jonetta rose barras: DC budget politics

In presenting his recommended Fiscal Year 2022 Budget and Financial Plan to colleagues, DC Council Chairman Phil Mendelson called the $17,962,963,587 spending proposal and the attached Budget Support Act (BSA) “transformative.” 

“I believe this budget proposal can be transformative for those who most need services in the District,” Mendelson said Monday during his press conference. He reiterated that perspective Tuesday as the legislature took its first vote on the FY 2022 BSA and the Local Budget Act, which called for $9,251,948,409 in local revenue in the upcoming fiscal year before legislators added about $100,000,000 more. (The $17.96 billion figure includes federal money as well as enterprise funds, such as Events DC.)

Council members will cast their final votes next month.

“My goal was to increase equity in education, jobs and access to justice. At the same time, we focused on funding programs that would improve the quality of life for District residents,” Mendelson added.

The “transformative” label should not be applied to either the 2022 budget process or the results. Truth be told, it was more of the same, including various fee and tax increases.

Last year, legislators raised the gasoline tax, increased the estate tax, and pulled a tax credit for tech companies. This time, they assaulted middle-class and wealthy residents. Like those involved in any professional heist, advocates and the far-left wing of the council cased the bank accounts of the upper-income for years, even before the coronavirus pandemic became their fiscal patsy and propaganda tool.

Initial passage this week of the Homes and Hearts Amendment Act by an 8-to-5 vote was declared a victory by lawmakers and advocates, many of whom are employed at nonprofit organizations that could benefit directly from the infusion of additional cash. There are more than 11,000 nonprofit corporations in the city, according to the DC Office of the Chief Financial Officer (OCFO). In 2018, they outnumbered restaurants.

Hundreds of nonprofits — small and large — receive direct grants, earmarks or contracts from the government. Of course, no one questions the motives of charitable groups, but few of them work for free. In fact, their council allies pushed through the Nonprofit Reimbursement Fairness Act of 2019, which became law earlier this year and mandates that the DC government compensate them for larger portions of their indirect costs on contracts and grants. 

The Homes and Hearts Act as approved would increase the marginal tax rate from 8.5% to 9.25% for residents with incomes between $250,000 and $500,000. Those with incomes between $500,000 and $1,000,000 would see a jump from 8.75% to 9.75%. The rate for residents who earn more than $1,000,000 would rise from 8.95% to 10.75%.

For fiscal year 2022 (from Oct. 1, 2021, through Sept. 30, 2022), the increase would bring in about $100 million. By 2025, that amount could increase to $175,408,000, according to the OCFO’s preliminary estimates.

The tax increase, lusted by far-left-leaning progressives with their eye on the national agenda, had become a political issue during the last three local election cycles. This year the plan was shaped by Ward 6’s Charles Allen, Ward 1’s Brianne Nadeau and Ward 4’s Janeese Lewis George, a self-avowed democratic socialist and newcomer to the legislature. 

Allen, Nadeau and at-large Council member Elissa Silverman, who also voted for the measure, are all up for reelection. Another supporter, Ward 8 Council member Trayon White, seems to be voting more and more in concert with Silverman after one of her political allies provided assistance to him during last year’s election. 

Like Lewis George, at-large Council members Robert White and Christina Henderson pledged in their 2020 campaigns to support a tax hike on upper-income residents; advocates and nonprofit lobbyists reminded them of that fact days before the vote.

There are political stakes in play for the opposition as well. Four of the five who voted against the tax increase — Mendelson, Council Chair Pro Tempore Kenyan McDuffie, at-large Council member Anita Bonds and Ward 3 Council member Mary Cheh — are up for reelection in 2022. Ward 2’s Brooke Pinto also opposed the tax hike. 

They likely are hoping their constituents will consider, as I do, that ramming through a tax increase without even a public hearing is irresponsible. A Tax Revision Commission, funded in the 2022 budget, is poised to examine the city’s entire tax structure, with an eye toward a complete overhaul. Further, it isn’t as if the city is running out of money: It received more than $2.3 billion from the federal American Rescue Plan Act.

