jonetta rose barras: Financial mismanagement and recklessness in DC

The two just don’t seem to jibe: lamentations by elected officials about the tough decisions they are being forced to make and the generous $11.4 billion local fiscal year 2025 operating budget as submitted last week by Mayor Muriel Bowser. Overall, “the proposed FY 2025 Local funds budget increased by $789.1 million or 7.4 percent,” according to documents posted on the website of the Office of the Chief Financial Officer. 

The total gross operating budget is $20.9 billion — $1.1 billion more than FY 2024.

Not to put too fine a point on this massive spending proposal, but the mayor’s submission also includes a six-year capital budget of $11.8 billion — including $3.1 billion in FY 2025 spending alone, according to the chief financial officer’s transmittal letter.

That, my friends, is a lot of money for a municipality with only 700,000 people and an economy suffering a version of long COVID. “For every dollar she cut, she spent two,” joked one finance expert with whom I spoke.

City Administrator Kevin Donahue defended the mayor’s fiscal management and decisions during an extensive interview with me earlier this week. He described a systematic process he and the administration’s budget staff went through, reviewing areas of funding, service levels and specific programs. They performed initial cuts and then took their results to the mayor: “We said, we can go deeper, or we can raise taxes.”

She chose the latter, scattering targeted tax hikes throughout her plan, including a sales tax increase in 2026.

Donahue acknowledged the budget is larger but said “the cost of continuing the level of service went up from 2024 to 2025.” The Washington Metropolitan Area Transit Authority used federal funds to keep spending flat for local jurisdictions during the pandemic; now the bill has come due. There are several union agreements that have to get done between 2025 and 2026.

“We also have a lot of services we started over the past two years whose costs have been growing faster than the city’s revenues,” added Donahue. “We pulled back from spending quite a bit.”

I still don’t see it. I’m not the only person who remains skeptical.

“We’re facing a somber reality with our budget,” at-large Councilmember Robert White wrote in a recent statement. “It’s equally crucial to acknowledge that this year presents us with the largest budget in DC’s history.

“That contrast is stark, and it demands our attention and action,” he said, noting that during Bowser’s two-plus terms the city’s budget has increased a “staggering 55%.”

“With a budget growth of $7 billion and adding 10,000 employees over the last 10 years, it’s perplexing that we’re still grappling with many of the same challenges we faced 10 years ago,” said White. 

“I want to see more progress,” he added.

Does he — really? And what does he mean by progress?

I can’t remember a budget season in the past five years where White and his council comrades, many of whom are members of the far-left wing of the legislature, didn’t demand more spending — often on unproven, unevaluated programs — simply because a group of vocal advocates made the demand. Generally, Council Chair Phil Mendelson proved the fiscal moderate, urging against unwieldy financial growth, including unnecessary tax increases. 

Mendelson’s position appears to be changing. Could that be related to the fact that he met with a group of progressive advocates at his home prior to the mayor’s budget submission? When I asked him last month about the gathering, he said that “they asked for the meeting” but didn’t elaborate on its purpose or content.

Once upon a time, nonprofits were the second layer of the social safety net. They used an array of donors to fund their operations, keeping staff salaries and other costs low so the lion’s share of their fundraising haul could go to the people they claimed to serve. These days, however, many nonprofits are at the government trough, sopping up contracts and grants without being subjected to much scrutiny over the amount of time and money they spend lobbying the government for programs whose perpetuation directly affects their bottom line.

When Mendelson held his progressive klatch, it was around the same time he was battling DC Chief Financial Officer Glen Lee over his demand that the mayor and council use appropriated — rather than surplus — funds to replenish the Fiscal Stabilization Reserve Fund, from which the mayor snatched $217 million in FY 2023 and FY 2024 to help cover spending that exceeded revenues. Advocates have objected to the CFO’s mandate, believing it puts at risk their sacred social services for low-income and working-class residents.

Mendelson continued his assault last week during the public hearing at which Bowser, Donahue and others formally presented her budget. In response to Mendelson’s questions, the mayor said compliance with the CFO’s directive had forced greater cuts. Her budget includes $100 million in FY 2025 that would go to the Stabilization Fund; another $50 million has been set aside for 2026 and again in 2027.

