After a careful review of the Mayor’s proposed Fiscal Year 2014 Budget, released on March 28th, we at the Chamber are pleased to see no new taxes or fees proposed--yet we continue to urge the Mayor and Council to take action to repeal the unnecessary fees and fines imposed on businesses over the last two fiscal years. These revenue increases were deemed necessary when the CFO forecasts reflected budget deficits; now that we’ve seen two straight years of budget surpluses, these extra financial challenges for our City’s businesses are burdensome and should be rescinded.  We have waited long enough.

Again this year, the District’s budget is expanding along with the City’s spending.  The FY2014 base local budget is $6.13 billion, reflecting a $171.5 million increase in local revenue over FY2012 and $79.7 million over FY2013.  Meaning, local tax and fee increases are fueling $251 million in additional spending in only two years.    The total FY 2014 budget including local revenue and general funds is budgeted at $6.96 billion--$187.7 million over FY2013.

Without the fear of a budget shortfall, the District should be working to identify areas of efficiency and cost containment.  Now is the time to identify where resources can be refined, instead of making drastic budget cuts in the future.  Look at human resource spending--while the net loss of full-time-equivalents (FTEs) from FY2013 to FY2014 is 21, the size of government administration is growing by 325 FTEs!  Only public education and safety are seeing staff reductions.  Again, this year, the bureaucracy is growing with unchecked speed.  For a City with about 632,000 residents, the Mayor proposes 26,349 city employees for FY2014.  That’s about one government employee for every 24 residents.  Given, our unique City is required to perform many of the functions of city, county, and state governments--but still, this ratio does not reflect efficiency.

One bright spot in the FY2014 Budget is the Mayor’s proposal to fund the repeal of the out-of-state municipal bond tax. We appreciate this gesture and hope it will signal further tax repeals. Specifically:

• The following items on the Revised Revenue Estimate Contingency Priority List should be funded outright:

o The Commercial Property Tax decrease

o Small Business Technical Assistance Funding

• The proposed $36 million placeholder for a FEMS lawsuit settlement should go directly to rolling back taxes where any funds go unexpended

• Combined Reporting has proven very profitable for the City, and the FY2014 Budget is amending this significant tax on business again. The District never needed this revenue when it became law, and we continue to urge its repeal.

• The Overpayment Interest Rate, which is paid while a real property tax appeal is pending, should be returned to 6%, instead of prime plus 1%

Our local businesses, which provide the bulk of our City’s tax revenue, could use a break. Giving business the breathing room to grow could only help increase the tax base even further, meaning more money to spend on necessary activities to help grow our workforce, employ our residents, and provide affordable housing.

Wrapping up Fiscal Year 2012, it once again looks like the District will finish with a surplus. This time, we’re projected to be in the black by over $400 million (compared to the $240 million surplus when we closed out FY 2011). This money is the result of revenue collections that were higher than expected, a stabilizing economy, and under-spending by local agencies. Of course, the talk at the Wilson building is all about what to do with this windfall, and I have plenty to say on that subject as well, but it seems we’re missing the most important point of this revelation--if the government is collecting far more than it needs, it’s time to cut taxes!

The first initiative listed in the Mayor’s Five-year Economic Development Strategy is to establish the District of Columbia as “the most business-friendly economy in the nation.” Reducing taxes in our City--which is still ranked 51^st out of 50 in business-friendliness--will inevitably lead to more new firms opening and more jobs and opportunities for DC’s residents. Right now, the District’s business community is still being hamstrung by a corporate tax rate that’s much, much higher than it is in neighboring jurisdictions in Maryland and Virginia. Bringing us back in line with our neighbors can only improve our economy for everybody in the long run--and is perfectly in line with the Mayor’s own vision for DC!

It seems a no-brainer: DC raised taxes over concerns of a revenue shortfall--concerns that turned out to be unfounded. Now that we have a surplus, it’s time to rescind those increases. To refresh your memory, here are some of the measures enacted in the 2012 budget that we can now afford to fix:

• The 6% sales tax rate was supposed to sunset on October 1, 2012, but was extended indefinitely, costing DC consumers $16 million annually.
•  The Minimum Corporate and Unincorporated Franchise Tax, raised from $100 to $250, costing the smallest of District businesses an estimated $12 million annually.
• Combined Reporting, of course, is still an issue, costing District enterprises over $20 million every year.

