Council Should Pass the Clean Hands Economic Expansion Act to Achieve More Progress Toward Equity

Chairperson McDuffie and members of the committee, thank you for the opportunity to testify. My name is Michael Johnson, and I am a Policy Analyst at the DC Fiscal Policy Institute (DCFPI). DCFPI is a nonprofit organization that shapes racially-just tax, budget, and policy decisions by centering Black and brown communities in our research and analysis, community partnerships, and advocacy efforts to advance an antiracist, equitable future.

DCFPI applauds the efforts by Councilmember McDuffie, this committee, and DC Council to raise the debt threshold applicable under the Clean Hands Act to $1,000 in the Fiscal Year (FY) 2025 budget. While an important step toward greater equity, the Council could achieve more progress through the passage of B25-0619, or the “Clean Hands Certification Economic Expansion and Revitalization Amendment Act of 2023” (Clean Hands Economic Expansion Act).

This legislation would 1) prohibit the District from denying occupational and business licenses to DC residents under the Clean Hands Law, including residents with Department of Motor Vehicle (DMV)-related debts, and 2) raise the threshold of allowable debts from $100 to $2,500 for contracts, grants, and other licenses subject to the Clean Hands Law.^[1] DCFPI fully supports the Clean Hands Economic Expansion Act for the following reasons:

• Inability to pay government-related debts should not serve as a barrier to employment or economic security for District residents;
• Exempting occupational and business licenses from the Clean Hands Law will advance racial equity; and
• Concerns about the bill’s fiscal impact may be overstated and should not be used to deny economic opportunity to DC residents.

Concerns About B25-0619’s Fiscal Impact Are Likely Overstated

Throughout the FY 2025 budget process, the Council has hesitated to raise the Clean Hands debt threshold to the $2,500 level as proposed in the Clean Hands Economic Expansion Act due to concerns about the legislation’s cost. Because of these fiscal concerns, in the FY 2025 Budget Support Act the Council instead limits the threshold of allowable debt to $1,000 and excludes DMV-related debts.^[2] However, Central Collections Unit (CCU) revenue data collected to date suggest that the fiscal concerns about the bill’s implementation may be over-projected.

Although the Office of the Chief Financial Officer (OCFO) projects the Clean Hands Economic Expansion Act to have an unspecified negative fiscal impact due to anticipated reductions in CCU collections, the revenue impact of similar legislation exempting driver’s licenses from Clean Hands suggests CCU collections did not decline as the OCFO anticipated which was one of the major points of contention of the prior bill. The fiscal impact statement for the “Clean Hands Certification Equity Amendment Act of 2021” projected CCU revenues to decline by $2.5 million annually starting in FY 2024.^[3] However, based on initial CCU revenue collections to date, FY 2024 collections are consistent with projections prior to the 2021 bill and do not indicate this level of revenue decline.

In the first two quarters of FY 2024, the CCU has collected just over $21 million, nearly all of which is from DMV-related debts.^[4] If revenue collections remain consistent with the first two quarters, the CCU is projected to collect just over $42 million in FY 2024. According to FY 2022 revenue estimates—completed a year prior to the passage and implementation of the driver’s license exemption bill—the OCFO projected the CCU to collect $40.5 million in FY 2024.^[5] The revenue collections to date suggest that CCU revenue collections are not only expected to remain level, but possibly to increase since the approval of the 2021 Clean Hands bill. Although exempting occupational and business licenses from Clean Hands may not have the same fiscal impact as exempting driver’s licenses, since the vast majority of CCU collections are DMV-related debts—which would still continue to be collected under the proposed bill—it is unclear how much the proposed bill will impact CCU revenues.

Exempting Occupational and Business Licenses from the Clean Hands Law Will Advance Racial Equity

DCFPI encourages the committee and Council to pass and fully fund the Clean Hands Economic Expansion Act to promote greater economic security for District residents and particularly for Black residents. Currently, over 125 occupations and businesses require an occupational or business license, representing nearly one in five District workers and occupations.^[6] By prohibiting residents with unpaid debts to access and maintain employment opportunities, the Clean Hands Law creates a barrier to well-paying jobs for thousands of DC residents. From March 2022 to January 2023, for example, the District denied nearly 24,000 applications for a Certificate of Clean Hands, or 36 percent of all requests.^[7]

Although the Office of Tax Revenue (OTR) does not collect demographic data regarding applicants and denials of Clean Hands, passing and fully funding the “Clean Hands Economic Expansion Act” will likely improve employment and business opportunities for Black residents in particular. In 2022, the Council Office of Racial Equity (CORE) concluded that Clean Hands disproportionately blocks Black residents from accessing occupational licenses, starting a business, or competing for contracts, among other wealth-building activities.^[8] CORE’s assessment is especially alarming given the stark racial wealth and income gaps among DC residents, which are the result of the District’s long history of exploiting Black workers.^[9] In the DC area, white households have 81 times the wealth of Black households, and the District’s white household income is nearly 2.5 times Black household income.^[10],[11]

By passing the “Clean Hands Economic Expansion Act,” the committee can help eliminate barriers to employment and wealth-building opportunities for DC’s Black workers and workers with low incomes. Additionally, to further advance racial equity, the committee should work to ensure that the OTR collects and publishes demographic data for applicants and denials of Clean Hands, eliminate down payment requirements for payment plans, and explore scaling fines and fees to a person’s ability to pay.