jonetta rose barras: More financial and budgetary mess in DC
Next week, the DC Council is expected to take the first of two votes on Mayor Muriel Bowser’s proposed $21.2 billion Fiscal Year 2027 Budget and Financial Plan. Don’t expect a smooth landing.
The budget, combined with concerns raised in recent reports released by DC Auditor Kathy Patterson and DC Chief Financial Officer Glen Lee, suggests the District’s finances, fiscal management processes and overall economy are a mess.
Additionally, DC Council Chair Phil Mendelson is on the hunt for money to prevent fee and tax increases being contemplated by his colleagues, including mayoral candidate and Ward 4 representative Janeese Lewis George and Ward 1 Councilmember Brianne Nadeau, who opted not to run for reelection.
In 2025, legislators approved the mayor’s proposal for a phased increase in the retail sales tax in future years; the rate is now slated to hit 7% in October 2027 under the current budget plan. Sales taxes have long been considered regressive.
Now, they are talking about a “wealth surcharge” on income from interest, dividends, capital gains, rental property, residential property sales, and “passive business incomes,” among other areas.
In a letter to Mendelson dated June 2, Bowser complained about some of the actions taken by the council during their committee deliberations, as well as proposals still under consideration. “Unfortunately, some of the Council’s proposed changes would undermine the progress we’ve made over the past 12 years in educational achievement, weaken public safety strategies that have resulted in the lowest violent crime rates and highest case closures in decades, discourage the economic growth that is absolutely vital to our recovery from the impacts of DOGE, and add new burdens that reduce affordability for our residents and businesses by once again hiking taxes and fees,” she wrote.
Among specific issues, Bowser took aim at the tax increase floated for council consideration, arguing — with one phrase notably in bold italics — that the plan is “deeply unfair and inequitable to our residents. It is also terrible public policy: Making major tax policy on the fly with no public input, no public hearings, and no public scrutiny.”
Members seemed either unfazed or more focused on potential pushback from vocal advocates, who could affect the outcome of the June 16 primary election, in which ranked choice voting will be used for the first time.
Given all these variables and players, there’s little doubt that the coming fights and debates as they head to a final vote won’t be pretty.
However, District residents are the only ones really entitled to be upset by all of this. It isn’t as if the city’s fiscal issues just arrived last night; they have been around since the COVID-19 pandemic. But instead of the anticipated recovery in 2025, a madman took up residence in the White House for a second time and promptly opened Pandora’s box in the nation’s capital. It immediately became clear that more fiscal and political troubles were headed the city’s way; however, too many local officials still seem content to do little more than act as passive witness to the economic sabotage.
DC is facing a fiscal cliff, Lee has warned legislators. He told them that as of April 2026, the unemployment rate was 6.2% — the highest in the nation. The inflation rate that month was estimated to be 3.8%; in February it had been 2.4%. “The District government’s revenue growth is expected to be at or below the rate of inflation for the foreseeable future,” according to documents Lee has shared during briefings with councilmembers.
That sounds like a recession.
Where elected officials once looked to end-of-the-year surpluses as a pot of money for select programs, Lee said those resources will be “exhausted by the end of FY 2027.”
“This creates a FISCAL CLIFF that will need to be addressed in future budgets by cutting spending, starting in FY 2028, or raising revenues,” he wrote.
“Short-term borrowing is not a solution to the District’s cash flow issues,” added Lee.
Prior to those briefings, Patterson had called into question the integrity of Lee’s fiscal management and the professionalism of his office. In the audit report “Reserve Fund Allocations Violated District Law,” she and her team found the Office of the Chief Financial Officer masked agency overspending with withdrawals from the city’s Contingency Reserve Fund — including transactions that may have violated the local Anti-Deficiency Act.
In his official response, printed in the audit report, Lee disagreed with many of the findings, especially those that claimed his office had violated the Anti-Deficiency Act, infractions of which are potentially firing offenses.
This week, Patterson sent a memorandum to Mendelson urging him to hold a special oversight hearing in September to explore the findings of the audit. “A hearing would bring light to these serious deficiencies in the operations of the OCFO,” she wrote, adding that it might also provide an opportunity to ensure the problems are addressed.
During a telephone interview on Monday, the same day her memo is dated, I asked Patterson why, if the violations were as egregious as reported, she proposed waiting until fall to hold the hearing. “They’re not going to do anything after the budget and leading up to their [summer] recess,” she said. As of Thursday evening, she had not received a response from Mendelson.
Unfortunately, she’s probably right. Rightsizing the government and ensuring excellence in service and management have rarely been priorities for this council, which accounts for its often poor oversight.
