Each fiscal year, the mayor and DC Council decide how to raise and allocate the District’s resources through the budget, with input from residents about what is important to them. This year, lawmakers faced big budget pressures—including the WMATA budget shortfall, expiring federal relief funds, union contract renegotiations, and declining commercial property tax collections—that required them to prioritize budget savings and raise revenue to meet residents’ needs. Ultimately, the mayor and DC Council failed to meet the moment and equitably raise adequate levels of revenue to resolve dire housing needs, make greater progress on transformative change, and avoid a sales tax increase that will hit low- and moderate-income residents hardest.
The mayor’s budget rolled back first-of-their-kind in the nation programs and slashed services that support residents facing economic hardship while also raising the sales tax. At the same time, Bowser’s proposal expanded tax breaks for downtown commercial property owners. Under this budget, more residents would have become homeless and been pushed to the economic brink without access to powerful anti-poverty tools, at a time when more than 1 in 5 Black residents already experience poverty and homelessness is on the rise.
DC Council reversed many of Mayor Bowser’s proposed cuts, including the elimination of the fund that supports higher pay for early childhood educators and invested in programs that give children a better start at life. To do so, Councilmembers built on the mayor’s increase to the Universal Paid Leave employer payroll tax, extended sports wagering to new mobile betting platforms, and modestly increased property tax rates on homes with a taxable value over $2.5 million. However, by ignoring more progressive sources of revenue, DC Council failed to raise the funds needed to adequately support housing and homelessness programs. This failure will exacerbate the housing crisis and undermine the benefits of antipoverty investments elsewhere in the budget.
Throughout the budget process, the Chief Financial Officer overstepped his authority on reserves and other appropriation and policy issues, which led to harmful budget outcomes for some residents with low incomes, particularly early educators.
The table below details how the DC Fiscal Policy Institute’s (DCFPI) budget recommendations fared in the mayor’s proposed budget and the Council-approved budget. DCFPI advocates for budget recommendations that are rooted in the belief that the budget can and should be a tool to disrupt longstanding racial and economic inequity and build a future where everyone has what they need to live to their fullest. Asks with an asterisk (“*”) are those that DCFPI developed in response to the mayor’s proposed budget. (The Council-approved budget is currently under the mayor’s review and then will go through a 30-day Congressional review period.)
Early Child & Pre-K3 to 12 Education
| DCFPI’s Recommendations | What the Mayor’s Budget Proposed | What’s in the Council-Approved Budget |
|---|---|---|
| Invest in DC’s public education system by providing additional funds for schools—especially the 30 schools in Wards 5, 7, and 8—that are facing staffing cuts under the mayor’s proposed budget.* | The mayor’s budget increased overall funding for schools but included harmful cuts to individual schools in Wards 5, 7, and 8, where 30 schools were expected to lose positions, on net. | The Council met our ask, allocating $25 million to reduce staff and budget cuts to individual schools. They also approved $3.5 million to fund an additional position at each elementary school in Wards 7 and 8. |
| Collect data from school communities to understand which Elementary and Secondary School Emergency Relief (ESSER)-funded programs and positions were most effective. DC currently has $164.4 million left in ESSER III funding. | The mayor did not meet our ask. The administration has not provided any updates on program evaluation for ESSER. | The Council also did not meet our ask. The Committee of the Whole, which oversees education entities’ performance, has not provided any updates on program evaluation for ESSER. |
| Explore the design of a small school weight in the Uniform Per Student Funding Formula (UPSFF) to bolster the ability of small, by-right neighborhood schools—some of which experience enrollment fluctuations or declines that destabilize their budgets—to afford valuable positions that larger schools offer, such as librarians and after school programs. | The mayor’s budget materials did not mention a small school weight. However, in the past, the Chancellor raised hood schools’ budgets. | The Council’s budget materials did not mention a small school weight. However, some council members expressed concerns around enrollment trends’ harm on neighborhood schools’ budgets. |
