D.C. Council Passes Budget, but Fight With CFO Continues

The D.C. Council on Tuesday finalized a $21.2 billion budget for the 2027 fiscal year, restoring funding for social services that Mayor Muriel Bowser had proposed cutting while at the same time finding itself locked in a showdown with the city’s chief financial officer over how it did so.

The dispute – in which neither side yet seemed willing to blink – could have significant implications, potentially attracting congressional intervention and throwing D.C.’s long-standing fiscal stability into question.

It involves $150 million that Chairman Phil Mendelson is pulling out of one of D.C.’s four rainy-day funds as part of a broader $420 million move to undo cuts that Bowser had made to health care programs, child care subsidies, housing vouchers and cash assistance for low-income residents.

Mendelson has insisted that the council is only drawing a small amount from the city’s reserves, will pay it back if more money becomes available, and is acting within its legal authority as the keeper of D.C.'s purse strings.

“We’re not doing anything we have not done in the past,” he told NOTUS on Tuesday afternoon.

But Chief Financial Officer Glen Lee has increasingly raised objections to the council’s move, calling it “imprudent” this week and saying that the money is needed to address the city’s cash flow needs over the course of the year. He also lobbed what was seen as an indirect threat at lawmakers, warning in a statement that “should the Council persist with approving a budget that uses reserves to support spending, the Council would be approving an unbalanced budget and financial plan.”

The use of the word “unbalanced” wasn’t lost on the council, as D.C. law dating back to the financial crisis of the 1990s that prompted intervention by a federal Control Board requires that the legislative body pass a balanced budget. Mendelson insisted on Tuesday that the budget would be balanced and that the law was on the council’s side.

But others are more concerned that Lee’s admonitions could be taken more seriously in Congress, where Republicans have demonstrated an aggressive interest in the city’s local affairs.

“I agree the legal footing is sound, but there is also politics, and I worry the politics aren’t in our favor if the CFO goes to the Hill and says the council is passing a budget that isn’t balanced,” said Ward 5 Council member Zachary Parker.

“That could be very dangerous,” said D.C. Auditor Kathleen Patterson, who has called on the council and the CFO to find a way to peacefully coexist. “It’s hard to know what would happen, but it’s never good to have bad working relationships with the Hill.”

The sniping comes amid a difficult budget year and expectations that things will only get more challenging in the near future, largely because of significant cuts to the federal workforce and consequent souring of the local economy. An initial indicator of where D.C.’s fiscal situation stands will come next week, when the CFO will release a quarterly revenue estimate. If the estimates are bad enough, lawmakers could be forced to adjust the 2027 budget they just passed.

What the council avoided for now is any tax increases – though those could be coming as soon as later this year. “We’re going to have to go there,” Mendelson said this week.

He has promised to hold a public hearing in the fall where revenue-raising options will be discussed. To that end, this week Ward 1 Council member Brianne Nadeau introduced a bill that would impose a 3% surtax on capital gains for residents making more than $400,000 a year or households making more than $500,000 – a wealth proceeds tax, as she calls it.

“The people of the District deserve a full hearing where they can weigh in on the options before us,” said Ward 4 Council member Janeese Lewis George, the Democratic nominee for D.C. mayor who may inherit significant fiscal challenges if she wins the November general election.

In a letter to the council last weekend, Bowser painted a dark picture of what her successor could face. “A new Mayor and Council will take office under enormous pressure to deliver on campaign promises – only to find every dollar of future revenue is already spoken for,” she wrote.

On Tuesday, Lewis George also repeated her past calls for D.C. to adopt a Business Activity Tax, which would target law firms, lobbying groups and consultants who work in D.C. but may not pay the city’s usual business taxes.

“There is still important work to be done to ensure that out-of-state corporations that benefit from our resources and infrastructure are paying their share of taxes,” she said.

Independents Finally Get Right To Vote

As part of Tuesday’s final vote on the D.C. budget, the council also moved to expand voting rights for tens of thousands of residents who are currently shut out of the city’s partisan primaries.

Lawmakers voted to spend $1 million to open those primaries to D.C.’s 86,000 independent voters, who can currently only cast ballots in general elections. The proposal to open the primaries was approved by D.C. voters as part of Initiative 83 in November 2024; that was the same initiative that brought ranked-choice voting to the city.

“We all have constituents who are federal employees and are not affiliated with a particular party, or simply residents who have not chosen to join a party. They deserve a meaningful voice,” said At-Large Council member Christina Henderson, herself an independent. “We should not be telling our residents that our price of admission to democracy in the District is changing their voter registration.”

Opening D.C.’s primaries to independent voters had drawn opposition from Democratic Party officials and activists, who worry that it would water down the party’s brand and allow conservative-leaning voters more power to shape who runs for office in the city. The council narrowly rejected a move last year to implement open primaries, but past skeptics – including Ward 5’s Parker – changed their vote this year.

“It is an opportunity for us as a District to make perfect our own local democracy while we’re fighting on the national level for [statehood]. I think we should respect the will of the voters,” Parker said, noting that Initiative 83 was supported by 73% of D.C. voters.

The first chance for independents to vote in D.C. elections will come in 2028.