Advocates of a paid family leave bill in the Wilson Building in December 2016.

Martin Austermuhle / WAMU

When D.C. Mayor Muriel Bowser unveiled her budget proposal last week, she had good news to share: officials had found a $400 million surplus in the city’s two-year-old paid family leave program.

But her plan to spend a portion of that money on tax relief for businesses is drawing opposition from advocates and some lawmakers, pointing to a first possible flashpoint as lawmakers start making changes to Bowser’s budget proposal.

Under her current plan, $114.5 million of the paid leave surplus would be used to replenish the city’s unemployment insurance trust fund, which was fully used up because of the spike in claims during the pandemic. Another $20.8 million would cover the cost of federal tax changes to unemployment benefits, $15 million would pay for financial assistance for undocumented workers, and $46 million would expand benefits to include prenatal medical leave and leave for victims of domestic violence, stalking, and sexual abuse.

Another $35 million would help decrease fees paid by businesses, and provide a one-time decrease in the annual tax every employer pays into the paid leave fund — from 0.62% to 0.27% per employee, returning $168 million to businesses across D.C.

“Basically we have $400 million in surplus that we shouldn’t keep on the books and we have to reinvest in some way,” Bowser told lawmakers on Wednesday, explaining that the amount collected from businesses has far exceeded the benefits paid out to workers.

But the way Bowser wants to spend the surplus is drawing criticism from advocates of the paid family leave program, who say the money should instead be used to expand the current program, which offers workers at businesses in D.C. up to eight weeks of parental leave, six weeks of family medical leave, and two weeks of personal medical leave.

“This surplus should be used to expand benefits for the working families who need them, like providing the 12 full weeks of paid parental leave that experts agree is medically necessary, and increasing the small amount of leave currently provided for personal and family caregiving,” said Jews United For Justice in a statement on Tuesday.

The debate centers on a relatively small part of Bowser’s proposed $17.5 billion budget, $9.1 billion of which comes from local revenues. (The remaining portion of the budget is federal funding every state gets for programs like Medicaid.) But it revives the years-long fight between Bowser and the council over how the paid family leave program is funded.

Bowser, and much of the business community, opposed the 0.62% annual tax, which is fully paid by employers. But advocates said it was the only way to pay for a program that could adequately cover workers in large and small businesses alike, as well as abide by a law that prevents D.C. from taxing non-resident income.

According to the D.C. Department of Employment Services, which manages the paid family leave program, just over 7,200 people claimed leave benefits from when the program kicked off last July through February 2021.

During Wednesday’s session, At-Large Councilmember Elissa Silverman — one of the authors of the bill that created the paid family leave program — criticized Bowser’s proposal as “un-targeted tax relief” that didn’t take into consideration which workers and businesses may have been impacted the most by the pandemic. She took specific aim at Bowser’s proposed one-year decrease in the tax every business pays to fund the paid leave benefits for workers.

“Why not deploy these dollars to help those workers and businesses that really have been clobbered instead of giving that money to law firms, tech companies, government contractors who didn’t lose revenues, didn’t have to lay off people?” she asked.

“If I overpay my taxes, I expect to get a refund, and I think that’s fair,” Bowser responded.

But Silverman and other advocates say Bowser’s position doesn’t take into consideration how the paid family leave program works — and why it even has a large surplus in the first place.

Under D.C.’s current program, every business pays into the paid leave fund — but only workers who remain in their jobs can claim benefits. Advocates say the unexpected surplus came about because of the large numbers of workers who were laid off last year, denying them access to leave benefits their employers paid for.

“It’s those businesses that were clobbered by COVID, had to lay off employees, they paid into the fund but they weren’t able to take money out,” said Silverman, arguing for more targeted tax relief.

Bowser stood her ground, saying she was using her budget to balance providing much-needed relief to residents and businesses impacted by the pandemic. “We certainly are focused on relief… but we’re also focused on how our economy recovers and how we continue to grow jobs,” she said.

Ward 4 Councilmember Janeese Lewis George sided with Silverman, saying that she’s like to see the surplus used instead to expand how much paid leave workers in D.C. get. “I’m really concerned about not being able to increase medical leave given what we’ve experienced during the pandemic,” she said.

Lawmakers will have the next two months to pick apart and propose changes to Bowser’s spending plan for the 2022 fiscal year, which kicks off Oct. 1. A first vote is expected in late July, with a second and final vote in the first week of August.