Council Softens Budgetary Blow on Those Most in Need, Funds Baby Bonds Through Sports Betting Expansion

On the seventieth day after Mayor Bowser’s budget was submitted (which not coincidentally doubles as the Home Rule Charter-imposed deadline for budget passage), the Council unanimously approved, for the second time, the FY 2025 Local Budget Act. In a difficult budget year, the Council made great efforts to reverse budget cuts that would have disproportionately impacted those who struggle economically in the District. Though not every cut proposed by the mayor could be overcome, and much of the need for these programs sadly remains unmet, the Council made significant strides filling in gaps wherever feasible.

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 by providing the families of newly-born children with $1,000 a year through age 18, for use towards specific wealth-building ends. 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.

When sports betting was first legalized nationwide by the Supreme Court, the Council allowed the standalone Gambet platform to handle all betting. After years of poor performance and dissatisfaction with Gambet, FanDuel was recently allowed to take over District sports betting. Because of its revenue implications, a pending piece of standalone legislation which would open up sports betting to multiple platforms was folded into the budget measures the Council has now approved.

In an additional equity-oriented investment in the Council’s budget, the District’s Earned Income Tax Credit was expanded and a new child tax credit for low and middle income earners was created and initially funded.

In the days following the release of the mayor’s original 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.

In regards to housing programs, the budget passed by the Council provides for 642 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.

Echoing an action the Council also felt essential in response to the mayor’s attempted zeroing out of the program last year, the Council this year again fully restored the budget for the civil legal representation Access to Justice program to $31.7 million.

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 employee in one of four specific roles 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 regards to public safety, the budget as passed also added back capital dollars for the renovation of the District’s Central Cell Block, and for construction of a new correctional facility. The budget also fully funded the mayor’s funding request for Metropolitan Police Department officers.

Finally, 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 gradual one cent increase to the sales tax (in FY 2026 and 2027) was maintained in the Council bill, but her increase to the per-room, per-night hotel tax was struck from the Council bill.

Only one significant Council vote remains for this budget season: the second of two required votes on the Budget Support Act. While the Local Budget Act includes the dollars-and-cents aspects of the budget, the Budget Support Act is the legislative language necessary to put the aforementioned dollars-and-cents changes into law and effect. The Council now expects to take its second vote on the Budget Support Act on June 25.

One interesting asterisk to this week’s Council action: For the first time in recent memory, the Council held two Legislative Meetings on two consecutive days—a Tuesday and a Wednesday. Virtually all Council Legislative Meetings are on Tuesdays. This has been the case not just since the District gained Home Rule in 1975, but also during the seven years that the District had a Presidentially-appointed mayor and Council prior to that. Even prior to this period, during the nearly 100 years that the District was governed by three Presidentially-appointed Commissioners, one of their two weekly meetings was always held on a Tuesday.

The need for the Council’s back-to-back Legislative Meetings, include the one Wednesday meeting this week and another Wednesday meeting held two weeks back, were triggered by the situation with the mayor and CFO detailed above, as well as the Home Rule Charter timeline for budget consideration. We sincerely hope that Wednesday Legislative Meetings, and Legislative Meetings on consecutive days, remain a historical asterisk and do not become more common!

The Council’s next Legislative Meeting will be held on Tuesday, June 25.