| Sign and fund a Washington Teacher’s Union contract for DC Public Schools teachers that accounts for inflation. The contract should be retroactive to the 2023-2024 school year. Lawmakers should also budget for how an increased salary scale for public school teachers will also increase the salary floor in the Pay Equity Fund (PEF). | The mayor did not fully meet our ask. While she set aside funding in her budget for future labor agreements, her team is still negotiating with WTU, resulting in teachers (again) working on an expired contract. Her budget also eliminated the PEF, failing to meet our ask to ensure pay parity for early educators. | Several council members expressed concerns around the expired contract by showing up to bargaining sessions and writing letters of support. They kept the funding set aside for future labor agreements. O updated WTU contract. |
| Preserve all funding in the Early Childhood Educator PEF and ensure adequate funding for rising costs in the PEF. Costs of the program are growing due to more teachers acquiring higher credentials, a necessary fix to the OSSE’s poorly designed funding formula, and to maintain parity with public school teachers. OSSE has leveraged carryover funds to keep up with growing costs but those are projected to run out by the end of the year. | The mayor did not meet our ask and eliminated the PEF, including HealthCare4ChildCare (HC4CC), and redirected the funding to repay the Fiscal Stabilization Reserve Fund. | The Council restored nearly all recurring funding ($286.7 million) to the PEF and reduced the allocation for HC4CC to $12 million from $18 million. The total amount restored falls short of what is needed to keep pace with growing costs and will require the program to reduce participation, reduce award amounts, and require a waitlist for new programs wanting to participate in the PEF and HC4CC. Due to underfunding, the Council also reduced the annual minimum salary level for educators with a bachelor’s degree by more than $11,000, just for quarter one of FY 2026 ahead of the PEF task force’s recommendations on program reductions due in September. |
| Maintain funding for the child care subsidy program, including $64.7 million in local funds and $24.3 million in federal funds to ensure access to high quality, affordable child care for nearly 8,000 children. | The mayor did not meet our ask and made a $10 million recurring cut to the child care subsidy program. | The Council maintained the mayor’s cut to the subsidy program. |
Affordable Housing & Ending Homelessness
| DCFPI’s Recommendations | What the Mayor’s Budget Proposed | What’s in the Council-Approved Budget |
|---|---|---|
| Ensure that the Affordable Housing Preservation Fund has at least $5 million in flexible capital, to help put preservation projects on the path to becoming safe, affordable, and high-quality housing. | The mayor did not meet our ask, providing no new dollars to the fund. | The Council met our ask, adding $5 million to the fund. |
| Improve safety and effectiveness of DC’s deeply affordable housing stock. Invest at least $60 million in public housing repairs and implement increased transparency and oversight requirements to ensure that the Housing Authority meets improvement benchmarks. | The mayor partially met our ask, allocating $50.8 million for public housing repairs. | The Council nearly met our ask, allocating an additional $7.2 million for public housing repairs for a total of $57.9 million. |
| Invest $30 million to enable tenants to purchase their building through the Tenant Opportunity to Purchase Act (TOPA), opening doors to stable homeownership opportunities for tenants and helping to building Black and brown wealth. | The mayor did not meet our ask, failing to allocate dedicated funding for TOPA. | The Council also did not meet our ask. |
| Allocate $100 million to the Housing Production Trust Fund (HPTF).* Restoring funding to at least this level will ensure DC does not fall further behind in tackling the affordable housing crisis. | After ten years of allocating at least $100 million to the HPTF, the mayor allocated just $59 million in her proposed budget. | The Council partially met our ask, raising the total HPTF allocation to $77 million. While this is an improvement over the mayor’s proposal, it still falls short of need. |
| Allocate $36.6 million for 1,260 Permanent Supportive Housing (PSH) vouchers for individuals experiencing chronic homelessness. PSH provides intensive services that help people experiencing chronic homelessness stabilize in housing. | The mayor did not meet our ask, failing to provide new PSH funding for individuals. | The Council partially met our ask, approving just $4.2 million for 148 new PSH vouchers for individuals. |
| Add 580 PSH vouchers for families, to support a share of the families being terminated from Rapid ReHousing (RRH) in FY 2024 and who need intensive services. | The mayor did not meet our ask, failing to provide new PSH funding for families. | The Council partially met our ask, allocating just $11.5 million for 325 new PSH vouchers for families. |
| Invest in vouchers for families, which offer access to long-term affordable housing. | The mayor did not meet our ask, providing no new vouchers for families. | The Council met our ask, adding $3.8 million for 126 new vouchers for families. |
| Allocate at least $100 million to the Emergency Rental Assistance Program (ERAP) so all in need can be served. ERAP prevents evictions by helping residents pay overdue rent and legal costs. | The mayor partially met our ask, allocating $20.2 million to ERAP. | The Council partially met our ask, allocating an additional $6.7 million, bringing total funding to $26.9 million. |
