The District of Columbia ended the fiscal year with a budget surplus for the fourth consecutive time, revealing excess revenue of $203 million that sparked debates over potential uses for the money.
The 2014 surplus brought the balance of the general fund — where the excess revenues are stored — to a record of $1.87 billion. This year’s surplus was slightly smaller than that of previous years. The D.C. budget had a surplus of $321 million in fiscal year 2013 and $417 million in FY 2012.
The Comprehensive Annual Financial Report, an annual report of the District’s financial affairs released Jan. 28, outlined the city’s financial situation as of Sept. 30, the end of FY 2014. A private, independent auditing firm compiles the report.
Mayor Muriel Bowser said in the report that the District’s financial strength will allow the city to invest in important services for D.C. residents.
“The District’s finances are among the strongest of any jurisdiction in the nation, and the strongest they have been in our history,” Bowser wrote in a statement. “Our growing prosperity will allow us to ensure financial stability in the years to come while also making important investments in the safety, health, education and quality of life of all of our residents.”
The District’s financial position earned it strong bond ratings for FY 2014, which allowed it to borrow money at record low interest rates and increase available funding for public programs and services.
As mandated by the current laws, around $72 million of the surplus has already been saved in the District’s federal and local reserves, though officials are still determining the best course of action for the rest of the surplus.
In contrast to previous years, the budget for the current year, FY 2015, is already operating at an $82 million deficit, leading the mayor’s office to consider using the surplus to fill the gap.
D.C. Council Chairman Phil Mendelson (D) discouraged this stopgap use, emphasizing the importance of building the city’s reserves.
“There are also funds available to cover that spending pressure,” Mendelson said. “Building up our reserves is important in maintaining our stability: it reduces borrowing pressure for next year and makes our financial situation more stable.”
The city’s surpluses have gone into its reserves for the past four years under the direction of previous Mayor Vincent C. Gray.
Committee on Finance and Revenue Chair Jack Evans (D-Ward 2) encouraged the mayor to follow this precedent and refrain from using the surplus to cover the budget gap.
“The deficit we’re dealing with this year is manageable, and using our reserves or the Fiscal Year 2014 surplus wouldn’t be a good strategy at all,” Evans said in a statement to The Hoya.
According to Evans’ Director of Communications Tom Lipinsky, saving the surplus is crucial for the city to reach its goal of maintaining enough money in reserves to fund the operation of the government for 60 days in order to cover catastrophes and improve the District’s fiscal standing.
“The District’s reserves would currently cover about 45 days of operation for the government,” Lipinsky wrote in an email. “Building our reserve balance to the level of spending for 60 days is an important threshold to further improve our credit rating and make it easier for the District to borrow money for schools, infrastructure and other capital projects.”
However, other policy advocates are urging the mayor and council to spend the surplus on funding public initiatives and improving existing programs.
According to D.C. Fiscal Policy Institute Executive Director Ed Lazere, whose organization focuses on researching the needs of low- and moderate-income residents, it would be prudent to prioritize community requirements, particularly those related to housing issues.
“The city has a lot of pressing needs, like improving the present family homeless shelters or building more affordable housing,” Lazere said. “Right now that’s more important than building up our fund balance, which is already at a record high level.”
Councilmember Elissa Silverman (I-At Large) highlighted the difficulty of deciding what to do with the surplus.
“Given that we already have congressionally mandated funds that are socked away, do we need to keep stockpiling dollars when we have certain immediate needs that should be met?” Silverman said.
On April 2, the mayor’s office will present a FY 2016 budget, including the proposed allocation of the surplus, to the council for review and will review expenses with government agencies. Each committee will have the opportunity to recommend amendments to the proposed budget before a council review on June 16.