Mayor Vincent C. Gray speaks on Thursday after discussing his proposal. (Aaron C. Davis/The Washington Post)

Mayor Vincent C. Gray’s final D.C. budget proposal, released to lawmakers Thursday, rejects several of the most ambitious and controversial tax changes recommended by a blue-ribbon commission last year.

Gray’s budget proposal for fiscal 2o15 includes a new, lower income-tax bracket for residents in the $40,000-to-$60,000 range, a change that would yield $200 in annual savings at the top of the range. Not included are commission recommendations for more dramatic structural changes in the city’s income and sales taxes and for a $25-per-employee fee to be levied quarterly on District employers.

Gray’s spending plan came two days after his loss to D.C. Council member Muriel Bowser (Ward 4) in Tuesday’s Democratic mayoral primary. Its submission kicked off an unprecedented nine-month lame-duck period for the 71-year-old mayor.

The budget proposal, which will be reworked by the D.C. Council in the coming months, calls for $10.7 billion in overall spending, $6.8 billion of which would be raised through local taxes and fees. Spending of local money would increase by 7 percent, officials said, 2.3 percent more than needed to maintain current services.

In a briefing to the council, Gray said that the spending plan was structurally sound and that it would boost reserves for a third year in a row, honor the city’s debt cap and move the city closer to a top-flight bond rating.

Gray's proposed budget


See Gray's spending plan released Thursday. Read it.

“There are no tax increases and no fee increases, and it is balanced, period,” Gray said. “So those who may be searching for that, I’ll save you time.”

Bowser did not attend the briefing. But she promised Wednesday to dig “deeply” into the budget proposal, “to make sure there are priorities I can support when I get in office.”

City officials said Gray rejected key revenue-raising recommendations of the D.C. Tax Revision Commission — including the per-employee “local services fee” on employers and a sales tax increase — as political non-starters.

The rejected recommendations would have produced additional revenue to fund other proposals, including income tax relief for low-income residents and a more substantial cut in business taxes. Many of those unfunded proposals appear in Gray’s budget on a “wish list” of priorities to be pursued later, if revenue projections improve.

Many of the more-ambitious proposals in Gray’s budget were rolled out during the primary campaign. They would provide $300 million for a new hospital on the St. Elizabeths Hospital campus in Ward 8, $116 million for education initiatives to benefit at-risk children and $8.5 million to reduce property taxes for senior citizens.

One of Gray’s new commitments would provide the first increases in welfare benefits for low-income families in nearly two decades. Gray has proposed cost-of-living increases in payments from the joint federal-local Temporary Assistance for Needy Families program over the next two years, followed by a larger boost in 2016 to bring the District’s benefits in line with those provided in Maryland.

Currently a family of three with no income is eligible for $428 a month in TANF assistance. The local cost of Gray’s plan over four years is estimated at $26 million.

Council member David A. Catania (I-At Large) — who chairs the council’s education committee and is running against Bowser for mayor in November — challenged Gray on the distribution of tens of millions of dollars for school improvements.

Catania said he was particularly dismayed that Gray would set aside $62 million to renovate the former Spingarn High School as a career and technical education center when a similar school, Phelps, is nearby. The money, he said, would be better spent to rehabilitate the Duke Ellington School of the Arts and establish an application-only middle school in Ward 7.

Gray’s budget proposes an additional $2 million for programs meant to keep low-income families out of homelessness. An additional $4.7 million would be set aside to help homeless veterans.

Council member Jim Graham (D-Ward 1) and advocates for the homeless asked why Gray did not include funding to begin to replace the city’s shelter for homeless families at the former D.C. General Hospital campus. Nearly 300 families have been staying at the crowded, run-down shelter, and 400 more are being lodged, at city expense, in motel rooms in the District and Maryland.

Gray has promised to move 500 homeless families into more permanent housing by summer. He said Thursday that his administration had identified 150 to 200 apartments to begin that process. He said he would like to empty the D.C. General shelter and never have to fill it again.

One big-ticket item not included in Gray’s budget — an omission that could prove politically explosive — is a new college scholarship program, D.C. Promise, that is a priority of Catania’s. The proposal would require about $8 million in fiscal 2015, increasing to more than $20 million in fiscal 2017. Gray continues to worry that the program could place at risk tens of millions of dollars in federal scholarship funding, his aides said Wednesday.

Catania said he will look for funding to launch the scholarship program despite warnings from Del. Eleanor Holmes Norton (D-D.C.) that a locally funded initiative could imperil the federally funded Tuition Assistance Grant program. But he said he was pleased that Gray would increase funding, by about $2,000 more per student, to benefit schools serving at-risk children, a change mandated in a bill Catania authored last year.

“You take your victories where you can get them,” Catania said.