The big day finally came: Yesterday marked the climactic point in each year’s DC budget cycle, the day when months of discussion and debate and oversight are tied up into a DC Council vote on two pieces of legislation: the Budget Request Act and the Budget Support Act.
The DC Council made a number of changes to the Fiscal Year 2012 budget proposal submitted by Mayor Gray on April 1, including funding restorations to a number of proposed cuts and modifications to the mayor’s revenue proposals. The Council also adopted provisions to guide the use of any increase in revenues that occurs over the year, as is anticipated.
The Council restored funding to a number of critical services that had been slated for cuts. Among the most notable:
“¢ $17 million was restored to homeless services, addressing most of proposed cuts of about $20 million.
“¢ The Council provided $1.5 million to help residents with disabilities who cannot work, which the Mayor had proposed to eliminate. (The Council also required the Department of Human Services to review the program, known as Interim Disability Assistance, in ways that may increase the success in recovering federal funds as IDA recipients transition to federal disability benefits.) The restored funds will serve fewer than 500 residents, which means that some of the more than 1,000 current IDA participants could lose their cash assistance in October. The Council approved a proposal to add further funding to IDA if allowed by rising DC revenues. (See below.)
“¢ The Council voted to restore $4.9 million to Temporary Assistance to Needy Families, which will allow cash assistance benefit levels for needy families with children to remain at current levels in 2012. The budget still includes substantial benefit cuts starting in 2013.
The Council was able to identify these resources in part through a modification to a proposal from Mayor Gray that would have moved $47 million in expenses from the city’s capital budget to the operating budget, based on an assessment that the expenses were most appropriate for the operating budget. The Council opted to slow that shift, leaving about $22 million in personnel expenses in the capital budget (with a plan to complete that shift to the operating budget soon). This freed up $22 million in the operating budget to restore budget cuts.
The Council also made three major changes to Mayor’s Gray’s revenue proposals. First, the Council agreed to increase a tax on hospital beds, from $2,000 per licensed bed to $3,800, which would raise $7 million in local funds and generate $16 million in federal Medicaid matching funds. The revenues will offset a similar level of cuts to Medicaid hospital reimbursement rates implemented this year.
Second, the Council eliminated a proposal to apply the sales tax to tickets for live performances, replacing it with new provisions to apply the sales tax to armored car, private investigation, and security services.
The third and most notable revenue change adopted by the Council was to eliminate Mayor Gray’s proposed income tax increase on income above $200,000. Instead, the Council voted to eliminate the tax exemption that DC provides for interest earned on out of state bonds. Prior to this vote, the District was the only state to extend a tax break to investments outside its borders. This provision, led by Chairman Kwame Brown, raises slightly less revenue in 2012 than the income tax rate increase it replaced, but about the same amount in future years.
Chairman Brown proposed using additional revenues (we’ll get to that in greater detail below) to restore the tax exemption for out-of-state bonds, but the majority of the council voted to make the bond tax permanent and use those dollars for additional restorations to critical services that had been cut.
As we mentioned above, the Council also added several provisions to address an expected increase in tax collections from a growing economy. Any additional revenues would first be used to move $22 million in personnel expenses from the capital budget to the operating budget. Of any additional funds, 50 percent would be set aside to build up the District’s savings account, known as the fund balance, and the other half would be used to fund a number of programs. The provisions to shift expenses to the capital budget and to save half of remainder were included in the Budget Request Act, legislation that receives only one vote, which means they cannot be changed.
The details over how to use the portion that is not saved were included in the Budget Support Act, which has two votes. This means the allocation of these funds can be changed in the second vote. On its first reading yesterday, the Council voted to use available resources in the following order:
“¢ $10.8 million to hire more police officers.
“¢ $1.6 million for the Housing First program
“¢ $12 million for the Housing Production Trust Fund (partially restoring an $18 million cut)
“¢ $5 million for the Department of Mental Health
“¢ $3 million for Interim Disability Assistance
“¢ $6 million for the Housing Production Trust Fund (to fully restore funding)
“¢ $900,000 for children’s mental health services
“¢ $2.5 million for homeless services
“¢ $300,000 to keep MLK Library open on Sundays
“¢ $1.8 million for the Commercial Revitalization program in the Department of Small and Local Business Development
“¢ $3 million to reduce parking meter rates from $2 an hour to $1
“¢$1.4 million for DC Public Library book acquisitions$2 million for early childhood educations
“¢$508,000 for DC Emancipation Day and $500,000 for Lincoln Theater
Is there more? Yes!
The council gave preliminary approval in the budget support act yesterday to a provision that properly taxes multi-state corporations that earn profit in the District, known as combined reporting. And the budget support act also included new rules that require more financial information and reporting on economic development projects seeking tax abatements and other assistance from the District.
The second vote on the Budget Support Act is scheduled for June 14. That means budget advocacy is not over! It’s important to let DC Councilmembers know they did the right thing to restore money to our critical programs to move our city forward and keep revenue measures in place.
The District Dime will keep you abreast of updates in the next few weeks! Thanks for reading!
