A Little Home Rule Could Go a Long Way

District of Columbia officials have good reason to be wary of Congress. Over the years, it has violated the spirit, if not the letter, of our putative home rule. We’ve been forced to do things we didn’t choose to do and barred from doing things we chose to do with our own local revenues.

For example, we had to have a referendum on the death penalty because a senior Republican Senator decided we should reinstate it. For 10 years, we were barred from formally recognizing domestic partnerships and from providing health insurance for the partners of D.C. employees.

Only this year did we gain, at least for the time being, the ability to implement laws passed in 2002 that fund elective abortions for low-income women and needle exchange programs to help control our egregiously high rate of HIV/AIDS. Our just-gained freedom to permit medical uses of marijuana gives life to a referendum passed in 1998.

But none of these intrusions seems to have scarred the memories of our elected and appointed officials so much as the 1995 imposition of a control board to manage the District’s financial affairs.

Last year, during budget deliberations, several Councilmembers repeatedly raised the specter of another control board–this in defense of balancing the budget mainly by tightening our belts and without tapping the cash reserves in the rainy day fund.

Use of those reserves, said Council Chairman Vincent Gray, would not be “prudent …, especially given the stringent pay back requirements.”

The reference here is to an amendment to the Home Rule Act that was attached to our budget 10 years ago. This amendment requires a rainy day fund of a specific size, mandates repayment of any funds withdrawn within two years and prohibits their use for “shortfalls in projected reductions in proposed District budgets.” Yet another instance of Congressional over-oversight.

We also heard worries last year about negative reactions from the bond rating agencies. They reportedly wanted to see spending cuts in core areas like education and human services. And the Council took heed, with cuts in these areas totaling more than $90 million.

But that was then. And this is now. We’ve got a $500 million budget gap to close. And no one, I think, could credibly assert that it reflects financial mismanagement. What member of Congress could flog us when so many states are grappling with enormous budget gaps?

So I think the DC Fiscal Policy Institute is right to recommend that our leaders seek relief from the unique restrictions on the use of our rainy day fund. As it says, no state has to replenish its fund so quickly. Indeed, most can wait until economic conditions improve enough to give them the needed revenues.

All but one of the states that have used their rainy day funds have the same bond ratings as before. The exception here is Illinois, which, as you may recall, had some big-time corruption issues at the top. Yet Councilmember Jack Evans, Chairman of the Finance Committee, still warns of risks to the District’s ratings.

Last year, Mayor Fenty and Council Chairman Gray testified in support of two related federal bills (H.R. 960 and H.R. 1045) that would give the District autonomy over its local budget and other legislation. These bills aren’t going anywhere fast.

So how’s about going back to Congress with a modest proposal to let us use our rainy day fund when it’s raining and replenish it when the sun shines again. That in itself wouldn’t close our budget gap. But it could make a big difference.

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2 Responses to A Little Home Rule Could Go a Long Way

  1. Matt McKillop says:

    The claim that the District’s bond rating will be downgraded if it uses its rainy day fund is highly questionable. See this article from Stateline.org: http://www.stateline.org/live/details/story?contentId=462179

    And note this passage:

    “Some politicians are reluctant to take too much from their rainy day funds for fear of hurting their states’ bond ratings, which then makes it more costly for a state to borrow. But experts say that concern is unfounded. “We are frequently asked if the use of the reserve leads to a downgrade,” says Robin Prunty who tracks state and local governments’ finances as a senior director in the Public Finance Ratings Group at Standard and Poor’s Ratings Services in New York. “Our feeling is that the reserves are established exactly to manage volatility, and I think the expectation is that they are utilized during difficult economic periods.”

  2. [...] in the neighborhood of $70 million. Together with Congressional approval of more reasonable rainy day fund rules, they would produce the wherewithal for a budget that minimizes immediate hardships and puts [...]

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