By Chris Kain
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Mayor Muriel Bowser and her team today laid out dire fiscal challenges they must address in developing a balanced budget next year, with a hypothetical shortfall of at least $1.15 billion if DC were to continue all services and programs at their existing levels.

Part of the budget pressure is due to $450 million in expected cost increases, officials said at this morning’s mayor-council breakfast, but another major aspect is the virtual depletion of “time-limited resources” — referring primarily to the use of the District’s accumulated surplus to balance the budget over the past five years. The combined effect, at a time of modest revenue growth, will mean the Bowser administration and the DC Council will face a number of difficult policy decisions.

Current estimates indicate that just $9.6 million in new revenue will be available in FY 2027 under the current four-year financial plan, City Administrator Kevin Donahue and Budget Director Jenny Reed said in their presentation. Meanwhile, the city faces multiple cost increases, including $24 million for the Washington Metropolitan Area Transit Authority and $175 million to cover expected overtime costs across the DC government. The adopted financial plan also incorporated reduced funding in the out years for violence intervention, emergency rental assistance and other programs that are often identified as priorities by advocates and lawmakers — ensuring controversy if funding is not restored.

“This is a really hard budget,” said Donahue, who cited his 25 years of experience within the DC government. “This is as hard as anything we did in the recession.”

Even with considerable cuts last year to Medicaid and DC’s other health insurance programs, costs are projected to continue rising above the prior year’s budget, officials said. Despite tightened eligibility requirements, 41% of DC residents are receiving publicly funded health care.

There’s also a projected $32 million gap in FY 2026 for the District’s child care subsidy program, due in part to enrollment growth and an increase in the number of facilities designated as high-quality and therefore eligible for higher payments. Policy options to reduce the budget gap include implementing a waitlist for any new applicants — rather than accepting all eligible applicants, per the current procedure — and paying the standard rate to all providers.

“It’s a pressure that we know is growing,” Donahue said.

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