jonetta rose barras: Kicking the can down the road on DC’s budget

At first blush, it’s easy to be content with the fact that Mayor Muriel Bowser and her team, including City Administrator Kevin Donahue and Budget Director Jenny Reed, managed to avoid layoffs and furloughs during this current fiscal year 2025. Those actions had been on the horizon as District officials responded to a budget crisis triggered by Congress when it approved a temporary federal government funding resolution that in effect mandated $1.1 billion in midyear spending reductions for DC.

Using an obscure 2009 law, Bowser was able to reduce the required cuts to about $400 million. Then, she deployed a hiring freeze, tapped various dedicated tax funds and special enterprise accounts, and shifted some costs from FY 2025 to FY 2026. She said those maneuvers helped her prevent a summertime catastrophe. 

But fiscal danger may still await the city.

Unwisely, Bowser continued her fiscal can kicking dance when preparing her $22 billion budget proposal for FY 2026; another $9.7 billion is allocated for capital improvements over the next six years. The mayor formally submitted her proposed FY 2026 Budget and Financial Plan to the DC Council earlier this week.

“She could have made the hard choices and blamed it on the federal government. Instead, she played a shell game,” said one public finance expert, who requested anonymity in order to speak candidly about the city’s fiscal challenges. 

The expert cited Bowser’s decision to push some spending to the out years — FY 2027 and 2028. For example, she shifted to 2027 the cost of some union contracts that had been expected to be finalized in 2026. 

However, what I find even more egregious is the fact that Bowser seems to have ignored tornado warnings coming from Capitol Hill about actions that could potentially send DC over a fiscal cliff. Her proposal does not include any contingency for the massive Medicaid cuts being promised by congressional Republicans. 

The mayor also hasn’t made any adjustments for the return of the block grant funding model for public education contemplated in the policy blueprint known as Project 2025 that has sparked so many of President Donald Trump’s actions.

When asked during a press conference held after she formally presented her budget proposal on Tuesday, Bowser asserted that it is hard to anticipate what Congress will do. She argued that she has attempted to rightsize the government and will continue the process being conducted in Donahue’s office that involves extensive scrutiny of agency programs. 

Paul Kihn, the deputy mayor for education, argued that the DC Office of the Superintendent of Education is well-positioned to handle block grants. He also said that it appears the city will continue to receive funding for children covered under Title I and who may have disabilities.

Bowser generally acknowledged the difficulty of the task she and her team faced in developing a four-year fiscal plan where costs are increasing more rapidly than revenues and demands from some segments of the city are outpacing the government’s ability to respond. 

“Even with a slightly larger budget we cannot buy the same amount as last year. The reality is that with inflation, increased labor costs and increased demand, many programs are growing at rates that are far higher than our revenues,” Bowser wrote in a letter dated May 27 transmitting her “Grow DC” budget proposal to Council Chair Phil Mendelson. 

“To address this imbalance and to adjust to our financial realities, Grow DC resets spending in several areas where costs are growing,” Bowser continued. “We have identified cost savings that can be achieved through consolidation, coordination, and efficiencies.

“And we avoid painful cuts early in the financial plan to give the economy time to grow,” she added.

No one should be surprised where the city finds itself. Former DC Chief Financial Officer Jeffrey DeWitt predicted years ago that the city’s financial problems, instigated primarily by the COVID-19 pandemic, would persist through 2025. 

However, poor public policies — advanced by various nonprofit advocates, enacted by local legislators, and financed in part by overly generous federal programs that encouraged excessive spending — exacerbated the challenges foreseen by fiscal experts. A surly ballot initiative — I-82 — helped seal the deal, laying waste to the city’s restaurant industry and fueling lost jobs or reduced hours for many workers.

Over the past two years, District elected officials, including the mayor, have been timid about halting the cascading damage of their poor choices. Instead of ending their excessive spending, they have raised fees and taxes on businesses and average citizens to fund their pet projects and unevaluated programs. They have retained a large number of vacant but funded personnel positions, using money appropriated for those costs like a slush fund. They have also raided with impunity the reserve accounts established under local and federal law; even now only one of the four is at the mandated funding level.

Based on comments made this week by the mayor and hints offered by some councilmembers, there seems to be the belief that good times are just around the corner. That may be a fantasy, according to fiscal experts. 

