The DC Council Should Protect Services While Reforming the District’s Accounting

We’ve all done it before – shifted money between different accounts in order to make ends meet.  Mayor Gray hopes to ultimately end this practice in DC government.  His proposed budget shifts $47 million in expenses from the District’s capital budget, where costs are funded by issuing bonds, to the operating budget, where expenses are paid directly with tax dollars.  Mayor Gray has taken these steps because he believes that certain costs have been inappropriately charged to the capital budget.  However, this reform creates short-term difficulties because it leaves the city with $47 million less to spend on services in 2012, in a year when many critical services are being cut.

Now the Council wants to keep $21 million of this money in the capital budget, at least for a year.  This would free up $21 million in funds for vital services and programs.

While we agree with the Mayor’s commitment to pay for the city’s day-to-day expenditures out of its operating budget, it is not a problem that has to be fixed all at once.  The Council’s more gradual approach toward shifting money from the capital to the operating budget would enable the District to maintain a number of critical public investments that keep the city moving forward.

This step can be taken without endangering the city’s fiscal health.  Even if this $21 million were kept in the capital budget for all four years of the District’s financial plan, an unlikely scenario, the added borrowing needed would not cause the District to hit its debt ceiling, and no projects would need to be cut from the capital budget.

The city’s capital budget is generally reserved for long-term investment in capital projects, which are financed through bonds, and limited by the city’s debt cap.  In recent years, there have been various expenses placed on the capital budget that would be more appropriately paid for through the operating budget, such as $20 million in maintenance costs related to DC Public Schools.

Mayor Gray’s desire to address this issue entirely in 2012 is one reason why his budget has $195 million in cuts, two-thirds of which come from human services.  Slowing this transfer could help the Council limit these cuts.  Some of the cuts currently on the table include:

• $17 million to homeless services
• $18 million to affordable housing
• $4.8 million to interim disability assistance
• $5 million to TANF

Through citywide polling, rallies, and personal testimonies, District residents have indicated in resounding fashion that they want the Council to protect the critical investments that the city has made in human services, education, and public safety.  Given that, it makes sense to consider shifting capital money onto the operating budget more gradually than the Mayor has proposed.

Ultimately, all expenses that are really operating expenses should be accounted for in the operating budget put in its rightful place.  That could happen sooner rather than later, even if the Council votes for now to slow down the shift.  There is widespread belief within the Wilson Building that next  revenue forecast, expected in June, will show revenues are coming in above previous expectations.  If this does in fact occur, new revenues ought to be used to maintain services and then to complete the shifting of all costs back onto the operating budget.