Despite Declining, DC’s Fund Balance is Larger than in Most States: DC Should Start Planning for How to Replenish the Fund When Finances Recover

The District’s “fund balance” ‘ essentially the city’s savings account ‘ grew sharply in the mid-2000s in the midst of a booming economy, but it has been declining in recent years.  Some of the funds have been used to support capital construction projects and some have been used to preserve services in the midst of one of the worst economic recessions in history.  While the drop in fund balance has raised legitimate concerns among policymakers and the District’s Chief Financial Officer, the District is not alone.  Most states have drawn down their fund balances, often to a greater extent than DC has.  In fact, the District’s fund balance remains far higher as a share of its budget than in most states.

At the same time the District’s fund balance cannot continue to be depleted much longer, and DC’s leaders should come up with a plan to stabilize and then begin replenishing it, although the questions of when and how much will need to be carefully considered.  Because DC’s fund balance remains one of the strongest in the nation, it does not appear that the city needs to start rebuilding the fund balance in the immediate future, especially as it continues to struggle with the recession.

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