D.C. confronts sweeping cuts and some tax hikes

Driving the news: Mayor Muriel Bowser's proposed budget prioritizes downtown incentives, education and policing investments. She wants to make sweeping cuts — eliminating all Circulator buses, for one thing, and wiping out a fund that boosts the pay of daycare teachers.

The big picture: It's the most painful budget in recent history. Increasing costs, declining tax revenue, and the end of federal pandemic stimulus have created a $4 billion gap over the next four years.

• D.C.'s 6% pre-pandemic growth has declined to 2%, per Bowser officials.

Zoom in: Bowser, who framed her proposal as "shared sacrifices," doesn't call for any income or property tax increases. But there are targeted tax hikes.

• One would raise a tax that businesses pay for the paid family leave program.
• Another would bump up the city's sales tax by a half-percent beginning in late 2025, to 6.5%.

But to balance the budget, Bowser also needed to cut about $500 million in spending, including slashing her signature affordable housing fund for the first time since taking office in 2015.

• 69 city workers will receive layoff notices.
• "We weren't able to save the Circulator," Bowser said, "but we were able to fully fund Metro," which will receive an additional $200 million a year from the city.

Friction point: The child care subsidy is top of mind for many lawmakers, including Council member Christina Henderson, who became emotional reacting to the cuts the council chamber. The fund enables early education providers to be paid on par with public school teachers.

• "It feels as though we are proposing to balance this budget on the backs of Black and Brown women in the child care sector," Henderson said.
• Bowser said the elimination of the fund came after a standoff with the city's independent chief financial officer, Glen Lee. He insisted the Bowser administration top off a reserve fund with $250 million.
• The D.C. Council has weeks to make changes before a final vote.

Between the lines: The business community will likely lobby against the paid family leave tax increase. That levy will return to a rate of 0.62% after it was reduced in 2022 to the current 0.26%.

• But any pushback against the paid leave tax may not gain much currency among progressive lawmakers, given the millions proposed for downtown and businesses.
• In addition to the $515 million approved on Tuesday for Capital One Arena's modernization, Bowser's budget doubles down with $68 million proposed for downtown parks, $12 million toward incentivizing business growth and entrepreneurship, and $2.5 million for bringing retail to vacant commercial spaces.

Public schools spending would rise $349 million, and D.C. would initiate stricter truancy enforcement, holding students and families accountable through the Department of Human Services. (Last year, 60% of high school students were chronically absent.)

The police budget would go up $77 million. Most of the funds would cover labor agreements and pay raises, but also new initiatives like $8.9 million toward civilianizing 40 positions to free up other officers for crime-fighting duties.

• The Metropolitan Police Department, which began a nine-year timeline last year to reach 4,000 sworn officers, will have a net gain of about 18 officers next year. That's thanks to fewer cops retiring or leaving the force and hiring catching up.

The fine print: A new tax will apply to electric vehicle purchases, at a lower rate than gasoline vehicles. An 80 cent per night hotel booking fee is also proposed.