May 2012


[DC for Democracy will deliver the following letter to Chairman Kwame Brown and 12 Councilmembers this afternoon.]

Dear Chairman Brown,

We are writing on behalf of our 550 members to convey our deep concern with the proposed budget for Fiscal Year 2013.

Attached are the signed statements of 32 DC for Democracy members conveying our concern that 75 percent of the budget cuts fall on safety net programs, while all of the proposed revenue measures are regressive and apply regardless of ability to pay.

We are unconvinced by the Council’s excuses that money is lacking for these important government services.  These vital needs can be funded by tapping into just one-fourth of the more than $300 million in budget surpluses from the current and past fiscal years, as well as by asking the richest 5 percent of DC residents to pay their fair share of taxes.  Our complete proposal on the FY13 budget is attached.

As Councilmember Catania said, this is a rich city. What is lacking is not money, but due consideration to the input of concerned citizens.  It is, in short, a failure of democracy.

At the Budget Support Act (BSA) hearing on April 30th at which a DC for Democracy representative testified, only Chairman Brown and Councilmember Graham were present to hear the public witnesses.  A few other Councilmembers made their appearance for limited periods of time.  The absence of the full Council for what is arguably the most important hearing of the entire year showed a shocking disregard for the public.

Furthermore, a new revenue proposal was introduced at the BSA hearing for which the public was not able to prepare testimony, i.e. Councilmember Graham’s proposal to increase the alcohol excise tax.  While we commend Councilmember Graham for his efforts to raise additional revenue, this proposal deserves public input. The public also has a legitimate interest in expressing our priorities for the use of the sizable budget surpluses from the current and past fiscal years.

Finally, at the Day in the Strife action last Thursday, only Chairman Brown and Councilmember Graham met with the more than 200 concerned residents who crowded the John A. Wilson building.  Other Councilmembers were seen riding the elevators, but were mysteriously unavailable to meet with the public.

It was clear to us that most Councilmembers have little understanding of their highest obligation as elected officials: to understand and represent the concerns of the public.  In short, our so-called representatives have failed to represent.

There is one way that Council can make amends for this failure: hold a public hearing specifically on the use of the budget surpluses and new revenue proposals.  All Councilmembers should be required to attend this important hearing, which should be held before the Council holds its second vote on the Budget Support Act.

We look forward to testifying at this important hearing.

At our May meetup, we had a short presentation on the DC FY13 Budget, with accompanying charts. Here they are:
Chart 1
Note: In Chart 1, HPTF= Housing Production Trust Fund, HPAP=Housing Purchase Assistance Program


Note: In Chart 5, “Investment Income” = Qualified Dividends and Capital Gains.

DC for Democracy’s proposal on DC’s Fiscal Year 2013 Budget was delivered to the Council Committee of the Whole as written testimony for the FY13 Budget Support Act of 2012.

DC for Democracy strongly objects to the proposed FY13 budget, on the grounds that it is an austerity budget that is not fair, not socially responsible, and will fail to pull our economy out of the current economic recession. [Note: our response is based solely on the Mayor’s budget proposal; the Council is discussing many changes to both spending and revenues, but they are unofficial and continually evolving].

Spending Proposals

The Mayor calls for $102.7 million in spending cuts, 75% ($76.6 million) of which inflict further suffering on people who are homeless, poor, unemployed, or sick, many of whom are children. These are the people who are asked to sacrifice:

    Homeless people who will suffer $7 million in federal funding cuts, which may require shutting down the DC General homeless shelter.

    Low-income DC residents currently paying more than 30% of their income on rent and who need affordable housing will suffer from $20 million in cuts to the Housing Production Trust Fund which builds affordable housing. DC has financed 8,900 units of affordable homes since 2002, but we have slowed down the pace significantly in the last few years and the government has diverted money from building affordable housing to pay for other housing programs that do not solve the problem. They will also suffer from the loss of $5 million in federal funds that help them buy affordable homes (Home Purchase Assistance Program).

    23,000 low-income DC residents who get health insurance through the public Healthcare Alliance program will suffer $23 million in cuts, which means they will not be covered for hospital care.

    Low-income DC residents suffering from domestic violence will suffer $1.2 million in cuts to the Victim Services Program, which offers a variety of services for the victims of domestic violence.