| Invest $6.4 million to fully fund the Coordinated Street Outreach Network. With unsheltered homelessness on the rise, full funding maintains the current baseline budget for outreach and makes up for the loss of outreach staff due to the sunsetting of an existing outreach pilot. | The mayor partially met our ask, funding only $3.9 million for street outreach. | The Council partially met our ask by adding $1.4 million to the mayor’s funding, bringing the total street outreach funding to $5.3 million. |
| Ensure there are at least 150 medical respite beds for individuals. Medical respite beds offer people who are unhoused a safe place to recover from surgery and illness or to learn to manage a chronic condition. | The mayor did not meet our ask, failing to add funding for additional beds. | The Council also did not meet our ask. |
| Invest $13.275 million to operate two non-congregate shelter sites. This funding is necessary to provide residents at the new shelter sites the highest quality services. | The mayor met our ask, fully funding operations at two non-congregate shelters. | The Council maintained the mayor’s funding, meeting our ask. |
| Maintain 24-hour shelter access and increase shelter staff capacity. Allowing individuals to remain at shelter sites 24 hours per day eases the experience of homelessness and facilitates connecting individuals with services. | The mayor met our ask, providing sufficient funding to maintain shelter access and meet staffing needs. | The Council maintained the mayor’s funding, meeting our ask. |
| Create a flexible funding program at the Department of Human Services to cover one-time move-in expenses for residents receiving a voucher or in RRH. The program should also provide storage space for unhoused residents. | The mayor did not meet our ask, failing to invest in flexible funding to cover residents’ moving expenses and storage needs. | The Council also did not meet our ask. |
| Maintain $1 million in funding for DC Flex, which provides cash assistance annually to working households who are struggling to afford rent. | The mayor did not meet our ask. | The Council also did not meet our ask, maintaining the budget proposed by the mayor. |
| Increase the number of psychiatric beds. There are not enough psychiatric beds for unhoused residents who need intensive services. | The mayor did not meet our ask, failing to increase the number of psychiatric beds. | The Council also did not meet our ask. |
| Increase Personal Needs Allowance (PNA). The current PNA for assisted living recipients falls short of what residents need to cover essentials such as hygiene products and clothing. | The mayor did not meet our ask, failing to increase the PNA. | The Council also did not meet our ask. |
| Restore $5 million in cuts to the Rapid ReHousing (RRH) program for single adults and add $2.5 million to create an additional 100 slots to address demand.* This program, which already has a waitlist, supports individuals with housing search assistance, supportive services, and short-term rental assistance. | The mayor proposed cutting $5 million from the RRH budget for single adults, cutting the program nearly in half. | The Council did not meet our ask, failing to restore the mayor’s $5 million cut or add funds for program expansion. |
Inclusive Economy
| DCFPI’s Recommendations | What the Mayor’s Budget Proposed | What’s in the Council-Approved Budget |
|---|---|---|
| Fully fund the Child Wealth Building Act, or baby bonds program, at $66.5 million over the financial plan. Begin to implement the law and improve program transparency. The Office of Chief Financial Officer (OCFO) and other agencies should quickly begin enrolling eligible children in the program, publicize an implementation timeline for the program, and release updated regulations. | The mayor did not meet our ask and instead narrowed baby bonds eligibility, substantially reduced the District’s contributions to future beneficiaries’ baby bonds accounts—including by removing the inflation index for contributions—and scaled back funding for the program by three-quarters by FY 2028. The mayor’s proposal applied retroactively to FY 2022, when the Child Wealth Building Act became effective. | The Council partially met our ask, allocating $26.5 million across the financial plan and by restoring the program’s broader eligibility thresholds. Beginning in FY 2025, children enrolled in the program will receive a maximum annual contribution of up to $1,000, contingent on available revenue from the newly-expanded online sports betting market. The annual deposit will not be indexed to inflation nor tiered by income, as under the original law. |
| Fund and implement a rigorous evaluation of the Marion Barry Summer Youth Employment Program (MBSYEP). The MBSYEP program is entering its 45th year and serves 10,000 or more young workers in DC—predominantly Black young workers—each summer. An evaluation should assess the efficacy of the MBSYEP program. | The mayor did not meet our ask, failing to include funding for a rigorous evaluation of MBYSEP within her budget. | The Council did not meet our ask. However, the Council added two new staff positions dedicated to program evaluation initiatives to the Office of the Budget Director. |
