DC Council gave initial approval to a fiscal year (FY) 2027 budget that restores at least partial funding to many critical programs that Mayor Bowser proposed gutting, using largely one-time funds. While these investments are meaningful and commendable, the budget still falls short by a minimum of $160 million of what is needed to adequately fund programs and services. At a time when many DC residents have lost their jobs and are experiencing economic hardship, lawmakers should be doing everything in their power to adequately fund DC’s health coverage, housing assistance and production, worker pay, and other services that support residents and their contributions to the economy. And, failing to raise recurring revenue this year means that the new mayor and Council will face the same dire choices next year—either bring in new resources to stabilize the budget or make even more harmful cuts.
Revenue growth is expected to remain at or below the rate of inflation, according to the Chief Financial Officer, meaning that the District will struggle to pay for the increasing cost of programs and services in the coming years. Likewise, DCFPI analysis shows revenue is not keeping pace with growth in the economy, even as the economy slows. While lawmakers should always root out ineffective spending through their oversight duties, the decline in local revenue measured as a share of the economy means they should also find new or increased sources of revenue to stabilize the budget.
A wealth proceeds tax that asks households with high incomes and high wealth to pay more at a time when wealth from capital gains is growing could put DC on stronger footing now. And it would be a reasonable ask of those gaining the most in DC’s economy and given the windfall tax cuts at the federal level. Over 70 percent of the nearly $1.4 billion in tax cuts in the One Big Beautiful Bill Act going to DC residents benefit families within the top 20 percent of incomes and 42 percent go to the top 5 percent alone. Furthermore, DC Council can increase future revenue in an ongoing way by more completely decoupling from wasteful federal tax cuts that will be replicated locally without action.
Instead, Councilmembers chose to rely on one-time funds, do minimal and temporary decoupling, delay a decision on how to solve structural budget issues, and largely “kick the can down the road.” The combination of tactics Councilmembers used to reverse damaging program cuts, mostly on a one-time basis, include:
- Tapping the local Fiscal Stabilization Reserve, using $150 million to offset harmful cuts that the mayor proposed.
- Using CFO-withheld decoupling dollars from FY 2025 and FY 2026 and extending for a couple of years Mayor Bowser’s more limited temporary measures to avoid replicating some federal tax cuts locally. This brings in $463.6 million across the four-year financial plan but expires in FY 2030.
- Closes a business tax loophole, saving $10.4 million in FY 2027 and $43.4 million over the financial plan.
Ideally lawmakers would instead identify a vision for DC—one in which the wellbeing of every resident, no matter their race, ethnicity, or immigration status, is secured—and build the revenue policy needed to sustain it.
Lawmakers Should Have Done More to Reduce Racial Disparities and Growing Hardship Amid Downturn
With the largely temporary revenue Councilmembers were able to raise, they at least partially addressed cuts to several programs that help residents afford their basic needs. But even with these meaningful changes, the Council left many needs unmet as Black, brown, and low-income residents are disproportionately impacted by the economic downtown. DC Council:
- Restored $60 million in funding for the Pay Equity Fund in FY 2027 to restore the wage supplements for early childhood educators that Mayor Bowser proposed cutting. This amount falls short of the funding needed to restore pay parity between child care workers and DC Public Schools teachers. Councilmembers also failed to fund the program beyond FY 2027, creating uncertainty for child care centers and workers.
- Increased funding to the child care subsidy program, which helps families afford DC’s high cost of child care, to eliminate the enrollment freeze. But it is uncertain whether the funding is adequate to eliminate the waitlist. The Office of the State Superintendent of Education is authorized to maintain the waitlist and reduce reimbursement rates if the funding is insufficient.
- Allocated funding to remove the harmful FY 2026 enrollment cap for the DC Health Care Alliance and restored recently cut benefits, so that enrollees in Alliance and the Healthy DC Plan have access to dental and vision care. Councilmembers failed to restore Alliance eligibility for households earning between 138 percent and 215 percent of the Federal Poverty Line, leaving many previously covered residents without access.
- Delayed certain cuts to Temporary Assistance for Needy Families (TANF), which offers cash assistance to families with the fewest resources. Councilmembers rejected the return of a 60-month time limit and increased sanctions for FY 2027 proposed by the mayor but did not restore the cost-of-living adjustment (COLA), which helps benefits keep pace with rising prices. Council also expanded TANF eligibility to include pregnant people in their second trimester and allowed families currently or formerly receiving benefits to keep up to $200 in child support.
- Restored some of the mayor’s deep cuts to the paid leave program but still permanently reduced the maximum number of weeks workers can take from 12 weeks to 10 weeks for medical leave and to six weeks for family caregiving leave. Council set the maximum weekly benefit for FY 2027 at $1,100—a decrease from the current maximum of $1,190 but higher than the mayor’s proposed cap of $1,000—and restored annual inflation adjustments.
- Allocated $28.2 million to sustain 495 locally-funded housing vouchers that were underbudgeted in previous years. This will allow existing households to retain their housing and allow for vouchers to be reissued to new households when recipients leave the program.
- Allocated more funding for housing vouchers serving families but still falls short of need. For families exiting Rapid ReHousing, the Council added $4.5 million for 100 Targeted Affordable Housing vouchers, $345,000 for 45 DC Flex shallow subsidy slots, $2.5 million for 45 Permanent Supportive Housing vouchers, and $1.1 million for 25 Local Rent Supplement Program vouchers.
- Allocated $100 million for pay raises for unionized government workers, possibly only enough to cover a bargaining agreement for DC’s , which the mayor left completely unfunded in her proposal thus compromising future contract negotiations.
In their initial budget, Councilmembers failed to:
- Continue the DC Earned Income Tax Credit boost and restore the local Child Tax Credit, which would have provided families with low and moderate incomes up an up to $1,000 tax cut per child and would have reduced DC’s high child poverty rate by an estimated 20 percent.
- Adequately fund the Emergency Rental Assistance Program, which helps households avoid evictions by helping to pay overdue rent and legal costs. Councilmembers maintained the Mayor’s proposal of $7 million. This falls dramatically short of the need and will lead to the eviction of thousands of households.
- Allocate the $14 million needed to sustain emergency housing vouchers to replace expiring federal funding that had been previously available to support people who are unhoused.
- Fund any new housing vouchers for individuals experiencing homelessness. This will leave thousands of residents trapped in homelessness with no way out at a time when these residents are facing increased harassment from federal law enforcement.
- Adequately fund the creation and preservation of affordable housing. The mayor budgeted $62.6 million for the Housing Production Trust Fund, just over half of previous year commitments. Council did not identify additional funds or dedicate any of the funds to preservation. This means that hundreds of affordable units will not be built and existing affordable housing will not be preserved.
- Prioritize inclusive economic growth and protect taxpayer dollars. Council refused to require clawback provisions for a slate of new and expanded tax cuts for developers and large businesses, which would have recaptured tax breaks if recipients failed to meet program requirements, such as contracting with DC businesses and prioritizing hiring DC residents. They also rolled back First Source requirements that prioritize hiring DC residents for some existing business and developer grants and tax breaks.
- Address DC’s structural revenue problem. Instead of addressing the steep decline in commercial property tax collections and the effects of DOGE layoffs, Council adopted a revenue package that mostly consists of one-time sources rather than recurring ones. They failed to position the new mayor with a budget on more solid ground, and punted fixing significant budget holes to next year.
