Heavy doses of fiscal fantasy in DC politics

RECENTLY, during a breakfast meeting with members of the DC Council, Mayor Muriel Bowser and senior managers of her administration reported on the dismal state of the

District’s current and future finances, going into particular detail on two areas of concern — health care and child care — though there are more than a half-dozen others. While working to develop the fiscal year 2027 budget, the executive branch team determined that maintaining the current level of programs and services could leave the city with a potential $1.15 billion shortfall. 

In years past, District officials have frequently closed the gap between revenues and expenditures by tapping into one of four emergency reserve accounts or applying end-of-the-year surpluses that should have gone in one or more of those funds. They likely will try to use that same formula to make adjustments to the current FY 2026 spending plan and in their formulation of next year’s budget. 

FY 2026 contains at least $300 million in one-time spending that will expire at the end of September. In order to retain those expenditures in the upcoming fiscal year, officials will need to find new money. Further, there are reductions that would take effect beginning Oct. 1 — the start of FY 2027 — unless councilmembers reverse decisions they made last year. 

Complicating those choices, City Administrator Kevin Donahue said the additional revenue available for the FY 2027 budget is likely to be less than $10 million, although the chief financial officer later in the day suggested that figure might reach $100 million — still far short of the amount needed to cover rising costs. Donahue said this week’s mayor-council meeting was convened to ensure both branches were not “operating in different realities.” 

If he thought that a two-hour gathering, replete with a PowerPoint presentation, was a road to unity and collaboration, he should fuhgeddaboudit.

DC Councilmember Janeese Lewis George

Within hours of that sobering fiscal discussion, Ward 4 Councilmember and mayoral candidate Janeese Lewis George outlined a plan via email that figuratively amounted to someone purchasing a multimillion-dollar mansion and Aston Martin after receiving notice of a pay cut. 

“I will fully fund DC’s existing childcare programs, so no family is on a waitlist, and no educator faces a pay cut,” Lewis George wrote in her campaign email.

Call that the umpteenth chapter in the era of magical thinking by District elected officials.

DC currently provides child care subsidies for 7,380 children. There are 294 providers in the program. According to officials, projected payments for FY 2026 total $132 million — creating a $32 million funding gap.

“The projected payments are above budget,” officials noted on one of the slides presented at the meeting.

Interestingly, Lewis George’s plan knocked down possible solutions outlined hours earlier by Bowser’s team to deal with child care challenges: Establish a one-size-fits-all pay structure for providers; create a waitlist that would prevent the city from offering subsidies beyond the money it has at its disposal; and reduce its payments for child care on days DC Public Schools are closed. 

That blend of changes, yielding less than $13 million in savings, is not nearly enough to address the budget gap, however. 

Truth be told, DC has serious financial and management issues. That much is clear from even a cursory read of its Annual Comprehensive Financial Report, which was the subject of a council roundtable on Tuesday, the same day as the mayor-council breakfast meeting. 

In a preface to the report, Kimberly Williams, deputy chief financial officer and controller in charge of the Office of Financial Operations and Systems, wrote that the city’s population has rebounded after losses during the pandemic. She also indicated that as of Sept. 30, 2025, the end of the last fiscal year, there were 40,100 fewer jobs in DC; the unemployment “not seasonably adjusted rate” was 6.90%, up from 5.20% in 2024. Rents for commercial offices went up about 0.30%, but the vacancy rate is near 18%. Hotel occupancy is only at 69.20%. The poverty rate in DC is less than 20% but far higher than the national rate of 10.60%. The city’s middle class apparently continues to shrink.

The audit was conducted by a team that included experts from F.S. Taylor & Associates and independent certified public accountants with CliftonLarsonAllen LLP. The District may have received a clean or “unqualified” report, but the accompanying “management letter” included a material weakness related to a loan from the Housing Production Trust Fund and more than two dozen deficiencies around control of technology systems and files.

In fiscal year 2025, the period covered by the audit, federal government funds issued during the COVID-19 pandemic were exhausted, forcing the city to use its own money to offset those losses.

The can has met the end of its road.

While revenues may have grown in some categories, auditors noted that “expenses also increased such that at the end of the year expenses were higher than revenues, a circumstance which also decreased [the District’s] net position.”

