Those cuts included trimming $4 million from a proposed boost to mental health services and $2.8 million that had been allocated to break up the city’s permitting and licensing agency, and redirecting $11 million to pay for capital projects in cash — a move that will increase the city’s borrowing costs in the long run.
The jostling over the advertising tax followed weeks of tensions at the council over the first budget since the Great Recession in which officials had to make cuts. Legislators who are used to flush revenue projections have less money to work with amid the coronavirus downturn, and are facing more demands to provide relief for struggling residents and businesses.
Council Chairman Phil Mendelson (D) proposed the advertising tax on the eve of the first budget vote, on July 7, and abandoned it in the face of opposition from business groups and local media outlets — including The Washington Post — that would be affected.
Although the budget presented to the council by Mayor Muriel E. Bowser (D) this spring included no tax hikes, the council approved more than $60 million in tax increases earlier this month to fund additional spending on a host of programs, including violence prevention and child-care subsidies.
The tax increases on gasoline, advertising and certain businesses arrived with little public discussion or debate — leading to pushback and complications for the already fraught budget season.
Mendelson said he regrets his role in pushing those last-minute tax increases and would support reviving a tax commission to examine the tax code in a broader way with opportunities for public feedback. He urged his colleagues to rethink their reliance on taxes as a way to fill budget holes, especially when times are tough.
“We just can’t tax our way out of a recession,” Mendelson said in an interview. “We can’t adopt tax policy based on overnight amendments that get support because they are tied to politically popular programs.”
Mendelson’s plan to fill the $18 million hole largely relies on accounting maneuvers, such as borrowing to pay for infrastructure and tapping money from fund balances at agencies such as the Board of Medicine, which drew objections from the Bowser administration.
Officials said the Department of Health, which oversees the board, needs the various funds at its disposal as it scrounges for money for the coronavirus response.
“It’s really irresponsible, in our opinion, to have any reductions to a fund when we may need to have the ability to reprogram money from that fund to cover health department expenses,” said LaQuandra Nesbitt, the director of the D.C. Health Department.
Cuts to social service programs also drew scrutiny.
Mendelson said he removed some funding for mental health services because it was less likely to be spent than funding for other areas. He noted that the council is still providing a $5.5 million increase in mental health spending over what the mayor had proposed.
He also pared back recurring funding for rental assistance and homeless services programs, meaning lawmakers would have to again authorize spending increases in future budget cycles.
Council member Brianne K. Nadeau (D-Ward 1) blasted Mendelson’s approach to reversing the advertising tax, criticizing him for tapping infrastructure funds he usually urges the council not to touch and for only consulting select lawmakers before deciding what to cut.
“I’ve never been so proud to not be invited to the popular kids’ table,” said Nadeau, who along with David Grosso (I-At Large) voted against the plan to repeal the ad tax.
Mendelson fired back Thursday against advocacy groups that are calling the city’s funding for various aid programs insufficient. He said the District was in a far better place financially than many state and local governments that are confronting steeper declines in revenue and shallower financial cushions.
“You would think, to hear some of the advocates, that we’ve done nothing,” Mendelson said at the council meeting before ticking off areas in which lawmakers have boosted funding. “Yes, you can look at a budget and see if we are caring for the downtrodden. So look at ours. Look at these changes we’ve made, and don’t preach to us about morality.”
Officials are bracing to see revenue for next year’s budget decline further, with revised projections coming out in August, potentially forcing them to revise the $8.6 billion portion of the budget controlled by the city.
“We are heading into a different budget reality than the one that most of us have seen since we’ve been on the council,” said Council member Robert C. White Jr. (D-At Large). “These are the first of what I think are a lot of very difficult decisions that we are going to have to make.”
Julie Zauzmer contributed to this report.