There are already recession-like conditions in the region. Those may become more pronounced if Trump continues to decimate the federal workforce while pursuing his abusive and unfocused economic policies that are beginning to affect the value of government bonds among other things. “At some point the chickens come home,” said another expert, who like the first agreed to speak on the condition of anonymity.

That reality is made clear by the fact that among the reductions Bowser has had to make are cuts to the city’s Medicaid program. Wayne Turnage, deputy mayor for health and human services, said the current recommendations are not the result of congressional proposals, however.

In the FY 2026 budget, District officials are estimating that local Medicaid costs could increase by as much as $182 million. The Bowser administration’s answer was to slow the growth by altering eligibility.

That decision will affect more than 25,000 childless adults and adult caregivers who are at between 138% and 200% of the federal poverty level, according to the mayor’s budget presentation. They will be shifted to a “basic health plan,” to be provided through the Affordable Care Act or ObamaCare and funded largely by the federal government. Only three states — Oregon, Minnesota and New York — run such a program, according to Mila Kofman, the executive director of the DC Health Benefit Exchange Authority.

“The ACA is good health coverage. Our goal is continuity of coverage, continuity of care,” Kofman told me during an interview on Wednesday. The current network of managed care organizations is expected to continue to serve the former Medicaid clients. The new program won’t go into effect until October. Whether participants will have to pay any premiums and out-of-pocket costs will depend on how much federal funding is available, according to a draft document posted on the authority’s website.

Residents still may not be safe, however.

If the federal government implements cuts in how much it reimburses states for Medicaid payments, more DC residents might find themselves pushed to the basic health plan or into the private insurance sector. 

Currently, DC pays 30% of Medicaid costs. The remaining 70% comes from the federal government. 

According to Turnage, federal officials in February were discussing reducing the reimbursement rate to 50%. If that happens, the city could lose $2.1 billion. 

To make matters worse, there was also a discussion about cutting reimbursement for the ACA program from the current 90% to 50% — meaning DC’s creation of a basic health plan might not work as intended. 

Hearing the various debates on Capitol Hill, it’s hard not to conclude that Medicaid will be cut. The only questions are, by how much and how many people will be adversely impacted? 

The fact that Bowser has made no contingency in her FY 2026 budget or even in the out years is, in my view, irresponsible. Did she and other District officials not learn anything from the Continuing Resolution debacle?

The mayor has highlighted the “Transformational Growth Agenda” incorporated in her budget as the best way to avoid or at least blunt steep cuts in future years. I have offered support for many of her growth proposals, including the repeal of Initiative 82 and the construction of the Commanders stadium-entertainment-retail-housing complex. 

That development project is sure to infuse thousands of jobs and taxpaying residents into the city’s economy. However, the benefits won’t be fully realized until after 2030. 

Meanwhile, DC likely will continue to face declining local revenue and declining federal support at least for the next several years. It’s time District elected officials disabuse themselves of their penchant for magical fiscal thinking. 

Reality is knocking hard at the front door. 

Council committees began this week to hold public hearings on Bowser’s proposals. Legislators will have 70 days to finish that process and produce their own financial plan. A statement made by council Chair Pro Tempore Kenyan McDuffie at Tuesday’s budget presentation telegraphs their likely approach. 

“I hope we are not going to see the results we did 30 years ago,” McDuffie told Bowser, who replied that she wasn’t sure what he was talking about. He explained that many longtime, low-income, working-class residents were pushed out of the city during the District’s most severe fiscal crisis.

My recollection is that elected officials’ refusal to make difficult financial decisions prompted the imposition of a financial control board by a Republican-dominated Congress in 1995. Some of the same conditions that exist now, existed then. However, with Trump as titular leader of the Republican Party, where moderates are a dying breed, the District cannot expect any sympathy or a dignified rescue.

Bowser has made some spending reductions in her budget proposal. However, she needed to make deeper cuts and divert more savings to address the prospect of an even larger financial crisis or recession. Unfortunately, she didn’t. 

We’ll have to see whether, this time, the council can muster the courage to make the difficult choices necessary to protect the city from a Republican invasion while giving the District the opportunity to truly rightsize the government, placing it on a stronger and more stable foundation for the long haul.

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