Mayor Gray Takes Balanced/Unbalanced Approach To DC Budget

April 4, 2011

I, along with many others, have been advocating for a balanced approach to balancing the District’s Fiscal Year 2012 budget. Now I see that there’s more than one way to take an unbalanced approach.

What we meant was that the budget should be balanced by a reasonable mix of spending cuts and new revenue-raisers. Mayor Gray did a relatively good job on this score.

“Relatively” because, according to the mayor’s own summary, spending cuts account for $187 million, while the revenue-raising proposals would bring in a projected $135 million.

But the spending cuts are egregiously unbalanced. As the DC Fiscal Policy Institute reports, human services programs would lose $130 million — more than two and a half times their share of the locally-funded budget.

The mayor deserves credit for backing off his opposition to any increase in income taxes. He proposes a new, slightly higher top rate for residents with adjusted incomes over $200,000 — 0.4% higher than what they’re paying now.

According to the Chief Financial Officer’s letter certifying the budget as balanced, the new bracket, plus some unspecified limit on itemized deductions, would yield $35.4 million next year — somewhat over a third of what the plan advocated by Save Our Safety net and allies would bring in.

But at least it’s a step in the right direction — maybe even an indication that the mayor attended to the feedback he asked for.

Other smart revenue-raisers include an extension of the sales tax to live theater tickets, an overdue hike in the off-street parking tax, an increase in the modest minimum business franchise tax and, I infer, the final legislation needed to prevent multi-state corporations from legally evading the local corporate tax.

But the proposed budget is nonetheless, to use the old cliche, balanced on the backs of the poor.

We’ll undoubtedly be learning more about the cuts to human services programs in days to come. So let me just pick out three of the big ones here.

Homeless Services. The proposed budget would reduce funding for homeless services by $11 million — this when the current funding shortage has led the Department of Human Services to deny shelter to homeless families who’ve got no place to stay.

IDA. Local funding for the Interim Disabilities Assistance program would be cut by 75%, leaving only $875,000 for stipends to low-income severely disabled residents who are waiting for the Social Security Administration to act on their claims for Supplemental Security Income.

Last year, SSA had a backlog of more than 705,300 disability claims hearings. Now it’s unable to speed up resolution time because the budget impasse in Congress has meant no additional funding. So it seems that no one on the IDA waiting list will get a stipend for a very long time, if ever.

TANF Benefits. Funding to provide cash assistance to families enrolled in the Temporary Assistance for Needy Families program would be cut by an additional $7.9 million.

I understand that $4.9 million of this cut represents the mayor’s reversion to his earlier plan to totally phase out benefits to families who’ve been in the program for more than five years.

The initial 20% cut that’s already been imposed leaves a family of three with $342 per month — 21% of the very low federal poverty line. Imagine what this means to the children whose future the mayor claims to be so concerned about.

Imagine what it will mean when the family gets even less and then less until there’s no cash income at all. And this almost certainly will happen to some families because many long-term TANF recipients face formidable, multiple barriers to work.

The remaining $3 million will be “saved” by imposing full family sanctions, i.e., cut-offs of all cash assistance when the participating parents don’t comply with the requirements in the job preparation/job search plan that’s been developed for them.

We’ve seen something like this before — in former Mayor Fenty’s 2009 budget-gap closing plan.

As I remarked at the time, it creates a perverse incentive to find TANF parents in noncompliance, minimize efforts to resolve problems and get sanctions in place as quickly as possible because that’s the only way sanctions can save as much as the budget assumes.

In his recent State of the District address, Mayor Gray asked us to share his vision for the District and its government. “Above all,” he said, “it is a compassionate government — one that takes as its most urgent task the welfare of the least fortunate among us.”

I don’t see that in his proposed budget. Do you?

UPDATE: I was too optimistic about prospects for disabled residents on the IDA waiting list. DCFPI analysts report that Mayor Gray’s budget would suspend the program. This means that no more eligible residents would get benefits. Instead, vacant slots would be eliminated until the program ceased to exist.

At Least Would-Be Mayor Vincent Gray Is Honest

May 12, 2010

One thing I like about DC Council Chairman Vincent Gray. He’s honest when it comes to his mayoral campaign. Some months ago, I recall, he confessed he wasn’t sure he’d run because if he lost, he’d be out of a job.

Now another sterling instance of Gray’s candor. Feisty Save Our Safety Net volunteer Mike Wilson got in his face at a campaign event. Said he hoped the Chairman was with them on the proposed new top tax brackets. Gray said he shared some of their “sentiments.” But he wasn’t sure “the timing is the best.” Not because of the recession, but “well, the elections.”

Is he worried that a majority of D.C. residents would vote against him if he supported the tax increase? Only about 5% of them would have to pay more. A far larger percentage would be affected by the proposed cuts in safety net programs that the increase could avert.

Or is he afraid to get pounded with Mayor Fenty’s claim to have solved the budget gap without raising taxes? Gray has already said, in effect, that the mayor’s proposed budget is smoke and mirrors–putting himself forward as the leader who will, once again, produce a plan that “provides services in a fiscally responsible way.”

And he’s publicly stated his support for pre-K and child care programs for all D.C. infants and toddlers. This in contrast to the cuts the mayor has proposed.

