guarantees of their own. Guaranteeing DC resident employment and specific benchmarks for community benefits would be a great start.
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June 8th, 2012 | by Soumya Bhat
The District of Columbia is known for its commitment to public school choice. If parents do not want to send their child to their neighborhood school, they can apply to an out-of-boundary DC public school or to any DC public charter school. But what happens when the most sought-after schools do not have enough seats available to meet the demand? Or what happens if your neighborhood DC public school (DCPS) closes but you cannot get into a nearby charter school because it accepts students city-wide?
One idea to be studied by a task force this summer is a neighborhood admissions preference for DC public charter schools. As the number of DCPS schools decline, helping families to access public charter schools in their neighborhoods is important to consider. But the District can use the opportunity of this task force to look at broader issues, too, including how to help more low-income students get access to the highest-performing schools.
Currently, if a DC charter school has more applications than available seats, students are selected through a random lottery (after preference is given to siblings of enrolled students and children of the school’s board members/founders). A neighborhood preference for a share of each charter school’s seats could mean a family living near a charter school has a greater chance for admission.
There are mixed reactions to this concept. Supporters believe it is unfair that parents who live near a high-quality charter school are not able to send their children there. This forces many DC children to travel far to go to school, which is inefficient, costly, and may prohibit some families from being able to access a better school. Many residents also feel that if low-performing schools are replaced with charters as recommended in a recent study of DC school quality, then a neighborhood admissions preference could help these families get access to the new schools first.
Others worry that this type of preference would lead to greater levels of segregation. Because many higher-performing charter schools are in middle class neighborhoods, neighborhood preference could, in some cases, make it harder for low-income students to get in, and would essentially displace low-income children by catering to more affluent neighborhood residents instead.
The task force will be led by Brian Jones, board chair of the DC Public Charter School Board. Other members now being selected will include representatives from government agencies, charter schools, researchers, and charter school advocates. The meetings, which should be open to the public, will take place this summer to complete the final report with recommendations by Sept. 1, 2012.
The task force is only charged with exploring a neighborhood preference but, why stop there? With all the right people in the room, why not maximize this opportunity to increase access for our city’s neediest students? DCFPI recommends the task force also consider a “weighted lottery” to give low-income students a preference in charter admissions. Research confirms that these students face the greatest educational barriers and that they benefit significantly from being in academically rigorous environments. A similar recommendation for the funding formula already came out of the DC Public Education Finance Reform Commission. Adding an income preference to the charter lottery system would truly increase access to quality schools for our neediest students. As they work through what works best for DC, DCFPI urges the task force to take the conversation even further to level the playing field for education.
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June 7th, 2012 |
Today, DCFPI testified before the DC Council’s Finance and Revenue Committee on legislation that would give daily deal company LivingSocial a $32.5 million tax break. Here are the remarks of DCFPI policy analyst Kwame Boadi:
I am here today to testify on the Social E-Commerce Job Creation Tax Incentive Act of 2012. The bill would provide LivingSocial, the online daily deal company, up to $32.5 million in tax breaks over ten years if the company meets certain targets. DCFPI believes that the Council should support this a subsidy deal with LivingSocial — if the legislation is strengthened to ensure that it is both a good deal for LivingSocial and the District. As currently written, the legislation does not provide enough safeguards for the District. In my testimony today I want to focus on how DC officials can maximize the benefits and minimize risks to the District to make it a mutually beneficial deal.
The bill before the committees would grant LivingSocial two separate tax breaks — $17.5 million corporate income tax break and a $15 million property tax break — over ten years. As a qualified high-technology company, LivingSocial would also qualify for up to $5 million or more in additional tax breaks. In order for LivingSocial to qualify for the full abatement, they must meet a number of conditions, including: making 1,500 hires between 2010 and 2015; retaining at least 1,000 DC-based employees throughout the abatement period; making 50 new hires annually after 2015; completing a joint business activity strategy with the District; and occupying a building of at least 200,000 square feet.
There are several good reasons for DC to want to keep LivingSocial in the city. It is a homegrown company that has gone from an idea among four friends to over 1,000 employees in the District. Half of LivingSocial’s DC employees live in the city. It has 130,000 square feet of office space in the city, and wants to purchase or lease a new headquarters of at least 300,000 square feet. With its projected growth over the next few years, both Mayor Gray and company executives see LivingSocial as a catalyst to create a high-technology hub in DC and diversify the city’s economy.
LivingSocial has indicated that now that it wants to consolidate its operations into one global headquarters, although other jurisdictions have offered financial incentives to lure the company from DC. It has also stated that while it would like to stay in DC, the high real estate costs may make that difficult.
