D.C. got used to big budgets, but deep cuts are back
Add Axios as your preferred source to
see more of our stories on Google.
Out: cutting ribbons. In: cutting budgets. Photo: Craig Hudson/The Washington Post via Getty Images
For over a decade, D.C.'s coffers grew bigger and bigger, allowing the city to expand its social safety net, pour hundreds of millions into affordable housing, and give teachers raises. Screech!
What I'm hearing: The District will confront likely cuts and even a tax increase this year — at a scale we haven't seen since the Great Recession.
Follow the money: The budget gap looks to be anywhere between $700 million to $1 billion.
- Metro needs an additional $200 million, $300 million in reserve funds need replenishment, federal pandemic relief funds are ending, and there are raises for public sector employees and other growing expenses that will become clear once Mayor Muriel Bowser releases her budget proposal on March 20.
The big picture: Schools will likely need to lay off employees, along with agencies that ambitiously hired analysts and other bureaucrats thanks to one-time pandemic stimulus funds.
- Progressives fear that novel experiments like "baby bonds" — which set aside money for low-income children to use in adulthood — are on the chopping block.
- Downtown groups may not get the full $39 million next year (let alone $401 million over five years) they requested to resurrect the area's economy. That showy action plan from last week looks more and more like wishful thinking.
Behind the scenes: A tax increase is on the table. But those are tricky.
- Upping the sales tax is likely DOA at the left-leaning D.C. Council, which will likely call it a tax on the poor and middle class.
- Taxing higher earners is favored by progressives — yet revenue growth from income taxes is slowing as "the labor market softens and wage growth slows," Glen Lee, D.C.'s chief financial officer, recently wrote.
- Homeowners, who are more likely to vote, also hate when their property taxes go up.
- That leaves some opportunities to tap into the wealthy, still — either targeting their valuable homes or stock gains. But tax hikes alone won't close the gap.
State of play: Every year, the mayor asks residents at community meetings to play a budget game: How would you spend $100 running the city? Except this year, the $100 was crossed out and replaced with $90.
- Meanwhile, in a preview of the tensions ahead, progressive activists are girding for battle: "We are witnessing our executive administration revert to Reagan-era trickle-down economic and social policies," wrote Niciah Mujahid, the head of the left-leaning Fair Budget Coalition, in a recent letter.
💭 The mayor should repurpose her ribbon-cutting golden scissors on last year's thick budget book. Town Talker is a weekly column on local money and power. Send your tips to [email protected]