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THE WHITE HOUSE PROPOSAL FOR THE DISTRICT OF COLUMBIA
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JOINT HEARING
before the
SUBCOMMITTEE ON THE DISTRICT OF COLUMBIA
of the
COMMITTEE ON GOVERNMENT
REFORM AND OVERSIGHT
HOUSE OF REPRESENTATIVES
and the
SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT
MANAGEMENT, RESTRUCTURING AND THE
DISTRICT OF COLUMBIA
of the
COMMITTEE ON GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED FIFTH CONGRESS
FIRST SESSION
__________
MARCH 13, 1997
__________
Serial No. 105-24
__________
Printed for the use of the House Committee on Government Reform and
Oversight and the Senate Committee on Governmental Affairs
42-281 U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1997
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpr.gov Phone: toll free (866) 512-1800; (202) 512ÿ091800
Fax: (202) 512ÿ092250 Mail: Stop SSOP, Washington, DC 20402ÿ090001
COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
J. DENNIS HASTERT, Illinois TOM LANTOS, California
CONSTANCE A. MORELLA, Maryland ROBERT E. WISE, Jr., West Virginia
CHRISTOPHER SHAYS, Connecticut MAJOR R. OWENS, New York
STEVEN SCHIFF, New Mexico EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California PAUL E. KANJORSKI, Pennsylvania
ILEANA ROS-LEHTINEN, Florida GARY A. CONDIT, California
JOHN M. McHUGH, New York CAROLYN B. MALONEY, New York
STEPHEN HORN, California THOMAS M. BARRETT, Wisconsin
JOHN L. MICA, Florida ELEANOR HOLMES NORTON, Washington,
THOMAS M. DAVIS, Virginia DC
DAVID M. McINTOSH, Indiana CHAKA FATTAH, Pennsylvania
MARK E. SOUDER, Indiana TIM HOLDEN, Pennsylvania
JOE SCARBOROUGH, Florida ELIJAH E. CUMMINGS, Maryland
JOHN B. SHADEGG, Arizona DENNIS KUCINICH, Ohio
STEVEN C. LaTOURETTE, Ohio ROD R. BLAGOJEVICH, Illinois
MARSHALL ``MARK'' SANFORD, South DANNY K. DAVIS, Illinois
Carolina JOHN F. TIERNEY, Massachusetts
JOHN E. SUNUNU, New Hampshire JIM TURNER, Texas
PETE SESSIONS, Texas THOMAS H. ALLEN, Maine
MIKE PAPPAS, New Jersey ------
VINCE SNOWBARGER, Kansas BERNARD SANDERS, Vermont
BOB BARR, Georgia (Independent)
------ ------
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
Judith McCoy, Chief Clerk
Phil Schiliro, Minority Staff Director
------
Subcommittee on the District of Columbia
THOMAS M. DAVIS, Virginia, Chairman
CONSTANCE A. MORELLA, Maryland ELEANOR HOLMES NORTON, District of
ILEANA ROS-LEHTINEN, Florida Columbia
STEPHEN HORN, California THOMAS H. ALLEN, Maine
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
Ron Hamm, Staff Director
Anne Mack, Professional Staff Member
Ellen Brown, Clerk
Cedric Hendricks, Minority Professional Staff Member
COMMITTEE ON GOVERNMENTAL AFFAIRS
FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware JOHN GLENN, Ohio
TED STEVENS, Alaska CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine JOSEPH I. LIEBERMAN, Connecticut
SAM BROWNBACK, Kansas DANIEL K. AKAKA, Hawaii
PETE V. DOMENICI, New Mexico RICHARD J. DURBIN, Illinois
THAD COCHRAN, Mississippi ROBERT G. TORRICELLI, New Jersey
DON NICKLES, Oklahoma MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania
Hannah S. Sistare, Staff Director and Counsel
Leonard Weiss, Minority Staff Director
Michal Sue Prosser, Chief Clerk
------
SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT MANAGEMENT, RESTRUCTURING AND
THE DISTRICT OF COLUMBIA
SAM BROWNBACK, Kansas, Chairman
WILLIAM V. ROTH, Jr., Delaware JOSEPH I. LIEBERMAN, Connecticut
ARLEN SPECTER, Pennsylvania MAX CLELAND, Georgia
Ron Utt, Staff Director
Laurie Rubenstein, Minority Staff Director and Chief Counsel
Esmeralda Amos, Chief Clerk
C O N T E N T S
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Page
Hearing held on March 13, 1997................................... 1
Statement of:
Barry, Marion, Jr., Mayor, Washington, DC; and Charlene Drew
Jarvis, chairwoman, Pro Tempore, Washington, DC City
Council.................................................... 12
Brimmer, Andrew, chairman, District of Columbia Financial
Responsibility Management and Assistance Authority; and
Anthony Williams, chief financial officer, Washington, DC.. 150
Letters, statements, etc., submitted for the record by:
Barry, Marion, Jr., Mayor, Washington, DC:
Information concerning State functions................... 137
Prepared statement of.................................... 65
Two year budget analysis................................. 16
Brimmer, Andrew, chairman, District of Columbia Financial
Responsibility Management and Assistance Authority,
prepared statement of...................................... 155
Jarvis, Charlene Drew, chairwoman, Pro Tempore, Washington,
DC City Council:
Article entitled, ``The Orphaned Capital'', and P.R. 12-
109, chartered resolution.............................. 97
Prepared statement of.................................... 89
Lieberman, Hon. Joseph, a U.S. Senator in Congress from the
State of Connecticut, prepared statement of................ 9
Rogers, Michael, city administrator, cost savings initiatives
and transformation progress................................ 126
Williams, Anthony, chief financial officer, Washington, DC,
prepared statement of...................................... 182
THE WHITE HOUSE PROPOSAL FOR THE DISTRICT OF COLUMBIA
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THURSDAY, MARCH 13, 1997
House of Representatives, Subcommittee on the
District of Columbia, Committee on Government
Reform and Oversight, joint with the U.S.
Senate, Subcommittee on Oversight of Government
Management, Restructuring and the District of
Columbia, Committee on Governmental Affairs,
Washington, DC.
The subcommittees met, pursuant to notice, at 10:10 a.m.,
in room 2154, Rayburn House Office Building, Hon. Tom Davis
(chairman of the House Subcommittee on the District of
Columbia) and Hon. Sam Brownback (chairman of the Senate
Subcommittee on Government Management, Restructuring and the
District of Columbia) presiding.
Present from the Subcommittee on the District of Columbia:
Representatives Davis, Morella, Horn, and Norton.
Present from the Subcommittee on Oversight of Government
Management, Restructuring and the District of Columbia:
Senators Brownback and Lieberman.
Staff present from the House Subcommittee on the District
of Columbia: Ron Hamm, staff director; Howard Denis, counsel;
Anne Mack, professional staff member; Ellen Brown, clerk; and
Cedric Hendricks, minority professional staff member.
Mr. Davis. Good morning. Welcome to this joint information
hearing on the Pesident's National Capital Revitalization and
Self-Government Improvement Plan.
I am particularly pleased today to share the dais with my
good friend and colleague, Senator Brownback, who chairs the
Senate Subcommittee on Oversight of Government Management,
Restructuring and the District of Columbia. As chairmen of the
two authorizing subcommittees, we share legislative
jurisdiction for our Nation's Capital.
I am always cognizant, and I know Senator Brownback is as
well, that our actions have a direct and immediate impact not
only on the District of Columbia, but on the entire Washington
metropolitan region. That is why we must continue to exercise
our leadership with such special diligence and care. For we
have a constitutional oversight for an entire city and its
region, not just a department or agency.
Two years ago, the District of Columbia faced a spending
and management challenge of epic proportions. We began in this
subcommittee a critically important process to address serious
issues in a truly bipartisan manner. I am always happy to
reiterate my gratitude to Delegate Eleanor Holmes Norton for
working with me in such a constructive way.
Two years ago, we got on the right track. Today, we
continue our efforts to get the train moving toward the next
stop. With patience and perseverance, the control board we
created is having the intended effect. The control board has
instilled much needed fiscal discipline into the city's budget
process. The city's return to the private financial markets is
solid evidence that what Congress did is finally producing
credible numbers and better performance.
Without the control board, the President's proposals are
unlikely to have been made. I commend President Clinton for
stepping up to the plate and for directing his administration
to work with Congress as we move into the next phase of our
quest to revitalize the Nation's Capital. The President's
announcement just 2 days ago adds even greater weight to the
momentum which has been established. His proposal for an
Economic Development Corp., is a significant addition to our
deliberations.
I would also like to commend Speaker Gingrich for the
extraordinary leadership, time, and attention he has given the
District of Columbia. Clearly, the stars appear to be aligning
for a truly historic breakthrough in the relationship between
the Nation's Capital and the Federal Government. There is a
rare opportunity right now to establish a new relationship, to
enhance better delivery of essential local services, and to
more substantially involve the private sector. We are all
stakeholders in the Nation's Capital.
I know that some have expressed legitimate interest in the
creation of a city manager form of government here in the
District of Columbia. With the greatest respect, based on my
own experience as chairman of the Board of Supervisors in
Fairfax County, I am not persuaded that we should be moving in
that direction at this time.
I was struck by something that Philadelphia Mayor Ed
Rendell shared with us just a couple of days ago. Mayor
Rendell, whose city we studied so carefully in setting up the
control board 2 years ago, spoke about quality of life issues.
He said that these issues, such as education and public safety,
are the most important ones to focus on in attempting to
reverse a downward trend in a big city and restoring health and
optimism. Mayor Rendell helped to turn Philadelphia around. He
did it in significant part by working with the local control
board. I am optimistic that with the same degree of cooperation
and bipartisanship, that we can do the same here in Washington.
And let me invite some of our guests here, if you would
like to sit down on the floor in the front, we would be happy
to do that as well. We welcome our class here. Just come in and
make yourself comfortable. I am pleased to have you here.
Today, we look forward to hearing from many of our leading
local officials and learning of their reaction to the
President's proposals. I have worked with Mayor Marion Barry
and Council Chair Pro Tem Charlene Drew Jarvis for 2 years now
and look forward to their input and strong leadership.
It is our bill that created the positions that Dr. Andrew
Brimmer and Chief Financial Officer Tony Williams hold today,
and I look forward to working with them further as we continue
to address the challenges underlying the District's distress.
I thank all of you for working with us as we proceed to
fashion a positive and historic restructuring of the Nation's
Capital we all share.
I would like to yield now to my friend, my former House
colleague and a member who in the House last year who shared a
great interest in what was going on in the District.
I remember many different discussions with him, and I think
at that point he never dreamed he would be a U.S. Senator this
early, at least, in his career and have the responsibility that
he does in the Senate. We are very pleased to welcome Senator
Sam Brownback back to the House side. Welcome, Senator.
Senator Brownback. Thanks, Tom. I appreciate that, and it
is a pleasure to co-chair this committee hearing, this hearing
on the District of Columbia. I am delighted to work with you as
we craft together proposals to again return the District of
Columbia to a shining city and a Nation's Capital worthy of a
great Nation. This is my objective as we hold hearings and as
we move forward in the legislation on the Senate side.
I am delighted to have all of our witnesses here today, the
Mayor, a number of the council members, control board members.
And I am particularly tickled and pleased to have the children
here, because, to me, that is all of why we are serving,
really, it is for the kids and for their future and making this
place a better place for them. I have got three myself. One
just turned 9 last week, and I am anxious to get home and see
them.
It is going to be a good hearing today on the President's
proposals, the first one that he put forward on his plan for
revitalizing the District, and the second one that came out the
day before yesterday. I am looking forward to the witnesses'
comments about those. I am very pleased that the President
stepped forward and put forward proposals of how we would
revitalize the District of Columbia.
I do not know that I agree with all of them, and I have
some problems, as I have expressed already, with those, but it
does seem to be, Tom, as you pointed out, we have got a moment
here where things seem to be lining up that we can actually do
something and do something constructive and something positive
for the District of Columbia.
We have an old saying in Kansas that you make hay when the
sun is out, meaning that when things line up and are set to do
something, you move forward, and I think we have got a chance
to move forward in a very positive, very caring, and a very
appropriate fashion for the District of Columbia.
I am going to be very interested in the witnesses'
perspective regarding the President's proposal, which seems to
me to be transferring a number of things that used to be in the
Federal Government that went to the District of Columbia back
to the Federal Government, and I question whether we have not
already been there, done that; but let's see and let's hear
what you have to say and whether or not the Federal Government
can manage it any better than what the city has managed.
We held a hearing last week on Delegate Eleanor Holmes
Norton, tax proposal of a progressive, flat tax, if I could put
it that way, and zero capital gains in the District of
Columbia. It has broad, wide support as an incentive and a tool
to move forward with stimulating growth and economic
opportunity in the District of Columbia, and I am going to be
asking witnesses whether they think that would be a more
valuable tool than an Economic Development Corp., or do they
think the Economic Development Corp., model of control and
incentivizing is a better way to go.
I hope that in the end we can craft together a set of
incentive-based policies that could help in the stimulation of
the city to begin again to be Eleanor Holmes Norton's city,
because she said this is not her city now. It is not the one
she remembers, and it is not the one that is going to be there
in the future. It is going to be better, and that is why we
want this all. That is what we are all about, to try to get
this done.
So, I hope you will critically examine these proposals and
say what you really think will work and what you do not think
will work as we move forward to craft something together that
really can help and make a difference in the District of
Columbia. I look forward to working with you. Thank you, Mr.
Chairman.
Mr. Davis. Senator Brownback, thank you very much. I now
would like to recognize our ranking member, the delegate from
the District of Columbia, Ms. Norton.
Ms. Norton. Thank you very much, Mr. Chairman. And before I
welcome our witnesses, may I welcome elected officials who are
here this morning, Council Member Frank Smith, Council Member
Jack Evans, and Council Member Carol Schwartz? I will welcome
our witnesses shortly.
May I also welcome the third grade class from Bunker Hill
Elementary School? I have met with them upstairs, but I thought
that they might want to hear just a few minutes of a hearing
about their city. I told them to watch out, it is going to get
boring real fast, but that they might want to see their elected
officials come up.
They have responded to a program that I have initiated
called ``DC Students at the Capitol,'' or ``DCSC.'' As a
fourth-generation Washingtonian, I cannot remember being
brought to the Capitol, but I think there was a reason. We
could not even vote for President of the United States. We had
no government of our own, and so our wonderful teachers, and
they were extraordinary, never brought us here, because this
was not our Capitol; this was their Capitol. In essence, we
were excluded from the Capitol because we were not represented
in the Capitol, and we were not even represented in the city.
Well, we are represented, so to speak, both places now, and
I have a program that says that every school child should get
to visit the Capitol before graduating from high school, that
if they were to visit California or New York, one of the first
things they would be asked is, ``Tell us about the Capitol,''
and if they had not even been to the Capitol, they would
probably be embarrassed.
So I am particularly pleased to welcome the third grade
class from Bunker Hill Elementary School and to thank Ms. Carol
King, Ms. Eviva Boyd, and Ms. Sohanna Smith and the other
parents and teachers for bringing these bright youngsters here
today.
I certainly want to thank Chairman Tom Davis and Chairman
Sam Brownback for convening this hearing. I appreciate that you
are working together to try to keep the several parts of the
President's bill from spinning off to so many committees and
subcommittees that the bill may never be seen again.