Yet, offering a large tax break package to a big business raises a number of concerns, including whether a subsidy of this size is really needed, the lost potential to use these resources to support economic development in other ways — such as small business development — and whether this sets a precedent that companies can threaten to leave DC if they do not get a tax break. The proposed $32.5 million is more than double the cap on subsidies for high-tech companies that the Gray Administration recently proposed.
DCFPI’s focus is on ensuring that this legislation guarantees the District the greatest return, while including the strongest safeguards in order to minimize the city’s risk. While the Gray Administration has developed a deal that has some safeguards for the city and ties the subsidy to LivingSocial’s performance, a review of the bill reveals that there are significant risks to the District, and that it should be modified to better protect the city’s interests. The key shortcomings of the bill include:
- The subsidy deal requires LivingSocial to have “new hires” but does not mandate any increase in total employment in DC beyond its existing level. The “new hire” requirements could potentially be met by turnover — hiring new staff to replace departing staff — without a net gain in employment;
- There is no minimum requirement for DC resident employment. LivingSocial could claim over half of the full subsidy deal even if it does not employ a single DC resident;
- The deal would not allow DC to reclaim subsidies already paid if LivingSocial does not meet its obligations. LivingSocial could potentially claim most of the subsidies fairly quickly and then move employees out of DC or leave the District entirely; and
- The community benefits are not tied to specific benchmarks.
While DCFPI believes that the potential exists for a mutually beneficial relationship between the District and LivingSocial, the current legislation should be amended in the following ways in order to guarantee a return on the District’s investment and to better protect the District’s interests:
- Tie subsidies to net job growth among DC residents.
LivingSocial should only be able to claim the full tax subsidies offered if the company actually adds employees — with the full subsidy tied to reaching 2,000 employees — and if it continues to have at least half of its employees living in DC. As currently written, the subsidy legislation requires LivingSocial to maintain 1,000 employees in the city — its current employment level — but other hiring provisions could be met simply through turnover. The District should tie the provision of the full subsidy package to meeting job growth projections that LivingSocial already hopes to meet.
LivingSocial should also be required to meet a minimum DC hiring threshold to qualify for subsidies. Because the typical company has one-third of its employees living in DC, LivingSocial should not get any tax incentives unless it meets a higher threshold, such as 40 percent working in DC
- Mandate that LivingSocial maintain, at a minimum, its current salary and benefit levels.
If the city is to grant LivingSocial a subsidy it should also mandate certain standards for salary and benefits for LivingSocial employees to ensure that the city’s investments results in good quality jobs. LivingSocial notes that the average salary for its employees is around $60,000 and that the company offers competitive benefits packages to its employees. Given that, it should not be controversial to include wage and benefit standards into the subsidy legislation. The legislation should ensure that at a minimum, LivingSocial maintain its current level of wages and benefits during the abatement period. Without minimum wage and benefit requirements, LivingSocial could pare back benefits or salaries as a cost-saving measure and still obtain a subsidy from the District.
- Limit the subsidy deal to $32.5 million and prohibit LivingSocial from taking advantage of additional subsidies that are available to QHTCs.
As a “qualified high-technology company (QHTC),” LivingSocial would also qualify for additional QHTC tax breaks, which the CFO has estimated could total $5 million or more. Because the $32.5 million targeted tax break for LivingSocial is substantial — it is more than double the cap on subsidies the Gray Administration has recommended for other high-tech firms — the company should give up any claims to additional QHTC tax breaks.
- Require LivingSocial to maintain its IT and software development headquarters in the District.
The District hopes that LivingSocial will spur the growth of a technology hub, in part through the training and retention of software developers and engineers who may go on to begin their own startups in the District. Those efforts would be hampered if LivingSocial shifted its software development and other tech-related divisions out of the District. Yet, as currently written, the legislation would enable LivingSocial to do just that. As a condition of the subsidy package, LivingSocial should be required to certify that no less than 15 percent of its District-based employees work in software development and IT, matching the employment distribution of its current DC-based workers.
- Include a clawback provision requiring LivingSocial to repay the District if it violates conditions of the deal.
If the intent of the LivingSocial subsidy is to build a technology hub in DC, it can only work if the company remains in the city and continues to grow. A clawback provision should be included in the legislation obligating LivingSocial to maintain the terms of the subsidy through FY2025, when the property tax abatement period passes, including keeping its corporate headquarters here and meeting hiring targets. The company should lose a portion of its subsidies and be required to repay DC if it no longer meets the targets. This provision will especially help safeguard the District against the possibility of LivingSocial leaving early.
- Obligate any potential future buyer of the company to abide by the stipulations of the legislation.
The Gray Administration wisely included a clause in the legislation that stipulates that LivingSocial will become ineligible for any benefits in the legislation if it declares bankruptcy. However, the legislation neglects to address another plausible scenario in this dynamic industry: LivingSocial could be purchased by another company. If that occurred, there is nothing in the legislation that would require the buyer to repay the subsidies received by LivingSocial if the buyer does not adhere to the requirements of the legislation. The legislation should include a clause that would require any potential future buyer of LivingSocial to pay back the subsidies if it decides not to uphold the standards set forth in the legislation.
