$417 million D.C. budget surplus should be saved, mayor says

District of Columbia officials are weighing how to handle an expected $417 million budget surplus from the 2012 fiscal year.

If D.C. Mayor Vincent Gray and his council counterparts Jack Evans and Phil Mendelson have their way, the District would save most of the budget surplus and spend a little, but residents argue the money should go toward improving the city.

The mayor says he wants the city to think of this money and its potential long term use, especially if most is kept in a reserve.

“I understand the need for services, but I do what it is intended to do, save for the future,” says Gray.

He told reporters Tuesday that because the federal economy is still experiencing growing pains, it's probably best for the city to have a large sum of emergency cash.

The mayor said once both his office and the council have time to look over the numbers, he's hoping they can move some money to help citizens of the District who need it the most.

“We think we have an opportunity with 2013 funds to make important investments in social programs that I certainly have wanted to make for a long time,” Gray said.

The mayor didn't specify which programs those were. He also said it's unlikely that this cash overflow will prompt taxes to go down although he said it's something the council will look at.

But residents aren’t so thrilled at the mayor’s idea. Some think that instead of the money going into a savings account it should go toward helping the homeless and the less fortunate.

“Everybody’s got bills to pay, children to feed, and so how in the name of God are we going to do this? If you’re going to put some up, up and let it sit,” says Larry Taylor of SE Washington.

Advocates for the city's poor and homeless residents say the mayor and the D.C. Council should spend some of the surplus on safety net programs.

"It's disappointing that we're not being given access to the money for smart, one-time investment opportunities that would support human needs," said Janelle Treibitz of the D.C. Fair Budget Coalition. The group argues that spending on the district's 15,000 homeless residents has actually decreased, despite the city's robust finances.

“What hope are we giving our most vulnerable when we say that our savings account is far more important than your children having a safe place to sleep at night?” asks Patricia Fugere, the executive director of Washington Free Legal Clinic.

Councilmember Jim Graham, who said 25 percent of the residents in his ward live in poverty, said the failure to invest in social services would ultimately cost the city.

"We're going to pay for all of this in human misery and crime and drug trade. That's how we pay the piper," Graham said.

City leaders were also cool to the prospect of reducing some of the nation's highest personal income tax rates.

"I'm not in a position where we think we should be reducing taxes at this stage," Gray said, noting that the reserve fund still doesn't have enough money to cover the city's spending needs for 2 months. The district has an annual budget of roughly $10 billion, with $6 billion coming from local revenues.

So where did the surplus come from? The city’s chief financial officer explained the 2012 surplus was in part due to unexpected revenues. Business taxes brought in $78 million more than planned, sales taxes brought in $68 million more and estate taxes brought in $53 million.

The mayor pointed to the 55 tower cranes dotting the skyline and to the brand new Costco as examples of booming business in the city, but George Smith argued all the more reason to spend the money, not save, where he said it is needed most.

“Earmark the money and mark the money for it to go back into the system for the schools and track it,” says Smith.

If you want to track what happens next, look to next week’s City Council hearing. Already, it appears two leaders there are in step with saving most of the surplus but spending some of the money on services.

The Associated Press contributed to this story.