So where will the revenues come from? Seems that Gray is still trying to figure that out. No harm there. But he’s had time enough to decide where he stands on a tax proposal that dates back to last year.

After all, he was quick to decide against one revenue-raising option. All it apparently took was a barrage of e-mails from riled-up health club members for him to announce that he wouldn’t be putting an expansion of the sales tax on the table.

I’ve admired Chairman Gray’s leadership, though I’ve not always agreed with the results. But now he seems preoccupied with how the political winds are blowing and keeping the people who fund campaigns happy–not to mention using the budget deliberations as an occasion for Fenty-bashing.

We need Councilmembers who will stand up for choices that serve the needs of our community as a whole. Will Gray measure up to the “character, integrity, leadership” he claims?

New, Quick Way To Support A Balanced Approach To DC Budget-Balancing

April 18, 2010

I’ve already beaten the drum for tax increases to help balance the District’s Fiscal Year 2011 budget. Now the Fair Budget Coalition has given us a quick and easy way to support them.

Though the mayor’s proposals include some revenue-raisers, they’re apparently not enough to avert cuts to a number of programs that serve the needs of the District’s low-income residents. As the DC Fiscal Policy Institute reports, child care, adult education and job training, mental health services and support to help grandparents care for their grandchildren will all take hits.

And the level funding proposed for some other programs–homeless services and locally-funded housing vouchers, for example–will deny many low-income residents the help they urgently need.

DCFPI has pulled together its previous recommendations for revenue-raisers and, unless I’m mistaken, added some new ones. All told, they would raise somewhere 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 our community on track toward a fairer, more prosperous future.

FBC has an editable letter we can send to support this balanced approach. DC Council committees have begun work on their parts of the budget. So time is of the essence here.

Read His Lips: No DC Tax Increases

April 9, 2010

Mayor Fenty has triumphantly announced that his proposed Fiscal Year 2011 budget “solves a $523 million budget gap without increasing taxes on District residents.”

The credibility of this statement rests in part on a fine distinction between taxes and fees. Because many D.C. residents would most certainly be using more of their income to provide the District with revenues.

Based only on what’s been reported thus far, we know that:

  • Everyone with phone service would pay a higher monthly charge for the privilege of having 911 emergency service.
  • Parking meter rates would go up to $1.00 an hour and residential parking permits by $10.
  • Fees for renewing licenses issued by the Department of Health would go up by an as-yet unreported amount.
  • Various new fees would be imposed on health care organizations and other businesses, some of which might be passed through to us in price increases.

The proposed budget would also cut the Earned Income Tax Credit. Like the federal EITC, the D.C. credit reduces the income tax liability of low-income families and refunds to them any difference between the amount of the credit and what they owe. I’ll leave it to the mayor to explain how reducing the credit isn’t a tax increase.

There’s a more fundamental issue here than taxes versus fees–even than fees that would hit low-income residents hardest. More fundamental even than reduced taxes credits versus tax increases that would affect only low-income residents.

Why should we think it’s so great to preserve the current tax system?

As the DC Fiscal Policy Institute has been arguing for some time, there are strange anomalies in our sales taxes. For example:

  • Theater and opera tickets aren’t taxed, but movie tickets are.
  • Health club memberships aren’t taxed, but exercise equipment is.
  • Pet shampoo is taxed, but pet grooming services aren’t.

Do we see a pattern here? Or in the nearly-unique provision that allows D.C. residents to pay no taxes on interest from out-of-state bonds? The District essentially gives $10 million a year to well-off residents who invest in projects that don’t do a thing for us.

And then there’s the matter of our personal income tax rates. They’re progressive only up to $40,000. So people earning a relatively modest amount pay the same 8.5% rate as people with incomes over $1 million.

Last year, DC Councilmember Jim Graham proposed a new top tax bracket for income over $500,000. The Council instead opted to make the income tax structure more regressive, by eliminating the cost-of-living adjustments for the standard deduction and the personal exemption. The former, of course, meant nothing to high-income filers, since they generally itemize deductions, and the latter much less as a percentage of income.

We may again see proposed legislation to establish a new tax bracket–or maybe a couple of brackets. The Save Our Safety Net campaign is calling for two new brackets–a 9% rate for residents with incomes over $200,000 and a 9.4% rate for those with incomes over $1 million. It’s got a statement of support that we can sign on its home page.

The new rates would not only raise an estimated $50 million that would mitigate the need for budget cuts. They would also make our entire tax system more progressive.

According to a recent report by the Institute on Taxation and Economic Policy, state and local tax systems tend to be regressive in part because they rely heavily on sales and excise taxes. It goes without saying that wealthy families pay a much smaller percentage of their income for these. Once they’ve satisfied all their worldly needs and desires, they sock the rest away in investments–some taxable at a lower rate, some temporarily shielded altogether.

ITEC looked at total state tax burdens and adjusted for the amount that filers who itemize can shift to the federal government. For the District, it found that:

  • Residents with incomes less than $20,000 a year paid only 0.2% less of their income in taxes than residents with incomes of $1.54 million or more.
  • Those with incomes between $20,000 and $33,000 paid 3.3% more.
  • And those with incomes between $33,000 and $57,000 paid 4.1% more.

This is a system we should cut critical services to preserve?