    Poor, unemployed families with children will suffer $14.7 million in cuts to the new Temporary Assistance to Needy Families (TANF) employment program which has been proven to be an effective way of moving them from welfare to work. These 6,200 families (which include 12,000 children) will also suffer from $5.7 million in cuts to TANF benefits, if they have received benefits for more than 5 years.

The Mayor has placed most of the above programs on a “Revenue Priority List” which is basically a wish list. These programs will only be funded if DC gets revenues that are currently not expected. It is unconscionable for the Mayor to propose funding basic human needs from fantasy dollars that may never materialize. We need to put these programs back in the real budget and pay for them with real revenue.

Revenue Proposals

The Mayor calls for raising $70.5 million in revenue to bridge the budget gap through 4 revenue sources. All of these revenue sources are imposed on DC residents regardless of income level and ability to pay.

    $28.2 million to be raised from collection of past due taxes and fees

    $25 million to be raised from new traffic cameras that will generate speeding tickets for drivers

    $5.3 million to be raised from expanded hours for selling alcohol, which increases alcohol addiction, accidents and injuries, noise, trash, and other social harm

    $12 million to be raised in income and property taxes from people of all income levels, by refusing to raise the standard deduction, personal exemption and homestead exemption to account for the last 4 years of inflation.

These revenue proposals will exacerbate a tax structure that is already regressive, where the working poor bear the heaviest tax burden.

According to the Office of the Chief Financial Officer (OCFO)’s 2010 “Tax Rates and Tax Burdens, Washington Metropolitan Area” report, a typical household of three earning $25,000 bore an overall local tax burden (consisting of income, sales, property and automobile taxes) of 10.4 percent, the highest tax burden of any income bracket. A comparable family earning $150,000 bore a tax burden of only 8.9 percent. [see chart on p. 20 of the report]

The FY13 revenue proposals will serve to further burden the working poor at the $25,000 level, making DC’s tax structure even more regressive.

Recommendations on Spending

DC’s FY13 Budget should reflect its progressive values. First, it should protect our most vulnerable residents: the poor, the sick, the unemployed, and the homeless, many of whom are children. The budget should pay for the $76.6 million in cuts identified above, and it should also pay for the following:

    Add $4 million to the Housing First Program, to allow more homeless families to leave the shelters and into a permanent home with wrap-around services to break the cycle of homelessness

    Add $2 million to the Local Rent Supplement Program, which helps poor families to stay in their homes

    Add $4 million to the public school budget to provide a school librarian for every school (44 schools currently do not have dedicated funding for a full-time librarian)

    Add $10 million for public libraries, to build up the library collections and to reopen the branch libraries on Sundays, when they are most needed by the community

With the addition of this $20 million in essential social infrastructure to the $76.6 million in spending cuts that must be restored, the FY13 budget should include at least $96.6 million in additional spending, with a matching $96.6 million in additional revenues in order to balance the budget.

Revenue Recommendations

We should eliminate revenues raised from people who are already finding it hard to make ends meet, or from penalties designed to change behavior rather than raise money.

    Reinstate the inflation adjustment to the standard deduction, personal exemption, and homestead deduction. This means subtracting $12 million in new revenues.

    Exempt the 140,000 DC residents who are on food stamps from the improved collection of overdue taxes and fees. We should not be asking people who are not getting enough to eat to bridge the budget gap. This means subtracting an estimated $6.6 million from new revenues ($6.6 M = estimated $28.2 million * 140,000/600,000 residents).

    The expanded hours for alcohol sales is not advisable, given the likely social costs involved. This means subtracting $5.3 million from expanded hours for alcohol sales from new revenues.

    Use the automated cameras for traffic “calming” but do not count expected $25 million in revenues toward the FY13 budget. This will ensure that the goal is increasing pedestrian safety rather than raising revenue. This money can be counted towards the FY13 budget surplus instead.

Adding the $48.9 million from these foregone revenues to the additional $96.6 million required in new revenues means that $145.5 million of revenue must be raised to balance our budget in a progressive, socially responsible manner.

DC for Democracy favors making our tax code, which is currently regressive, truly progressive. However, given that the tax code is being reviewed by the Tax Revision Commission, we urge the Council to adopt the following short-term measures to fully fund urgent human needs:

1) Impose a 4 percent surcharge on the $1.2 billion — yes, that’s billion with a “b” — of investment income (qualified dividends and capital gains) received by the richest 5% of DC residents, i.e., households with $200,000 or more in Adjusted Gross Income (AGI). Qualified dividends and capital gains currently enjoy a tax advantage over wages and salaries, since they are taxed at a maximum rate of just 15%. A 4 percent surcharge would generate $47.2 million in needed revenues. See [IRS historical data from 2009].