| Invest in guaranteed income strategies, including through additional funding to the Strong Families, Strong Futures DC guaranteed income pilot. This pilot provides unrestricted direct cash assistance to mothers with low incomes in wards 5, 7, and 8. | The mayor met our ask, investing $1 million in one-time funding for the third year of the Strong Families, Strong Futures DC guaranteed income pilot. | The Council maintained the mayor’s funding, meeting our ask. |
| Provide timely record relief for individuals with prior cannabis-related offenses. Fully fund and restore the original timeline for record relief as included in the Second Chance Amendment Act of 2022. Allocate $3.3 million to initiate the automatic expungement process for prior decriminalized records. | The mayor did not meet our ask, providing only $300,000 for the bill’s first year implementation cost and failing to restore the original implementation timeline. | The Council also did not meet our ask, providing only an additional $18,501 for the bill’s first year implementation costs. |
| Improve public transparency of DC revenues collected from fines and fees. Invest in the capacity for the OCFO—and other public agencies that assess and collect fines and fees—to analyze, publish, and share fines and fees data by race, gender, and ward. Require the OCFO to bi-annually publish non-tax and special purpose revenue reports. | The mayor did not meet our ask, failing to make investments to improve public transparency of fines and fees. | The Council also did not meet our ask. |
| Remove financial barriers to obtain occupational and business licenses for those with unpaid fines and fees. Pass and fully fund the Clean Hands Certification Economic Expansion and Revitalization Amendment Act of 2023 to allow DC residents with more than $100 in unpaid debts to renew District occupational and business licenses. | The mayor did not meet our ask, failing to advance Clean Hands reform to remove financial barriers to obtaining occupational and business licenses for DC residents with unpaid fines and fees. | The Council partially met our ask, raising the Clean Hands debt threshold to $1,000. The Council did not exempt the issuance of business or occupational licenses for qualifying Clean Hands debts. In late June, the Council held a separate hearing on the Clean Hands Economic Expansion and Revitalization Act. |
| Restore the Medical Cannabis Social Equity Fund (SEF).* The mayor’s budget proposal eliminated the SEF, which supports the entry of legacy cannabis entrepreneurs into the medical cannabis market. | The mayor proposed to eliminate the SEF, resulting in a reduction of $6.5 million towards the fund over the financial plan. | The Council met our ask and fully restored the SEF. |
Tax Justice and Sound Revenue Policy
| DCFPI’s Asks | What the Mayor’s Budget Proposed | What’s in the Council-Approved Budget |
|---|---|---|
| Restore planned increases to the DC Earned Income Tax Credit (EITC) for families.* | The mayor proposed permanently freezing DC’s EITC at 70 percent of the federal credit, which would have meant a profound decrease in income (about $70 million across the financial plan) for 39,000 eligible workers compared to what’s been promised. | The Council restored the planned EITC increases, albeit on a slower timeline. The credit will increase to 85 percent of the federal credit in tax year 2025 and remain at that level through the remainder of the financial plan with the aim of raising to 100 percent in tax year 2029. |
| Amend the DC EITC to allow taxpayers to opt into monthly payments or a lump sum payment, rather than monthly payments being automatic. Unlike lump sum payments, monthly EITC payments put some taxpayers’ federal benefits at risk. | The mayor did not address DCFPI’s ask on monthly payments. | The Council met our ask, allowing taxpayers to choose their DC EITC refund via monthly payments or a lump sum, depending on what works best for them, beginning in tax year 2024. |
| Adopt a local Child Tax Credit (CTC) that takes aim at child poverty and builds on strategies to boost income. A DC CTC for all children ages 17 and younger should be set at $500 per child, at a minimum. But the District should consider a larger CTC of $1,500 per child that would cut child poverty in DC by 18 percent while also helping families with low- and middle-incomes better manage the cost of raising children. The credit should include families filing taxes with an Individual Taxpayer Identification Number (ITIN) and be targeted first to the families most in need. | The mayor’s budget did not include a CTC. | The Council established a local CTC for families with children below age 6 and with household income up to $120,000 for married couples filing separately, $160,000 for single and head of household filers, and $240,000 for joint filers. The credit is $420 per child for up to three children. The credit is not designed to go to all eligible filers with ITINs. The reach and design of this CTC only partially meets DCFPI’s ask. |
