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Posted at 8:34 PM ET, 11/ 5/2010

D.C. can't tax its way to a balanced budget

By Jack Evans, Washington

On Tuesday, voters spoke nationwide, and the message was clear. Many Americans believe their government is spending too much money, going too far into debt and taxing too much. We in the District need to heed that message, especially with the arrival of a Republican-controlled House of Representatives ready to flex its muscles.

The next several weeks will be crucial in determining the fiscal future of the District. Although the city is overall in good financial shape, we learned from Chief Financial Officer Natwar M. Gandhi in September that we are facing a $175 million shortfall for the fiscal year that began Oct. 1. This shortfall comprises approximately $50 million less in sales tax revenue, $50 million less in income tax revenue, $35 million in federal stimulus money the city anticipated but did not receive, $25 million in spending pressures in our public schools and other costs. We face another $135 million shortfall in fiscal 2012, when one-time stimulus money is no longer available.

As a result, Mayor Adrian M. Fenty will soon send an amended fiscal 2011 budget to the council to address these shortfalls. The D.C. Council will then act to close the deficit before the end of this calendar year.

When the mayor and council faced similar shortfalls over the past three years, we relied largely on spending our reserves to close the gap. This was possible because by September 2005, the District had built up reserves totaling $1.6 billion. But year after year, as revenue slowed and spending increased, we drew down our savings. Over the past three years, the District has spent almost $1 billion in reserves, leaving us only $611 million today. No more of this amount can be used because it supports our revenue bonds and other debt commitments. The District also continued to borrow for capital investments and has increased its outstanding debt to the legal limit of 12 percent of annual debt payments to revenue.

Without reserves available to close our spending gap, and no more room to borrow, we must either raise revenue, cut spending or both. Because our rates in commercial property tax, personal and corporate income tax, and sales tax are already the highest in the region, and in some cases the nation, it is difficult to ask our residents and businesses to pay more, particularly in these tough economic times and in light of the message of Tuesday's election. Raising taxes might help to close the shortfall now, but it will also put us at a greater competitive disadvantage with Maryland and Virginia in the future. It's no secret that new residents and businesses that relocate to the region go elsewhere to save money. This hurts our long-term ability to expand our revenue base and pay for government -- including the social safety net -- that we want and need.

On the expenditure side, more than 85 percent of our budget is dedicated to social services, education, public safety and debt service. Reductions in these areas are very difficult, again because of the times. But these areas must be reduced if the city is to balance its budget. Keep in mind that we spend more money on education per student, and on social services and public safety per resident, than most cities and states. And we are consistently ranked as having one of the highest rates of government employees per capita.

We cannot afford to jeopardize all the progress we have made with our bond ratings and investment climate. Now is the time to right-size spending, no matter how painful the decisions might be. Postponing this downsizing by using tax increases and one-time fixes will only lead to larger deficits. The experience of the District in the 1990s is evidence of that approach. Back then, we used one-time fixes and ended up with a control board. The board then made the hard decisions that the elected government would not make. I will not allow something like that to happen to the city on my watch.

The writer is a member of the D.C. Council (D-Ward 2).

By Jack Evans, Washington  | November 5, 2010; 8:34 PM ET
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Comments

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Posted by: scottevans1 | November 6, 2010 6:18 AM | Report abuse

Well, first of all, let's go after the 15% of the budget that is NOT devoted to public safety, education, social services, and debt service. There should be NO arts or culture funding. In this area, there are many, many wealthy, affluent people who are very conscious of their public images; their pockets are deep, and they must be the source, not taxpayers, of funding for the arts and culture. That's an easy reduction right there.

Posted by: WashingtonDame | November 6, 2010 9:38 AM | Report abuse

Immediately suspend luxury pet projects (Streetcars, Bike Lanes, Dog Parks, and the like)and reinvest those dollars back into the city's reserves because they are the projects that drained them.

End the Summer Jobs for Youth Program, as it is today, and reinvest those dollars into expanding trade programs that will provide young people with skills that will lead to indepenedence from government for income.