2) Impose a higher limit of 10 percent on itemized deductions claimed by the richest 5% of DC residents, i.e., households with $200,000 or more AGI. Last year, the Council wisely imposed a 5 percent limit on such itemized deductions. Based on the CFO’s forecast last year [pdf] we calculate than a 10% limit would raise an additional $20.1 million this year.

3) Use just one-quarter ($78.2 million) of the budget surpluses of $304.5 million from FY11 and FY12 to fund urgent human needs for the next fiscal year, saving a full three-quarters of the money to build up our savings.

Together, these three proposals would yield the $145.5 million we need for a more balanced, progressive, fiscally and socially responsible budget.

DC for Democracy members can help the budget campaign by doing the following:

1) Commit to email and phone targeted Councilmembers in early May (we will provide information and talking points).
2) Join us at the Wilson Building on Thursday, May 10, 10am - Noon to show our elected officials a typical “Day in the Strife” of vulnerable DC residents. For more information, click here to view the flyer [PDF].
Please contact Kesh at keshinil@yahoo.com or 202-537-6768 to join the campaign.

DC for Democracy’s proposal on DC’s Fiscal Year 2013 Budget was delivered to the Council Committee of the Whole as written testimony for the FY13 Budget Support Act of 2012.

DC for Democracy strongly objects to the proposed FY13 budget, on the grounds that it is an austerity budget that is not fair, not socially responsible, and will fail to pull our economy out of the current economic recession.

Spending Proposals

The Mayor calls for $102.7 million in spending cuts, 75% ($76.6 million) of which inflict further suffering on people who are homeless, poor, unemployed, or sick, many of whom are children.  These are the people who are asked to sacrifice:

    Homeless people who will suffer $7 million in federal funding cuts, which may require shutting down the DC General homeless shelter.  

    Low-income DC residents currently paying more than 30% of their income on rent and who need affordable housing will suffer from $20 million in cuts to the Housing Production Trust Fund which builds affordable housing.  DC has financed 8,900 units of affordable homes since 2002, but we have slowed down the pace significantly in the last few years and the government has diverted money from building affordable housing to pay for other housing programs that do not solve the problem.  They will also suffer from the loss of $5 million in federal funds that help them buy affordable homes (Home Purchase Assistance Program).

    23,000 low-income DC residents who get health insurance through the public Healthcare Alliance program will suffer $23 million in cuts, which means they will not be covered for hospital care.

    Low-income DC residents suffering from domestic violence will suffer $1.2 million in cuts to the Victim Services Program, which offers a variety of services for the victims of domestic violence.

    Poor, unemployed families with children will suffer $14.7 million in cuts to the new Temporary Assistance to Needy Families (TANF) employment program which has been proven to be an effective way of moving them from welfare to work.  These 6,200 families (which include 12,000 children) will also suffer from $5.7 million in cuts to TANF benefits, if they have received benefits for more than 5 years.

The Mayor has placed most of the above programs on a “Revenue Priority List” which is basically a wish list.  These programs will only be funded if DC gets revenues that are currently not expected.  It is unconscionable for the Mayor to propose funding basic human needs from fantasy dollars that may never materialize.  We need to put these programs back in the real budget and pay for them with real revenue.

Revenue Proposals

The Mayor calls for raising $70.5 million in revenue to bridge the budget gap through 4 revenue sources.  All of these revenue sources are imposed on DC residents regardless of income level and ability to pay.  

    $28.2 million to be raised from collection of past due taxes and fees

    $25 million to be raised from new traffic cameras that will generate speeding tickets for drivers

    $5.3 million to be raised from expanded hours for selling alcohol, which increases alcohol addiction, accidents and injuries, noise, trash, and other social harm

    $12 million to be raised in income and property taxes from people of all income levels, by refusing to raise the standard deduction, personal exemption and homestead exemption to account for the last 4 years of inflation.  

These revenue proposals will exacerbate a tax structure that is already regressive, where the working poor bear the heaviest tax burden.