While the mayor complied with the CFO’s mandate, Donahue told me it was an “unreasonable demand. He does not forecast any risk until the end of 2027.”

Donahue also said the CFO has a “role in making sure we pay our bills. The question of how we pay our bills is a determination elected officials get to make.” 

Both Mendelson and Bowser seemed to suggest during the public hearing that resorting to short-term borrowing is not necessarily a dangerous maneuver. If past is prologue, and it often is, testing out that theory could create fiscal and political problems — just look at the decline in the mid-1990s as an example.

Donahue said he doesn’t “take as a given the CFO’s revenue estimates for the next few years.” If the Bowser administration makes the proper investments, particularly in public safety, education and downtown and is able to “build in the right optimism [among citizens], we can beat their estimates. We’ve beaten their estimates before.”

Call that an abracadabra moment. During the budget season a whole bunch of folks seem to be channeling Merlin.

However, it will take more than magic or wishful thinking to fix the city’s fiscal issues, which — as finance expert Yesim Sayin has noted, and Donahue even agreed in our conversation — are in fact structural.

“Once again, in each of the four years in the FY 2025-28 period, the recurring expenditures are above recurring revenues,” Sayin, executive director of the D.C. Policy Center, wrote in an email to me earlier this week. “In Fiscal Year 2025, this gap is over $830M — or about 8 percent of recurring revenues, even when one includes the new revenue raisers in the proposed budget.

“By the time we hit Fiscal Year 2028, the gap narrows down to $400M, but it is still there. And this, again, after including all the revenue raisers which include both new taxes (about $1.5B over the financial plan period) and eliminating certain commitments to programs in the budget to pay for general expenditures (about $600M over the financial plan period).

“The crucial issue is: how do we close this gap?” asked Sayin. 

If the council restores program cuts made by the mayor — to the Pay Equity Fund, Emergency Rental Assistance Program and Earned Income Tax Credit, for example — “We will end up with higher spending, and higher revenue to pay for this spending,” Sayin said. “But the underlying problem will not be resolved.”

Besides, cautioned Donahue, if the council does so by delaying repayment of the Fiscal Stabilization Reserve Fund, “It only buys itself one year.”

Sayin said to get DC to a point where it would not have to dip into its reserves as it has been doing, revenues would have to grow by 5% each year of the financial plan. “There was a time where we could have taken this kind of growth for granted. I don’t think we live in those times anymore.”

In a recently published essay, Sayin seemed to suggest a course of action DC officials might consider, including a “rigorous evaluation of program design and execution,” which DC rarely conducts. Officials, she said, should assess the costs and benefits of the District’s current business regulations, and should “take a fresh look at [program] priorities.”

According to Donahue’s account of the budget process, the mayor and other administration officials engaged in that kind of an assessment. The final product doesn’t indicate those were sufficiently aggressive, however. 

Further, during the public hearing, I didn’t hear many questions related to such evaluations and analyses asked of the administration. There was no extensive discussion, for example, around potential impacts of the proposed appropriations for downtown revitalization, which is odd given that it is perceived as the “catalytic agent” critical to turning around the city’s economy.

What does that mean, anyway?

The council has at least 60 more days of budget deliberation, so maybe I am getting ahead of their story. 

“We need fundamental reforms embedded in our budgeting process to identify wasteful spending and get that money working for residents,” White said in his statement.

That was last week. Maybe that’s all campaign-speak for his reelection bid. 

Let’s see whether he joins Mendelson and his other colleagues, who seem intent on making CFO Lee the villain — instead of acknowledging decades of excessive spending, poor financial decisions, plus the layering of questionable social programs and failed public policy without sufficient data collection or objective evaluation, as the greater culprits for the fiscal challenges facing the District.

It’s hard, I think, to blame those long-term woes and current issues on someone who arrived in the city only two years ago.

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jonetta rose barras is an author and DC-based freelance journalist, covering national and local issues. She can be reached at thebarrasreport@gmail.com.