- The Washington Times - Saturday, March 15, 2003

As the nation and the nation's capital brace for war, the D.C. Fiscal Policy Institute is proposing relaxing the rules that govern the District's use of its so-called rainy day fund. While the institute's report makes enticing arguments for "fixing" the fund, it would be unwise, even counterproductive, to consider any modifications.
D.C. Council member Jack Evans, chairman of the Finance and Revenue Committee, said just yesterday that the District must lower taxes if the city is to continue attracting new residents and, at the same time, continue to improve services for residents and businesses. It is a delicate balancing act, as war looms and economic jitters reverberate from the goings-on on Wall Street to shoppers in WalMart. But belt-tightening must continue.
What's particularly troubling about the institute's recommendations is that it argues that the rainy day reserves need "fixing" when they do not. The District has two reserves emergency and contingency totaling $250 million. Officials can utilize both funds for emergencies, such as a natural disaster. The contingency fund, however, is aptly named because officials can only dip into that pool of money if revenues fail to meet budgetary projections. And, further still, if those revenue collections fall more than 5 percent below projections. The reserves, established in 2000, are necessary because agencies continue to overspend and the city needs to have cash reserves in case it faces a fiscal crisis as it did in the mid-1990s.
In its own report, the DCFPI says, "Rainy day funds can play a significant role in helping states and cities manage a fiscal crisis." Fortunately, the District does not face a fiscal crisis but it could if D.C. officials come to depend on using reserve funds to bail them out when they overspend or mismanage taxpayer's money. That is precisely as things now stand, with the District struggling to close budget gaps.
Mayor Williams and 12 of 13 members of council were all in power when the rainy day reserves were established, and they all knew the rules and the fiscal constraints that would be imposed on their liberal policies during these so-called outyears. These are tough times, and we face still tougher times ahead. All the more reason not to loosen the rules on the District's savings plans.

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