(Washington, DC) – Today, Mayor Muriel Bowser testified in support of her Fiscal Year 2025 Budget, A Fair Shot: Strategic Investments and Shared Sacrifice.
Below is the Mayor’s full testimony, as delivered:
Good morning, Chairman Mendelson and members of the Council. I am pleased to testify before you today on my Fiscal Year 2025 Budget.
Through strategic investments and shared sacrifice, this budget invests not only in a safer, stronger DC right now, but it looks ahead three, four, and five years and includes investments that will accelerate our comeback and increase our capacity to make big investments in the outyears of our financial plan.
So, while we approached this budget soberly and with financial prudence, we also know that the state of Washington, DC is strong. We continue to have a Aaa bond rating; DC is the number one city in the country for tech careers and among the top cities for women-owned business openings; we are leading the nation in office-to-housing conversions; tourism is rebounding; our public school enrollment is up two years in a row; crime is trending down; and unlike many of our peer cities, our population is growing.
Since 2015, our annual operating budget has grown by 70%, from $11.7 billion to $19.8 billion, and our capital budget has also increased by 62%. Over a decade, the value of our commercial properties grew by 44%. And this growth has allowed us to make significant investments in all eight wards and in all of our people:
- We modernized 45 schools and eight libraries, including the phenomenal Martin Luther King Jr. Memorial Library.
- We renovated 73 recreation and community centers.
- We broke ground on a new full-service hospital on the St. Elizabeths campus that will open next year.
- We opened the Entertainment and Sports Arena in Ward 8 and Audi Field in Ward 6, two wards now connected by the largest infrastructure project in District history: the new Frederick Douglass Memorial Bridge.
- We invested more than $1.5 billion into the Housing Production Trust Fund, making us the jurisdiction with the largest per capita investment in affordable housing.
- We transformed the Walter Reed campus in Ward 4 and are similarly transforming the McMillan campus in Ward 5.
- We closed down DC General; we opened smaller, more dignified shelters across DC; and drove down family homelessness.
- We used the Food Access Fund and Neighborhood Prosperity Fund to help open more than a dozen restaurants and other food access points in Wards 7 and 8.
- We used the Commercial Property Acquisition Fund to help local entrepreneurs turn rent payments into mortgage payments so that they can stay and grow in DC.
Our growth and prosperity also supported a strong pandemic response that then turned into a strong recovery and now a strong comeback.
The fiscal year 2025 budget and financial plan is made up of $21 billion in operating funds and $11.8 billion in capital funds. It addresses the reality we’re in right now – the confluence of post-COVID economic factors: slower economic growth; the end of federal stimulus funding; significantly higher operating costs, including an additional $200 million in WMATA funding, that will grow during this financial plan; and the impacts that you heard from the CFO.
Of course, our budget is unique because we are required to have a balanced five-year financial plan across not only this fiscal year but the upcoming four years. The result of these factors is a widening gap across the plan that requires us to make prudent investments now that change the trajectory of our out-year revenue estimates. In other words, what we do right now lessens the likelihood of the dim revenues currently projected by the CFO.
So, the big question for this budget is: how do we change the trajectory? We must be smart. We must be strategic. And we must value each of our investments, whether they are efficient and how it moves us closer to the DC that we want to be five years from now. And we must stick together.
To help us close the gap and make the right investments for our future, we created a set of guiding principles that reflect our values and goals:
- First, we focused on maintaining and enhancing the core services of city government and preserving programs and services that protect the health and safety of our community.
- We prioritized programs with track records of success that focus on equity.
- And for the District’s long-term stability, we worked to reset spending so that it aligns with our resources, and we focused new spending on three pillars: public safety, public education, and the Downtown.
You will see these values reflected across the budget, and you will also see examples of where we worked very hard to save some of the projects and programs that we know are important to you.
We were able to close just over half of the gap through good government efficiencies and by rightsizing programs across District agencies. This included eliminating vacancies, negotiating better leases, and even turning off devices that were no longer being used. We also scaled back programs with unsustainable growth, recalibrated service levels, cut duplicative programs, eliminated low-priority programs, and, in doing so, we looked holistically across the budget as we weighed the impacts of each decision.
For example, we weren’t able to save the Circulator, but we were able to fully fund Metro so that we can avoid painful cuts, build on the progress that has brought riders back to our system, and continue moving riders to and from many of the same points that the Circulator currently serves.
I also scaled back a program that many of you know is important to me. This budget includes a $60 million investment in the Housing Production Trust Fund that we collect from our deed recordation taxes, not the $100 million that I’ve made a hallmark of my tenure. Adding only $60 million to HPTF means that some very worthy programs may not have funding. But we also know that it allows us to invest in other programs that you, in your letters and comments, have shared are a high priority to you, including more funding the Emergency Rental Assistance Program at $20 million. More funding for the HPAP program, which will allow more DC residents to get HPAP assistance. Just like we have done in resetting our public safety ecosystem, we will need to focus on our rental housing ecosystem. It needs our attention.
