Council Approves Budget on Second Vote, Asserting Reserves are a Policy Matter

Imagine the unfortunate situation you would be in if your personal finances played out in the following manner. In a gig economy, you have multiple sources of income, but some of those payouts come in two big bursts, just twice a year. Similarly, think what it would be like if some of your biggest out-of-pocket expenses also had to be paid in giant lump sums, a couple of times a year. Now, imagine if these bursts of income and expense were out of sync, time-wise, and to a certain extent unpredictable in their timing. Then, imagine that despite all of this, your household manages to have socked away not just the recommended three to six months’ worth of expenses in your personal savings account, but actually well above and beyond that already weighty and fiscally conservative recommendation. Then finally, imagine that in one tough year, you marginally cut into that financial cushion, while still maintaining above the gold standard, best practice level of rainy day savings for a household.

This a profoundly oversimplified but nonetheless illustrative explanation of how some aspects of the District government’s budget works. More specifically, it analogizes the situation faced by the Council in developing its budget each year, and this year in particular. Coordinating the timing of income versus expenditures is undoubtedly difficult to manage for any household or business, but cash flow can also be challenging for governments at times. Property taxes, a key source of District government revenue, are paid by property owners to the District twice yearly, with deadlines on March 31 and September 15. This results in cash troughs for the District government in February and August, until peoples’ property tax payments hit our books. On the other side of the ledger, certain key District government expenditures, such as pension payments and the District’s twice-yearly payments to the Washington Metropolitan Area Transit Authority, are similarly lumpy and difficult to manage.

The District government maintains four reserve funds, two of which are Congressionally mandated and two of which were created through District legislation. One of these funds was designed intentionally to deal with the lumpy nature of some of the District’s income and expenditures, and the cash flow/liquidity issues that result. The Council has repeatedly attempted to analyze and flatten this lumpiness for some time. Multiple requests to the Office of the Chief Financial Officer to release a monthly cash flow analysis have gone unfulfilled. Knowledge is power, and better understanding the timing and magnitude of variations in cash flow would be a profoundly powerful tool in determining how best to ride and survive these waves. As just one action step in the effort to flatten the lumps, the budget approved in the second of two necessary votes at the Council’s most recent Legislative Meeting provides legislative language that will help eventually parse out and flatten pension payments into an increased number of more regular and even outlays.

In its ongoing dispute with the Chief Financial Officer, the Council contends that the District’s reserve policies are just that—policy decisions. Within District government, as established in the Home Rule Act, policy matters are the exclusive purview of the District’s policymakers—the Council and the mayor. The creation of the local reserve funds, the determination of the levels at which they should be maintained, and whether these funds can be accessed for appropriation purposes in times of heightened need are policy matters for policymakers—and beyond the purview of the Chief Financial Officer. The Council solicited—and the Attorney General provided—a formal legal opinion that reinforced this distinction two years back.

As indicated in the home budgeting analogy above, financial advisers recommend that prudent households maintain three to six months’ expenses in savings to predict against unexpected financial calamities. On the government budgeting level, the equivalent savings recommendation is issued by the Government Financial Officers Association, and it states that maintaining sixty days of reserves is the gold standard in this regard. The District currently maintains sixty-six days of reserves. Even after the comparatively small draw-down of one reserve fund included in the budget approved by the Council in the second of two necessary votes at its most recent meeting, the District will maintain sixty-two days of cash in this critical fund.

Whether it is a household or a government that goes above and beyond the best practice level of recommended savings, if in a lean year they were to spend down half of the margin they maintained in excess of even the most stringent savings recommendation, they could hardly be faulted for temporarily overachieving just slightly less than they had previously. To fault such a decision would essentially serve to penalize past extra credit efforts, effectively grading them down for the prior extra credit work they had voluntarily undertaken.

Local Budget Act Revisions

In terms of the budget bills’ content, the text of the Local Budget Act approved in a second vote at the most recent Legislative Meeting largely echoed what had been approved two weeks earlier in the first vote. One key difference, relevant to the reserve discussion above, is that in response to a discussion at a public, informal budget discussion the prior day, the budget includes contingency language that dictates the required uses of any excess revenues generated beyond what had been estimated by the Chief Financial Officer in February of this year.

The very first stated use of any FY 2026 and/or FY 2027 revenues would be to replenish the $150 million taken from the Fiscal Stabilization Reserve Account, as discussed above. If excess revenues beyond prior estimates exceed $150 million, the next $9 million would go towards emergency housing vouchers in the event the federal program expires, the $3 million after that would go to the Emergency Rental Assistance Program, the next $2 million would go to the Credible Messengers program at the Department of Youth Rehabilitation Services, and the next $36 million would go to the Workforce Investment Account, to fund salary/benefit increases for District employees who negotiate new contracts.

Funding for Semi-Open Primaries

In November of 2024, DC voters approved Initiative 83 by a margin of 73 to 27. While both election related, the initiative actually comprised two distinct elements: ranked choice voting and semi-open primaries. Though approved, neither element of the Initiative was initially funded, and therefore remained unimplemented. Ranked choice voting received funding in July of 2025, and was implemented for the first time in the primary elections earlier this month.

Via an amendment to the Local Budget Act approved as part of the second vote on the measure, the second half of Initiative 83, semi-open primaries, are not just the law of the land but now will also have the funding to be put into effect for the 2028 primary elections. Under semi-open primaries, District voters who are registered as independents will be able to vote in the party primary of their choice. District voters who are registered members of a political party must still vote in that party’s primary election. (The Home Rule Act mandates partisan primary elections, and does not allow two members of the same party to appear on a general election ballot, so DC is unable to have a French/California style primary election, whereby the top two vote-getters, regardless of party, advance to the general election.)

Emergency and temporary versions of the Local Budget Act were also approved at the most recent meeting, to allow for their implementation on a more expedited timetable than Congress’ slow-moving review process would normally allow. The element of the District’s complex legislative package that funds the exclusively federally funded portion of our budget also received the second of two necessary votes at the meeting.

A single piece of non-budget legislation was on the non-consent agenda for the meeting—a clarification of the recently revised Open Meetings Act. The bill clarified that group text messages (much like the previously addressed category of group emails) do not constitute meetings under the law. The bill also modifies the language regarding which Council official will provide the mandatory report-out regarding private Council meetings, generalizing the language while maintaining the assumption that it will most likely be the Secretary of the Council.

The Council’s recent streak of Legislative Meetings every Tuesday (broken only by the prior week’s primary election) will continue, with meetings on June 30, July 7, and July 14. The Council’s final expected budget vote for the season, the second of two necessary votes on the Budget Support Act, is expected at the July 7 meeting. The Budget Support Act provides the legislative language necessary to implement the dollar-and-cents aspects of the annual budget, as included in the Local Budget Act discussed above.