I hope that you succeed. Without the centralizing mechanism
that Chairman Tom Davis used for the Financial Authority bill
and that your committees provide, it will be difficult to pass
any bill this session.
I also want to welcome Mayor Barry, Council Chair Pro Tem
Jarvis, Financial Authority Chair Brimmer, and Chief Financial
Officer Williams, who will be testifying on the President's
plan today. I want to thank city officials and Authority
members for their hard work over the past months.
We all know that the city has not revived as much or as
quickly as city officials and the Authority desire. Part of the
reason is that the District has had to carry the burden of
recovery alone, without assistance from the only sources that
can help the city: the Congress and the Federal Government. The
Congress has given no assistance of the kind that Philadelphia,
New York, and Cleveland received at the time that their States
imposed tough discipline.
The Congress has been all sticks and no carrots, even with
the presence of the strongest control board in the country and
one that has shown that it knows how to see that carrots are
not wasted. The sole contribution of the Congress, enacting the
Financial Authority legislation, was necessary but hardly
sufficient to ensure recovery.
Recently, however, the President has put forward a plan to
assume the cost of congressionally accumulated pension
liability and the cost of some, but not all, State functions.
District officials and the Financial Authority have responded
with helpful suggestions and criticisms that the Congress needs
to hear, even recognizing the difficulty of enacting spending
bills this year.
At the same time, the President, in designing his plan, has
listened very closely to District officials and the Financial
Authority. City officials and the Authority have emphasized the
cost of pensions and Medicaid, and the President's plan
responds directly. He also has included some other State costs
that were not anticipated. What was most unanticipated and most
troublesome, however, was the elimination of the Federal
payment, on the theory that the District would come out ahead.
While appreciating that this tradeoff was meant to help
meet the requirement that the bill be paid for, the elimination
of the Federal payment raises questions of both cash-flow and
collateral that I hope we will hear discussed in detail today
by our witnesses.
Our disagreements notwithstanding, the administration
deserves credit for being innovative and flexible. I appreciate
the responsiveness and give-and-take of Attorney General Reno,
Treasury Secretary Rubin, and OMB Director Raines, in
particular. Where disagreements have arisen, they have shown a
willingness to work with us to resolve them. I believe that
this bodes well for achieving a bill acceptable to all
concerned.
An example of the problem-solving approach we are using is
apparent in the work that has already begun to bear fruit on
the original proposal in the President's plan to impose the
irrationally harsh Federal sentencing guidelines that even the
Federal Sentencing Commission has said should be changed. We
now have agreed that, instead, the District will draw its own
sentencing guidelines.
Although considerable work has yet to be done on the
criminal justice section, my own meetings with the Attorney
General and with U.S. Attorney Holder lead me to believe that
matters of concern can be resolved. We especially need the best
thinking of the Mayor and the city council on the criminal
justice provisions.
Finally, let me thank Chairman Brownback for initiating a
hearing on my bill, the District of Columbia Economic Recovery
Act, last week and Chairman Davis for holding a similar hearing
during the 104th Congress.
This week, the President filled in some of the details in
his own previously announced empowerment zone approach to
economic development assistance. I welcome the President's
thoughtful work. I remain appreciative of the bipartisan
support my bill has received, especially from the leadership of
the House and Senate. I will work to see that the best ideas
from both proposals are on the table as we work here to design
a suitable bill that all can support.
I look forward to the testimony of the city and the
Authority today as we continue our vital work on the
President's plan. Thank you very much, Mr. Chairman.
Mr. Davis. Ms. Norton, thank you very much. Let me
recognize Representative Horn who is member of this
subcommittee, and ask if he has a statement? I know he has to
go somewhere else, and he has a staff here to monitor the
hearing.
Mr. Horn. Thank you, Mr. Chairman. I am delighted you
called this hearing. I have to leave for a hearing two
buildings away, where my principal witness is the Honorable
Rudolph Guliani, mayor of the city of New York, so this is the
day to hear about local problems.
But what we are doing in that hearing is what my
Subcommittee on Government Management, Information, and
Technology has stressed for 2 years, which is results-oriented
government. We only have one State in the United States where
we have that: Oregon. There are only two countries in the world
that are leaders in this area: New Zealand and Australia.
As we try to make the Nation's Capital a model city, we
should be thinking about results-oriented government, not just
adding to budgets because somebody said, ``Gee, if you give us
more money, we will solve the problem.'' We have to have the
solutions to solve the problem.
My initial inclination is to support the President's plan.
I want to hear testimony on it, but the District of Columbia
needs to be innovative in terms of tax policies which will
attract people back to the District of Columbia and the
businesses and the services that we need in this city. Those of
us on Capitol Hill go 14 blocks to find a chain grocery store,
and that is true all over the city, for the average citizen.
And I think we also have to break the cycle of bad
education in our schools and turn that around. We cannot afford
to see thousands of young African-Americans getting out of a
school system where they cannot read; and if we do not face up
to that, shame on us.
Now, Mr. Chairman, I thank you for letting me say those
words, and I have to leave to open my own hearing. Thank you.
Mr. Davis. Thank you very much, Mr. Horn. I now recognize
the ranking minority member on the Senate side, Senator
Lieberman. No stranger to this committee. He came here, Ms.
Norton, last year on behalf of your tax proposal. He has been a
strong advocate for the city.
Senator Lieberman. Thank you, Mr. Chairman. I am glad to be
back. Let me begin by congratulating you and my chairman, Mr.
Brownback, for helping to return to the top of Congress's
agenda this year both the problems of the District of Columbia
and what we can and must do to help solve them. I am also
pleased to join in welcoming Mayor Barry and Chairwoman Jarvis
and Chairman Brimmer and Chief Financial Officer Williams.
I have some residual--I do not want to say ``paternal,'' to
make myself older--interest in the career of Anthony Williams,
because I knew him when he was a callow youth at college in my
home town of New Haven, CT. I do not know whether I am going to
hurt his credibility here, but he then went on to be a highly
successful member of the New Haven board of aldermen and then
deputy comptroller of the State of Connecticut before he came
to Washington, so I have a high regard for his ability, and it
is a pleasure to have the opportunity to work with him again.
Mr. Chairman, I have, as you indicated in your remarks,
joined Delegate Norton now for the second consecutive Congress
and am proud to do so in offering what we think is one
innovative and very comprehensive response to the District's
financial crisis, which is to say tax relief that we are
confident would not only bring more business investment to the
District and create more jobs, but uniquely would create a
powerful tax incentive to bring people back to the District, to
stop the flow of population outward in which people are
essentially speaking with their feet about the problems and tax
burdens of the District.
The President's plan that we are going to be discussing
today, I believe, offers a good complement to Delegate Norton's
proposal by addressing some of the structural and management
problems now facing the District. Alone among cities in our
Nation, the District of Columbia has had to assume and
administer functions that elsewhere are borne largely by State
governments. That is a fundamental reality, and it is
fundamentally unfair.
At the same time, and also alone among our Nation's cities,
the large Federal presence and the fact that the District
cannot collect a commuter tax has left its government unable to
provide adequately for the functions it must perform. These
very important, inherent structural deficiencies have been
compounded over the years by mismanagement of many aspects of
the District's government, mismanagement that I think we in
Congress must acknowledge has been made more likely by the lack
of District autonomy over and responsibility for many aspects
of its own governance.
By proposing to have the Federal Government assume
responsibility for many traditional State functions and invest
the District with greater responsibility for those functions
that the District will retain, I think the administration's
plan will go a long way toward remedying the problems of our
great Nation's Capital--our great Nation's great Capital, I
would say.
The administration plan, as has been indicated, is not
perfect, and I have some of my own ideas about things we might
want to do to make it better. But it is a strong start, and,
most importantly, I am glad--in fact, proud--to say that we
finally seem to have agreement that are Nation's Capital should
be our Nation's priority. Even better, I might add, our
Nation's bipartisan priority, and that is witnessed by the
leadership and interest in both Houses of Congress and both
parties. It gives us some pause for hope that we actually will
take some critical steps in this session to make the District's
situation better.
I look forward to hearing today the reactions to the
President's plan from some of the people who are in the best
position to know about what faces the District, which is to say
those blessed men and women who must deal with the District's
problems everyday. Thank you, Mr. Chairman.
[The prepared statement of Hon. Joseph Lieberman follows:]
[GRAPHIC] [TIFF OMITTED] T2281.001
[GRAPHIC] [TIFF OMITTED] T2281.002
Mr. Davis. Thank you very much. Now, I would like to
recognize the vice chairman of my committee, the gentlelady
from Montgomery County, MD, Mrs. Morella.
Mrs. Morella. Thank you. Thank you, Chairman Davis.
Chairman Davis and Chairman Brownback--Senator Chairman Brown-
back, good to have you back over here working with us, and it
is always good to have Senator Lieberman over on this side--I
want to thank you for holding this important hearing.
Since one of the goals of the White House proposal is to
improve prospects for Home Rule to succeed, I quote, it is
essential that we take into consideration the views of our
local officials. Mayor Barry, Chairwoman Jarvis, Chairman
Brimmer, Mr. Williams, I welcome your participation in this
hearing. I want to also acknowledge Councilwoman Schwartz, who
is here, and Frank Smith, Jack Evans. Thank you all for being
here.
Certainly, I plan to be listening very intently to your
analysis of the President's plan. You are the defenders of Home
Rule. You are the advocates of a better quality of life for the
500,000-plus citizens who live in the District of Columbia and
the children who are here assembled.
There are many critics who blame the District government
for the city's financial crisis. There are District supporters,
however, who place much of the blame for the city's problems on
Congress. These same District advocates accuse Federal
lawmakers of meddling too much in local affairs, ranging from
taxicab rates to the death penalty.
The President's plan would increase the role of the Federal
Government in the District's business. It would eliminate the
Federal payment meant to compensate the District for lost
revenue. Instead of the Federal payment, the Federal Government
would relieve the District of certain expenses, among them the
growing unfunded pension liability, which was incurred by the
Federal Government for District employees that were part of the
Federal work force before Home Rule.
The Federal Government also would assume a larger share of
the Medicaid costs and take over the operation of the prison
system. According to a Brookings Institution study called ``The
Orphaned Capital,'' the District assumes responsibilities which
in all other jurisdictions are handled by the State. These
responsibilities include Medicaid payments, mental health
facilities, infrastructure, prison systems, and higher
education.
The President's plan would allow the Federal Government to
fund the District government much in the same way that State
governments support their cities. There is little doubt that
our discussions must reflect the uniqueness of the District and
that the relationship between the District and the Federal
Government must be reshaped and redefined.
Does the form of government make a difference in the
District? I believe it does. Congress passed the Home Rule Act
in 1973 because citizens fought for the right to participate in
government, but I believe that District residents must be
better educated about home rule and how to govern their city.
Every day in the local newspapers we all read stories about
mismanagement in the District government. Yesterday, there was
a story about overpayments to an HMO that had a contract with
the city. The Duke Ellington School was closed because of fire
hazards, and students had to be temporarily relocated.
This morning, there was an article about the poor condition
of the school buses. A little boy with cerebral palsy has to
ride several hours on a rickety bus to his school, which is
just a few blocks from his home. The city has hired temporary
bus drivers who get paid much more than full-time District
employees.
And I recall the American Psychological Association's
Commission on Youth and Children a few years ago studied first-
and second-graders, 6- and 7-year-olds in the District of
Columbia, and discovered 45 percent of them had seen somebody
mugged, 31 percent had seen someone shot, and 39 percent had
seen dead bodies. Some city children play a game called
``Funeral,'' where they pick out the color of their caskets,
the colors of their clothes, and the names of those to be
invited to the service.
What have we done to our children? We must do better. I
look forward to hearing from our distinguished panel today to
gain insights into a brighter future for our Nation's Capital.
Thank you, Mr. Chairman.
Mr. Davis. Thank you. Thank you very much. I think we have
concluded our opening statements.
I now would like to welcome our first panel, and this will
consist of the Mayor of the District of Columbia, Marion Barry,
and the Council Chair Pro Tem, Charlene Drew Jarvis.
If you would please come forward. You have both testified
here many times. I thank you for joining us again. Ms. Jarvis,
I believe this is the first time you will be testifying before
us in your present capacity.
We are all saddened by council chairman Dave Clarke's
illness. We wish him and his family God speed, and our hopes
and prayers are with him and his family.
The city is, indeed, fortunate to have someone of your
experience and dedication, to step up to the plate at this
particular time.
As you know, it is the policy of the committee that
witnesses be sworn in before they may testify. Would you rise
with me and raise your right hand.
[Witnesses sworn.]
Mr. Davis. Thank you. You may be seated. The subcommittee
will carefully review any written statements you care to
submit. I will first start with Mayor Barry and ask him for his
statement and then Councilwoman Jarvis.
STATEMENTS OF MARION BARRY, JR., MAYOR, WASHINGTON, DC; AND
CHARLENE DREW JARVIS, CHAIRWOMAN, PRO TEMPORE, WASHINGTON, DC
CITY COUNCIL
Mr. Barry. Good morning, Senator Brownback, Congressman
Davis, Morella, and Norton, and other members of the subcommit-
tee. I am pleased to appear before you today at this joint
hearing on President Clinton's National Capital Revitalization
and Self-Government Improvement Plan for the District of
Columbia. I am also delighted to see these young people here
who attend one of our public schools. They are very bright-eyed
and energetic and eager to learn. I just hope that our system
reforms itself to the point where that eagerness and that
bright-eyedness and that energy remains with you until you
graduate. So I am glad that you all are here from one of our
fine public schools.
Mr. Chairman and members of the committee, my statement is
going to be rather extensive, because this is a very serious
matter, and I want to take the time to put all of this in the
proper context.
The White House proposal comes as the weather gets very
pleasant here in Washington, and I hope that the long and hard
winter of our experience is facing a new spring. For me, Mr.
Chairman, this spring did not just start this year.
Let me also say, Mr. Chairman, you hear complaints, and
some of them rightly so and some of them not so, about the
social conditions which exist here in Washington, DC, and the
environment of violence and killings and other kind of things.
This is no different than the environment of New York City
or Richmond or Baltimore or Los Angeles or Chicago. That does
not mean we like this environment, but this type of environment
where you have too many murders on our streets, too many kids
not being educated, too many negative things happening to the
lives of our citizens is something that is prevalent in all of
our urban areas, so we should not just make it appear that
these horrible conditions are just here in the District of
Columbia.
We want to do all we can to change the social conditions,
to change the causes of poverty, to change the violent nature
of some of our people, and to improve the quality of life for
everyone who lives here and who visits here.
Let me also put why we are here in context. I took office
on January 2, 1995, and I was confronted with a major deficit
of disproportionate size. After balancing our budget for 11 of
the previous 14 years, the District government overspent its
1994 budget by $335 million, an unacceptable and disgraceful
performance. On the other hand, when we examine the nature of
that deficit, a lot of it had to do with these State functions.
The Medicaid budget was growing by 10 and 15 percent while
the revenues were growing by 2 or 3 percent. The pension
payments were growing by 3 and 4 and 5 percent. The prison
population was growing by 4 and 5 percent.
