Niciah Mujahid said she had an idea of what to expect this budget season when, during D.C. Mayor Muriel Bowser’s budget forums, administration officials gave community members an imaginary $90 to shape their ideal budget, as opposed to $100 in years past.
However, Mujahid said not even that prepared her for D.C. Chief Financial Officer Glen Lee’s requirement that Bowser allocate $250 million toward the replenishment of the District’s Fiscal Stabilization Reserve over the next four fiscal years.
“We had a keen sense that a lot of the cuts that would need to happen would come from programs and services, so that unnecessary requirement from the chief financial officer was disheartening,” said Mujahid, executive director of the Fair Budget Coalition, a conglomerate of organizations and District residents fighting for a budget that prioritizes racial justice.
“We have to fill the reserves, but it’s not legally required that we do it right now,” Mujahid continued. “The question is what do we do when we start the budget season with less revenue. How do we create tax systems to ensure our government and its residents have what they need to thrive? How do we show up for the community and what are we investing in?”
On Wednesday, hours before Bowser was scheduled to testify before the D.C. Council’s Committee of the Whole about the FY 2025 budget, the Fair Budget Coalition, along with representatives of Just Recovery DC and District residents gathered in front of the John A. Wilson Building with a set of demands.
Their demands centered on the preservation of social programs and a revenue increase via taxes on wealth, capital gains, and high-value homes. As it relates to the latter request, Mujahid said she questions the D.C. Council’s enthusiasm for ensuring the District’s top earners pay their fair share.
Mujahid also continues to weigh in on Lee’s $250 million request and Bowser’s late submission of the budget, both of which she said caused the last-minute adjustment to the 70-day budget deliberation process. “We can’t change the timeline but by so much because it’s legally mandated,” Mujahid said. “Yet, because of the delays, community members are getting the short end of the stick. There’s significantly less time for the community.”
Chief Financial Officer Lee Makes His Case
In his March 19 statement before the D.C. Council’s Committee of the Whole, D.C. Council Chairman Phil Mendelson (D) called Lee’s $250 million mandate a subversion of the council’s authority as appropriators of funds.
Mendelson also questioned whether Lee, after canceling the free bus fare program approved by the council, would target other programs or call for the termination of agency directors who mismanage their budgets.
Lee, responding to an Informer inquiry about the free bus fare program, said that legislation only allocated funds when revenue projections surpassed the Office of Chief Financial Officer (OCFO)’s budget forecast.
That didn’t happen during two consecutive forecasts, Lee pointed out, which in turn necessitated what some considered a controversial decision during the last budget season.
In recent weeks, Lee, in his second year as chief financial officer, has set out to clarify the nature of his role. He emphasized that he’s only responsible for certifying and keeping the budget balanced, making revenue projections, and ensuring that the District makes on-time payments to payroll, vendors, and creditors.
Failure to follow through on these obligations, Lee said, would trigger the D.C. Financial Control Board — the congressionally created entity that oversaw the District’s finances during the late 1990s, and led to OCFO’s creation.
“Whatever the disagreements about financial implementation that exist, it’s the reason why this office exists,” Lee said. “There’s always tension and checks and balances. It’s how financial control organizations work in the U.S.”
In the face of pandemic-related revenue depletion, the District has relied on federal funds and its reserves to meet its financial obligations. Last year, the District’s Fiscal Stabilization Reserve fell below what’s needed for 60 days for the first time since before the pandemic. Per Mendelson’s March 19 statement, Bowser’s $250 million allocation would be directed toward that coffer, which had been 12% funded by the end of the 2023 fiscal year.
“It’s important to have set aside [money] to pay bills because of the uneasiness of our revenue,” Lee said. “In the last five or six years, there were always resources to pay bills. There’s not an issue with spending surpluses [but] when you’re doing that, all you have is your checkbook.”
The District’s reserve fund balance currently stands at $5 billion split between four reserve fund accounts, including general funds from which the District meets its financial obligations throughout the year.
Lee said that a portion of this balance — approximately $2.3 billion — will be spent between this fiscal year and Fiscal Year 2027 in place of the COVID-related federal funds that are running out later this year.
By Fiscal Year 2028, the District will have $2.6 billion in surplus funds left, he told The Informer.
Lee said that while tax revenue collected at different points throughout the year replenishes the general fund, he expressed his concern that, due to fewer people working in person, among other factors, the District has “fewer resources available” to facilitate this process.
Case in point: Bowser administration officials told The Informer that revenue growth is expected to grow by 2% annually between FIscal Years 2024 and 2028, all while expenses are growing at a rate of 7.5% annually.
“The mayor and the council have a tough time trying to balance the budget given the growth rate of revenue is less than what it has been,” Lee said. “There will be less resources to spend, unless we have a dramatic turnaround in the economy, and of course, that’s a different matter.”
Difficult Decisions for Bowser Administration Officials
The Fiscal Year 2025 operating budget that Bowser presented on Wednesday stands at $20.9 billion, 53% of which is dedicated to human support services and public education.
When it came to the District’s Fiscal Stabilization Reserve, Bowser dedicated $215 million — not $250 million — over four fiscal years. Bowser administration officials said this happened upon the discovery of $35 million in the reserve.
In FY 2025, $100 million will go toward the District’s Fiscal Stabilization Reserve. The remaining $115 million will be split between Fiscal Years 2026 and 2027. Bringing the replenishment to fruition, per Bowser administration officials, meant fully cutting the Early Childhood Educator Pay Equity Fund.
Bowser administration budget priorities this season include: the maintenance and enhancement of core services, preservation of investments that promote health and safety, the longevity of programs with a proven track record of success, further facilitation of long-term fiscal stability, new spending on investments, and greater focus on Downtown, public safety and education.
The budget that Bowser presented on Wednesday closed a $4 billion gap that’s anticipated to materialize between Fiscal Years 2025 and 2029. She balanced the Fiscal Year 2025 budget with $493 million in reductions, $174 million in investments, and $328 million in revenue generators.
The revenue generators — in the realms of public safety and downtown economic development — will take shape via a readjustment to the paid family leave tax by to Fiscal Year 2021 levels, a sales increase in Fiscal Year 2026 to support the local transit system, and a 911 fee imposed on people who book hotels in the District.
A Bowser administration official said those tax increases on the “periphery” of the D.C. tax code.
On Wednesday, Tazra Mitchell counted among those who called on the D.C. Council to raise revenue and preserve social programs by taxing wealth. In her role as chief policy and strategy officer at the DC Fiscal Policy Institute, Mitchell often communicates what she understands to be the long-term effects of decisions made in the Wilson Building.
During the latter part of March, Mitchell wrote an article expressing her concern that Lee’s mandate could hurt Black and brown women. She said Lee took on a shortsighted position that ignores the likelihood of the mayor and D.C. Council cutting public investments in government programs to balance the budget.
Mitchell said that Lee may have further marginalized District residents who want to get more involved in budget deliberations.
“The process of how the budget comes together is often more difficult to understand, even for seasoned budget advocates at times, due to year-to-year irregularities and public officials’ mistakes and mishaps,” Mitchell said. “The chief financial officer’s decision to force the mayor’s hand on reserves threw a wrench into the process and led to a lot of confusion on the budget. Lawmakers don’t always take a people-centered approach when creating the budget.”