D.C. Faces $1B Budget Cut After Senate Passes National Spending Bill

The 99-page spending package passed narrowly Wednesday in the House of Representatives, largely along party lines, before making its way to the Republican-led Senate. The bill, first introduced March 8, caught many lawmakers and officials in D.C. by surprise — not for what it contains, but for what it leaves out. The bill omits language that would allow the District to spend its fiscal 2025 local budget, effectively relegating it to its fiscal 2024 budget instead, despite previous approval from Congress, for a difference of some $1.1 billion. 

D.C. Mayor Muriel Bowser and other District officials for days attempted to voice concerns over how the drastic reduction in spending could negatively affect the District — apparently to largely deaf ears. Aside from its “potentially devastating” impacts to D.C.’s operating budget, the bill essentially treats D.C. as a government agency, she said at a press conference outside the Capitol building earlier this week.

“But we are not a federal agency,” she said. “We are a city, county, state all at once, and we provide direct services to the people of the District of Columbia, visitors to the District of Columbia, businesses in the District of Columbia, diplomats and visiting heads of state and everyone who works here in the Congress.”

The District has operated under “home rule” since 1973, though Congress still approves its yearly budget under its appropriations process, despite the fact that most of its funds are made up of local tax revenue. The latest spending bill requires 60 votes in the Senate to avoid a filibuster, which at this point in the process would all but force a government shutdown. 

“The omissions constitute a dramatic escalation in the Republican effort to undermine what small measure of democracy and autonomy the more than 700,000 residents of the nation’s capital currently have,” Eleanor Holmes Norton, D.C.’s non-voting delegate to the House of Representatives, said in a statement earlier this week.

Such a drastic reduction in funds could affect everything from D.C.’s police department, emergency services, schools and other departments that make up the bulk of its annual spending, Bowser said in a memo to Congress this week. The deficit could also force up to $600 million in cuts to its Capital Improvements Plan, a six-year plan that identifies and funds upgrades to the city’s infrastructure, such as roads, bridges and its Metro system, she said. 

The plan also includes the District’s $515 million project to renovate Capital One Arena and part of its surrounding area, the deal Bowser negotiated with Monumental Sports and Entertainment founder and chairman Ted Leonsis last year in order to keep the Washington Wizards and Capitals professional sports teams within D.C. rather than move to Northern Virginia. The D.C. Council in December approved a plan to pay $87.5 million to Monumental for the arena, and then lease it back to the company for $1.5 million annually until 2050. Monumental pledged to spend the proceeds for the sale, alongside an additional $285 million, toward the improvements. 

Work on the arena project has already begun, leaving the District with more questions than answers of how it could fund its end of the bargain with Monumental if the budget cuts come to pass. 

Renovation and improvement projects aside, finding viable cuts elsewhere in the city at this point in the fiscal year is far more complicated than it seems. The District has committed hundreds of millions of dollars to programs and city agencies that it can’t nix without serious consequences, according to Yesim Sayin, executive director of the D.C. Policy Center. 

That includes $110 million added to D.C.’s debt service in 2025, non-payment of which would be disastrous for the city’s bond rating, as well as $90 million in added pension contributions. Non-payment of those commitments would raise questions about D.C.’s ability to control its own finances, Sayin said. 

The District of Columbia Financial Control Board, established by Congress in 1995 and suspended in 2001, had the power to overrule D.C.’s mayor and council on financial matters. President Trump has in recent days suggested the federal government should “take over” D.C., and re-establishing the control board could be a way for the federal government to reassert its control.

Local revenues in D.C. were already expected to drop by as much as $1 billion over the next three years compared to past estimates, largely due to steep federal worker layoffs amid the Trump administration’s cost-cutting efforts, according to a late February forecast from the office of D.C. Chief Financial Officer Glen Lee. Credit rating agency Moody’s has since placed the District’s credit rating under review for a potential downgrade from its Aaa rating. 

“It is very difficult and I don’t know how we’re going to do it,” Sayin told Commercial Observer. “I really would not want to be the mayor, any of the council members or the [chief financial officer] for the city right now. They have a tremendously difficult job on their hands.”

Nick Trombola can be reached at ntrombola@commercialobserver.com.