In nearly every column I have written on DC’s budget over the past five years, I have called attention to elected officials’ reliance on the city’s reserve accounts — two of which were mandated by Congress during the control board era and two of which were established by the council. Reimbursement of those funds has not always occurred according to the rules and procedures specified by law.
The reserves were a point of contention between Mendelson and Lee last year, as councilmembers struggled to restore spending cuts proposed by Bowser after Trump severely assaulted the federal workforce and the Republican-led Congress passed a funding bill that blocked DC from using $1 billion of its own locally collected money; that congressional punch came midway through the fiscal year and instigated unanticipated program reductions and a hiring freeze.
Things are not much better this year.
Last week, during a special administrative budget meeting, Mendelson reported that he had identified as much as $420 million that could be used to partially eliminate cuts made by the mayor. However, it appears the CFO has committed only to authorizing an additional $274 million from the $600 million that should have gone to District residents as part of local tax cuts tied to Trump’s so-called “Big Beautiful Bill.”
Where is the rest of the money Mendelson has mentioned coming from?
If Mendelson is looking — once again — to snatch millions from the city’s reserve accounts to support the spendthrift habits of the legislature, he may come away with an empty hand. OCFO spokesperson Eric Balliet told me in an email response to several questions I had posed that Lee “does not support spending the District’s local reserve funds as part of the FY27 budget and financial plan.”
“Local reserves are essential for the District’s ability to meet its basic obligations and pay bills during the year,” Balliet wrote.
Mendelson may contend that Lee is hoarding cash that the council should lawfully be able to spend, but there are reasons for CFO to do so if that’s the case.
In his fiscal briefing documents, Lee noted that “at its lowest point in the last fiscal year, the District’s general government checkbook was more than $1.6 billion in the negative until the next chunk of tax payments started coming in. To operate under these circumstances, the D.C. government relies on local reserves to cover expenses temporarily.”
To explain the potential for future disasters, Lee identified some of the major spending cuts proposed by the mayor for FY 2028 that stem from the use of one-time resources in FY 2027 rather than recurring funding. He specifically noted $77.7 million for DC Public Schools, $72.3 million for the Department of Health Care Finance, and $63.2 million for DC public charter schools, according to his briefing document.
The bottom line: There isn’t necessarily a problem for FY 2027, but if legislators decide to reverse the cuts in the FY 2028 spending plan — either this year or next — they will need to identify sources to cover those costs. Lee has essentially said the customary pots of money will not be at the council’s disposal, however.
A focus on education costs may get support from the auditor. Patterson issued a report in April highlighting the massive growth in education spending over the past several years. Currently, the city spends $2.8 billion on public education.
Reductions in education spending won’t be easy this year or any year, however. It’s like a third rail.
For now, councilmembers seem mostly focused on the FY 2027 budget. They have created three separate lists — small, medium and large asks — that essentially prioritize programs they would restore if funds are available. Those lists were discussed during their breakfast meeting before this week’s legislative session. Based on those conversations, it appeared the top priority was restoring housing vouchers, followed by replenishing the pay equity fund and child care subsidy. The Access to Justice program, which funds legal services for low-income residents who face challenges such as the threat of eviction or loss of benefits, also came up a few times in the discussion — although DC officials at some point need to grapple with whether the city can afford to continue subsidizing service delivery by nonprofit organizations.
In her letter, Bowser urged Mendelson to use those additional funds the CFO agreed to release to help fund “union contracts, childcare services, universal paid medical leave, and the Housing Production Trust Fund.”
“This is a far better alternative to another round of tax and fee hikes on our residents and businesses,” she added.
When I asked Mendelson’s office and the council’s budget director for a copy of the various priority lists, his spokesperson, Lindsey Walton, told me via email that “the document you’re requesting is an internal deliberative document that [neither] the budget office nor the Chairman’s office is circulating publicly.”
That was just the latest episode in the chair’s yearlong campaign to make the DC government a cloaked operation, preventing residents from knowing in advance actions being taken by their government — a government that they finance with their hard-earned money, including covering salaries of elected officials like Mendelson.
The claim that a spreadsheet discussed during a meeting of the council accessible to the public via Zoom is a “deliberative document” is laughable.
The city’s economic conditions and its current and future budget woes are no laughing matter, however, and elected officials are obligated to present a clear and detailed report to the public on the issues at hand and their decision-making process. After all, the legislature — not the mayor, and not the CFO — is the only local appropriator, as Mendelson likes to boast.
It is more than that, however. It is also the overseer and the enforcer. The chair and each member should be held to account if the District actually goes over that fiscal cliff.
jonetta rose barras is an author and DC-based freelance journalist, covering national and local issues. She can be reached at thebarrasreport@gmail.com.