There are also some issues in the 2013 budget we now have the financial security to fix:

• The Overpayment Interest Rate, which is paid while a real property tax appeal is pending, should be returned to 6%, instead of prime plus 1%.
• The Commercial Property Tax decrease, which was on the FY2013 Revised Revenue Estimate Contingency Priority List, should be funded.

 Last year’s numbers speak for themselves. DC is taking in plenty of money--so much so that we don’t know what to do with it all. The money is there for a whole “wish list” of social projects, and “unexpected revenue” is projected to cause yet another surplus for FY 2013.  DC’s cash reserves already top $1.2 billion, and another $400 million will place our “rainy day fund” among the top 10 fattest in the nation. Meanwhile, our local businesses, which provide the bulk of our City’s tax revenue, could use a break.

We understand the Mayor’s position, banking the surplus and rebuilding our City’s resources, but we also hope the Mayor will consider reversing some of the tax increases on DC’s business community--tax increases that will otherwise again account for a large portion of next year’s surplus, when the 2013 projections are released. Reducing the tax burden now on the drivers of our local economy only makes sense. We can afford it.

Here in the District, we are unique. We have a unique culture, a unique history, and a unique economy--made so in part by our ties to the federal government. With so many federal contractors doing business here, and so many residents employed by the U.S. Government, what happens on a national level is felt intensely in DC. That’s why we at the DC Chamber of Commerce are watching the Fiscal Cliff negotiations so closely.

We all breathed a sigh of relief last week when President Obama signed The American Tax Relief Act of 2012, preventing automatic tax increases and across-the-board budget cuts. But that relief may be short-lived. Many problems related to sequestration, the debt ceiling, and spending still loom large in our minds. Since the District will be particularly affected by these issues, it’s important that we all understand what was in the deal--and what wasn’t.

Here’s what we got:

•          Taxes went up on families making $450,000 and up (or individuals with incomes over $400K).  With an average household income 25% higher than the United States overall, and twice as many families in the $200,000-and-over segment, more DC area workers and entrepreneurs will be affected by this increase, proportionally, than nationwide.  
•          Capital Gains and Dividend taxes also went up on wealthier households. Again, this will hit DC taxpayers harder.
•          Personal exemptions for individuals making over $250K, and families over $300K, are being phased out.
•          The Estate Tax increases from 35% to 40%.
•          Unemployment insurance was extended for another year. With unemployment at 8.4%, .6% higher than the national rate, this is a positive for DC residents still looking for work.
•          Cuts to payments to physicians (of 27%) under Medicare were put off by a year.
•          Portions of the “Farm Bill” were extended, supposedly avoiding a “dairy cliff” in which milk prices would have skyrocketed.
•          National budget deficits will be reduced, and revenues increased, compared to a continuation of 2012’s tax and spending policies, according to the Congressional Budget Office (CBO). This, along with the savings in debt service these changes will bring, bodes well for the economy nationwide and here in the District. CBO projections show in increase in 2013 GDP growth of 1.5-1.75% over what would have happened under prior law.
•          The Alternative Minimum Tax was finally indexed to inflation.
•          Tax breaks for working families were extended (the American Opportunity Tax Credit, the Child Tax Credit & the Earned Income Tax Credit).
•          “Tax Extenders”--popular tax breaks for businesses for outlays such as R&D--passed. This is a win for small businesses in particular; one member told me his businesses fourth-quarter taxes would more than double had a deal not been reached.

And here’s what we didn’t get:

•          Automatic spending cuts--the “sequester”--were delayed by only two months. That’s right, we can look forward to hearing the same bickering about what to cut and what not to cut all over again in just a few weeks. But bear in mind that anytime the Federal Government talks about cutting spending, that means less dollar being spent here in the District.
•          The debt ceiling, which needs to be raised by February at the latest, was not addressed. The last debt ceiling negotiations hurt the national credit rating and caused tumult in the stock market.
•          The payroll-tax cut was not extended, costing workers an extra $1,000 in taxes for every $50,000 they make.
•          In the long term, CBO projections show the new legislation actually limiting GDP growth, with an estimated GDP in 2022 up to 1.7% lower than under prior law. 
•          A “grand bargain” was conspicuously missing. Major issues such as the complicated U.S. tax code, entitlement spending that’s as high now as it’s ever been in American history, and national debt that now exceeds $16 trillion were not addressed. These are the critical issues that Congress must face, if we are to avert our nation’s true fiscal crisis.