In celebrating the victory, Nadeau asserted that DC could now end homelessness because 2,400 unhoused people would have housing. Unfortunately, her fantasies are contagious. I don’t know whether she is the spreader or whether she simply caught them from special-interest groups. 

In either case, the naiveté is breathtaking. It ignores the reality staring at them. 

The DC government does not have the capacity to scale up a program that large — even within a 12-month period. What’s more, homelessness is a compound, complex issue caused by a cluster of problems affecting individuals and families. It cannot be resolved by abracadabra or some other wishful thinking and feel-good jargon.

If you doubt my analysis of the city’s abilities, consider the challenges it is facing with the implementation of Stronger Together by Assisting You. Commonly called STAY DC, it is the primary effort deployed by the city to prevent massive pandemic-related evictions. While there is $352 million in federal funding available for implementation, DC has had a difficult time setting up and administering the program. As I wrote last week, it was Lewis George who lamented the fact that there was a backlog of more than 16,000 applications while another 18,500 were incomplete.

Things have been so bad that last week the council approved legislation that encourages landlords to file for the assistance on behalf of their tenants. Before that, Silverman’s Committee on Labor and Workforce Development had sought to provide cash incentives to unemployed residents to inspire them to apply for a program established to pay their back rent. That recommendation was rejected by Mendelson and the majority of the council. 

Shouldn’t paying the rental arrearages be incentive enough?

Now people somehow believe 2,400 homeless individuals will suddenly get apartments. Wasn’t it just last year that Nadeau and crew pushed through budget increases and certain taxes and fees to expand funding for some of the same social services they are now proposing to fund via this new tax rate? Back then they raised $64 million. Those increases were not repealed in the mayor’s FY 2022 budget proposal.

A city with an estimated population of only 714,000 people — a fraction of which are considered low-income or poor — now has an annual budget of more than $18 billion.

Have mercy!

“I am worried about the city’s financial future,” Mendelson told me during last year’s budget deliberations. “The dramatic change in ideology on the council is putting at risk the financial stability we built over the years with healthy reserves and a largely competitive tax base.”

He was right to be concerned. The far-left wing of the council has a voracious appetite; it will consume every available penny of the public’s money and still not be satisfied. Anyone who thinks they’ll stop with this year’s increase is wholly misguided.

Equally troublesome, there appear to be duplications in this pending budget. For example, the council set aside $32 million to launch the Child Wealth Building Act of 2021, commonly called Baby Bonds and championed by McDuffie. The wealth tax would fund monthly child-credit payments for eligible families, many of whom are the same families that could receive benefits under the Baby Bonds, which are some of the same families currently receiving payments under the Temporary Assistance to Needy Families program. This kind of chaotic, unorchestrated public policy creation and implementation is not the best way to improve the quality of life for DC’s vulnerable residents. 

Don’t expect anything to change, however. Once FY 2022 begins Oct. 1, advocates will begin complaining that programs aren’t being implemented swiftly enough. They will decry the continuing sorry conditions for poor residents, even as government agencies fail to take advantage of all available resources. Typically, DC’s end-of-the year financial reports reveal money unspent by various agencies; in 2020, the total underspending was $200 million, according to government documents. The Department of Human Services, which handles homelessness and other social service programs, left $38 million on the table that year.

If past is prologue — and when dealing with the DC government, it usually is — there likely will be a surplus at the end of 2022. The majority of that money by law will end up in one of the city’s reserve or savings accounts. Those results will demonstrate, yet again, that some council members are poor fiscal stewards of the public’s money and remain out of touch with reality.

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jonetta rose barras is an author and freelance journalist, covering national and local issues including politics, childhood trauma, public education, economic development and urban public policies. She can be reached at thebarrasreport@gmail.com.