In taking office after discovering this deficit, we made it
public. We did not run from it. We, in fact, indicated a $722
million shortfall, and in the remaining months of 1995, we
moved to avert this calamity. And I am putting this in the
context of the State functions in this hearing because there
are too many simplistic statements made, too many frivolous
statements made about what the District has done, is doing, and
will do.
The record shows that in 1995, the actual spending was
reduced from 1994 by $151 million. That is quite an achievement
in 1995, to spend less money than you did in 1994. If you look
at every State government, the Federal Government, you will not
find anyplace where the State governments or the Federal
Government in a year afterward spent less money than in the
year before. And so this is a feat of historical proportions,
this event.
The sins of the prior administration precipitated, as we
know, this control board. If we had not had this deficit and
could not go to the bond market, we would not have had a
control board, would not be sitting here talking about a
control board.
If the naysayers and finger pointers who use the District
as a convenient door mat for the next sound bite would simply
examine the record, they would know that we have been the
leadership for trying to transform this government. This mayor
presented a well-thought-out transformation strategy that would
form the basis for the governmentwide restructuring that is
occurring as we speak.
The constant comment from our arm-chair quarterbacks
demeans and misconstrues our work. It is ridiculous, and it is
harmful, and ought to stop.
We have made great strides and great progress in reducing
the size of the government. Just look at the facts. The fiscal
year 1995 budget reflected 47,000 FTEs in the city, county, and
State functions, and the 1997 allocation stands at 36,000, Mr.
Chairman and members of the committee, a decrease of 10,000
position and people since 1995. No other city, no other State
in America can say that that has happened.
In New York City, they did not lay off anybody. Over a 4-
year period, they reduced their budget and their work force by
15 percent. Philadelphia did not lay off anyone and has not
reduced its work force by any significant amount.
And I am saying that we have taken the tough decisions. We
have made it possible for us to reduce the size of government.
In fact, as of February 26 of this year, we were down to 33,000
people, almost 12, 13,000 in less than a year and a half.
Also, there have been a lot of discussions about we are not
privatizing, we are not outsourcing, we are not being creative
as they have been in other cities. That is not the case. We
have done more outsourcing, more privatization than any other
city in America. If you look at Indianapolis, you look at New
York, you look at Philadelphia, you look at Los Angeles, you
look at Detroit, you will not find the amount of public/private
partnership that we have established here in Washington.
And my statement goes through a whole range of those
privatizations, from the privatization of the correctional
treatment facility in Southeast Washington to the fine, police
clinic. We have closed DC Village and placed residents in other
places.
Check the record. We have done all this during this last 2
years.
The Barry administration has established a package of
comprehensive health services. Again, we have done something
that has not been done in any other State in the last 14 years:
created a Department of Health to better focus and administer
services to our public.
We reduced Medicaid, Mr. Chairman, by $80 million. In 1
year, we have cut the Medicaid cost without reducing the
quality of services, but by tightening up our system, by $80
million. No other State in America has done that. No other city
that has Medicaid functions has done that. We have saved DC
General.
And we could go on and on about the kinds of things that
have happened that demonstrate that this Mayor and this
administration and this city council have made very tough and
painful decisions.
I would like to enter into the record the 2-year budget
analysis of the Department of Human Services and urge you all
to read it, because it shows the pain and suffering that our
people have suffered in the last year and a half because of the
tough, yet compassionate, decisions that this Mayor has made.
Mr. Davis. Without objection, that will be entered into the
record.
[The information referred to follows:]
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Mr. Barry. We have closed half a dozen health clinics. We
have closed emergency assistance programs. We have closed
almost a thousand slots for drug treatment facilities. Mr.
Chairman, when it gets to the point where this government does
not even offer burial expenses for those who pass and do not
have any income to bury their dead, we really have come to the
end of the road in terms of how we have managed to make these
very tough and difficult decisions.
If you do not think we made those difficult decisions, ask
the 700 older citizens who do not get chore aides to come to
their homes 4 hours a day, 4 or 5 days. If you do not think we
have made tough decisions, ask the DC government employees who
have not had a raise in the last 3 years, many of whom have had
cuts. Ask the 1,000 DC government employees who have been fired
from their jobs, if we have not made tough decisions about
trying to create a more efficient, a better-managed, and a
better-run DC government.
We also have moved programmatically to make our city safer.
We all talk about the quality of life. We know that Ms.
Norton's plan, in and of itself, the President's plan, in and
of itself, will not change the very nature of our city until we
change some of the quality-of-life issues here. We know we must
do more to make our streets safer for those who walk on them
and businesses who do business here, and we are making great
and steady progress in doing that.
We are investing more in community policing now by
restructuring police beats to take into account neighborhood
boundaries, developing greater linkages between police teams.
That is working. We have had a reduction in homicides by some
20-some percent. Not enough for me, but certainly any reduction
in any murder is something to be proud of.
We have had a 14-percent reduction in stolen automobiles, a
9-percent reduction in robberies, so we are working as hard as
we can with our citizens to make public safety a high priority
and make our streets safe.
Even though it is not in my statement, we are working with
General Becton to do all we can to reform our public schools.
Our public schools need reform. I have a son who is in 11th
grade in one of our public schools, so I know as a parent
firsthand what we need to do to improve the quality of our
educational system.
On the other hand, this educational system is facing the
same pressures, the same challenges as Baltimore, which has
asked the State to assist it in its efforts, the same as in
Richmond or Chicago or New York and all over.
In terms of, again, the kind of progress we are making to
make sure that we are an accountable government, we are
developing a comprehensive performance-measurement system for
the District. I agree with Congressman Horn, we need a results-
oriented government. That is my desire. That is my philosophy.
That is what we are beginning to do.
The DC government is operating much more efficiently now
than ever before. Our trash is being picked up more
efficiently. A number of other things are happening, but this
performance evaluation system will allow us to measure
outcomes, to measure what people are doing, and so we are
building a culture of accomplishment, agency by agency.
Also, Mr. Chairman, a couple of days ago, you heard
testimony from several of my colleagues from around the
country. First of all, I regret that you did not invite this
Mayor to come to be part of that discussion, but we will get
over that. But most of these officials were Republicans who
have not the faintest idea of what we are trying to achieve
here in the District.
None of them had to lay off as many employees as I have.
None of them have had these State responsibilities to fulfill
that I have. None have implemented to the degree that I have a
massive transformation and city-wide restructuring.
I hope in the future you invite persons who not only can
give an analysis of what they have done, but are more involved
and knowledgeable about the steady and persistent progress the
District has made to make our government better managed and
more efficient.
Now, to the President's plan. Mr. Chairman, let me state
that the last 2 months have been momentous occasions for the
District of Columbia's residents. For a long time, many of us,
including Ms. Norton and others, have advocated a transfer of
these State functions over a period of time. I was among those
in 1973, who lobbied the Congress, who worked awfully hard to
try to get this measure of self-government.
We were so eager to get it, we did not look at the details
of it. We did not look at the burdens of the future that may be
placed upon us. For instance, in 1973, when we took over--1975,
when we took over the city government in terms of Mayor and
city council, we were spending about $17 million on our
Medicaid program, both local and Federal, $17 million; yet, in
1996, this government spent over $800 million in Medicaid
payments, $400 of our own local money and $400 of the Federal
Government's. It had nothing to do with mismanagement. Medicaid
all over America was growing by 10 and 15 percent, and ours was
no exception.
The same thing was true in our prisons. We were spending
$32 million in 1975, for the upkeep and custody and care of our
sentenced prisoners, and yet, in 1996, we spent over $240
million of our own local money to do that.
The point I am making here is that the President has
initiated a bold, new push to right the economic and structural
deficiencies of America's first city. The President's plan is
both welcome and long overdue. It is a good first step. It
recognizes that Federal Government's responsibility and
Congress's complicity in perpetuating the District's
longstanding structural constraints, constraints that have
hamstrung our collapsing fiscal infrastructure.
Just to go back again to the Federal Government's role in
the past, when we took over the government in 1975, the Federal
Government left us in a deficit of $279 million and has not
paid its bills yet. So if you all want to do something to right
these wrongs, they ought to at least put this in the plan, to
pay our $279 million that was left with us when we took over
the government.
Also, the government, the National Government arbitrarily
left us with an unfunded pension plan, with laws passed by the
National Government that made police and fire pensions the most
generous in America: 20 years, and no age for retirement, a
liability that is still unfunded today of some $5 billion.
But the tragedy of that is that the DC taxpayers are paying
for that unfunded pension system, not the firefighters or
police officers or the judges or teachers who are in it. We are
paying over $300 million this year as our contribution to that
unfunded pension plan left over from the Federal Government.
Mr. Chairman, the Federal Government has prohibited us from
taxing income earned here in the District. This is not a
frivolous argument. This is a very serious discussion about not
being able to tax the $19 billion earned here in Washington.
Seventy percent of all the work force, 400,000 of the 600,000-
odd jobs in the District, are held by non-DC residents.
In Baltimore, if one lives outside of Baltimore and moves
into or works in Howard County or Baltimore County or Prince
George's or Montgomery County, the State captures that income
and redistributes it back to Baltimore. The same is true with
Richmond or New York City.
If I lived in Camden, NJ and worked in Philadelphia, where
Mayor Rendell is the mayor, I would have to pay a 4 percent
wage tax and take that off my income taxes in New Jersey. And
so what happens here is that because we cannot collect that
tax, some $750 million if we tax it at the Philadelphia rate,
we now sit before you.
If we could tax nonresident income, I do not believe we
would be asking for many of these State functions to be taken
over by the Federal Government because we will have the State
authority to raise revenue to maintain those State functions.
The only area we would probably be asking you to take over
would be the unfunded pension liabilities because that is
outside of anybody's purview. We would be unable to do that,
because we cannot tax this income, because we cannot raise this
$750 million. Our corporate income tax is the highest in the
region, over 9 percent, our personal income tax is over 9
percent, and our commercial property taxes are higher. This
means if we could tax these residents, we could lower our
property taxes, lower our income taxes, lower our business
taxes, and as the ``Orphan Child'' analysis stated, we could
become more competitive in this region.
So this is not just a discussion about philosophy, whether
you ought to tax people, should tax people or not. Moreover, we
have over 300,000 cars coming into Washington, using our
streets and our roads, not paying any taxes, not 1 cent to fix
these potholes. In fact, they create a lot of these potholes.
And so all of this has to be taken into context about why
we need the transfer of these States' functions, why we need
and why I continue, in spite of the political odds against it,
taxing income at its source, because it is so critical. Not
only are these cars coming into Washington, Ms. Jarvis, but
when you have to get up in the morning to move your cars by 7
o'clock so commuters can come in, it is inconveniencing our
local citizens. So this is a very serious problem.
Also, Mr. Chairman and members of the committee, the
Federal Government assigned significant State-level functions
to the local government without the appropriate resources.
Mr. Chairman, when you were a member of the board of
supervisors of Fairfax County, you did not have any
responsibility for State prisons or for welfare, as I do, or
for food stamps or for Medicaid or for State mental
institutions.
Mr. Davis. Actually, we did in some of those areas.
Mr. Barry. Not much.
Mr. Davis. Fairfax was the only government in the State
that----
Mr. Barry. Most did not.
Mr. Davis [continuing]. We did have some of this.
Mr. Barry. Right. I think you get the point, though. And so
every morning I wake up, I have to worry about 46 percent of
our functions being State functions. I am not complaining, but
explaining. I would like to enter into the record a detailed
analysis of our budget for 1996--I mean, 1997.
We had a budget of $5,108,000,000; 32,787 people working,
and you will find that $2.4 billion of this money was spent on
State functions, 47 percent. You can go through it line item by
line item. It is good work. You can see that no other city in
America is burdened with these responsibilities without the
appropriate financing mechanism.
I would like to ask that this chart be entered into the
record.
Mr. Davis. Without objection, it will be entered into the
record.
Mr. Barry. And so for the President to suggest that our
unfunded pension liability be transferred is supported
unequivocally. It should have happened a long time ago, but it
is finally being proposed. And we believe that the entire
unfunded pension, the entire pension plan should be taken over
by the Federal Government. It is about $360 million
contemplated for 1998, with an additional 60-some-million-
dollars in contributions from our employees.
Also, I support the takeover of the criminal justice
system. On the other hand, there are some serious reservations
about some parts of it. We are beginning to work out the
sentencing guidelines that would be acceptable to the council
and the Mayor, but most of us in Washington oppose the
inequities of the sentencing guidelines in the Federal
Government as it applies to drug use, drug possession.
In the Federal guidelines, if you are arrested with 5 grams
of crack cocaine, you receive a mandatory 5 years in jail, but
yet it takes 500 grams of powdered cocaine to get you those
same 5 years. Of those arrested for crack cocaine, 95 percent
are African-American and Hispanics, and 95 percent of those who
are arrested for powdered cocaine are non-African-American,
non-Hispanics; and so that inequity, we could never accept.
In the District of Columbia, we are working on that. Most
of us in the District are opposed to a general death penalty
for those who would kill people. Now, some of us are beginning
to look at a different sentencing for those who kill police
officers, but, again, we would never be able to accept that,
and there are some others. But we are working on those
guidelines.
We support the takeover of our Lorton facilities, which
house almost 7,000 sentenced prisoners. We support the taking
over of the courts system. The judges are now appointed by the
President, confirmed by the Senate. We do not have any say
about that.
The U.S. attorney prosecutes our local crime. In no other
place in America does that happen, so it is logical if you are
going to have control of the appointment of judges and the
control of the appointment of the U.S. attorney, in the
judicial philosophy, you ought to pay for that, so we support
that.
The present proposal to increase the Federal Government's
share of Medicaid--long overdue. We are the only city in
America that pays 50 percent of this payment. There are some
States where the Federal Government reimburses them up to 80
percent, 75 percent. I would like for this to have been 80
percent, but certainly 70 percent is a step in the right
direction. It would save us about $162 million in 1998.
Senator Brownback. Mayor, if I could break in for just a
moment?
Mr. Barry. Yes.
Senator Brownback. We appreciate your statement and your
thoughts on this, and we would like to, if we could, let's hone
them in on some of the specific points. We have a number of
people we have got----
Mr. Barry. I see.
Senator Brownback [continuing]. To get testifying, and I
think there will be some questions up here as well, so if you
could, we will certainly enter all of that into the record,
then, as well.
Mr. Barry. Well, I was speaking about the President's plan,
so I will just support the income tax collections. The
infrastructure investments are very important. The new Economic
Development Corp.; we do not know enough about all what it
would do, but it appears to be headed in the right direction in
terms of the Economic Development Corp.
But let me just say, Mr. Chairman and members of the
committee, that this Economic Development Corp., is no
substitute for Ms. Norton's plan. This Economic Development
Corp., obviously can assist in developing opportunities for
development in our neighborhoods, for housing, and for office
buildings, and other commercial ventures, but it gives no
relief to the average DC citizens who are overburdened and
overtaxed.
We need Ms. Norton's plan with the 15-percent flat tax. We
need the capital gains, zero capital gains not only just for
Washington; I mentioned in your hearing, Mr. Brownback, that we
ought to look at how you extend that to the Nation so we do not
limit investments and investment opportunity for the people who
live in the District of Columbia.
Early on, Senator, you indicated some concern about whether
or not the Federal Government could operate these entities. The
Federal Government has never operated our felony prison system.