| Permanently suspend the capital gains tax break for the sale or exchange of a qualified high technology company (QHTC) investment. Lawmakers suspended this tax break due to evidence that these incentives were costly and ineffective. Rather than allowing the tax break to resume in 2025, DC should eliminate it. | The mayor did not meet our ask, failing to eliminate the QHTC tax break. | The Council met our ask, eliminating the QHTC tax break. |
| Introduce progressivity into residential property tax structure by adopting a higher marginal property tax rate for single family homes valued over $1.5 million. Doing so will not only create a more equitable distribution of tax responsibility, but it could also raise up to $57 million in annual revenue for the District. | The mayor did not meet our ask, failing to include property tax changes in her proposal. | The Council introduced a marginal rate structure to the residential property tax for single-family homes and condominiums valued over $2.5 million. The value above $2.5 million will be taxed at $1.00 per $100 of taxable assessed value, up from $0.85 per $100. This partially meets our ask but falls short in terms reach and revenue gains. |
| Expand the Schedule H deduction for homeowners and renters with low and moderate incomes. Raise income eligibility to at least $78,000 and expand or eliminate the cap on the total benefit to allow for a larger credit. | The mayor did not meet our ask, failing to include Schedule H changes in her proposal. | The Council did not meet our ask, failing to include Schedule H changes in their proposal. |
| Tax all (realized) capital gains at a rate of 13 percent and create a credit to offset any tax increase for families in the bottom 80 percent of incomes. And eliminate the stepped-up basis for capital gains bequeathed at death. | The mayor did not meet our ask, failing to raise taxes on capital gains income and eliminate the stepped-up in basis. | The Council did not meet our ask, failing to raise taxes on capital gains income and eliminate the stepped-up in basis. |
| Reject revenue policies that fail to advance racial justice and are poorly designed. Avoid poorly targeted tax breaks—temporary or permanent— including ineffective economic development tax incentives. And avoid raising revenue through regressive taxes when addressing the WMATA budget gap. | The mayor did not meet our ask in multiple ways. Her proposal also doubled down on misguided property tax breaks for developers converting downtown offices to other uses, such as hotels and restaurants, costing $20 million by FY 2030. Her budget raised the sales tax by one percentage point (to reach 7 percent) by FY 2027. When combined with the elimination of the EITC, her sales tax proposal raised the effective tax rate on taxpayers with low- and moderate incomes, harming Black and brown communities the most. On the other hand, her proposal required the “Finnigan” method on apportionment of taxes for corporate tax filers beginning in tax year 2026. | The Council partially met our ask.They restored cuts to the EITC, created a limited CTC, and very modestly raised property taxes on homes valued above $2.5 million—all of which are progressive tax changes, but the latter two fall short of DCFPI’s asks. In addition to eliminating the ineffective QHTC tax break, their proposal begins taxing interest on investments in out-of-state municipal bonds and keeps in place the switch to the “Finnigan” method for corporate taxes On the other hand, the Council approved the regressive sales tax increase, which will undermine the tax equity effects of their CTC and property tax proposals. The Council also included $11 million in property tax breaks across the financial plan—less than the mayor’s budget—for developers converting offices in downtown and its surrounding areas to hotels, restaurants, and other uses. |
| Reject the Chief Financial Officer’s (CFO) demands to replenish the Fiscal Stabilization Reserve with current revenue estimates.* The CFO overstepped his authority by not allowing the mayor to replenish the reserve in her budget according to law (that is, with future budget surpluses). | N/A due to timing of the CFO’s demands, which came just days before the mayor’s budget release. | The DC Council met DCFPI’s ask by creating a plan to replenish the reserve using future revenue growth and surpluses by FY 2027, rather than local fund dollars available in FY 2025 and 2026 that are needed to cover human needs and services. Their proposal also shores up DC’s liquidity and cash flow capabilities in response to CFO’s demands and concerns. |
| Keep the mayor’s proposed Universal Paid Leave (UPL) tax increase.* | The mayor’s proposal raises the UPL tax rate that employers pay back to 0.62 percent from 0.26 percent, raising $1 billion over the financial plan. Her proposal shifts excess funds that aren’t needed for paid leave benefits to the General Fund. DCFPI offered lawmakers more equitably targeted revenue options compared to the UPL proposal. However, in the absence of adopting those revenue ideas, it is better to raise the UPL tax than to forgo much needed revenue, especially given this change ensures that UPL funding continues to prioritize paid leave benefits. | The Council met our ask and expanded upon it. They further increased the tax rate to 0.75 percent, raising an additional $321.6 million over the financial plan. |