The District government needs to increase revenue in order to adequately fund essential services and programs that residents rely on. While the mayor and some members of the DC Council have criticized growth in government spending over the last several years as out of control, the District’s Local Fund budget has held largely steady over the past 25 years when calculated as a share of the economy. In fact, the revenue the District has collected for the Local Fund budget—primarily made up of income, sales, and property taxes—as a share of the economy has waned over time.
The Chief Financial Officer’s (CFO) projections show that Local Fund revenue could drop far below the trend of the past two and a half decades, failing to keep pace even relative to an economy that is weakening due to a local recession. While DC lawmakers should pursue efficient spending and sound stewardship of shared resources, a decline under this measure points to the need for new or increased sources of revenue. Failing to do so would deeply harm District residents as it would require massive cuts to health care, subsidies that make child care more affordable, school funding, and other economic supports that lawmakers are already taking aim at.
DC Local Fund Budget Has Held Steady Over the Past 25 Years
Measuring revenue and spending as a share of the economy reflects DC’s fiscal capacity—or its ability to sustain or grow its taxes and public investments based on the health of the economy, as measured by personal income or Gross Domestic Product (GDP).[1] Since fiscal year (FY) 2001, spending and revenue have remained steady relative to the economy under both measures, in line with what the DC Fiscal Policy Institute (DCFPI) found in a 2024 report (Figure 1).
- Local Fund revenue typically ranged between 14 to 16 percent, averaging 15 percent, with a few instances of jumps and dips during and after recessions.
- Similarly, Local Fund spending most typically ranged between 13 and 16 percent, or 14.3 percent on average, with small jumps and dips during and following recessions.
- Local Fund spending was higher as a share of income in FY 2001, the final year of the federally mandated Control Board, than it was in FY 2025. It was highest in 2008, at 16.7 percent.
The trend line is even smoother when using GDP for the District from FYs 2006 to 2025.
- Local Fund revenue as a share of GDP ranged from 5 to 7 percent during that time range, hitting an average of 5.9 percent.
- Local Fund spending ranged between 5 to 6 percent, averaging 5.5 percent during that timeframe.
- Local Fund as a share of GDP was highest in FY 2022, at 6.5 percent.
These trendlines underscore that DC’s local spending and revenue has not outgrown, but rather kept pace with growth in the economy.
Figure 1
Lawmakers’ Claims on Out-of-Control Spending Are Based on Flawed Comparisons
Often, when lawmakers claim that spending is out of control, they fail to account for inflation, which produces an exaggerated picture of budget growth. Unadjusted data also obscures other factors of budget growth, including increasing costs of services, economic growth, or additional needs necessary for a growing population.
Even accounting for inflation with the consumer price index (CPI) does not fully portray spending and revenue growth. This is because CPI is based on what consumers buy, which is different from what governments purchase. Spending must also keep up with real growth in the economy if the District wants to continue to attract and recruit public employees and talent. The District will struggle to find workers if spending on these services increases so slowly that it holds down wages. The best method to study budget growth is to use spending and revenue collected as a share of personal income or GDP, as conducted here.
For example, failing to adjust for inflation shows that DC’s revenue increased an average 5.3 percent between FYs 2001 to 2025, but that drops to 2.6 percent once incorporating CPI and then further drops to just 0.6 and 0.9 percent when put into the proper context of revenue as a share of income and share of GDP, respectively.
Without Policy Change, DC Local Revenue is Projected to Decline, Even Relative to a Contracting Economy
Looking ahead, the Local Fund revenue as a share of income is projected to shrink far below the trend of the past 25 years, down to nearly 12.7 percent by FY 2030 from 13.32 percent in FY 2026 (Figure 2).
Local Fund revenue as a share of GDP is projected to decline from 5.63 percent in 2026 to 5.48 percent by FY 2030. Shifts in this measure are smaller due to the size of the District’s GDP, which in 2025 was $191 billion dollars. Local Fund revenue as a share of GDP has not fallen below 6 percent since FY 2015.
This means revenue is growing more slowly than the economy, which is also contracting. This is different than during past recessions. For example, during the 2001, 2008, and 2020 economic downturns, Local Fund revenue as a share of income tended to be higher than in other years, around 16 percent, likely due to lag effects on revenue collections and in the case of the pandemic-induced recession, local revenue replacement dollars allotted to states under the American Rescue Plan Act.
The departure from longstanding trends is especially alarming as the District will be left with fewer resources to address federal layoffs and cuts to federal safety net programs, chronic poverty, or the affordability crisis.
Figure 2
DC would need almost $2.2 billion more in revenue by FY 2030, in real terms, to maintain its average share of personal income (15 percent). Some of this revenue will materialize if economic factors improve or the District’s revenue projections prove overly pessimistic. However, DC lawmakers should also raise revenue to get back on track and keep up with the cost of providing current services.
DC’s budget is foundational to residents’ quality of life. At a time where many have lost their jobs and are experiencing economic hardship, lawmakers should shore up economic supports rather than slash them.