All crimes prior to 1970 were tried in Federal court, so,
therefore, people went to Federal institutions.
I think the Federal Bureau of Prisons can operate our
prisons. It is a big industry. It is a big part of the Federal
Government's budget, and they have good experience in doing
that.
For Medicaid; it is just a matter of formula change, so
there is no problem with that. The pensions are certainly easy
to do. The Federal Government operates Civil Service pensions,
Social Security, and a whole range of other retirement funds,
and so I do not think that we are going back to the past in
terms of been there, done that; we are going to the future in
terms of the Federal Government being able to take this over.
They ought to take over our mental institutions, too. St.
Elizabeth's Hospital is a State institution. We are spending
$190 million there. They ought to take that over. No other
mayor has that responsibility.
They also ought to support UDC. UDC is our State
university. We cannot seem to get the local support that we
need, but it is a State university. It ought to be put into the
President's plan for 1998, some support financially for our
State institutions.
And, finally, Mr. Chairman, let me speak about the Federal
payment. It is our view that the Federal payment is not a gift.
It is not a stipend. It is not a handout. Of all the land in
the District, 56 percent is tax exempt, 56 percent; 41 percent
of that is federally owned land; the other of these foreign
governments, though we certainly welcome them here, and our own
nonprofit organizations.
Then you have got the incredible situation where over 30
organizations in the District, including the National
Geographic and the National Education Association and others,
that do not contribute anything to the life of Washington, are
exempted from taxes by the Congress. Ms. Norton has introduced
a bill to right that wrong.
In conclusion, we believe that the Federal payment ought to
be part of this package. Ms. O'Cleireacain, in her analysis,
said it should remain as part of this package--maybe not $660,
but certainly $382, as a part of it.
I have been rather long, Mr. Chairman. I ask your tolerance
of this, but this is a very serious subject, and very rarely do
I have an opportunity to put it all in perspective in the way
that we are doing here. Thank you very much.
[The prepared statement of Mr. Barry follows:]
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Mr. Davis. Thank you very much, Mr. Mayor.
Chairwoman Jarvis, welcome.
Ms. Jarvis. Good morning, Mr. Chairman. Thank you for the
opportunity to testify. Good morning to Senator Brownback,
Senator Lieberman, Mrs. Morella, Congresswoman Norton, our
fighter on the Hill.
I am pleased that my colleagues, Council Members Schwartz,
Smith, and Evans, were able to join us this morning, along with
young people from the District of Columbia.
I feel that I am looking into the faces of people who care
about the Nation's Capital, and I am pleased to be here this
morning.
The President's proposal provides a historic opportunity to
address the city's financial crisis in a way that begins to
address fundamental inequities that have long existed in the
relationship between the District government and the Federal
Government. We who represent the residents of the District
embrace this effort that is both enticing and problematic.
As we continue to make difficult but steady progress to
improve the accountability of the District government for
improved delivery of public services and improved financial
management, and I might add that we are determined to balance
the District's budget in fiscal 1998, for the first time in
years and 1 year ahead of the schedule envisioned by the
control board legislation. We are pleased to be at the table to
ensure that all of the political and financial inequities which
exist in the relationship between the District and the Federal
Government and which exist in the relationship between the
District and its surrounding jurisdictions are at least raised
and discussed, even if they are not all addressed at this time.
Although the District, under the 1973 Home Rule Charter,
has attempted to perform State functions and to provide State-
like services, we have done so without the revenue base of a
State, which has been constrained severely and primarily by the
Federal presence or by congressionally imposed restrictions.
Recognizing the status of the District as the Nation's
Capital and recognizing the financial constraints uniquely
applied to the District, the President has proposed that the
Federal Government increase its budgetary responsibility, and
sometimes management responsibility, for some very costly
District operations which are either State-like functions which
virtually no other city in the Nation performs or which are
burdens which the Federal Government itself created and
unfairly transferred to the District as a part of home rule.
We agree with you, Congressman Davis, when you noted at
your hearing last month that the President's proposal is an
excellent foundation upon which we can build and to which we
hope to add value. Several aspects of the proposal are enticing
because they will clearly have a positive effect on the fiscal
health of the city. However, other aspects of the proposal are
quite problematic because they will further isolate local
citizens from the process by which their voices can be heard at
decisionmaking levels of the government.
With that overall framework, I would like to express
comments or concerns about each of the individual components of
the President's proposal. I will also specify additional
elements which we think would add value to the President's
proposal.
On the unfunded liability, no financial difficulty faced by
the District is more serious than this mushrooming $5 billion,
unfunded liability. We enthusiastically support adoption of the
framework of the President's pension proposal and want to
ensure that the Federal Government reassumes the entire,
unfunded pension liability that it created. It is important to
remember that DC taxpayers spent $1.9 billion to pay for
pensioneers who earned those benefits under the Federal system
prior to Home Rule. If that inequity, along with the unfunded
liability, were to be righted, I could stop my testimony now
and go home.
The bottom line of the pension problem is this: If the
District is to be responsible for any future costs associated
with the past unfunded liability, we must make sure that enough
of the District's assets are left in the District's pension
fund so that we can afford to pay off such costs over time.
On Medicaid, the council also supports an increase in the
Federal share of Medicaid costs from the current level of 50 to
at least 70 percent, but as you know, no city currently pays
more than 25 percent. The U.S. Department of Health and Human
Services has offered to provide more intensive technical
assistance to help the District improve management of our
Medicaid program, and we look forward to that assistance.
The council believes that the Federal Government should
also provide increased budgetary support for other State-like
health and human services provided by the District. In the case
of the Temporary Assistance for Needy Families, TANF program,
the same considerations that underlie the proposed change in
the Medicaid match would warrant review of the TANF block grant
to allow for a larger Federal contribution.
It should also be noted, the District's unique status as a
city without a State will make it more difficult to meet the
work requirement contained in the new welfare reform
legislation, which provides additional justification for
reconsidering the calculation of this block grant for the
District.
In the case of St. Elizabeth's Hospital, the Federal
Government unfairly transferred responsibility for the
operations of this State-like function, a State-like facility
10 years ago without providing the $56 million promised by the
Feds for infrastructure repairs, and we hope that there would
be a reassumption of that.
On the accumulated deficit, the council supports the
President's plan for the $400 to $500 million U.S. Treasury
borrowing, with a 10- to 15-year term to finance the District's
accumulated deficit, because without such financing, it will be
extremely difficult to solve our cash-flow problems.
When figuring out the overall, net benefit of the
President's proposal, OMB must recognize that there are future
annual costs associated with this financing. We want to ensure:
(1), that the District maintains sufficient liquidity to
operate; and, (2), that any financing must not impair the
District's ability to finance its future capital needs.
Economic development; the council strongly supports the
establishment of an Economic Development Corp., with
considerable local participation. Broad authority would be
given to spur economic development, the use of tax credits for
hiring District residents, and for business loans and
investments, and including the use of tax-exempt, revenue
bonds.
The economic turnaround of the District depends upon the
private sector, to a great extent, and the government can
provide the catalyst for this redevelopment. If we are really
serious about revitalizing our Nation's Capital, we must
reverse the hemorrhaging of jobs and residents from the
economic core. We believe Ms. Norton's bill can help to do that
and enthusiastically support it.
Transportation infrastructure investment; the council
supports the President's proposal to establish a National
Capital Infrastructure Fund, with $125 million in Federal seed
money in fiscal 1998 for capital projects only if it can be
spent primarily for our badly deteriorating local roads and
bridges. We do not need this separate entity if it is going to
be directed toward the 7 percent--that is only 75 miles--of our
roads that are part of the well-funded Federal Highway System
and not toward the 665 miles of local roads that had been
traditionally underfunded and are among the District's worst
roads.
In addition to the $125 million in Federal seed money, the
council supports the redirection of much of the $200 million in
Federal dollars previously authorized for the Barney Circle
project if there is a final decision at the local level about
that, again, to be used primarily for local infrastructure
projects, including the new convention center's infrastructure.
The council is working with OMB to ensure that any
independent authority that might be established to administer
this fund would have sufficient District representation so that
local priorities are properly reflected in the selection of
capital improvement projects.
The council also would like the Federal seed money in the
fund to be able to be used to leverage additional negative, an
important point which we have put to Frank Raines. But I want
to re-emphasize here that if that money, $125 million, could be
used for the repayment of bond holders and used as leverage to
issue further bonds, then we remarkably augment our capacity to
do local road and bridge repairs.
Finally, the council is working to encourage the
negotiation of pilot agreements with tax-exempt organizations
so that contributions by these organizations can be deposited
into the infrastructure fund or, and this is another
interesting alternative, these pilots could be made a
contribution to the Economic Development Corp. So you have two
options there.
And if it turns out that the infrastructure fund, that $125
million is not going to be made available for local funds, it
seems to me we do not need it as much as we need to put the
pilots in the Economic Development Corp., and let the Federal
Government continue to do its road repair in the way it has in
the past if those dollars are not made available for local
roads.
On the courts, the council supports Federal assumption of
the responsibility for the cost of the judicial system, which
is another function typically borne by States in other
jurisdictions. However, the council believes that there needs
to be continued local involvement in the courts programs,
including pretrial services, probation, and parole.
In light of the recognition in the President's proposal
that the courts are run well currently, we are working with OMB
to ensure that innovative and effective sentencing alternatives
to incarceration are still available, such as the drug court,
the multidoor dispute resolution program, the boot camp
program, and the new domestic violence calendar.
As an added value item, the council would like the Federal
budgetary responsibility for the courts in the President's
proposal to be expanded beyond operations to include financial
support for capital improvements as well.
Prisons; we support Federal assumption of the budgetary and
management responsibility for the District's prison operations
that are typically State functions. As you know, no other city
in the country operates a prison with felony inmates. The
council suggests that Lorton be phased out over a 5-year
period, during which time the District will develop an
independent capacity to handle the non-State prisoners, that
is, those convicted of misdemeanors.
At the same time, the council asks that: (1), the District
be given the ability to sell the lease it holds on the land at
Lorton; (2), that compensation be given for the improvements
made by the District on buildings at Lorton to enable the
District to pay off the general obligation bonds associated
with these improvements; (3), that the location of Federal
prisons to which District inmates may be relocated be limited
to a certain radius; and (4), that the District be compensated
if it ends up housing any class of felons under the President's
proposal.
In supporting Federal assumption of the State prison
system, the council at this time has serious concerns about the
condition associated with this element of the President's
proposal, i.e., that the District must adopt sentencing
standards that are comparable to Federal sentencing standards.
Such a condition would infringe upon the sentencing discretion
of experienced DC Superior Court judges who are Presidentially
appointed and upon the legislative authority of the council to
enact criminal sanctions.
Such a condition does nothing to revitalize the National
Capital, and it runs totally counter to the goal of the
President's proposal to improve the prospects for Home Rule to
succeed.
We frankly do not understand the need for requiring the
application of Federal sentencing standards by local courts as
a prerequisite to Federal assumption of responsibility for the
prison system. OMB Director Frank Raines testified before your
committee last month that this requirement was necessary
because the Bureau of Prisons had management concerns about
housing criminals convicted of identical crimes with different
sentences in the same prison.
However, since the beginning of Home Rule, large numbers of
District prisoners, as many as 2,500 District inmates, have
been housed in the Federal prison system with different
sentences and subject to local laws regarding parole
eligibility without any apparent management problem.
Moreover, there are thousands of District prisoners
currently in the system who were sentenced under current law
and who will not be released for decades. Thus, even if the
goal is to have a single-sentencing structure for all prisoners
in Federal penal systems, achievement of this goal is so
remote, it is very remote.
It also should be remembered that the Congress already has
the ability to reject any legislation passed by the council
and, in fact, has a longer review period, 60 days, for criminal
code enactments. For the locally elected legislator to cede
forever our limited authority over criminal sanctions to the
Congress, especially when District residents continue to have
no voting representation in the House on the floor or the
Senate, would be a further diminution of the Democratic rights
of our citizenry, which may not be worth the benefit of Federal
budgetary and management support of our criminal justice
system.
Tax administration and other technical assistance. The
President's proposal provides that the IRS would assume
responsibility from the District for the collection of local,
individual income and payroll taxes. Although we would like
assistance from the IRS in the area of compliance with the
payment of local taxes, the council is concerned that IRS
collection of local taxes might cause a delay in the District's
cash receipts, thereby further exacerbating our liquidity and
our cash-flow problems.
We are working with OMB to address this issue, but we
suggest that the question of IRS collection of local taxes be
deferred until after the council has an opportunity to consider
forthcoming recommendations of our local tax revision
commission. In general, we appreciate the availability of
technical assistance in the District which is normally a part
of Federal/State programs.
As the leading employer in the city, the Federal Government
has the additional responsibility, exercised in other cities by
their major employers, to provide assistance and support to the
local government. Moreover, the Federal Government needs to
reverse the flight of its agencies from the Nation's Capital
and to restore the historic relative distribution of Federal
employment between the District and elsewhere in the region in
order to strengthen the core.
Capital investment in schools--another added value. In
addition to capital investments identified in the President's
proposal for economic development and transportation
infrastructure, school construction is another area which, if
not 100 percent a State function, is usually subsidized by the
States. As another of our requested added-value items, the
council is seeking Federal assistance for new school
construction and reconstruction of existing schools.
And last, but not least, the Federal payment. You are
familiar with the mantra, but let me repeat it once more. The
annual Federal payment to the District represents compensation
for services rendered to the Federal Government and
compensation for restrictions on our revenue-raising options by
the Federal Government. We are restricted in our ability to tax
Federal properties and the many federally chartered entities
and other nonprofits. We are restricted by our height
limitation on buildings. We are restricted in our ability to
have reciprocal taxation upon income at its source.
In addition, elimination of the Federal payment will create
significant cash-flow problems for the District, but I should
note that OMB is working with us to identify alternative,
short-term financing vehicles to provide the collateral or
liquidity that has been traditionally provided by the Federal
payment.
Furthermore, and this is extremely important and pointed
out to us by the treasurer, the Federal payment is part of the
District's revenue and, as such, is a component of how the
District's debt ceiling is calculated. The debt ceiling, as you
are aware, is the amount of debt repayment which the District
can legally carry in any fiscal year and is capped at 14
percent of our revenues. Elimination of the Federal payment
will reduce our financing ability that has already been
severely reduced.
OMB is working with us on possible solutions to this
problem as well, including a possible amendment to the Home
Rule Act to raise the debt limit.
In summary, unless Congress removes restrictions on the
District's revenue-raising capability, we on the council
strongly believe that the Federal payment must be maintained.
Further, we believe that consideration should be given to
either increasing the Federal payment to reflect the actual
costs of revenue restricted and services provided, which two
recent, independent studies by Brookings & Appleseed each
estimated to be $1.2 billion, not $660 million, or more
realistically, adding value to the package of State-like
functions to which the Federal Government could provide
financial assistance to the District.
Chairman Davis, Chairman Brownback, Ms. Norton, and others,
thank you again for this opportunity to testify and to work
with your committees and the administration on this historic
restructuring.