Most importantly, roll back management positions in the District to the levels under Mayor Anthony Williams. It is in the ranks of management that the city can save the most in terms of salary and benefits. The city has already carved 2,000 positions from among the general workforce that hardly put a dent in the deficit. Fenty has created a top-heavy government that requires dramatic reduction.

Cut management, that sends a message.

Posted by: concernedaboutdc | November 8, 2010 12:35 PM | Report abuse

the budget of the commission on arts and humanities is no more than 0.25% of the District's operating budget. you could zero it out and still have a very long way to go.

Posted by: hungrypug | November 8, 2010 12:37 PM | Report abuse

Mr. Evans truly is DC’s Fiscal Public Enemy #1, though since last March he has tried to recast himself as a voice of prudence. He has bled DC’s public coffers for many years with repeated one-off special access tax abatements/incentives that don’t fit any sort of rational program. He never articulates a policy program that the deal du jour fits into before the giveaways commence. He is noticeably impatient on the dais to simply say yes to every special exemption.

Mr. Evans implies that holding only $611 million in reserves is a precarious, yet sadly, he single-handedly burdened DC’s already bloated/teetering balance sheet in 2005 with over-the-top, excessive new debt to pay for an $800 million stadium, a deal in which we gave the keys away to a billionaire family. DC has little to nothing to say on how the 98% taxpayer-funded facility is used outside a mere 80 annual baseball days, since the family has veto power over any special event proposal to produce ancillary revenue for DC that might touch their infield in any way.

And his oversight vis-a-vis his Finance Committee is nearly nonexistent. Ask his office to direct you to the appropriate video archive on council’s web site of any oversight hearing he has conducted in the last 4-5 years where rigorous discussion has occurred on DC’s financial controls and budget prudence he now espouses.

If Mr. Evans is serious, he needs to work full time in his council job. For at least the last 5 years, he has drawn $240,000 per year doing God knows what for God knows whom as a member of a local law firm. That is over $1 million in side income accepted over the last few years. That amounts to $20,000 per month, or about $1,000 per working day per month, assuming about 20 on average. At a lawyer’s billable rack rate of say $500 per hour, that’s a minimum for two hours per day not dedicated 100% DC’s people.

Finally, words don’t work if the example indicates otherwise. Mr. Evans also earns over $125,000 per year in his council salary, on top of the $240,000 from his part-time legal work. (That’s $365,000 as a local public official — almost as much as President Obama’s $400,000. All that cash excludes undisclosed added DC-paid health benefits and likely quite fat DC-paid retirement? Does any average citizen know what those total for current/former members?)

I am sorry to say Mr. Evans feigns public fiscal sincerity wanting to cut everyone else’s paycheck, but the council accepted automatic pay raises in 2008 and, I believe, in 2009 (but due to a brief public outcry perhaps not in 2010). This year the Council probably is on track to take another automatic COLA.

Before continuing his “prudence” spin, he needs to stop taking the unseemly $240,000 right now, begin working full time for the financial health of the People of DC 24x7, and rescind his pay Council increase for this year along with the rest of the sitting Council. He can return any other DC pay increases since December 2007 too.

Posted by: dave20009 | November 11, 2010 9:53 AM | Report abuse

"Although the city is overall in good financial shape,"

Say what? Jack Evans may be in good financial shape thanks to the misuse of his public job to benefit his employer of first resort, Patton Boggs, but he has spent the last ten years on the Council giving away the farm, as Dave20009 outlines. Time for Mr. Evans to retire to Florida in 2012.

Posted by: LongTimeRez | November 11, 2010 10:22 AM | Report abuse

Oh my: call for restrained spending in the District and out come the long knives.

Perhaps Evans will learn to pee to the lee. Windward is not working to well.

Can't wait for the House to intervene, though. Should be some high drama that allows Eleanor and the chorus of perpetual discontent to resume bemoaning DC's disenfranchisement---politics much sexier than calling for fiscal restraint (yawn.)

Posted by: confounded | November 11, 2010 9:01 PM | Report abuse

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