October 24, 2003
The Honorable Linda Cropp
Council of the District of Columbia
1350 Pennsylvania Avenue, NW
Washington, DC 20004
Note: The views expressed herein represent only those of the District of Columbia Affairs Section of the District of Columbia Bar and not those of the D.C. Bar or of its Board of Governors.
Re: Comments of the D.C. Affairs Section of the D.C. Bar in Support of the Rainy Day Fund Act of 2003, Bill 15-239
Dear Chairman Cropp:
On behalf of the District of Columbia Affairs Section of the D.C. Bar, we write to urge the Council pass Bill 15-239, the “Rainy Day Fund Act of 2003,” without delay.1 We ask that the Committee of the Whole set this legislation for public hearing as soon as possible to clear the way for the full Council to pass the bill, the Mayor to sign it, and the congressional review process to begin.
The Bar’s District of Columbia Affairs Section serves all attorneys who live, work, or have interest in the District of Columbia, and Bar members who practice before or work with the Council of the District of Columbia and the Executive Branch or the court system. The Section monitors legislative, judicial, and related legal developments affecting the District of Columbia. In general, the Section involves itself in the range of issues related to District sovereignty and governance. For example, we currently are working in support of the proposed District Budget Autonomy Act, S. 1267, which has just been unanimously passed by the Senate Government Affairs Committee.
The General Accounting Office’s (“GAO”) May 2003 Report concerning the “District of Columbia Structural Imbalance and Management Issues,” provides the most recent description of the misaligned fiscal structure under which the District operates. While it would not add new dollars to the District budget, Bill 15-239 directly addresses concerns raised by the GAO report by bringing restrictions placed on District reserves into line with best practices applicable to such reserves in other jurisdictions.
A report issued this spring by the D.C. Fiscal Policy Institute catalogues practices among forty-five states that make use of reserve funds similar to the District’s emergency and contingency funds. The report shows that requirements placed by Congress on District reserves are unusually restrictive and unnecessarily constrain the District’s access to these funds in times of economic stress such as those we currently confront.
TThe D.C. Affairs Section supports modifications to the reserve fund rules, which would accomplish the following:
Permit both contingency and emergency funds to be used to address revenue shortfalls. Under present law, only the $100 million contingency fund can be used in this fashion; the District’s emergency fund is reserved for use in response to natural disasters and similar emergencies. No other state reserve fund operates under such a restriction.
Eliminate the rule requiring District reserve fund withdrawals to be replenished within one year. Local governments do not recover from economic downturns in the course of one year. This rule would thus require the District to replace funds withdrawn to cover the revenue effects of such a downturn while revenues are still depressed. Only six of the states operating rainy day funds set a specified period for fund replenishment; none requires one-year replenishment. Relaxing the District’s rule will provide lawmakers a reasonable flexibility to use the fund to prevent cuts in core programming.
Allow the District to carry over cash balances at the end of the fiscal year, rather than those balances dropping to the bottom line. Currently, at the end of each fiscal year, any cash balance remaining in the District budget must drop to the District’s bottom line where the District is unable to access the funds unless granted special permission by Congress. This requirement, which is an additional burden on the District separate and apart from the reserve requirements, has caused the District to build up a huge cash balance that within several years could amount to over $1 billion dollars. The District is unable to utilize these funds, even in times of desperate fiscal need or to alleviate spending pressures, without affirmative congressional permission to do so. This constraint should be eliminated so that the District’s cash balance carries over from year to year and is available to the District for targeted purposes.Bill 15-239 will bring the District into line with the best practices utilized by other jurisdictions with respect to the management of their reserve accounts and should not jeopardize the District’s increasingly strong relationship with the bond markets. The Section appreciates and supports the efforts of the Council and the Mayor in support of these changes. We understand that because Bill 15-239 would request changes in federal law, it would have to be passed by the Congress before it could go into effect.
The following committee members participated in drafting this letter: Jon Bouker, Charlotte Brookins-Hudson, James Bubar, Bell Clement, Terri Thompson-Mallett, Thorn Pozen, and Jenny Rubin. Grace Lopes did not participate in this discussion.
The Section stands ready to assist the District in any way in support of this legislation as it progresses both through the local and federal processes. Should you have any questions regarding this letter, please do not hesitate to contact Jon Bouker, Chair of the Section’s Legislation Committee at (202) 857-6183.
The District of Columbia Affairs Section
of the District of Columbia Bar
James S. Bubar, Co-Chair
Bell Clement, Co-Chair
CC:Mayor Anthony Williams
Members of the City Council
Chief Financial Officer Natwar Gandhi
- The views expressed herein represent only those of the District of Columbia Affairs Section of the District of Columbia Bar and not those of the D.C. Bar or of its Board of Governors.