[The prepared statement of Ms. Jarvis follows:]
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Ms. Jarvis. Mr. Chairman, if I could, I would like to make
available for the record the testimony at a public roundtable
which the council held on Tuesday, February 25, 1997, which is
testimony about the President's package at which local and
Federal officials, as well as community leaders and experts,
testified. I'd like to make that a part of the record, Mr.
Chairman.
Mr. Davis. Without objection, so ordered.
[Note.--The information referred to can be found in
subcommittee files.]
Ms. Jarvis. I would like to also make as a part of the
record, the DC Appleseed Center Report on the District of
Columbia's pension dilemma, ``An Immediate and Lasting
Solution,'' of June 26, 1996. I would like to make a part of
the record, the DC Appleseed Center for Law and Justice's
study, ``The Case for more Fair and Predictable Federal Payment
for the District'' of November 2, 1995.
Mr. Davis. Without objection, it will be entered into the
record.
[Note.--The information referred to can be found in
subcommittee files.]
Ms. Jarvis. I'd like to make available for the record a
document which I know you have because it was mentioned this
morning, ``The Orphaned Capital,'' the Brookings Institution,
Carol O'Cleireacain. I would like to make available to the
record a resolution, P.R. 12-109, the Charter Review Sense of
the Council Resolution that was introduced into the council on
which a hearing was held by Council Member Schwartz yesterday.
[The information referred to follows:]
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Mr. Davis. Chairwoman Jarvis, without objection, they will
be entered into the record. It is important to have them in the
record so the committee can work from them, and I thank you
very much for including them.
Ms. Jarvis. Thank you, Mr. Chairman.
Mr. Davis. OK. Thank you very much. Let me start the
questioning on the Senate side with Senator Brownback, and then
Senator Lieberman. Senator Brownback.
Senator Brownback. You are awful kind. I will make sure
that my clock gets started here so that we can tie things down.
Thank you both very much, first off. I know you are
struggling with a tough set of problems, and you identified
those, and you articulated those, and I know your heart and
your soul is in the right place, to try to get something done,
as is ours as we wrestle with it. But I want to thank you,
first off, for stepping up to deal with the problems, because
that is very important and it is tough and I appreciate you
doing it.
I want to focus in on phase two of the President's plan
that was announced a couple of days ago, in particular. And you
both spoke about it a little bit, but particularly, Ms. Jarvis,
if I can ask you about this. The President is saying to
redevelop economically the District of Columbia, we should
start an Economic Development Corp., basically with tax
incentives; and as I read it, this would be a nine-member
board, seven of which would be picked by the President.
So it would be a department of commerce for DC. It looks to
me that this is him laying out seven people to have an Economic
Development Corp., and they would then pick businesses and
areas to give tax breaks and subsidies to. Is that correct?
Ms. Jarvis. Senator, it would be a nine-member commission,
seven of whose members would be selected by----
Senator Brownback. Controlled by the President.
Ms. Jarvis. Yes, and we have some concern about the
majority representation as appointees of the President, but let
me also say, Senator, that if the substantial resources of the
Federal Government are going to be made available, if some
substantial resources of the Federal Government are going to be
made available for this corporation--i.e., land, capitalization
of the corporation, the tax benefits that are Federal tax
benefits which can be used judiciously to create some real
economic activity, it seems to me--that I am personally less
concerned about who is appointed than I am about where the
resources of the Federal Government are going to be brought to
bear.
Clearly, I would rather have higher representation of local
appointees. Let me make that clear.
Senator Brownback. And I am just trying to make clear that
this would be an Economic Development Corp., controlled by the
President that would decide where these tax subsidies would be
going in the District of Columbia.
But I am juxtaposing this compared to Delegate Norton's
proposal, and I want to frame you in on which do you think
would do more to develop the economy of the District of
Columbia, whether it would be a zero capital-gains tax on
tangible property or this Economic Development Corp.
Ms. Jarvis. Well, I think Ms. Norton's entire proposal is
better, very frankly, for the growth of the economy because it
provides a stimulus package to reattract residents as well as
businesses, and the President's package, welcome as it is, does
not include an income-tax stimulus incentive for people who
would move back into the District of Columbia.
Senator Brownback. And don't you think that would do more,
indeed, much, much more, to grow the District of Columbia and
provide the tools than a Presidential-controlled, tax-subsidy
direction?
Ms. Jarvis. I think Ms. Norton's plan has the potential for
providing more economic growth to the District of Columbia. I
think that the President's plan is a good plan which could
easily have added to it as a complement the plan that Ms.
Norton has for income tax relief for residents. I think they
both complement one another.
Senator Brownback. But if you go with the zero capital
gains on tangible property, you do not need an Economic
Development Corp., targeting your tax subsidy of business
development or blighted areas, do you?
Ms. Jarvis. Senator, I think that the capital gains
provision would be a very significant stimulus.
Senator Brownback. The reason I am picking on this is I
want to get one piece that we have looked at, at least from the
Senate side, and I just--I do not think the President's plan
does it to provide the stimulus to grow the District of
Columbia, and I think it is more centralized planning on you in
the District of Columbia. I mean, it is a department of
commerce for the District of Columbia run by the Federal
Government.
I have real problems with us telling you what to do, when I
would much more like to see us give a broad-based set of
incentives, and you figure out what to do.
Mr. Barry. Mr. Chairman, could I speak to that?
Senator Brownback. Yes, please.
Mr. Barry. Obviously, part of the difficulty of the economy
of the District is that we are almost a paper-thin economy. The
Federal Government is the base of our economy, not
manufacturing, not steel, or anything else, so we have to find
ways where individual investments can help grow the District of
Columbia, and I think Ms. Norton's plan does that--well, the
President's plan does not deal with that issue of individual
tax relief with capital gains reduction and income taxes for
those who live here. That has to be part of the centerpiece.
I think we need both. I am concerned about the composition
of this corporation. It will be a DC-chartered corporation. It
will not be a federally chartered corporation. My own view is
that it ought to be five DC residents and four from the Federal
Government because we best know how to take this money--it
almost goes back to--I hate to use this word, but States
rights--I really do. I really do because it had such a negative
impact when I was growing up in Memphis about segregation.
But the Federal Government for a long time had been taking
power to itself, funding things to itself, and now the move is
to do block grants and to put money back into the community,
put tax credits back in the community controlled by the
community, so I would advocate a five-and-four composition, but
the main thrust ought to be with Ms. Norton's plan, this would
be a good supplement.
And the other part of this is the Economic Development
Corp., which would deal with housing, too. I do not think that
you are going to get as much housing development with a capital
gains, zero tax as you would--you may--as you would with
business development, but you may get both.
So I guess in summary, we need both, but the focus ought to
be to get the President and the Democrats, the Democratic
leadership to buy into Ms. Norton's plan, to stop ducking it.
Senator Brownback. Thank you.
Mr. Davis. Thank you very much. Senator Lieberman.
Senator Lieberman. Thank you, Mr. Chairman, and thanks,
Mayor and Chairwoman. My questions really follow the questions
of Senator Brownback. In fact, he asked a couple of them that I
wanted to ask, and this all goes to this reality. We do think
that we have an opportunity here with interest from the
President and the Republican leadership of the Congress and the
Democratic leadership to do something tangible and constructive
for the District, to maybe put the District back on a real
positive course for the long term. This is not just a band-aid.
Hopefully, we are going to do something structural here that
will deal fundamentally with the problems the District has had.
The leaders of both parties here are appointing people to a
working group or task force on the District, and the
administration will do the same. And as you probably know, I am
sure you do, when the leadership got together with the
President, they chose five areas where they thought there was
enough bipartisan interest and common ground that they wanted
to actually work on it, and one of them was the District of
Columbia.
But like everything else in the world, well, like
everything else in life, but certainly in government, our
choices are going to be limited, and our resources are going to
be limited. So we are going to have to make some choices here
between the alternatives given to us. Speaking roughly, we have
the President's plan, we have Delegate Norton's plan, which I
should declare, as I did earlier, my self-interest in because I
am a co-sponsor of it, and now we have the appeal that you both
have made to continue the existing financial payments to the
city, which are basically payments in lieu of taxes that are
lost because of the tax-exemption of Federal property here.
That happens in a lot of States, including my own, as you
said, chairwoman, where the State makes payments to communities
in lieu of taxes that are lost because of State-imposed,
property-tax exemptions.
So begin the process of helping us--and I am going to be on
that working group, as others up here are--to make some
choices. Knowing that we are not going to be able to do it all,
what are your priorities? Maybe I ought to ask the general
question here. And I know we would all like to do it all, but
we are probably not going to have it happen.
In terms of those three rough choices, what are your
priorities, or would you pick and choose from among them, and
if you would, what would you choose?
Ms. Jarvis. Senator, I would say that the aspect of the
President's plan which is really critical for the future fiscal
health of the District of Columbia is the pension, the
assumption of the pension system, and that really is righting a
wrong, as far as we see it. We have paid into the pension
system, District taxpayers, $1.9 billion of our own locally
generated funds to pay for pensioneers who were in the Federal
system before they became employees of the District of Columbia
government. So there is a terrible inequity created there.
So in the President's plan, the pension system is really, I
think, the most critical aspect of it.
Senator Lieberman. OK.
Ms. Jarvis. And if I were asked for my druthers, I would
say the pension assumption, Ms. Norton's bill, and the Federal
payment, and then I think we could go home.
Senator Lieberman. Very interesting. OK. Mayor, do you have
any guidance for us on what the sense--acknowledging, as you
said eloquently in your statement, but if you had to list
priorities, what would be your priorities? You are acting like
a Senator now.
Mr. Barry. We need a vote in the Senate, and you support
that, I know.
Senator Lieberman. Thank you.
Mr. Barry. Senator, I really find it difficult within the
constraints here to limit our discussion. We are going to have
to recognize that from the economics of it, the $660 million
Federal payment, the $770-some-million transfer of State
functions really ought to be expanded by another $3 or $400
million in terms of just budget discussions here.
We ought to expand this discussion to look at what the
Brookings study talked about, $382 million, so we would expand
the discussion by $382 million, and in my view, I know that is
a lot of money, but really when you look at the Federal,
trillion-dollar budget, it is not. And so I would say that Ms.
Jarvis is correct in the sense of if we are going to keep the
Federal payment at $660, we want to assume the pension
payments--that is about a $306 million situation--and Ms.
Norton's plan, and that would be my direction here.
So however we state it, whether Ms. Jarvis states it her
way or my way, we are still talking about an additional amount
of budget output from the National Government. I think we have
to think that way. We do not want to just temporarily fix this
situation; we want to have it fixed for generations to come, so
when, you know, another 25 or 30 years we look at this, we will
say the District is now economically stable, it is doing
things, and----
Senator Lieberman. You are absolutely right. Again, this is
an opportunity to create a partnership and structural change
that puts us on a long-term, upward course for the District.
Mr. Barry. While we are in the ball game, we ought to hit a
home run rather than try to hit a single or a double.
Senator Lieberman. Absolutely right. A timely comment as we
approach opening day.
Mr. Barry. Right.
Senator Lieberman. Let me ask this question. My time is
going. One of the unique features, and perhaps the most unique
feature, of Ms. Norton's plan is the reduction of the Federal
income tax, which has the clearly stated objective of bringing
people back to the District. How critical is that, and let me
ask you again to make some tough choices, and probably these
are not real choices, but if you had to choose between that and
the tax incentives for business development, what would you
choose?
Mr. Barry. I would choose the Norton plan.
Senator Lieberman. Thank you, Mayor.
Ms. Jarvis. I think that in order to produce an economic
growth in the District, you must have a middle-class tax base
and a business base. You cannot do one without the other. One
supports the other.
Senator Lieberman. That is right.
Ms. Jarvis. And I do not think you can really isolate those
two. Residents support the businesses, and both support the
revenue base of the District. What we really are looking for is
not to be given the fish, but the opportunity for the----
Senator Lieberman. Right.
Ms. Jarvis [continuing]. Technology and the incentives that
provide a long and deep well of fish for the future.
Senator Lieberman. Right. You want a high-tech fishing rod.
Ms. Jarvis. Yes.
Mr. Barry. Yes.
Senator Lieberman. Thank you both very much. Thank you, Mr.
Chairman.
Senator Brownback. Thanks, Senator Lieberman. Delegate
Norton?
Ms. Norton. Thank you very much, Chairman Brownback. I
appreciate the ways in which both you, Mr. Chairman, and Mr.
Lieberman have sought to clarify and to structure what the
outcomes of these various approaches would be because I can
understand that these are difficult choices. It is not as if we
can pick apples from a tree here and get whatever we want, but
it is important to get that clarification.
This notion of whether or not we want or would profit most
from attracting middle-income taxpayers or attracting business
is an important question. Let me just indicate who supports the
District of Columbia, however, at the moment. The District of
Columbia has never had a true business tax base. We need to get
one now, particularly with the downsizing of the Federal
Government, but it has never been supported that way, and we
were almost up to 900,000 people when I was a child.
Downtown business and employers tell me this, that without
a middle-income tax base, stimulus of the DC economy for jobs
that pay what we want them to pay go overwhelmingly to
suburbanites. And I just want everybody to understand, business
does not come back to a city because of tax breaks. They look
for an educated pool, and they come where they are, and, of
course, they look for the conditions in the city and the taxes
in the city.
So I am very worried about stimulus that assumes that just
because there are some jobs, District residents get them. Even
the President's plan has had to have something in there that
says, you know, the jobs and the job credit will have to go to,
but who is it going to go to? Low- and moderate-income people.
You know what? Low- and moderate-income people today pay 65
percent of the tax filers. They are crying out for more people
up the scale to help them out because they simply cannot do it.
We do not have a tax base, and if you look at people in the
middle, we have about half the average of people in the middle
of the national average; and that is why we will continue, with
the help of my good colleagues here, to press for some relief
for the folks that for as long as there has been a District of
Columbia have been the major support for the District of
Columbia with their property tax, with their sales tax, and
with their income tax.
The President's plan, I very much support and believe that
we can reach some accommodation somehow. But I do not intend to
let income tax relief for District residents slide off the
table because of a traditional empowerment approach, which, in
the long run, sometime up God knows when, may kick in and have
some effect on the District.
Our city is going down now, and if we do not do something
to make sure middle-income people remain here, what is most
tragic is that the hard work of the city and the control board
will just go to naught because you keep working, and yet the
tax base keeps going down, so you keep being in deficit, which
leads me to my first question.
You are working very hard to bring us into deficit a year
ahead of time. Most people do not understand that when we have
talked about the DC deficit for the last couple of years, we
have been talking about an annual deficit. We have not even
been talking about the unfunded deficit that we are carrying
over from year to year.
The very good, strategically good idea to bring us into
balance a year ahead of time leads me to ask you, particularly
in light of some of the testimony that you may not have read
yet--I will be asking him about it, but in light of some of the
testimony of Dr. Brimmer, whether you believe, given everything
as it now is, that we could come into balance in 1998 and stay
into balance, or whether we might be like the Chicago
Educational Authority, which came into balance and then went
out of balance in the next and ensuing years. That happened, I
think, sometime in the 1980's.
I mean, are we chasing the wind here, or do you foresee--
now, with the President's plan, now, I am assuming at least the
parts of the President's plan--leave aside the economic
development part, which would not kick in in any case--I am
assuming the other parts of the President's plan--do you think
that we could come in balance by 1988 and stay in balance for--
well, for the Financial Authority to recede, it would have to
be 4 years, I guess. But I'd like your comments on whether we
could stay in balance for any period of time except the time
that you would come into balance for in 1998.