- Strengthen the community benefits with verifiable benchmarks and a formal partnership with District education institutions.
The District should work with LivingSocial to ensure that the community benefits the company agrees to are as specific as possible. The legislation should include specific benchmarks for each of the commitments LivingSocial will make: hiring students from the Summer Youth Employment Program, developing deals with DC businesses in corridors disrupted by streetscape construction, and training individuals and businesses in software development and social media.
Additionally, the District should also consider having LivingSocial enter into a formal partnership with District educational institutions, such as McKinley High School, the University of the District of Columbia, or the Community College of the District of Columbia, to ensure that DC students studying computer science and engineering can be put on a pathway towards employment with the company.
LivingSocial officials have made it clear that they want continue growing in DC. Their continued presence and growth would be a positive development for the District’s economy. But in order to maximize the city’s benefits and minimize its risks, the legislation should be amended to more concretely tie the subsidies to LivingSocial’s current plans for growth. The District should not take this deal unless it is guaranteed something good in return.
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June 6th, 2012 | by Kwame Boadi
LivingSocial, the online daily deal company, wants its own good deal from the District of Columbia. The Gray administration has proposed giving LivingSocial $32.5 million in tax breaks to keep the company in DC. The deal, which in legislation is known as the “Social E-Commerce Job Creation Tax Incentive Act of 2012,” is now before the DC Council for approval.
The legislation would give LivingSocial up to $17.5 million in corporate income tax breaks over five years and $15 million in property tax breaks over ten years. In exchange, LivingSocial would agree to lease or buy at least 200,000 square feet of office space in the District, hire at least 50 new employees a year and maintain at least 1,000 employees in the District.
So should the District buy this deal?
Yes—if the bill is strengthened so that the transaction is mutually beneficial to both LivingSocial and the residents of DC. Right now, the tax package lacks the safeguards that guarantee the expenditure of all these taxpayer dollars will benefit the District. But the DC Council can strengthen the bill — by guaranteeing job growth and hiring of DC residents, by requiring LivingSocial to stay in DC for the long-term, and by truly being a high-tech catalyst for the city by maintaining its product development headquarters here and by agreeing to create tech-training pipelines for DC residents. These additions will make it a good deal for both the company and DC.
LivingSocial has expanded quickly from an idea among four friends to a DC-based company of 5,000 employees — with over 1,000 of them right here in DC — in just a few years. Yet the company’s core business is volatile and largely untested. The Gray Administration moved in the right direction by structuring the tax incentives down the road to see if the company remains in business and is profitable.
But in order to make this mutually beneficial relationship pay dividends for the District, DC officials should amend the LivingSocial legislation in the following ways:
- Guarantee job growth and hiring of DC residents
As LivingSocial expands, the number of DC resident employees should expand as well. Currently in the legislation, LivingSocial can meet hiring targets simply through turnover.
- Require LivingSocial to Provide Good Wages and Benefits
At a minimum, LivingSocial should have to maintain its current level of wages and benefits.
- Limit LivingSocial’s Eligibility for Other Subsidy Programs
Because the $32.5 million targeted tax break for Living Social is substantial—it is more than double the cap on subsidies the Gray Administration has proposed for other high-tech firms—the company should not be eligible for additional high-tech tax breaks.
- Require LivingSocial to Maintain Its Product Development Headquarters in DC
If the intent of the subsidy is to build a high-technology hub in DC, it needs to be guaranteed that LivingSocial will keep its engineers and developers in the city.
- Require LivingSocial to Repay the Subsidy If It Fails to Meet Key Deal Provisions
A clawback provision should be included in the legislation obligating LivingSocial to maintain the terms of the tax break package through fiscal year 2025.
- Obligate Any Potential Buyer of LivingSocial to Abide by the Legislation
The legislation should include a clause that would require any future buyer of the LivingSocial to abide by the terms of the deal or pay back the District if it does not uphold the targets set forth in the legislation.
- Strengthen Community Benefits
The legislation should include specific benchmarks for each of the commitments LivingSocial will make: hiring students from the Summer Youth Employment Program, developing deals with local DC businesses in distressed corridors, and training DC residents in software development and social media.
LivingSocial says it wants to stay in DC, it wants to grow in DC, and wants to hire DC residents. Unfortunately, the legislation before the Council would give the company $32.5 million without requiring it to promise to follow through on what they plan to do. In order to maximize the city’s benefits and minimize its risks, the legislation should tie the tax breaks to concrete promises and not just hopes.
Click here to read our full report on the LivingSocial tax break package.
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