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Financial Insecurity Could be DC’s Fate Once Again Unless Warnings are Heeded

As we wrote in this space 10 months ago, “[r]egular readers of our commentaries know that we have consistently argued for and applauded fiscal restraint by our city government so as to ensure that programs, services and policies that advance the kind of progressive society we taxpayers stand behind will have the resources necessary to achieve these goals.”

We urged then, as we do now — though maybe with an even greater sense of urgency — continued vigilance that funds be wisely spent and only precisely as the City Council has specified through it approved budgets. This vigilance is even more necessary in light of the continued prospect of significantly reduced or eliminated federal funds given the Trump Administration’s rush to slash spending on domestic programs, especially those that benefit the health and welfare of families needing help to meet housing, food, and health needs.

Anticipating the expected major cutbacks in federal funding for Medicaid especially, as we noted in another editorial, that one exactly one year ago this month, the chairman of the Council’s health committee, Ward 7 Councilmember Vincent Gray, as reported on March 9th by the Washington Business Journal, “Gray said [during his committee’s March 8th hearing] the city should create the reserve to protect District residents from the ‘deep uncertainty’ caused by health care debates in Congress. He said he is proposing the use of surplus funds for health care before it can get earmarked for something else.” (Italic ours)

We were impressed by Gray’s foresight; as we have more than once commented, with few exceptions including Councilmember Gray, finance committee head Evans, and Chairman Mendelson, there have been too many members who seem to encounter a surplus dollar they didn’t desire to spend on a pet project.

More than ever now, this temptation must be resisted for the very reasons articulated by Council Chairman Phil Mendelson in his February 1st statement following the release of the District’s annual financial report, as follows:

“This report is both good news and bad. Of course, everyone will focus on the fact we ended last year with a surplus, the General Fund Balance increased by $287 million, and there were no deficiencies or materials weaknesses in the District’s reporting.

“But there is no extra money to spend. The increase in funds has already been set aside for other purposes: $256 million for future budgets and $71 million for legally required federal cash reserves.

“Despite the increase in the cash reserves, the total rainy-day fund actually dropped in terms of how many days operating cash is reserved – dropping from 56 to 54 days.

“Our financial picture is healthy, but there are warning signs nonetheless. Debt service continues to grow and is projected to exceed $1 billion dollars a year in 2021. That’s because we are borrowing more than ever. Another problem is that we are budgeting to spend in the current and future years more than we actually receive in each of those years. We are able to do this because extra cash from past years is carried forward — over $500 million at the end of last year.

“We should celebrate our financial health, but at the same time recognize that there are still challenges to be worked out.”

By way of conclusion, we think Mark Lee, a Washington Blade columnist and long-time small business advocate has – just as we were writing this commentary — nicely echoed our own cautionary views:

“Big-spender types are either poorly informed about the city’s near-term fiscal realities or don’t much care about long-term financial stability.

“They are also blissfully unaware or blatantly unconcerned that . . . new financial pressures will soon confront the city. Among them is a whopping $5 billion in unfunded immediate government infrastructure requirements. Federal assistance for existing program areas will also decline, resulting in huge new price tags.

“Bottom line: D.C.’s cadre of spend-more evangelists should first listen to Mendelson before reflexively and irresponsibly demanding the city spend money it doesn’t have.”