Mr. Barry. Ms. Norton, we have made some tremendous
sacrifices to bring this deficit down, structurally down--not
gimmicks, not window dressing, not a flash in the pan, but
real, substantial progress in cutting out or reducing certain
services, certain programs. Our FTE count is real in terms of
how many people have left the DC government's payroll. We are
suffering the consequences of some of that every day in terms
of income maintenance. Case loads are going up. Clinics are
being closed.
And so my proposal for 1998 would bring us into balance, a
real balance, and would keep us in balance because it is not
based on any gimmicks or any accounting mechanism; these are
real cuts with real people being affected by that. And also our
proposal will propose a balanced budget in 1999, 2000, and
2001.
Of course, if there is some unforeseen economic downturn,
we will have to make those tough decisions to cut the budget
even further, but when you see this, which we released to the
control board on Tuesday and to the council and to you all,
these are real, real balanced budget. And it has taken, and
people do not want to appreciate this, Ms. Norton, a tremendous
amount of sacrifice to come in 1 year early.
When we had this outstanding structural budget problem, to
come in 1 year early meant cutting some programs, cutting some
reductions in agencies, and so the answer is, yes, I believe--
in fact, I am confident that this budget--and the control
board, in sending the budget back--and that is another story
when we are talking about how that process does not work that
well--acknowledged that we did, in fact, have a balanced
budget.
We may differ on some program priorities of where you spend
money here and not spend money there, but in their submission
back to us, said the budget was balanced by generally accepted
accounting methods, and we are going to keep it----
Ms. Norton. If you restructured, that included your $50
million in----
Mr. Barry. That was out. We did not use that.
Ms. Norton. So you were balanced without that? You were
balanced without that?
Mr. Barry. I sent amendments to the budget over on February
28, that did not use restructuring the debt. And this was a
valid restructuring discussion; we just had a different
philosophy about it. It was balanced without the $50 million
restructuring.
Ms. Norton. Ms. Jarvis.
Ms. Jarvis. Ms. Norton, I believe that we can have a
balanced budget in 1998. Whether we can remain in balance for
the future depends critically on the ability to stimulate
growth in the District. If there is no stimulation of growth in
the District, if there is no increase in the revenue base of
the District of Columbia, then there will not be in the out
years an ability to balance this budget.
With respect to the issue of management and mismanagement
that we are often faced with, I have given this analogy. In a
city where rents are $800 and my rent is $400 and I have $200,
that is all I have, and if I mismanage $50 of that $200, I have
a management problem, and I have a cash problem. I mismanaged
that $50, but I do not have the other $200 to pay my rent, and
that is the position that the District is in: We do not have,
for the foreseeable future, a growth in our revenue base which
is going to enable us to balance our budgets in the out years.
Yes, we can do it this year. In 1999, we can try to hold
the line, but in the out years, if there is not growth, we will
continue to reduce the budget of the District of Columbia and
to cut into those essential services. This is a point that is--
--
Senator Brownback. This will be the last question, if we
could.
Ms. Norton. Well, Mr. Brownback, I need another round of
questions.
Senator Brownback. OK. We may do that, and I will come
back, but let's see if we can--I am trying to be fair on time
with everybody.
Ms. Norton. All right. The point that is missed about the
stagnation in growth or the stagnation in the economy of the
District of Columbia, where we are going down every year, is
that the cost of living goes up every year, no matter what you
do. You have to pay more for goods. I would not say more for
services, since our employees have not gotten a raise in so
long, but obviously for some services you are also paying more.
So this point about whether we are fooling ourselves by
going into balance is an important one because if we do not
signal that now, the Congress will come down on the District
like a ton of bricks because it will look as though we had
promised to, in fact, balance the budget. Mr. Chairman----
Mr. Barry. Ms. Norton, on that score, let me just say that
our approach to this is that for--and the pain is tremendous--
we are assuming in 1999, 2000, and 2001 that our personal
services costs remain steady, which means that are employees
are going to take it on the chin in order to bring this into
balance. It means that no pay increases. It also means further
reduction in the work force, and also it means reduction in the
nonpersonal service areas. That is what it means. It means
making further sacrifices and suffering more pain in terms of
the lack of service delivery.
On the other hand, that service which is delivered will
become increasingly efficient because we are just getting
better at doing it. I agree with Ms. Jarvis in general about
the out years, but we have put together a model which shows
that if we keep personal services steady, we are going to have
to probably--what we have done is assume minimum growth in
Medicaid and in debt service and in the pension area. Those are
the three big, heavy hitters.
Senator Brownback. I am glad to have Chairman Davis back. I
am afraid I am going to have to go on to another set of
meetings. Thank you all very much, and I will hope to catch
some of the written testimony from some of the other
presenters.
Mr. Davis. Senator Brownback, thank you for being here.
Senator Brownback. Thank you.
Mr. Barry. Let me thank Senator Brownback for your immense
and intense interest in the District. We have now met several
times. We are going to do some things together, and we
certainly appreciate your involvement here. Thank you.
Senator Brownback. Thank you.
Ms. Jarvis. Thank you very much, Senator.
Mr. Davis. I did not get to hear all the responses to
Senator Lieberman's question, with regard to setting priorities
where we have a limited ability to act. It seems from my
perspective that we need to do several things. First of all, we
have got to get better management control of the city which we
are starting to do.
Mr. Mayor, I agree with you in terms of some of the things
that have started between you and the control board and the
revisions. I am excited about this Booz-Allen study of the
police department where they talk about redeploying personnel;
the Water and Sewer Authority that was established last year
was a giant step forward. However, it is going to take time
because we do not have the information technology available to
make real-time decisions. It takes time to train and retrain
managers and key personnel, but once we start turning the
corner on computer technology, education, and public safety all
will be beneficial.
The administration's plan then talks about the relationship
between the city and the Federal Government. I would be the
first to say that all these comparisons with Washington and all
these other cities are apples and oranges. The city is very
unique. It is envisioned that way in the Constitution. But, it
is also unique in terms of its current structure and
relationship with the Federal Government, its taxing authority,
and its authority to deliver services.
For the record, we invited seven Republican and six
Democratic mayors, and we heard from Mayor Rendell and several
Republicans who were not overly critical of the city. Mayor
Rendell, for example, talked about some of the issues he, as
mayor, had to go through in Philadelphia, a city which is very
much like this city in terms of the urban cycle that it has
undergone.
I think we can look at Ed Rendell as one of the premiere
mayors in the country and learn from some of the things that he
has done. It was in that context that he was asked to testify.
Cities like San Diego, which do not have a commuter tax, were
here as well. It just varies across the country, because every
relationship is unique in terms of what the taxing authority
is, the services they deliver, the relationship to schools, and
the State government. So, it is very, very difficult to make
direct comparisons.
There is no question in my mind that the current
relationship the city has with the Federal Government needs to
be revisited. I think we have all been vocal on that. The
unfunded Federal payment, which I understand you said is one of
the priorities, is a huge problem down the road.
Today, it is a bit of a problem, but in about 6 or 7 years,
it will become 15 percent of the city's budget, so we need to
address the issue. Now, we have resistance to that from some of
the Civil Service Committee members and others, but I think we
can structure this in a way that hopefully we can take that off
the plate. I think that is critical. I applaud the President
for addressing that issue.
I think on the Federal payment, we continue to work through
that and recognize that you have cash-flow needs. I also
believe that some sort of tax reduction is going to be very
important to bring the city back. Given the tax burden that you
have and the services that you have to deliver and the limited
tax base you have, particularly being from the suburbs, I think
it would be extremely selfish to say there should not be some
form of tax relief we can look for for some Federal help. And
how that evolved, I do not know at this point.
Ms. Norton has put forth, I think, a very bold plan that
has won the support of some very key members, but it also has
some opposition from some key members, but it certainly brings
the tax burden down, and that is what makes the city
competitive. Bringing the tax and regulatory down will help
make the city competitive, both from a commercial side and from
the residential side as well. And I hope that what we come up
with in the final analysis will have some elements of that and
we can all sit down and get something accomplished.
I like the Economic Development Corp., concept. It is not a
panacea; it is a piece of a large puzzle, that has some
outstanding attributes, but we have to talk about the makeup of
it, as was asked in some of the other questions, to make it
work; I applaud the President for that as well.
I have got a few questions now I want to go to. You have
given that as a preliminary from my perspective, and we have
heard your perspectives. Let me, first of all, talk about the
transition, Mr. Mayor, the transition team support when you
came into office. They were talking about doing things like
turning the heat down a few degrees, joining the FTS-2000,
which you are specifically allowed to do; and with a new
procurement coming up, I think there will be greater savings
for users of that; using different types of light bulbs. Do you
know how many of these items have been completed at this point?
Mr. Barry. Mr. Chairman, let me speak, but before I do
that, let me say what upsets me about this discussion and the
comparison to other cities. And Mayor Rendell are good
political friends----
Mr. Davis. Well, let me get to that first. First of all, if
you could tell me where we are----
Mr. Barry. I am going to do that.
Mr. Davis [continuing]. On some of these concepts.
Mr. Barry. I am going to do that. It will not take but a
minute to say this. We have done far more restructuring and far
more efficiencies than any of these cities, and in that regard,
we are on track with our transformation plan. We have a number
of initiatives that have been taken to restructure the city
government to bring about savings in energy, savings in lease
negotiations, but also the thrust of my transformation was to
become more efficient in the delivery of city services, and
that is what the thrust has to be, and we are doing that.
Our trash pickup has improved tremendously. You know, we
got beat up last year, rightly so, about our snow preparation.
We are ready now. So the short answer is that we are on track.
The only area of the transformation that we are not really on
track with has been our negotiations with our labor unions. We
had intended to reduce certain costs by $25 million by
eliminating certain benefits. We were told by one of our boards
that we could not do that, but the rest of the transformation
is either on schedule or ahead of schedule in terms of
restructuring the various departments.
We have had dialog with Ms. Jarvis about the business
economic part of it. We are going to try to work that out, but
the answer is, yes, we have reduced energy costs, I think, by
$4 or $5 million--in fact, in our 1998 budget, we are going to
do it by another $3 or $5 million.
Mr. Davis. But transformation is not really on track. You
have met with some setbacks, haven't you, in terms of the
timing of this? My understanding of the budgets that we looked
at is there was going to be tremendous savings, and we have not
achieved those savings on the transformation side.
Mr. Barry. That is not true.
Mr. Davis. OK.
Mr. Barry. Our budget--I will give you an example. We have
an FTE goal as part of our transformation. We are on track with
that. We had savings in certain departments. I could give you
some of those. We are on track with that. And I do not know
about the information you have, but if you look at the
information----
Mr. Davis. I am not trying to be critical. We are just
trying to share information here.
Mr. Barry. I am not saying it is.
Mr. Davis. Well, have you joined FTS-2000?
Mr. Barry. I do not know.
Mr. Rogers. Mr. Chairman, Michael Rogers, city
administrator.
Mr. Davis. Hi, Michael.
Mr. Rogers. You pointed out a number of items that were
recommended by the various transition committees of the Mayor,
and a number of those recommendations were taken; some were
not. But with respect to----
Mr. Davis. Could we supplement the record--we do not need
to do it today.
Mr. Rogers. Sure.
Mr. Davis [continuing]. Try to show us what was in the
original recommendation, what you have done and the status of
others, including maybe not approving it. That is fine.
Mr. Rogers. Well, with respect to FTS-2000, we went another
step. We have adopted a plan for saving telecommunications
costs by moving to an ISDN platform in the District, and we are
working with our contractor to do that, so we are saving--are
projected to save once fully installed, $4 million a year in
telecommunications costs.
With respect to energy, there are energy savings. There is
an energy audit in progress, and there are savings there. With
respect to the overall mass transformation plan, there are
hundreds of projects that are tracked by the city, and those
are interfaced with the budget, and there are a number of--
there is a lot of progress.
Where there is slippage and projects cannot be accomplished
either because congressional action decides to change the
project or go another direction or council decides that they do
not agree with the project or we run into some other roadblock,
then we look for ways to supplement that project or change that
project and still produce the revenue.
We will be very pleased to submit to you a full report on
the cost savings initiatives and the transformation progress.
[The information referred to follows:]
[GRAPHIC] [TIFF OMITTED] T2281.090
Mr. Davis. Thank you. More than a year ago, you received a
report on real estate savings that you could achieve. Are these
changes in savings still in process and being developed, or
have they been implemented? What is the status of that?
Mr. Rogers. Yes. We did receive the strategic real estate
plan. That plan is being implemented. We have initiated audits
of some of the many month-to-month leases. I think to date six
audits have been done. We have entered into contracts to do
audits at a faster rate, so that project is moving forward.
Mr. Davis. What is the status of the Tax Revision
Commission? Do you know when you expect that group to report?
Mr. Barry. Ms. Jarvis.
Mr. Davis. Ms. Jarvis, do you know?
Ms. Jarvis. By the end of the year.
Mr. Barry. By the end of the year. As I understand, they
are going to make some interim recommendations as they get to
them.
Mr. Davis. OK. I gather from the context of the comments,
that you would be willing to consider even more tax elimination
and tax reduction if that action could be held harmless
regarding DC revenues. Is that fair to say?
Ms. Jarvis. I was listening to my colleague. I am sorry,
Mr. Chairman.
Mr. Barry. Do you mean in terms of tax reductions and new
business?
Mr. Davis. Reduce taxes further if it could be harmless in
terms of the revenue loss and it was made up by increased
Federal payment or something else?
Mr. Barry. Yes.
Ms. Jarvis. A very affirmative yes.
Mr. Barry. Yes.
Mr. Davis. How about the Regulatory Reform Commission? When
did you anticipate a report from them?
Mr. Rogers. We will get a report from the Regulatory Reform
Commission in June. It was given a 1-year life. That commission
is moving along, and it will conclude its work June 1, I
believe.
Mr. Davis. Could each of you comment on your reaction to
the possibility of putting surplus District land, including
closed schools and other District economic development programs
like the RLA, into the proposed Economic Development Corp?
Mr. Barry. We support that, at least speaking for the
executive, we support all the resources that are available,
whether it is Federal land or District land, including schools
that have been closed or even parks that may not be as useful
as they once were as part of the overall pot that we could put
this into.
Ms. Jarvis. Mr. Chairman, I do not support putting surplus
land, RLA land and schools into the Economic Development Corp.,
until there is a Federal contribution of land. We already
dispose of those lands. If there is not to be a Federal
contribution to the Economic Development Corp., of substantial
amounts of Federal land with the capitalization, we would just
as soon retain the ability to dispose of our own land.
Mr. Barry. I want to identify with Ms. Jarvis's amended
position.
Mr. Davis. Should the Economic Development Corp., be
limited to certain neighborhoods, or should its jurisdiction be
the whole city with specific goals and targets for particular
distressed areas? Do you have any thoughts on that?
Ms. Jarvis. Yes. The contemplation of the corporation is
that it is a holding company that has various subsidiaries,
each of which has a target, so that a couple of subsidiaries,
one of which could do the development around the Navy Yard
where the Southeast Federal Center would have been, another
subsidiary could do Metro stops, could do Minnesota and
Benning, could do Georgia Avenue, New Hampshire Avenue, could
do sites in the Ward 8 community.