According to the Office of the Chief Financial Officer (OCFO)’s 2010 “Tax Rates and Tax Burdens, Washington Metropolitan Area” report, a typical household of three earning $25,000 bore an overall local tax burden (consisting of income, sales, property and automobile taxes) of 10.4 percent, the highest tax burden of any income bracket.  A comparable family earning $150,000 bore a tax burden of only 8.9 percent.  [see chart on p. 20 of the report]

The FY13 revenue proposals will serve to further burden the working poor at the $25,000 level, making DC’s tax structure even more regressive.

Recommendations on Spending

DC’s FY13 Budget should reflect its progressive values.  First, it should protect our most vulnerable residents: the poor, the sick, the unemployed, and the homeless, many of whom are children.  The budget should pay for the $76.6 million in cuts identified above, and it should also pay for the following:

    Add $4 million to the Housing First Program, to allow more homeless families to leave the shelters and into a permanent home with wrap-around services to break the cycle of homelessness

    Add $2 million to the Local Rent Supplement Program, which helps poor families to stay in their homes

    Add $4 million to the public school budget to provide a school librarian for every school (44 schools currently do not have dedicated funding for a full-time librarian)

    Add $10 million for public libraries, to build up the library collections and to reopen the branch libraries on Sundays, when they are most needed by the community

With the addition of this $20 million in essential social infrastructure to the $76.6 million in spending cuts that must be restored, the FY13 budget should include at least $96.6 million in additional spending, with a matching $96.6 million in additional revenues in order to balance the budget.

Revenue Recommendations

We should eliminate revenues raised from people who are already finding it hard to make ends meet, or from penalties designed to change behavior rather than raise money.

    Reinstate the inflation adjustment to the standard deduction, personal exemption, and homestead deduction.  This means subtracting $12 million in new revenues.

    Exempt the 140,000 DC residents who are on food stamps from the improved collection of overdue taxes and fees.  We should not be asking people who are not getting enough to eat to bridge the budget gap.  This means subtracting an estimated $6.6 million from new revenues ($6.6 M = estimated $28.2 million * 140,000/600,000 residents).

    The expanded hours for alcohol sales is not advisable, given the likely social costs involved.  This means subtracting $5.3 million from expanded hours for alcohol sales from new revenues.

    Use the automated cameras for traffic “calming” but do not count expected $25 million in revenues toward the FY13 budget.  This will ensure that the goal is increasing pedestrian safety rather than raising revenue.  This money can be counted towards the FY13 budget surplus instead.

Adding the $48.9 million from these foregone revenues to the additional $96.6 million required in new revenues means that $145.5 million of revenue must be raised to balance our budget in a progressive, socially responsible manner.

DC for Democracy favors making our tax code, which is currently regressive, truly progressive.  However, given that the tax code is being reviewed by the Tax Revision Commission, we urge the Council to adopt the following short-term tax measures to raise $ 83.9 million to bridge the FY13 budget deficit:

Impose a 3 percent surcharge on investment income (interest, ordinary dividends, and capital gains) received by those households with $200,000 or more in Adjusted Gross Income (AGI).  This income group enjoyed investment income of $1.45 billion in 2009 [IRS historical data]. A 3% surcharge will generate $43.7 million in needed revenues.

Impose a higher limit of 10 percent on itemized deductions for those households with $200,000 or more AGI.  Last year, the Council wisely imposed a 5 percent limit on such itemized deductions.  The CFO forecast [pdf] that a 5 percent limit would raise $20.1 million in FY13; therefore, a 10 percent limit on itemized deductions will raise $ 40.2 million.

We need to use the surplus from previous years to benefit those who made the greatest sacrifices. Therefore, use one-quarter ($61.6 million) of the FY11 surplus of $240 million for our FY13 needs.

Adding together the $83.9 million in new revenue from high income filers and $61.6 million from the FY11 surplus yields the $145.5 million we need for a more balanced, progressive, fiscally and socially responsible budget.

DC for Democracy members can help the budget campaign by doing the following:

1) Commit to email and phone targeted Councilmembers in early May (we will provide information and talking points).
2) Join us at the Wilson Building on Thursday, May 10, 10am - Noon to show our elected officials a typical “Day in the Strife” of vulnerable DC residents. For more information, click here to view the flyer [PDF].
Please contact Kesh at keshinil@yahoo.com or 202-537-6768 to join the campaign.