The Squabble Over How to Handle DC’s Budget Deficit

D.C. is facing an estimated budget deficit of $600 million to $800 million for the next fiscal year as covid relief dries up and pandemic effects linger. It could mean service cuts and increased taxes in 2025.

What Led to the Deficit?

D.C. makes a lot of its revenue from property taxes on office buildings. As office vacancy rates grew during and since the pandemic, building values dropped, which means less money flowing into D.C.’s coffers.

Additionally, D.C.’s tourism industry, especially hotels and restaurants, have made less money in the last few years and the federal government has stopped doling out covid relief grants. All combined, that leaves us with a big ole’ deficit.

So How Bad Is It?

When compared to D.C.’s annual budget of $20 billion, $800 million sounds like pennies. However, it could have a major impact on how the city funds public services in 2025, and could lead to some painful cuts.

What’s the Solution?

The two obvious solutions to the deficit are to increase taxes – most likely property or sales taxes – and/or make cuts to city services. However, there has been much dispute among city leaders about how to fill the gap, delaying the budget proposal significantly.

What’s The Hold Up?

D.C.’s Chief Financial Officer Glen Lee is pushing the city to allocate $250 million in its new spending plan to replenish a reserve fund. He says this is also crucial for protecting the city’s bond rating. But Bowser says the last thing the city needs to do is put money aside when it’s already looking at a large deficit and major service cuts.

The ensuing political drama has already forced the city to postpone its budget proposal unveiling once (a first for Bowser). The CFO is now expected to send the files to Council on March 30. But who knows? And more delays mean less time for Councilmembers to debate and settle on a plan that best serves us, the taxpayers funding that pretty little budget.