So I think there needs to be initially a push to assemble a
great chunk of Federal, local, and private sector land, for
example, around the Navy Yard area, where there could be a
substantial massing of activity that really creates an economic
driver in that area, and then there should be other
subsidiaries that address communities in our various respective
wards.
Mr. Davis. Ms. Jarvis, I understand that you talk about
reprogramming some of the money from the Barney Circle Freeway
into the Convention Center and arena area.
Ms. Jarvis. Yes.
Mr. Davis. I would support that.
Ms. Jarvis. The infrastructure.
Mr. Davis. And I will work with Ms. Norton and you to do
that. I think that makes a lot of sense, from an economic
development perspective.
Ms. Jarvis. Yes.
Mr. Davis. I just wanted to put that on the record as well.
Ms. Jarvis. Good.
Mr. Davis. Can either of you tell me what the status is of
the Memorandum of Understanding right now with the
administration? Ms. Jarvis, you can go first.
Ms. Jarvis. Well, Mr. Chairman, we do not know an actual
date, but I will tell you that I am very encouraged that for
each of the areas of the President's plan there has been a
working group with OMB local officials and other officials
looking at the issues that are critical. And so while I believe
that Mr. Raines hoped that the, and believed that the MOU could
be available to us last week, in the interim we have solved
some problems with the pension system.
In the interim we have solved some problems with the courts
and the prison system. In the interim we have solves some of
our concerns about the debt refinancing, and we then have had
an opportunity to weigh in on these issues, and that has really
delayed having a document before you, but it has been a
substantial contribution that we have been able to make.
Mr. Davis. I would just add, on the prisons you talked
about, that we have discussed with the city alternatives to
having a Federal takeover, which raises a lot of issues the
city is uncomfortable with and we are uncomfortable with, at
least this member. In terms of looking at some of the
privatization options and the like, we will continue to work
with you on that, and as you approach the Memorandum of
Understanding, if you will keep that option in mind as well, I
am sure that will be appreciated from this corner.
Mr. Mayor, did you want to comment?
Mr. Barry. Mr. Chairman, I think we are probably 10, 14
days away from a final draft that we will be looking at. We
still have some concerns in the critical justice area, some of
the concerns that you have raised about how this actually
operates as of October 1.
The Federal Government wants a transition period before the
Federal Bureau of Prisons takes this over. We are not
comfortable with how they want to structure that, but we have
met once this week already. We will meet again I hope the next
day or so to see how far we have made--what progress we have
made.
I get the impression that in the other areas there has been
substantial progress to the point where there are very few
major objections from the city to those areas. I think critical
justice is the last remaining area, because it is complicated,
very complicated, both philosophically and programmatically,
but we are making great--so I would say 10 or 14 days when I
can gather.
Mr. Davis. OK. Do you think we could make more progress
more quickly if we had greater cooperation between you and the
control board?
Mr. Barry. We have excellent cooperation now. I mean, I do
not understand that, these myths out here. What happens from
time to time, on a budget item, the control board may say, we
are not to put this money in this pot but put it over here.
That is not noncooperation; that means that we just disagree on
a philosophy.
But on the major thrust of this city, if you talk to Dr.
Brimmer and the other four members, talk to myself and others,
you will find that we are in communication with each other, but
there may be some philosophical and program differences because
I was elected, and I have a certain constituency that I have
to, as you were, listen to promises made during the campaign.
We may have some slight differences on priorities, but that
does not mean we do not cooperate, not at all, and we ought to
just stop that notion. That is not happening. We do cooperate.
We do talk with each other. The staff met yesterday on the
fiscal year 1998 budget to make sure we are on track about what
was required for the budget. So that is just a myth that ought
to stop.
Mr. Davis. Ms. Jarvis, let me ask you, has the control
board been helpful to the council while you look at the
cooperation at this point between the control board and
council?
Ms. Jarvis. I think that the cooperation with the control
board on the council side is critical for a number of reasons.
First of all, when they go away, we would like some of their
authority.
Second of all, we believe that the control board's staff
could help us in the same way that a congressional budget
office helps the Congress and that what the control board has
brought is an analytical capacity that we do not have locally
because just of the size of--the absence of something like the
Congressional Budget Office, that what the control board has
done is produce some quantitative data that take us to the next
step in our planning and for that reason has been very
important.
We have indicated on the council side that we would like to
meet more often with the control board, and we will be doing
that this afternoon, because we believe that the analyses that
they have done are critical for us as we are making day-to-day
decisions in conjunction with the Mayor.
So we just want more of their information, very frankly. We
wish there were a greater flow of information that would help
us make some of the critical decisions that we have to make. We
think that our recommendations would be stronger with the
advantage of all of their information.
Mr. Davis. Thank you. Let me just add, I think particularly
with the President's proposal and other proposals that are to
be floated up here, you, Ms. Jarvis, you put some in the
record, Carol O'Cleireacain's report and some other
recommendations, and Ms. Norton's proposal.
To the extent we can get the control board, the council,
and the Mayor on the same sheet of paper saying we all agree on
this, that helps up here. It helps us sort it out. But this is
the beginning of a long process, and we are going to keep all
of you involved as we go forward.
Mr. Barry. Mr. Chairman, I think on the President's plan
and the overall focus, in listening to Ms. Jarvis and my own
statement and Dr. Brimmer's statement, you will find that I
think we are 98, 99 percent on the same page with this.
But let me also reiterate again, just because I may differ
programmatically with a member of the council or the control
board does not mean cooperation; that is democracy.
Mr. Davis. Absolutely. Thank you, and I appreciate that.
Mr. Barry. It is democracy.
Mr. Davis. Mr. Mayor, let me just ask you, since I saw this
on the news last night. I was originally going to stick to the
script, but since you have wandered all over in your opening
statement.
Mr. Barry. Mr. Chairman, ``wander.'' That is not a good
word.
Mr. Davis. Yesterday----
Mr. Barry. Comprehensive.
Mr. Davis. Thank you. You gave a very comprehensive
overview.
Continuing on, we received a report in the news last night
about two cars that were being stopped for illegal u-turns, and
both were from out of town. One was given a ticket. The other
had an expired license and was going to be ticketed. As the
story came to me, and we have confirmed it this morning,
evidently a call was made from one of the cars, and the chief
of police, Chief Soulsby, was on the other line speaking
directly to the officer. You were not involved with that, were
you?
Mr. Barry. No, I was not.
Mr. Davis. OK. I just wanted to clarify that.
Mr. Barry. Absolutely not.
Mr. Davis. Finally, let me just add that I think you
realize that Congress is not merely going to rubber stamp the
President's proposal, although we are very impressed and
delighted at his interest in this--it is unprecedented. As I
said, the stars are aligned for all of us to work together, but
most provisions are going to undergo probably some change.
Hopefully, we will be adding value to some of the others, as
you have suggested, and that is what the legislative process is
all about.
I just hope that we can work with you for the city's
benefit as we add value to this and work in a very cooperative
manner. We have a great opportunity here working together on
these issues, and I am very excited about the possibilities
that this time period holds for the city.
So, thank you both. Mrs. Morella had a couple of questions.
I now recognize the gentlelady.
Mrs. Morella. Thank you very much, Mr. Chairman. I want to
thank the Mayor and councilwoman for their presentations, and
it is indeed true that Councilwoman Jarvis did put a lot of
material into that record, which is going to be voluminous but
very informative.
My question to you both is, let's do a dollar sign on all
these plans that we have in terms of what we want, because I
hear about the fact that we like the President's revitalization
plan. We want to add to it; we do not want to eliminate the
Federal payment. We want to include St. Elizabeth's. We like
Congresswoman Norton's plan.
We have to sell whatever plan this committee comes up with.
We have to sell it to the Appropriations Committee, and then we
have to sell it to our colleagues, and I want you to be mindful
of that, because I would like to ask you if you have any idea
of what the cost would be of the plan that you would like to
put together with all the pieces out there that would best move
the District of Columbia into a healthy state and what it would
cost in the short run and maybe what it ultimately would cost
in the long run.
Mr. Barry. Congresswoman, I think we ought to approach this
a little bit differently in the sense that it is going to be
expensive to right the wrongs of the past. I know that does not
sound very practical. I have not yet had a chance to add this
all up, but if you took the President's plan, which is about
$700-and-some million, keep the Federal payment, that is
another $660; that is $1.3; and if we added St. Elizabeth's to
the plan, that is another $190 million. Ms. Norton's plan, I
think, is about $7--how much is it--$8, $900 million? What is
it, Ms. Norton; $700 million? So you are talking about----
Ms. Norton. My plan has never been costed out.
Mr. Barry. OK. So I think very easily, Congresswoman, you
are talking about over $2\1/2\ billion, but I think we ought to
look at that in the context of the Federal budget, a trillion-
dollar budget. And I think that is how I would like to approach
it.
Mrs. Morella. And right now we are having committee
meetings with regard to authorizations that are going to be
within certain boundaries that have been established, and that
is going to be difficult. Our concern also is if we do not
prioritize what we need to do a jump start that then can be
continued, then I think we are operating in a vacuum. My humble
point of view is we have got to come up with something that we
think we can sell.
Mr. Barry. Ms. Jarvis and I, we talked about this while you
were out, in terms of continuing the Federal payment, taking
unfunded pension liabilities, and Ms. Norton's plan. Those are
our three priorities.
Mrs. Morella. But the total cost, then, give me that again,
you estimated.
Mr. Barry. Federal----
Ms. Jarvis. Wait a minute. With all due respect to the
Mayor, if we talk about the pension, District taxpayers have
already paid $1.9 billion, I believe, into the pension system
for pensioneers who were Federal employees before we got Home
Rule, and so I do not want to say to you, here is what this
package costs, without there also being on the table what local
tax revenues have paid for that system. That is $1.9 billion.
That is why our citizens have some of the highest taxes in
the country, because we have paid $1.9 billion of benefits. We
have the third highest per-capita income taxes of Federal taxes
in the country. All right? So, to say that this package would
cost this without recognizing that $1.2 billion is revenue
foregone because of restrictions on our revenue, and if you put
that package together, that is $2.4 billion.
Mrs. Morella. I will not only recognize that, but I
mentioned in my opening statement that it was 1973, with Home
Rule and prior to that, that that is why you had the unfunded
pension liability, because it had been paid.
Putting that with an asterisk, then what would the cost be?
Now, I say this in light of, again, in my opening statement,
schools that leak, buses that fall part, safety that is not
safe. I mean, you know, Duke Ellington School, which closes
under court order.
You know, all of these kinds of things that are so
deplorable that Members of Congress want to know that we can
achieve results and what they are going to cost, and I think
they are willing to invest, but they also need to know what the
amount is going to be, and we need to know because we want to
be able to come up with----
Ms. Jarvis. OMB has done for the pension plan a cost in the
out years of that plan, Mrs. Morella, which we can provide to
you, but which, of course, as a Member of Congress, you have
access to immediately. And the pension proposal would take the
$4.5 billion of assets and bring them into the Federal
Treasury.
Now, they would be set aside for the payment of the
pensioneers, but that would be an asset pool that is brought
over, and the pensioneers would be paid out of that $4.5
billion of costs for a period of time--I am not sure--6 or 7
years, and then there is--in fact, 10 years. And then in the
out years there is going to be a $700 million cost to the
Federal Government for a period of time in order to fully fund
the pension system.
So those costs are not going to be in the 1998 budget; they
are going to be 10 years hence, and there will not be a cost in
the current budget for pensions except those that are pay as
you go, I think I am correct in saying.
The Medicaid costs for the President's plan are----
Mrs. Morella. Well, you can figure out the whole
president's plan, you know, with the courts and the prisons and
Medicaid.
Ms. Jarvis. But it brings us even.
Mrs. Morella. That comes to what? Is it about $4 billion on
that. But what I am saying is that we like that, but then we
also want to not terminate the Federal payment. I mean, this
may have merit, and I have mentioned this before. We also want
to do something about St. Elizabeth's. We also want a tax-
benefit plan. And they all sound great, but when you put them
together, we have got to think about a package which
prioritizes and will bring about results, so it is asking----
Ms. Jarvis. Let's do the pensions, Ms. Norton's stimulus
package because you produce some economic growth for the
District, and we cannot survive without economic growth and the
Federal payment, and the Federal payment properly constituted,
which reflects the real loss of revenue.
These are not gifts. This part of it, these are not gifts.
Mr. Barry. Congresswoman, I know you have been supportive,
but I think the Congress has to do what some of us have to do
from time to time: Bite these tough bullets and advocate a
level of Federal involvement that will begin to permanently
solve these problems.
Mrs. Morella. Of course.
Mr. Barry. I know it is hard, but we have got to just do
that. When the Defense Department comes up, they talk about all
what they need, and people bite that, so we need a balance here
where we begin to move in 1998 as a first step to permanent
recovery for the District, with our doing our share. There is
no question about that. We are prepared to do more than our
share, but I think you have to bite these tough bullets and be
advocates as you have been on the Appropriations Committee and
other places that we have got to put this level of funding over
here and push for it.
Mrs. Morella. I appreciate your both trying very hard to
respond to the question. I do not quite have an answer, but I
value working with you and look forward to so doing. Thank you.
Thank you, Mr. Chairman.
Mr. Davis. Thank you very much. Ms. Norton.
Ms. Norton. Mr. Chairman, in light of the time, I will
simply put before these witnesses a few issues that I wish they
would look into on the theory that if there were substantial
progress on such issues, it would aid us in what I must tell
you for sure is going to be an uphill struggle to get any
substantial part of these bills.
On FTS-2000, I thought I heard Mr. Rogers talk about
another kind of system. Now, let me tell you something about
FTS-2000. I do not know if it was between administrations, but
I recall sending something, and it may have been in the
transition between administrations, but if you were to tell
cities across the country you could get on FTS-2000, they would
hug you, kiss you, and not let you out of the room.
Alone, FTS-2000 will save millions, multimillions of
dollars in telephone bills. I did not hear an answer as to
whether we are on FTS-2000. I believe we are not. What happened
was one of my committees sent off and said--sent the chairman--
I am sorry--the staff director of one of my committees sent to
me several years ago and said, Do you realize how much money is
going down the drain because the District has not accepted our
invitation to come on FTS-2000?
Now, I ask about it because whatever that system was, it
did not sound like FTS-2000.
Mr. Rogers. Well, let me just say, Congresswoman, that the
system that we are moving forward with, I think, is a part of
the FTS-2000 program. It was procured off of the GSA schedule,
and it was procured for the purpose of achieving the same
benefits of FTS-2000 in terms of saving the District----
Ms. Norton. Do you mean off of a competitive schedule, or
off--do you mean you got the vendors off of their schedule?
Mr. Rogers. Yes, yes. We will give you a specific answer on
that.
Ms. Norton. I see Mr. Demczuk there. Look, follow through
is my middle name. This is money. I would like to know, because
I would like to help. If we are not on FTS-2000, we are going
some other route. I need to know it right now. I am on the
subcommittee that can get us on FTS-2000. If you hook into the
Federal Government system, even before the District went down,
that was seen as a way for us to save money.
Could you get that to me by the end of the week? I need to
know if we are on FTS-2000. I need to begin to work to get us
on FTS-2000.
