D.C.’s Budget Surplus: The Hand that Itches

D.C.’s Budget Surplus: The Hand that Itches

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Washington, D.C. is faced with a problem that is sure to make some other city governments jealous.

The District has a $240 million surplus due to some drastic financial moves Mayor Vincent Gray and the D.C. Council made in 2011. Among them were four emergency furlough days for District employees. There was also a tax increase from 8.50 to 8.95 percent on D.C. residents making over $300,000 annually. Officials sought the funds due to financial projections that would have left them short on funds.

According to The Washington Post about $130 million of it is already appropriated. The remaining $110 million can be used in a general fund of sorts.

Now that the city is sitting on some serious cash, the naysayers have come out to blast the leadership about overstating the financial needs last year. The mayor, Chief Financial Officer Natwar M. Gandhi, and Eric Goulet, Gray’s budget director have felt the heat from the public.

Both sides of the argument over whether or not D.C.’s taxes should have been raised makes sense. At the same time, city leaders forgot about the economic realities of the past few years.

They have $240 million in excess revenue at a time when other major cities are busy just trying to make ends meet. If the District government’s job is to serve the people, it seems that one way to do so is by saving for a rainy day. The U.S. economic climate is still uncertain, even though signs of progress are showing.

The federal government, for instance, is constantly in debt and their struggles should be a reminder for D.C. officials of what not to do. Now is not the time to forget what it actually means for a major U.S. city to have cash in the bank.

Obviously, city leaders saw some form of a financial emergency on the horizon and proactively put steps in place to avert a crisis. This is known as “doing your job,” which includes planning ahead and thinking about the near future. Unfortunately, their plan involved furloughs and tax hikes. However, the District could not continue operating as it did in the past and avoid financial trouble.

D.C. Councilman Jack Evans had an idea to remove the tax increase on upper income District residents. That is feasible now that the city has extra operating funds. Overtaxing people does not make a lot of sense. Budgeting in the real world requires adjustments and takes into account the unknown and human error. It’s ok to go back and say, “We overestimated, so we need to make the following changes…”

However, the argument that city leaders cried wolf in order to get more money out of residents is disingenuous. In these tough economic times, it makes more sense to err on the side of fiscal responsibility rather than living on the edge. The mayor and financial officials saw what they perceived to be a financial storm on the horizon and they appropriately planned. Most leaders would be lauded for that type of forethought, no matter what their party affiliation is.

The harsh response from members of the D.C. Council and others says a lot about the financial state of the country. Some have failed to learn from the painful lessons of the Great Recession and how to save as much as possible from your overflow. The same strategies people use to operate their personal finances shows up when they take public office. Governments must learn how to save more money. That’s heading in the right direction.

D.C. officials should take a step back and realize their financial situation is a rather good problem to have.

 

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