The Mayor and the city’s Chief Financial Officer have made contingency plans calling for cuts in funding of key areas of the city's budget. Our hope is that the District will not have to exercise this plan. 

Two bills are currently in front of the Council, both of which have the laudable goal of easing re-entry into society for ex-offenders, and helping them find gainful, meaningful employment. One of these bills, the “Re-entry Facilitation Amendment Act of 2012” (B19-889), sponsored by Council Chair Phil Mendelson, is well thought out and based on comprehensive research done by the Council for Court Excellence. Unfortunately, the other bill, the “Returning Citizens Anti-Discrimination Act of 2012,” sponsored by Councilman Marion Barry, is based less on research than on emotion, and would have disastrous effects on our local businesses, universities, hospitals, and the District government itself. The major differences between the two bills are illustrated below:

Returning Citizens Anti-Discrimination Act vs. Re-Entry Facilitation Amendment Act.pdf

Markup on the Returning Citizens Anti-Discrimination Act is scheduled for tomorrow. We need to take action and make sure our voices are heard! The Chamber is currently reaching out to membership and other stakeholders to encourage them to contact the Councilmembers and staff on the committee and tell them how you feel about these bills. This is an important fight, and it’s one we’re working on 110%!

Sincerely,

Barbara B. Lang,

President & CEO

Post Script—If you’d like to join the fight, click on the email addresses below to send a message to the Councilmembers and staff on the committee. Use the sample text below or craft your own response.

Dear Councilmember & Staff,

Tomorrow, you will be participating in the markup of the Returning Citizens Anti-Discrimination Act of 2012, sponsored by Councilman Marion Barry. This prospective legislation is patently dangerous for DC’s businesses and institutions, exposing them to frivolous litigation and outlandish fines for noncompliance. As your constituent, I urge you to vote NO on this bill.

On the other hand, B19-889, the Re-entry Facilitation Amendment Act of 2012, sponsored by Council Chair Phil Mendelson, has the same goal of helping ex-offenders return to society successfully, and accomplishes that goal in a much better fashion. With this bill having been based on recommendations by the Council for Court Excellence, I see no reason to consider another piece of legislation.

Thank you,

[Your name here]

Email addresses:

·        At-Large Councilman Vincent Orange – vorange@dccouncil.us

·        Councilman Marion Barry - mbarry@dccouncil.us

·        Councilmember Yvette Alexander - yalexander@dccouncil.us

·        Councilman Tommy Wells - twells@dccouncil.us

·        Councilman Jim Graham - jgraham@dccouncil.us

·        Garret King, Committee Director for the Committee on Aging - gking@dccouncil.us

·        Estell Mathis-Lloyd, Chief of Staff for Councilmember Orange - elloyd@dccouncil.us

·        Ed Fisher, Chief of Staff for Councilmember Alexander - efisher@dccouncil.us

·        Charles Allen, Chief of Staff for Councilmember Wells - callen@dccouncil.us 

·        Calvin Woodland, Chief of Staff for Councilmember Graham - cwoodland@dccouncil.us

Grandfathered small group plans are a myth

We’ve said it before—one of the key components of the Affordable Care Act was President Obama’s promise that if you like your insurance plan you will be able to keep it (the grandfather clause); this plan violates the spirit of the original law. The closed market advocates who state that small businesses can rely on grandfathered plans do so in direct contradiction of the Mercer Report--because of the constraints surrounding grandfathered status coverage and the economic pressure to limit premium increases, the Report asserts that by 2014 grandfathered plans for small groups will no longer be viable. In all of the Mercer Report’s prediction models, grandfathered plans will be eliminated.  In essence, in order for a small business to keep grandfathered status, its coverage with an insurance carrier must not shift or change during a time when the entire health care system in the United States is being shifted and changed.  To say grandfathered plans are a viable option is disingenuous at best.