In some cases, we found programs that were previously created to fill gaps in services, but that we no longer need. For example, Career Connections – I created it back in 2015. But now, we know with our Advanced Technical Centers, we are better able to invest in the needs of our young people, preparing them for college and career – we are expanding in Ward 5 and opening a second location in Ward 8, and the DC Infrastructure Academy which will open in a new permanent at the historic Spingarn High School.
With this budget, we are also shifting some funding to the Department of Human Services so that agency, which already supports many of our most vulnerable families, can play a bigger role in working with families to address chronic absenteeism and truancy. Today, I will also share a legislative package that supports these investments and that will help our community more strategically address truancy and youth violence.
So, that is how we closed half of the gap: through savings within the government. In fiscal 2025, this saved us approximately $500 million. We looked to see if we could go deeper, but going deeper would mean cuts to programs that I know none of us would like to touch, including Medicaid for single adults. I know that there will be some questions about which programs we chose to scale back and rightsize, and my team and I will be in the community at budget hearings over the coming weeks to answer these questions.
But reductions alone were not enough. In some years, it got us close to covering our base costs and must-fund items but left no additional funding for the types of catalytic investments that will fuel our comeback. So, to close the remainder of the gap, we identified new revenues that will be shared across the community. To fill $300 million in fiscal year 2025:
- Businesses will help through an adjustment to the Paid Family Leave tax that will take that tax back to fiscal 2021 levels to support our human services safety net.
- And guests will help through a small 911 fee on hotel stays to support increased public safety hiring.
And if, after fiscal year 2025, we still have gaps, then beginning in fiscal year 2026, consumers will help through a modest sales tax increase to support increased Metro costs.
You know by now that I don’t take revenue increases lightly. I’ve said very pointedly to residents and to our businesses that if taxes have to be raised, I’ll tell you and tell you why. And I will be able to assure you that we are putting them to the economic growth of our city that allows us to invest in the programs and services that reflect our values.
So, I am sure you’ve noticed by now that we were able to balance this budget with no property tax increases, none on our residential property, none on our commercial property. And no increases to income taxes. This includes protecting the 2% cap on annual increases in property taxes for our senior residents. We also didn’t create any new taxes.
The combination of interventions we chose was largely based on two factors: we already know, from past experience, for example, the impact of adjusting the Paid Family Leave tax and second, we had to make the math work. Adjustments to the income tax or property tax simply won’t close the gap. For example, raising taxes on high-income earners, which the Council has already done just a few years ago, would only bring in $62 million a year – that’s just 25 percent of what Paid Family Leave adjustment yields. And in order to raise the same amount of resources through residential property tax, we would have needed to raise the residential property taxes by 18 percent – a tax category where we are currently leading the nation.
So again, the District is unique in that we must submit a balanced budget across five years. No one else does this. We know from past experience that estimates for the outyears tend to be wrong. They’re just too far away for us to predict what circumstances will be. But, because of this, some are burdened by pessimism; I am not. I will always be a responsible steward of taxpayer dollars; but being responsible should not prevent us from thinking big and being realistic about our ability to change the revenue projection three or four years from now. As the mayor, it is my job and mine alone to propose a budget to this body that reflects the needs, the tradeoffs, and policy vision for Washington, DC – and it is yours alone to consider and ultimately pass the budget.
As I said at the outset of my remarks, the state of the District is strong. People want to live here. People want to do business here. And people know that we mean business. And that is what we want: we want to be a city that people are excited about. I say to many people, “No one wants to be a city where people are leaving, businesses are failing.” And my hope is that, throughout this budget process, we’re able to stick together to keep Washington an attractive place for residents, business and visitors.
I am grateful for the Council’s lockstep partnership on our deal to keep the Wizards and Capitals in DC; and I was proud that everyone recognized what I knew to be true: DC is the best place for an important business and employers like Monumental Sports to create jobs and grow their footprint. Collectively, we recognize the important role that the arena plays in a thriving Downtown and our ability to invest in services and programs that support all eight wards. I know that by continuing to work together – by striking the right balance between investments and sacrifice and by prioritizing investments that will kick off more revenues for the District – we will get back to the economic growth levels that have fueled the renaissance of modern Washington.
Five years from now, we will look back on this budget and know its impact. But we get to decide, today, and over the next 70 days what that future will look like. Again, I am optimistic. DC is a global capital, we lead. Let’s keep leading. The world has learned by now: never bet against cities; and especially, never bet against this one. We are a resilient city. We never give up. We know how to make a strong comeback. But our wins are also not accidental. We’re smart, creative, and strategic. This is the spirit of my fiscal 2025 budget. It’s smart, it’s responsible, but most important, this is a budget that will keep DC the best city in the world.
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