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D.C. Council passes $10.8 billion budget

Final debate centers on priorities on spending potential future revenue

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The D.C. Council on Tuesday approved a $10.8 billion budget plan for the coming fiscal year after hours of debate that focused on the best way to spend any additional dollars projected to enter the city's coffers.

The 13-member panel voted 11-2 in favor of the spending plan, with council members Phil Mendelson and Jack Evans in dissent.

Council Chairman Kwame R. Brown's plan restored funding to services for the homeless and other programs, even as it attempted to plug a $322 million budget gap.

The plan eliminated an income tax on wealthier households in favor of revoking the tax-exempt status of out-of-state bonds held by D.C. residents — a controversial move that survived attempts to repeal the tax if additional revenue becomes available or to grandfather in existing bond holders.

Mayor Vincent C. Gray has indicated he would sign the budget, despite his disagreement with the tax swap.

Council members fought for hours over their No. 1 priorities for additional revenue, turning a list of needs into a revolving Rubik's cube of hopeful spending with dollars the city has a long-shot chance of collecting.

Mr. Mendelson, at-large Democrat and chairman the Committee on Public Safety and the Judiciary, voted against the budget because it no longer listed the hiring of additional police officers as the No. 1 new spending priority.

A spending plan that does not keep police as its top priority for any additional revenue "is unacceptable in my view," Mr. Mendelson said.

Kristopher Baumann, chairman of the Fraternal Order of Police unit that represents most D.C. officers, said the budget vote "just made the city less safe."

Mr. Evans, Ward 2 Democrat and chairman of the Committee on Finance and Revenue, voted against the budget for the second straight year. He said the council's decision to make the bonds tax retroactive to Jan. 1 rather than grandfathering in current bond holders was "the straw that broke the camel's back."

Spurred by council member Jim Graham, Ward 1 Democrat, the council voted 7-6 to make Green Teams — a beautification program that employs many ex-offenders — its first priority on the revenue list if $1.8 million becomes available.

It is followed by a $32 million commitment to the Department of Healthcare Finance to raise rates for underfunded Medicaid managed care providers.

The spending pressure had for a time occupied the No. 1 spot on the priorities list and is based on inaccurate long-term Medicaid reimbursement calculations that emerged in talks with the mayor in the weeks leading to Tuesday's votes, council members said.

Mr. Brown and other members tried to remove it from the priority list once more, with some saying the mayor must take on the responsibility.

"Let them find the $32 million and not keep kicking the can down to the council," Mr. Evans said.

Council member David A. Catania, at-large independent and chairman of the Committee on Health, said rumblings that a managed-care organization would end its contract with the city were unfounded and amounted to a squeeze by the group to obtain $32 million without negotiations.

"We don't have to take the bait," he said, noting that the mayor should look at supplemental rebates on pharmaceutical purchases for needed revenue.

But council member Tommy Wells, Ward 6 Democrat, said the problem is shared by all sectors of the city government. The council voted 7-6 to keep it on the list before it was knocked down to second place by the Green Teams.

Funding for the Department of Health's school nurses is third on the list, at $12.5 million, pushing additional police officers and the bonds tax ever further down the list.

Mr. Graham was able to secure the No. 1 spot by splitting up an unsuccessful proposal by Mary M. Cheh, Ward 3 Democrat, that would have placed the grandfathering of the bonds tax at No. 1 and Green Teams at No. 2.

Mrs. Cheh voted in favor of the budget, although she was "deeply disappointed" that the out-of-state bonds tax will affect current bondholders.

"I have to look at it as a package," said Mrs. Cheh, whose ward has a large percentage of constituents with tax-exempt income now affected by the bonds measure.

Local governments typically don't tax in-state municipal bonds as an incentive for residents to buy them. The District was the only jurisdiction in the United States that did not tax out-of-state bonds, largely because the bonds had not been available in the city in the past.

A contingent led by Mr. Wells successfully moved on May 25 to make the tax on out-of-state bonds permanent instead of "buying it back" if $13.5 million in additional money comes into the District's coffers — and after other line items on the priorities list are checked off.

After the legislative meeting, Mr. Wells said a pivotal vote cast Tuesday by council member Yvette M. Alexander, Ward 7 Democrat, preserved the May 25 maneuver, keeping him optimistic about the new spending plan.

"I don't think we did anything to imperil the city," he said.

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