Small employers want to provide insurance coverage to their employees—healthier employees are happier and healthier

Our members repeatedly tell us they want to provide employees with insurance, and that the healthier an employee and their family, the happier and more productive the employee will be.  With small employers leading our economic recovery, why would we remove their ability compete with large corporations to attract and retain talent by significantly increasing the cost of providing healthcare?  Small businesses are left with two choices: They can attempt to budget for increased premiums and lose their current plans, or choose to drop employee coverage altogether, driving their employees into the individual market.  We urge the Authority, the Mayor, and the DC Council to slow down and really look at the report that it commissioned. The Mercer Report highlights the unpredictability and uncertainty of this massive shift in DC’s insurance market. The implementation of the DC Health Exchange should not be taking unnecessary risks, especially during this fragile economic recovery.

In last week’s vote by the DC Health Benefit Exchange Authority, every insurance marketplace regulation stood unanimously, except one. We are happy the authority listened to us on that point, which was to limit the exchange mandate to plans with 50 members or less, as opposed to 100. However, the other regulations, as written, still impose severe difficulties for small businesses--by not letting an off-market exchange occur or looking at a regional market.

Under this system, the District will be one of only two jurisdictions that limit insurance plan purchases to the exchange only (Vermont is the other one).  The Authority contends that the proposed closed exchange will be a positive alternative to current health coverage in the District; but in order to be viable, the exchange had to pool groups together, proposing an exchange with over 100,000 participants--one-sixth of the DC population.

We believe that the new rules should allow for choice in the marketplace. That means we need to see multiple providers within the exchange, and regulations should be written that allow employers to seek health benefits outside of the exchange no matter the size of their business, as intended by the Affordable Care Act.

Further Council approval is required before the rules take effect, and the Authority is creating a working group to make recommendations to the Mayor as he creates the final legislation; giving us more opportunity for input in the actual implementation of the exchange. Our membership and all DC businesses can rest assured we will persist in making the case for proper healthcare availability for all District residents and businesses. It is our goal to see DC's success in keeping residents insured continue--we are just not sure this is the way to do it.

Dear Members and Supporters,

I am very excited to announce the Chamber’s new International Export Program. I wrote about it in this space first a few months ago, and I am pleased to tell you that it is now up and running! I would also like to welcome our newest staff member, Kimberley Person. Kim will serve as our new Export Counselor, a position committed to helping you grow your business through exporting.

It just makes sense for the Chamber to focus on exporting and global business. Our DC businesses are ripe for growth into the international sector.  Let me tell you why:

• In 2010, 95.5% of potential customers lived outside the United States
• 86% of global economic growth takes place outside of the U.S.
• Over the next 5 years, the world’s population will grow by more than the populations of the U.S., the UK and Canada combined

This is why the International Export Program is so important to us at the Chamber and for your business. It will offer no-fee counseling services designed to help you grow your business through exporting. Providing you with up-to-date market intelligence, the IEP will guide you in developing the most practical and useful strategies for your goods and services in different markets around the world.

Services that range from assessing your export feasibility to technical training programs are provided by skilled professionals who are here to help you. Through this program I hope that you will:

• Increase revenue
• Gain global market share
• Reduce dependence on domestic markets
• Hedge against cyclical/seasonal market fluctuations
• Extend sales potential of older product lines
• Optimize your production capacity and gain efficiencies and economies of scale

DC-based businesses have a unique advantage in the international market--being in the Nation’s Capital gives us direct access to representatives of all the major international players (D.C. houses the embassy of nearly every nation on this planet). Location is everything! Some of the greatest connections are right in our backyard. This presents an opportunity just too good to pass up.

     For more information on the International Export Program please contact Kimberly Person, Export Counselor with the DC Chamber of Commerce Small Business Development Center, at 202-347-7201 x 1221 or email KPerson@dcchamber.org. Or click on the link below to get started!

https://dcsbdc.org/reg.aspx?mode=counsel&center=15400&subloc=1

Sincerely,

Barbara B. Lang
President & CEO
DC Chamber of Commerce

With the Supreme Court having ruled in favor of healthcare reform’s legality, there is still a lot of confusion and misunderstanding about what the law actually means, and how it affects business. What is clear is that Washington, DC will have to have a health insurance exchange system up and running by 2014. We must now turn our attention towards what that system should look like.

As always, our concern here at the Chamber is to protect DC businesses--and in this instance, small business in particular. We have concerns about the exchange model that is currently being considered, and we will work to ensure a competitive process, so that all our members can participate, so that small businesses are not just saddled with one more cost, and so they have the most productive and effective options available to them.

