Reserve Fund Improvement Amendment Act of 2017

Introduced: February 7, 2017

Summary: To amend section 47-392.02 of the District of Columbia Official Code to align the locally mandated cash reserve funding formula with the federally mandated cash reserve funding formula.

Councilmember Grosso's Introduction Statement:

Thank you Chairman Mendelson.

The recently released FY16 CAFR report illustrates that the financial health of our city is strong. 

We are enjoying a General Fund balance of $2.4 million and our federally and locally mandated reserves have increased from $985 million to $1.165 billion, amounting to 56 days of cash on hand.

These are extraordinary achievements, and I want to thank the Mayor, the Chairman and the Chief Financial Officer for their hard work to get us to this point. 

While we are in a good financial position, the city is still 4 days shy of achieving our goal of 60 days cash on hand.

Based on testimony received by the Chief Financial Officer during last week’s CAFR Briefing, the District’s emergency, contingency, fiscal stabilization and cash flow reserves are approximately $95M short of being fully funded.

After working closely with the Council Budget Office and analyzing the numbers, I believe this shortfall could be turned into a surplus of millions if the requirements for our federally and locally mandated reserves were calculated using the same expenditure budget assumptions.

That is why today, I am introducing the Reserve Fund Improvement Amendment Act of 2017.

Currently, we use three different methodologies to calculate the federal and local reserve requirements.

Pursuant to the Home Rule Act, the federal reserve mandate (emergency and contingency cash reserve) is calculated using the actual operating expenditure from local funds reported in the CAFR for the fiscal year immediately preceding the current fiscal year, less debt service payments.

The locally mandated fiscal stabilization reserve fund is calculated using the General Fund operating expenditures for each fiscal year and the cash flow reserve fund, also locally mandated, is calculated using the General Fund operating budget for each fiscal year. 

My legislation will align the locally mandated cash reserve funding formula with the federally mandated reserve funding formula. 

I believe standardizing the reserve calculations across all reserve funds would allow the District to meet its reserve requirements this year, and allow a portion of the CAFR surplus to be used for other investments, such as affordable housing and PayGo capital projects. 

Given the uncertainty that pervades as the Trump Administration and a Republican Congress continue to undermine all that we’ve worked to accomplish in the city, hitting the 60 days is more important than ever.

Additionally, once we reach 60 days, 50% of all additional uncommitted amounts in the unrestricted fund balance will be deposited in the Housing Production Trust Fund and 50% will be reserved for PayGo funding, provided that these funds will be used to supplement the existing capital budget for school construction.

If we were to change the method of calculating our locally mandated reserve requirements, both of these funds could receive millions now.

Thank you Chairman Mendelson and I welcome any co-sponsors.