The District of Columbia announced a $417 million surplus for its 2012 fiscal year, the highest surplus in recent memory and setting up an immediate fight between leaders on saving versus spending the money.

Under D.C. law, the money will go directly into the city’s fund balance, bringing up that total to $1.5 billion. The law also states that surplus money is not subject to spending until the reserve reaches the equivalent of two months of city revenue.

However, the District has one of the highest fund balances in the country when it is measured as a share of its total budget. The balance represents 16.5 percent of the city’s total operating budget, the ninth highest in the country when compared with other states. That fact has already spurred interest groups and some council members to advocate spending at least a portion of the surplus on city programs.

At a news conference announcing the surplus, Gray was adamant about not spending the surplus and said he was “not in a place” where he would consider any tax cuts, according to media reports on Twitter.

The D.C. Fiscal Policy Institute advocates spending half the surplus and saving the rest. “The city’s savings would continue to grow, but the District could also use its resources on smart and needed investments,” the group stated in a release. The Fair Budget Coalition is asking supporters to sign a letter allocating more funding for human service programs like welfare and the Housing Production Trust Fund.

The overages came from a variety of areas. Business taxes came in $78 million more than estimated while estate taxes were $53 million more than budgeted. City agencies also spent less than budgeted.

The surplus represents about 2 percent of the city’s budget.