Despite Mayor Bowser’s stated goal of growing the economy, her proposed fiscal year (FY) 2027 budget and four-year financial plan cut programs that support workers and struggling residents and suppress public employee pay, among other choices that actually work against economic growth and increase racial inequities. Instead, she sinks scarce public resources into disproven “trickle-down” tactics that amount to corporate giveaways.
Actions by the federal government continue to hit the DC economy hard. Mass federal layoffs, the government shutdown, and the immigration crackdown that began in the summer of 2025 have hampered economic activity and revenue growth. Plus, growing costs, significant agency overspending, and the Trump administration’s decision to shift costs for programs including food assistance to states and DC mean that the District does not have enough revenue to meet current needs.
Mayor Bowser balances her proposed budget through a mix of revenue raisers, program cuts, and fund sweeps. While her budget delays some health care cuts and a general sales tax increase that she initially proposed, the mayor’s plan doubles down on enacting what is likely the largest local safety net cut that DC has seen in a generation. One of her most significant cuts is to the Pay Equity Fund, which increases compensation and offers affordable health care for early childhood educators, a workforce comprised mostly of Black and brown women. By eliminating the compensation portion of the program, the mayor would likely set off a chain reaction in which educators leave the field, child care availability for families shrinks, tuition rises, and parents have a harder time finding quality child care.
The mayor also raids $95 million from Paid Family Leave, which employers pay into to fund paid parental and medical leave for workers. Research shows that paid family leave increases women’s labor force participation, improves worker morale, and reduces turnover.
Mayor Bowser’s strategy for economic growth has focused on business attraction and downtown investments, not on workers or addressing DC’s extreme inequality, which is itself a drag on the economy. To date, there is no evidence that her strategy is working: DC’s unemployment rate was 6.7 percent in January and child poverty is spiking. If that growth continues not to materialize, DC’s lowest-income and Black and brown residents will be the most harmed, after already bearing the brunt of budget cuts last year and again in the mayor’s proposal. Once again, the mayor is asking those with the least to sacrifice the most in a time of rising prices and economic constraint.
Instead, DC lawmakers can grow the economy from the bottom up and the middle out by investing in the workers who power the District’s economy and vulnerable residents doing their best to make ends meet. To raise critically needed revenue, DC Council can ask the wealthiest residents to pay more in taxes on passive income and close costly business tax loopholes. That revenue can be used to adequately fund programs that help keep struggling residents afloat.
Below are more details of what is in the mayor’s budget proposal based on initial review.
Addresses Revenue Needs Through a Mix of Tax Increases, Fund Sweeps, and Decoupling from Federal Tax Policies
- Raids more than $95 million from the paid leave fund in FY 2027 and makes massive cuts to benefits, including new eliminating medical and family caregiving leave benefits for FY 2027, reducing the maximum number of weeks for these benefits beginning in FY 2028, and permanently capping the weekly benefit amounts for all types of leave at $1,000 (the current max is $1,190, adjusted annually for inflation) starting in FY 2027.
- Temporarily unlinks the DC tax code from select “One Big Beautiful Bill Act” federal income tax changes in tax years 2026 and 2027, raising nearly $78.1 million in FY 2027 and $58.7 million in FY 2028. Her proposal raises just half the level of decoupling revenue in FY 2027 that the DC Council raised in its temporary bill last year.
- Raises the sales tax rate for sales of medical marijuana to 10.25 percent from 6 percent, increasing sales tax revenue by more than $1.5 million in FY 2027 and a total of $6.3 million through FY 2030. The responsibility of paying this tax will fall more heavily on people with lower incomes because they have less disposable income to cover the flat tax increase
- Delays by one year a 1 percentage point sales tax increase—which she originally proposed in her FY 2025 budget—that was scheduled to take effect October 1, 2026. This delay will benefit residents with the lowest incomes the most.
Partially Restores Health Care Coverage for Residents in Need of Affordable Care
- Reverses planned cuts to the DC Health Care Alliance program in FY 2027 but fails to restore cuts implemented in FY 2026. This program provides critical health care coverage to residents with low incomes who do not qualify for Medicaid, most of whom are immigrants. The proposal maintains the eligibility income threshold at 138 percent of the federal poverty line rather than the planned drop to 19 percent in FY 2027, but it maintains the moratorium on new enrollees over age 21 enacted in the FY 2026 budget.
- Restores dental and vision coverage to the DC Healthy Plan and Health Care Alliance that lawmakers eliminated in FY 2026 but does not restore other vital benefits, such as intensive behavioral health services.
- Reverses the planned elimination of Medicaid expansion in FY 2029. This will ensure that many working age adults with low incomes can access quality and affordable health care.
- Maintains funding for HealthCare4ChildCare, which provides free and low-cost health care to 3,300 early educators and their families through the Pay Equity Fund.
Squanders Limited Resources on Ineffective Strategies That Won’t Grow the Economy
- Creates new 10- to 20-year property tax abatements near Metro stations and for former federal government properties.
- Appropriates more than $14 million for unproven business attraction and grant strategies, including $7 million for the unproven Vitality Fund and Technology Ecosystem Fund.
- Makes business and developer-friendly policy changes such as loosening First Source requirements—which require that at least 51 percent of new hires on District contracts between $300,000 and $5 million be District residents—for the Office-to-Anything program and Vitality Fund recipients, as well as cutting corporate and business fees.
- Spends nearly $1.5 billion of local dollars in FY 2027 to pay for debt service costs associated with major construction and capital projects, such as school modernizations, the RFK stadium, and Capital One Arena improvements.
Slashes Funding to Vital Lifelines with Disproportionate Harm to Black and Other Residents of Color
- Eliminates TANF benefits entirely for adults who have received assistance for more than 60 months, beginning in FY 2028. Previously, benefits were set to phase down gradually (reduced by 30 percent in FY 2027, 50 percent in FY 2028, and 75 percent in FY 2029) rather than being fully eliminated.
- Maintains the elimination of TANF’s cost-of-living adjustment—which helps families make ends meet as prices rise—and increased sanctions for not meeting work readiness requirements.
- Fails to fund the DC Child Tax Credit or the planned increase to DC’s Earned Income Tax Credit that would boost the value from 85 percent of the federal tax credit to 100 percent—two proven tools that would help reduce DC’s recent spike in child poverty, particularly Black and brown children.
- Fails to fund any new housing vouchers. This is the second year in a row that the budget includes no new vouchers for individuals experiencing homelessness, who are some of the most vulnerable and most likely to die without housing and services.
- Reduces the Emergency Rental Assistance Program to $7 million, further cutting funds available to tenants at risk of eviction.
- Cuts Rapid ReHousing funding for individuals. Those currently enrolled will continue to be served but no new residents can enroll until others exit.
- Increases funding for the child care subsidy program by nearly $32.8 million to reach $135.2 million in the revised FY 2026 budget but only allocates $114.2 million for FY 2027, falling short of the funding required to meet the full cost of the program. Due to this underfunding, the child care subsidy waitlist and enrollment freeze will go into effect on May 12 and remain in place unless the Council increases funding.
- Reduces funding for Access to Justice, a program that provides legal services to residents with low incomes, by $27.3 million.
