D.C. surplus revenue can’t fund priorities

Council hits snag at health care

An influx of $77 million into the District’s coffers will not be enough to fund even two of the nine spending priorities the D.C. Council settled on for any additional money the city collects, according to revenue projections released Wednesday.

The revised June estimate marks a Pyrrhic victory for the District. Revenues exceeding projections indicate a healthy local economy. But while the newfound cash will cover a $1.8 million beautification program the council agreed to fund with any surplus dollars, it falls $6 million short of a $32 million commitment to the city’s public health care system.

That means priorities further down the list, such as hiring additional Metropolitan Police Department officers, will not be funded unless revised revenue estimates in September paint a rosier picture.

Council member Jack Evans objected to the $32 million obligation, which council members inserted into their list of priorities at the mayor’s request during late-stage budget negotiations.

“It would have taken care of everything had we not had this $32 million item dropped in from the sky at the last second,” the Ward 2 Democrat said. “So it’s disappointing for me to see that, indeed, everything as I had laid it out was exactly as it would have happened, and now it’s all messed up.”

Mr. Evans, chairman of the council’s Committee on Finance and Revenue, voted against the fiscal year 2012 budget after the council failed to put his priorities - grandfathering in the tax on out-of-state bondholders and police recruitment - at the top of their wish list.

David A. Catania, at-large independent and chairman of the Committee on Health, had warned against adding the $32 million expenditure to the council’s list of priorities. The commitment would tip the city’s hand in negotiations with a managed care organization, and parties should pursue untapped pharmaceutical rebates to address the financial gap, he said.

Mayor Vincent C. Gray on Wednesday said his administration was put in the “odd situation” of having to submit a budget before it received actuarial data from Medicaid negotiations that revealed the spending pressure.

He said the Department of Health Care Finance will provide the council a document that sets forth “exactly how the $32 million was arrived at, whether there are any opportunities for savings there, and then we’ll work with the council to figure how we can close the $6 million gap.”

Mr. Evans said there are a few options, including reopening budget talks. While there may be little appetite for renegotiating, “You have to fix this,” he said.

Otherwise, the council could find spending cuts or hope for a positive revised estimate in September.

The latter option might not work out, because, “As we all know, the economy has slowed down substantially,” said Natwar M. Gandhi, chief financial officer for the District.

Mr. Gandhi also noted that the District is doing “far better than any other major city in the country” in economic terms.

Although the June estimates reveal $107.1 million in additional revenue for this fiscal year and $77.2 million for the next - placing the city in an enviable position - a slowdown in federal government wages and procurement, market pressures from Europe, high oil prices and slow job growth are hampering financial progress in the District, he said.

Unrealized dollars have been the source of great debate among the council, who spent hours prioritizing anticipated funds without any guarantees on how much would be in the city’s piggy bank.

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