He envisioned danger in the administration’s failure to replenish the city’s Fiscal Stabilization Reserve Account, which was used to meet cash obligations during fiscal 2021 and the covid-fighting years. Lee took a close look at the city’s cash-flow data, slow revenue growth and the unlikelihood of unanticipated surpluses, and concluded, as he did in a March 11 letter to City Administrator Kevin Donahue, that failure to replenish the reserve will “result in a clear deterioration of the District’s financial condition.” The mayor’s proposed budget, he wrote, “must include replenishment of the Reserve in order to receive certification from my office.”
I learned from city sources on Friday that Bowser has indeed charted a budgetary course for the city. Whether a shipwreck is in the future remains to be seen.
A few days ago, Bowser sent Lee a proposed fiscal 2025 budget that should, in the administration’s view, receive CFO certification because it fully refills the Fiscal Stabilization Reserve, as Lee demands. That means an additional $253.6 million must be added to the nearly $1 billion gap that Bowser has to close to balance the budget. At this stage, the full extent of Bowser’s budget cuts is unknown. But it’s fair to assume that the administration’s knife has plunged deeper than fat and meat and has worked its way to bone.
And to think: This week’s dust-up was over Bowser’s failure to meet the council’s budget submission deadline. Mendelson rightly faults Bowser. “This delay is 100% on the Mayor,” Mendelson wrote in a March 19 statement. “It disregards the law. It is an affront to the Council.”
Tender council sensibilities notwithstanding, it can’t be said that Bowser has been sitting on her hands. She has been facing a first-class spending crisis. The flow of pandemic-era federal money into the District runs dry this fiscal year. The city is losing federal jobs. The commercial real estate market has seen better days, and the worst may be yet to come. The city’s champagne ideas must now be adjusted to accommodate a soda-water pocketbook. Spending had to be refocused on meeting unmet needs vs. unmet desires. The likelihood of a “tight” 2025 budget was a virtual certainty, with the prospects of pain from program cuts and tax increases. That Bowser and her team were scrubbing and rescrubbing the numbers at this late stage was no excuse, but given her decision to accommodate Lee’s wishes, the delay is easy to understand. The consequences will become clearer once the full scope of Bowser’s cuts are known.
Less understandable is the inability of Bowser, Mendelson and Lee to come to an accord on handling of the Fiscal Stabilization Reserve Account. Mendelson is holding Lee up as a power-grabber who subverts the council’s authority over the budget. “Think of it,” he wrote. “So last year [Lee] cancelled the free bus program. Next year he could cancel other programs or maybe insist on firing agency directors because they mismanage their budgets.”
(The free bus program, methinks, wasn’t sacrosanct, and directors who mismanage budgets surely should be encouraged to seek other lines of work.)
Under the law, the CFO is an independent office responsible for the District’s finances, including the annual operating and capital funds. Lee, as with his predecessors, is appointed by the mayor with council confirmation. They all know the rules of engagement.
Lee readily acknowledges that there is no legal requirement that the reserve be replenished as he suggests. But Lee rightly cites his broad legal authority to certify the mayor’s budget, and he won’t do it unless there is concrete evidence that the reserves will be replenished. Lee said his position is “not based on a policy preference, but rather on the negative impact that [failure to replenish] will have on the District’s financial position.” The Fiscal Stabilization Reserve Account is no political football, but a source of all-important liquidity that shouldn’t be allowed to run dry. Bowser’s submitted budget reportedly accomplishes that end.
I had hoped a no-wiggle-room agreement on replenishment of the reserve account could be reached among all parties.
Bowser, instead, has decided to resolve the issue Lee’s way with all of the painful scaling-down of programs and services that it entails, leaving it to the CFO and council to sort out their differences in the public square. Shipwreck? Iceberg? More government seamanship is still needed to avoid them.
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