Council Approves Budget on First Vote, Reversing Mayor’s Cuts Amid Fears of a Tough Budget Year

When Mayor Bowser proposes a budget, it is just that—a proposal. The odds of that exact proposal ever being voted on, as-is, by the Council is essentially zero. Each of the Council’s committee chairs (currently 11) takes the segment of the budget proposal attributed to the agencies they have oversight over and make changes that their committee then approves. The Chairman then merges all the committee drafts into one cohesive package, while simultaneously addressing other Councilmember requests that did not make it into the committees’ drafts, responding to requests from the public that were gleaned from the marathon hearing held on the entirety of the budget, fixing any yet unaddressed under-funding in the mayor’s proposal, plus highlighting priorities of the Chair himself has identified. All of this on a Congressionally-mandated timeline that dates to the origin of Home Rule: 56 days before the Council’s first of two votes, and 70 days before its second.

Add to this recurring annual complexity the fact that this year, the mayor blew past the Council’s legislatively mandated deadline to get her budget proposal before the Council. This overshot deadline was itself due to Chief Financial Officer (CFO) Glen Lee’s unexpected and unprecedented insistence that all of the District’s multiple reserve funds must be fully replenished in this budget cycle. (The mayor’s delay in submitting the budget did not shorten the Council’s timeframe for budget consideration, but it did push back the start and end dates for our work.)

The Chairman’s job in drafting a budget bill for the Council’s vote is always an impossible job. This year’s unprecedented delay by the mayor, plus the additional debate and gymnastics required by the CFO’s demands, added yet another dimension to the already breathtaking intricacy of landing the Council budget plane intact, on time, and with finesse.

Yet thanks especially to the resolute work of the Council’s Budget Office, General Counsel’s office, and the Committee of the Whole staff, this unique and impossible labor was yet again successfully completed, against all odds. And while the budget the Council approved is still in its early days, criticism of the package from anyone outside the mayor, including Councilmembers, the business community, advocates, and the media has been muted.

Improvements Included in the Council’s Budget

At its most recent Legislative Meeting, the Council took the first of two necessary votes on both the Local Budget Act (which includes the dollars-and-cents aspects of the budget) and the Budget Support Act (the legislative language necessary to put the aforementioned dollars-and-cents changes into law and effect). The Council’s second vote on the Local Budget Act will be held on June 12 (uncharacteristically a Wednesday), and the second vote on the Budget Support Act will be held on either June 25, July 2, or July 9.

Below is a look at a number of highlights from the Council’s initially approved budget bills.

As of 2023, District law (specifically the Schools First in Budgeting Act) states that except in certain narrow circumstances related to significantly decreasing enrollment, from one year to the next, each DC public school’s budget must either remain level (after inflationary costs) or increase. Remarkably, in both last year’s and this year’s budget proposal, the mayor violated this part of the District of Columbia Code, issuing a budget proposal replete with multiple alarming cuts to individual school budgets, the very same unjustified and ultimately unenacted cuts that the Schools First in Budgeting Act was created to avoid. In the budget bill approved by the Council, $25.4 million was restored to individual school budgets to bring them into compliance with the Schools First in Budgeting Act.

An additional $3.5 million will fund an additional teacher at each elementary school in Ward 7 and Ward 8, Also, $17 million was added back to the financial plan to re-establish a 3.1 percent increase each year in the per-pupil charter school capital facilities allotment.

In the days following the release of the mayor’s budget proposal, there was near unanimity in opposition to the gutting of the Early Childhood Educator Pay Equity Fund. Councilmembers, advocates, and the public spoke with a single voice in insisting that this nationally pioneering landmark Council-created program had to be restored. In the budget bill that was approved at the most recent Legislative Meeting, fully $70 million was restored to this important fund, including critical expenditures for health insurance coverage for these essential workers.

Echoing an action the Council also felt essential in response to the mayor’s budget cuts last year, the Council this year restores the budget for the civil legal representation Access to Justice program to $31.7 million. Similarly, must as was done last year, the Council added back funding for the “Baby Bonds” program (via the Child Wealth Building Act), designed to promote the creation of inter-generational wealth in communities where there is need. In an effort to ensure the program is not continuously defunded by the mayor each year, this year’s budget dedicates funds from the expansion of sports betting to new mobile betting platforms to this noble end. Additionally, in pursuit of equity, the budget would expand the District’s Earned Income Tax Credit and would create a new child tax credit for low and middle income earners.

In regards to housing programs, the budget initially passed by the Council provides for 477 new housing vouchers (a number it is thought can actually be administered in this coming year). An additional $6.7 million in Emergency Rental Assistance Program (ERAP) eviction prevention funds was also included, plus $1.8 million in one-time homelessness prevention for individuals and families.

Proposed cuts by the mayor to several environmental programs were at least partially reversed. The new Healthy Homes law was funded, providing funding for the electrification of homes that might not normally be able to afford it. And in regards to public safety, the Council budget bill fully funds the mayor’s police staffing tally.

Reassurance Regarding Reserve Fund Balance

Although the original disagreement with the CFO regarding the timetable for topping off reserve fund balances remains in play, significant effort was made in the Council’s budget bill to provide reassurance that everyone in District government is on the same page regarding the critical importance of refilling all fund balances in a timely manner. The Council budget bills create four mechanisms to accelerate and achieve this common goal.

First, revenue increases in the coming three revenue estimates through the end of 2024 will be dedicated to the Fiscal Stabilization Fund. Second, if the Fiscal Stabilization Reserve is not fully replenished by the time when the CFO issues his annual audit of the previous fiscal year in February of 2026, the FY 2027 budget will need to budget for the full replenishment of that reserve. Third, the bill increases by $200 million (or ten percent of the General Fund operating budget) the amount of money that goes into the Cash Flow Reserve Account. Fourth and finally, the bill would allow the CFO to use the DC government’s other large reserve accounts for temporary cash flow purposes during the cyclical dry spells just prior to property tax and income tax revenue refilling the District’s coffers.

Revenue Raisers Limited but Necessary

While much of the funding for program restoration came from shifts in spending, some revenue measures were necessary to meet the Council’s policy and funding priorities. One such measure was the first-ever introduction of a progressive element into the inherently regressive property tax. Whereas up until now, an $0.85 property tax for every $100 of real estate value applied to all residential properties, under the new Council bill, that standard $0.85 rate will only apply to property values under $2.5 million. Residential properties valued at under $2.5 million will be taxed entirely at the current $0.85 rate. For properties valued at over $2.5 million, the first $2.5 million of their value will be charged at the same $0.85 rate as everyone else. Only the segment of their value above the $2.5 million ceiling will be taxed at a new, higher $1 rate.

Additional revenue raisers include increasing the Universal Paid Leave program employer contribution rate from the Mayor’s proposed 0.62% to the higher 0.75% rate instead. The mayor’s proposed increase to the sales tax was maintained in the Council bill, but her increase to the per-room, per-night hotel tax was struck from the Council bill.

Changes to the Council’s budget bill can and will occur prior to the necessary second votes coming later in June and in July. Stay tuned to this space for all news on that topic.