The best part of the health insurance exchange in DC is that it creates a marketplace for choice.  For that choice to be meaningful, however, there needs to be an opportunity for multiple providers to participate. If the exchange is to be the only place for employers of 2 to 100 people to shop for insurance, there needs to be multiple choices within the exchange.  We are absolutely opposed to a single-carrier system in DC--that is not choice. It goes against the free market system that has made the U.S., and DC in particular, such a strong place to do business.

That’s where we have our first concern with the recommendations of the Health Reform Implementation Committee.  Another concern is the change in definition of small businesses from having 50 and under employees to 100. This in effect forces more firms to utilize the exchange, limiting choice. Unless the exchange model itself is perfected, we cannot support this recommendation.

Further, the added burden of regulations may make it untenable for providers to participate in the exchange. Again, anything that keeps multiple providers from participating eliminates choice for the businesses required to use the exchange.

The District’s unique geography also presents regional questions that must be addressed. For example, which exchange would a Virginia resident who commutes to work in DC use--Virginia’s or DC’s? There are a lot of variables that come into play in hashing this system out, and it’s going to take a lot of work to come up with a system that’s fair and effective for everybody.

The Chamber has been closely monitoring progress on this issue since day one. We spoke with the Mayor regarding the consideration and installation of Exchange Board members over the past month, and we attended the Informational Briefing where the recommendations were presented. Rest assured that the Chamber will stay on top of this, and continue to advocate for choice and the continued success of DC businesses, large and small.

I have heard varying viewpoints on the June 13th City Council hearing at which former Council Chair Kwame Brown’s resignation and who would replace him was discussed. Anyone who thought that meeting was a good and productive session must have been watching a different meeting than I saw.

Last week’s now-notorious Council hearing, the purpose of which was to identify a new chairman and chair pro tempore, devolved into an adolescent scene of shouting, name-calling, and pettiness. I have never been less proud of my City’s government than I was that day.

What we should have seen was a thoughtful and frank discussion of who is best suited to lead the Council through these troubled times. What the business community needed, and the residents of DC as well, was a true, and civilized, process focused on choosing the person most capable of leading the District through its continued resurgence—from a business standpoint, an economic standpoint, and a policy standpoint.

Instead, what we got was personal attacks and race-baiting. The topics of capability and leadership were barely addressed—anger, bitterness and old grudges took precedence over any discussion of substance. In my decade at the helm of the DC Chamber of Commerce, I have witnessed some challenging Council hearings on some of the most controversial topics—baseball, school reform, and so on—but never before have I witnessed such a lack of respect, decorum and civility.

The citizens of the District of Columbia deserve better than the sort of childish antics we saw.

Sincerely,

Barbara B. Lang, President & CEO 

DC Chamber of Commerce 

With all the attention lately on indictments and plea deals of a few of DC’s elected leaders, it is difficult, but important, to focus on the important work that there is to be done in this city.

I cannot mince words here--I am extremely disappointed with Chairman Brown’s activities, and overall I find the lapses in personal judgment amongst our elected officials extremely disturbing. These are the people we have chosen to lead and manage our City; that they should be trustworthy shouldn’t even need to be said.

One action item I am calling for immediately is for all elected officials to redouble their efforts to regain and restore the public trust. I’ve expressed my outrage over the ethical missteps made by other members of this government. This is a serious issue, affecting the economic health as well as reputation of our city. We cannot continue to have our leaders in the spotlight for one indiscretion after another.

However, the government’s business will continue. Washington, DC is an unparalleled city, with so many positives to promote. Our residents and this business community are resilient; we will get past this disappointment to continue the important work of making the District a world-class place in which to work, play, live, and above all, do business.

At the end of the day, we must put this behind us, and move forward. At the Chamber, our confidence remains with the Council, the governance structure, and their ability to constructively move the city’s agenda forward. We are encouraged by the FY13 Budget that just passed--with no new taxes or fees imposed upon DC businesses or residents--as well as the declining unemployment rate, the success of programs like One City – One Hire and others, and so on.

DC will weather this storm, as it has so many others in the past. Of course, we are saddened by these latest occurrences, but we will not allow that to distract us from the business at hand--which is business!