Despite calling for “shared sacrifice” in a time of budget constraints, Mayor Bowser’s proposed fiscal year (FY) 2025 budget and financial plan demands the biggest sacrifices from DC’s lowest income residents while prioritizing the wealthiest businesses. The mayor’s budget backtracks on previous commitments to low-paid residents by taking an ax to transformative investments including the Pay Equity Fund and DC Earned Income Tax Credit (EITC). She also proposes vastly scaling back DC’s “baby bonds” program, a first-of-its-kind in the nation investment aimed at reducing racial income and wealth gaps. As is, the proposed budget will set back the progress that DC has made on poverty reduction, greater economic inclusion, and shared prosperity.
The mayor has made the “tough choice” to slash District spending on programs and services that support residents facing economic hardship, while maintaining or enhancing investments in downtown. While the mayor does propose to raise revenue, one of the major proposals is increasing the sales tax, which disproportionately harms residents with low and moderate incomes. Combined with the backtrack on the EITC, the mayor’s tax proposals would, on net, raise the effective tax rate on DC’s residents with the lowest incomes relative to where it would otherwise be.
While the challenge of major budget pressures—among them the WMATA budget shortfall, declining commercial property tax collections, and the Chief Financial Officer’s (CFO) requirement that $250 million go towards refilling DC’s reserves—is very real, lawmakers have had the tools and the time to address that challenge. For example, last year, if lawmakers had prevented expiration of an FY 2020 increase of the deed recordation and transfer tax on commercial property valued over $2 million, they would have preserved at least $282 million in revenue across in FYs 2025-2027 to stave off cuts. This year DC Council must choose between equitably raising revenue and balancing the budget on the backs of DC’s Black and brown residents.
Below are details of what is in the mayor’s budget proposal based an initial review.
Raises Revenue and Makes Important Investments in Some Key Programs
- Raises over $1.8 billion in Local Fund revenue to help balance the budget across the four-year financial plan, reducing the extent to which larger budget cuts are necessary.
- Maintains $1 million in one-time funding to support the Strong Families, Strong Futures guaranteed income pilot, which provides cash assistance to mothers with low incomes in Wards 5, 7, and 8.
- Provides funding for 24-hour shelter access for single adults and operations at two new non-congregate singles shelters.
- Increases the supplemental weight for “at-risk” students in the Uniform Per Student Funding Formula from 0.24 to 0.3. Also, increases the alternative student weight and the adult leaner weight, helping ensure that more funds go to educate students with the greatest need.
- Includes higher wages to some government workers due to collective bargaining agreements—such as higher teacher pay won in a past Washington Teacher Union agreement—and sets aside $103.2 million for future negotiations.
Takes an Ax to Transformative Programs that DC Leads the Nation on Implementing
- Eliminates the Pay Equity Fund across all four years of the budget plan, causing significant salary cuts to 4,000 early educators participating in the program—in some cases, a 40 percent reduction to salaries—and putting their access to health care at risk.
- Stops in its tracks planned for increases in the DC EITC, reducing the planned income boost for workers with low and moderate wages by half, or $68.8 million through the end of FY 2028.
- Slashes DC’s baby bonds program, reducing funding for the program by more than two-thirds, or $63.3 million across, the financial plan. The mayor’s plan restructures program eligibility to include fewer children and caps the annual deposit amount to $500 with no indexing to inflation, which means fewer children will benefit and those who do will receive less than originally designed.
Slashes Funding to Vital Lifelines and Backtracks on Promises to Residents
- Eliminates wealth-building opportunities for legacy cannabis retailers by ending the medical cannabis Social Equity Fund, resulting in a $6.5 million reduction in funding over the financial plan. This funding aimed to provide capital to legacy cannabis workers and communities most directly harmed by cannabis criminalization to support their entry into the medical cannabis market.
- Reduces the child care subsidy budget by $10 million annually, stalling progress toward improving and expanding affordable child care to more District families.
- Repeals the Schools First in Budgeting Amendment Act of 2022, which aimed to stabilize school budgets year-over-year by minimizing overall budget cuts as well as staffing cuts.
- Cuts the Emergency Rental Assistance Program (ERAP), which helps residents avoid eviction, by more than half (to $20 million) from the FY 2024 level that had already failed to meet actual need. Her budget also fails to include funding for new housing vouchers when the need for these programs remains high. Nearly 40,000 DC households earn less than 30 percent of family median income (just $31,950 for an individual) and pay more than half of their income in rent.
- Provides only $59 million for the Housing Production Trust Fund, just 60 percent of the mayor’s promised minimum annual commitment.
- Reduces by $7.3 million funding intended for traffic and pedestrian safety initiatives by redirecting excess Automated Traffic Enforcement (ATE) revenues to the general fund.
Slashing DC’s programs and services demonstrates short-term thinking and a lack of vision. People are DC’s economic engine, and increasing economic precarity for DC residents undermines the economy and our revenue. In the coming months, DC Council should think long-term about how to equitably raise revenue—not just to keep programs and services whole in the FY 2025 budget, but also to grow the strength and resilience of our economy into the future.
Councilmembers can do this by taxing wealth and taking other steps to broaden our tax base, including adopting higher marginal property tax rates on single family homes with taxable value over $1.5 million, taxing realized capital gains at a higher rate, and enacting a business activity tax.