The city’s long-term liabilities, which represent “86.90% of total liabilities, increased by $1,800,609, or 10.86% from the prior year.”

Williams also noted in her letter that the infrastructure needs of DC “are significant.” The District maintains a $10.71 billion spending plan for its capital needs through 2030. “However, the overall need for new or replacement facilities and maintenance of existing facilities far exceeds this funding level.”

The District faces nearly $6 billion of “additional unmet needs that cannot be funded during this Capital Improvements Plan period,” added Williams. That calculation is based on an inventory that encompasses land, buildings, roadways, vehicles and equipment. 

Does that explain why snow removal efforts after the recent storm were so abysmal? 

DC Chief Financial Officer Glen Lee

Things may get worse if legislators continue to engage in performative sparring with Bowser and DC Chief Financial Officer Glen Lee as DC Council Chair Phil Mendelson and others did earlier this week, rather than work with them collaboratively to prevent the city from falling over that proverbial cliff.

It was apparent to me, spending almost the entire day as I did Tuesday monitoring the various meetings around budget and finances, that some councilmembers need a tutorial. The only legislator who seemed to demonstrate any measurable dexterity to engage was Ward 3’s Matt Frumin. Others read questions prepared by their staff; experts may have provided answers but elected officials seemed unable to contextualize those responses. 

Solving the city’s fiscal problems isn’t just a game of where to move the numbers or how to embarrass the mayor and CFO. The lives of about 700,000 people are connected to the budget.

Even the old, tried and true methods for plugging holes have lost their magic. Fitzroy Lee, deputy chief financial officer and the city’s chief economist, told Mendelson and others that non-tax revenues are underachieving; there was a drop of about $103 million. That category includes business licenses and permits and automated traffic enforcement tickets.

What?

“We face serious financial challenges at the federal and local levels,” said Donahue. “All of us, the executive and the council, need to make tough decisions.”

This is election season. Pols like Lewis George, who is facing former at-large Councilmember Kenyan McDuffie, among others, in the Democratic primary for mayor, are focused on winning — maybe even if it means promising what can’t be delivered.

“When I’m mayor, every family will be eligible for childcare assistance and no family will pay more than 7% of their household income on childcare, with many families paying less and some paying nothing. If you’re a family of three with one child making $100,000 a year, you’ll pay no more than $7,000 a year, or $583 a month,” Lewis George wrote in an email in which she also asked recipients to donate money to help her get elected.

Maybe she is partially driven by family circumstances. Last year, she gave birth to her first child. It appears she suddenly is shocked by the cost of child care, although she is in her second term as the Ward 4 representative. Also, Lewis George’s aunt is an early childhood educator.

“I will build on the success of DC’s Early Childhood Educator Pay Equity Fund, a program I championed, to guarantee good wages and benefits for educators,” she wrote, offering that she will boost investments, create a dedicated facilities grant fund, and co-locate established programs in underutilized school buildings and District-owned facilities.

“I’ll pay for these investments by phasing them in over time, finding savings in DC’s budget, and closing tax loopholes,” added Lewis George.

A self-identified democratic socialist, she is undoubtedly hoping the issue will catapult her into the mayoral suite the way it helped Zohran Mamdani in New York City. Universal free child care was a major element of his platform in what initially seemed like an improbable campaign to become mayor of one of the country’s top urban centers.

Mamdani eventually won. He has subsequently persuaded New York Gov. Kathy Hochul to support the first stage of his program, which targets 2-year-olds; his goal is ultimately to extend it to ages 5 and younger.

The District is no New York City. DC does not have an independent state government that can tap the resources of other jurisdictions to help fund a politician’s pet project. 

DC has the U.S. Congress. Both houses are currently under the control of President Donald Trump, who is more interested in building ballrooms, placing his name on a living memorial to a beloved deceased president, and raiding years-old voting records to prove he won an election that he actually lost. 

Children and child care are nowhere near Trump’s radar.

Considering this month’s votes in the House and Senate to repeal DC legislation disconnecting local tax codes from the recently approved One Big Beautiful Bill Act, District officials who hope to solve the city’s fiscal challenges and retain sacred programs may want to steer clear of anything that looks, walks or quacks like a tax hike.