I have a bill in. We have talked a lot about State
functions. There is one State function that the President's
bill does not mention and that we have not talked about, and
that has to do with welfare. In the first 2 years, these funds
go up, then they drop off the side of a cliff. I have a bill in
that would, in fact, put the District not in the position of a
State, but in the position of a city and would require that we
contribute what an average city would contribute to the quotas
that must be met in order to keep from losing your grant.
You will lose, by the year 2000, 21 percent of your grant
if you do not have 50 percent of your people in work activities
or at work at least part time. We do not have time for me to
get a progress report on where we are on welfare reform in the
District. Now, I know we had a late start, but I would
appreciate knowing that because perhaps I could include in my
own bill other sections that could be helpful to you if there
are problems with respect to how you are proceeding.
Ms. Jarvis, I appreciate that you have moved the pilot bill
forward. Frank Raines included in his bill in the President's
bill the National Infrastructure Fund, and in delineating where
money beyond the $125 million will come from, talked about the
pilot. The council has had before it a legislation or a
proposal for payment in lieu of taxes for some time, and I
believe I have a letter from you saying that that is moving
forward. I would like also to know--again, could I know this by
the end of next week?
I know this has to be negotiated, but based on how other
cities have negotiated it--let's take two that I know, and
there are many more, New Haven and Boston. They have negotiated
even with small colleges. They get some payment in lieu of
taxes. I would like to know how significant you believe would
be the revenue if we negotiated payment in lieu of taxes from
the kinds of tax-exempt entities that other cities now get on a
regular basis payment in lieu of taxes from.
We know that there have even been some offers, or at least
an offer from at least one, the National Education Association,
to give 40 percent. That is a lot of money, and as you are
cutting budgets, if we could proceed on that, as Ms. Jarvis
apparently has moved the council recently, that would be very
helpful.
FTS-2000--I am taking these down, you all. Do not let me
have to call you; call me--FTS-2000, pilots, the welfare bill,
and, finally, Mr. Mayor, when your transformation plan came up,
even your harshest critics up here embraced it and embraced
you. You have indicated that the transformation plan is moving
along. I have said to you that I would like, in my own work on
the House floor which I do every day, to indicate specifics
about how the transformation plan is being implemented.
And what began as a compliment to you has now become a
point of criticism from the Hill because the Hill will not buy
these notions that we are moving along, we are having meetings,
and it is going along. So the kinds of things that most
interest Congress is restructuring agencies and services.
This is what the District and the control board could not
get a hold of initially because the financial situation was
what you worked on initially, but here, the impression is that
we have the largest government per-capita, and if we do not
show not only that the District has cut, but that the agencies
look differently, your figures do not register up here, and it
is a terrible, terrible shame that the District is not getting
credit for privatization and even for layoffs because the
District cannot show when it comes up here that X agency had 10
layers last year, and it has got 5 layers this year, that it
had what your transformation said would happen, that there were
5 agencies in one department, and now there are 2.
That is what would most help us to show a difference based
on the transformation plan that many of us believed was going
to be the road map out of which you would proceed. And I
recognize how difficult it is to get there, but even working on
some of those consolidations, some of the elimination of
bureaucratic layers would help me to respond to people who do
not give you any credit for very substantial changes in the
District government.
Moreover, without working off of a plan like the
transformation plan, when there is overspending, there is a
clear impression here that the District and the control board
are forced to get the bodies and the money wherever they can
find them and that that will not necessarily be in
consolidations and elimination of layers of bureaucracy, but
will be wherever because you have got to stop the hemorrhaging
of money.
We are most interested in specifics, not only on what has
happened thus far, but on what the process is for implementing
the transition plan, whether there are pieces of legislation
before the city council that would, in fact, carry out the
transformation plan. It would be one of the most significant
things you could do for us as we go forward with this plan so
that we would be armed with this evidence as we have the
skepticism come at us that the District should not have more
money, should not even be relieved of these State costs.
I ask also, because constantly we are told that we have the
largest government per-capita, that we do not need any more
money, just cut, and you will get the money out of that, I
would ask that you send the number of employees and, if
possible, the amount of money that goes for the State functions
alone up here. They count all of the employees, and then they
say, See, we have a fraction of those. You obviously have to
have employees for Medicaid. Well, you will have to have that
anyway because you will keep Medicaid. Employees for prisons.
I do not know if the court employees--I suppose they are
counted to you. You have employees for the State functions, and
I do not need to run down what they are to you. If somebody
could isolate what those employees are, so we then would cease
the process that I am faced with every year of comparing apples
to oranges, their city employees or their county employees with
our State, county, and municipal employees.
If I could get responses to those, you would help me, and I
believe you would help the chairman, who is trying to help us a
great deal. Thank you very much, Mr. Chairman.
Mr. Davis. Thank you.
Mr. Barry. Ms. Norton, in terms of the specific information
about State functions, here it is, and I would like to----
Mr. Davis. Without objection, it will be placed in the
record.
[The information referred to follows:]
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Mr. Barry [continuing]. Ask you to take it, you know, and
expand on it as you talk about this on the floor of the House.
It is very specific, by agency, by function, and etcetera.
Mr. Davis. It will be put in the record.
Mr. Barry. Second, we are going to get to you a list of
where we are with transformation. I am going to discuss it with
Congressman Davis this afternoon. Also, there is a lot of
misinformation and noninformation that we want to share so that
people can see that this process is making steady and
significant progress.
On the other hand, Congresswoman, we certainly can become
more efficient. We certainly can streamline. But if you look at
the big cost centers in our budget, the big cost centers in our
budget--Medicaid, prisons, and others--they are a result of our
disproportionate share of poverty in this community. If you
look at where a lot of this money is going, it is the
disproportionate share of poverty.
Now, the way you correct that is get people out of poverty,
and I have got some notions about these nonprofits, which I
will not say today, but I share with you about how we can get
them more involved with putting people to work.
So we are going to do all of that, but I think if we do not
point out, though, that these big cost centers, look at where
they are, are really the direct result of the social and the
demographics of our city, which are disproportionate low income
compared to other parts of the region or other parts of the
city. New York City has all these other boroughs to do that.
Mr. Davis. Thank you. Ms. Norton, thank you very much. I
will make two final comments.
First, I would like to see, if you have it, all the Federal
property, and what you would get under normal real estate
assessments if the Federal Government paid real estate. I have
seen a lot of conflicting numbers on that, and if you have the
programs ready to run that----
Mr. Barry. We have it exactly.
Mr. Davis [continuing]. That would be very helpful, and I
would be happy to put that in the record, because that will
give us an idea of what the Federal Government is not paying
for the real estate that would be payed by someone else.
Mr. Barry. The other thing, Mr. Chairman, people fail to
point out and notice that we usually talk about property tax
forgone, but just think of the income that would be earned on
this property, too, with people working in office buildings or
living in homes that would be on some of this property.
Mr. Davis. If you can provide us with your numbers, I am
going to have our staff go over it.
Mr. Barry. We have them.
Mr. Davis. We would like to get a definitive number. A lot
of numbers are floating out there. People have tried to make
the best stab----
Mr. Barry. Mr. Chairman, we have the exact numbers.
Mr. Davis. Fine. And, finally, I just want to ask you, Mr.
Mayor, and you do not have to answer this now, maybe for our
discussion this afternoon. There is a high-technology
revolution that is encompassing the beltway and the DC area
that has produced hundreds of thousands of jobs, and our
question is, how can we get the city to participate in this? To
date, the city has not been a beneficiary of this. And it could
be the function of the University of the District of Columbia.
UDC could be starting with appropriate training programs.
We have over 12,000 jobs identified in northern Virginia
that we cannot fill in the region. There is no reason the city
cannot start doing some training and share in this.
We would love to have you as partners, and to get all of
the university presidents from Virginia and DC, and Maryland
together to talk about how we can fill this gap. It does not
take a college diploma in some of these cases, but it takes the
appropriate training. This is something that we can work
together on, and we can discuss that later this afternoon, but
let's be thinking in these broad terms--not just Government
jobs, but some of these high-technology, telecommunications,
Net-based service jobs that we cannot find people to do. How
can we start orienting our young people in this direction?
I would love to see you share in that with us. It would
help the whole region.
Mr. Barry. Mr. Chairman, one of the things that we are
doing immediately is to assign staff, and we will talk more
about it this afternoon, that will begin to look at these lost
opportunities, including the high technology, and also how we
can begin to match up DC residents with jobs in the suburbs and
the impediments to doing that. So we will discuss it.
Mr. Davis. Thank you both.
Mr. Barry. Thank you.
Mr. Davis. We have kept you here longer than we
anticipated. You can have the last word, Ms. Jarvis.
Ms. Jarvis. Just with respect to the high-technology
revolution, as an outgrowth of the Board of Trade's Greater
Washington Initiative, Susan Williams is now working with them
to bring together at the consortium of universities to talk
about the training that should occur, and there is a meeting, I
believe, that has been set for that, and so you are right on
target, Mr. Chairman, on that.
The Appleseed Center also has numbers with respect to the
Federal payment.
Mr. Davis. Thank you both very much.
Ms. Jarvis. Thank you, Mr. Chairman, for your support.
Thank you, Ms. Norton.
Mr. Davis. Mr. Rogers, thank you.
Mr. Barry. Thank you very much, Mr. Chairman; and certainly
our warrior on the Hill, Ms. Norton, thank you.
Mr. Davis. We are pleased to have next Dr. Brimmer.
We have Dr. Brimmer and also the District's chief financial
officer, Tony Williams. Tony, I do not know whether to call it
your checkered past or a historic past, being the local
official in Connecticut, but we are pleased to hear about that.
Thanks, both, for the fine job that you are doing. As you
know, it is our policy that all witnesses be sworn before they
may testify.
Let me start at the beginning, Dr. Brimmer. I understand
that congratulations are in order for you. As I understand, you
became a first-time grandfather last night.
Mr. Brimmer. Thank you very much, Mr. Chairman.
Mr. Davis. I have not had the pleasure of that particular
honor yet, for which I am grateful at my age, but I look
forward to it sometime in the future. I know how proud you must
be, and we congratulate you.
Would you just both stand with me and rise.
[Witnesses sworn.]
Mr. Davis. Thank you. Dr. Brimmer is chairman of one of the
most underpaid jobs in America. We are happy to have you here.
I have read your testimony, and I think Ms. Norton has. If you
would like to hit the highlights, that would be great. It is
very thoughtful, and it will all be put in the record.
Mr. Brimmer. Thank you very much, Mr. Chairman. I would
like very much to do that.
Mr. Davis. Pull that microphone next to you, too. Go
through and summarize the facts you want to get into and then
we can get right to the questions and not keep you longer than
we have to.
STATEMENTS OF ANDREW BRIMMER, CHAIRMAN, DISTRICT OF COLUMBIA
FINANCIAL RESPONSIBILITY MANAGEMENT AND ASSISTANCE AUTHORITY;
AND ANTHONY WILLIAMS, CHIEF FINANCIAL OFFICER, WASHINGTON, DC
Mr. Brimmer. What I would like to do is call the
committee's attention to several attachments to my prepared
testimony, and I will use those attachments to highlight the
brief remarks I will make.
You have a chart called ``Plans for Revitalization of the
Nation's Capital.'' I will refer to that. It compares the
Authority's strategic plan with the President's plan. You will
also find in the attachments two tables. Table 1 shows the
impact and trends of revenue and expenditure through the year
2000 under the current financial plan and budget.
And, by the way, the copy you have may have left the
numbers of the years off, but those are years 1996 through year
2000.
Mr. Davis. We have that. What we do not have is a table
based on no interyear or intrayear Treasury borrowing. Is that
correct?
Mr. Brimmer. The first one, as you will notice, does have
Treasury borrowing, and I will comment on that in the table.
The second table shows the President's plan and its effects
on revenue and expenditures. Attached to each of those tables
is a graph which tracks revenue and expenditures first under
the current financial planning budget, and the second one under
the President's plan, and I will use those for illustrative
purposes in a few minutes.
I would also like to include in the record the control
board's strategic plan, which we released last December. Much
of my remarks today will be designed to contrast the
President's program with our strategic plan because we believe
that the proposal for the assumption of State-like functions
contained in our strategic plan is the better one to follow.
Mr. Chairman, if you were to look at Chart 1, you will note
that in the left-hand column we have identified several of the
principal elements in our strategic plan, and in the right-hand
column we contrast our proposal with the President's. I will
not go through each of these in detail, but I would ask you to
note that with respect to the unfunded pension liability, we
have recommended that the Federal Government assume all of
those liabilities, $4.8 billion.
The President's plan would do the same. I should say, Mr.
Chairman, that with respect to the President's plan, we
recognize that we are trying to assess a work in progress. From
the original announcement there have been a number of
modifications, and so the figures I will be using today are
those which were available in the original plan.
You will note that the first-year cost of the Federal
Government's assumption of the unfunded pension liability in
our estimate is $246 million. The President's plan, about $268,
they are not essentially different. Over 5 years, we believe
that about $1\1/2\ billion would be the cost under our proposal
and about $1.6 billion under the President's proposal.
With respect to Medicaid, we propose that the Federal
Government assume 100 percent of the cost of the Medicaid
program. The President's proposal calls for the assumption by
the Federal Government of 70 percent, and that makes a great
deal of difference in terms of the cost. Our first year is
about $467 million. The President's program, because of the
assuming only 70 percent, is much less, $156 million. And you
will notice over 5 years we believe that it would be $2.4
billion; the President's is only $918 million.
Before I go further, let me say that the President's plan
is designed to relieve the city of certain expenditures. It is
a cost-relieving plan. It is not a revenue-generating plan--
quite the contrary. The President's plan would remove $660
million of revenue from the city that is now available to the
city, $660 million of Federal revenue flowing to the city.
Those divergent actions represent the major difference
between our proposals and the President's. You will notice that
I also show what the 1st-year and 5-year costs of prison would
be, the court system in the case of the President,
transportation and infrastructure, mental health. We propose
that the Federal Government take over the full cost of mental
health, and we estimate that to be about $114 million the first
year and just under $570 million in 5 years. The President's
plan has no provision in that regard.
The other major difference deals with the revenue, as I
have said. If I were to add up the first-year cost of the
proposal we made--and, Mrs. Morella, this has some bearing on
the question you were asking--we get just about $1\1/2\
billion, $1.4 billion. That does not include any capital, and
it does not include the cost of long-term financing of $4 to
$500 million for the accumulated deficit.
The first year cost of the President's program, insofar as
we can estimate them on the basis of figures that are still in
flux, we believe the President's first-year cost would be about
$950 million. But since the President also had some capital
costs, the first year for the capital would be about $300
million, so that would sum to about $1.3 billion.
What I would like to do now, Mr. Chairman, is to look
briefly at the effects of the President's program in budgetary
terms. I call your attention to table No. 1 and chart No. 1.
What we have done in this table is to identify the principal
revenue sources now available to the District of Columbia, and
we have projected those through the year 2000.
These figures are from the 1997 financial planning budget,
under which the city is now operating and with adjustments that
were made in the interval. You will note that the principal
sources of own revenue are sales taxes and income taxes. You
will note the Federal payment, and then you will note other
revenues, mainly grants and so on.
You should note that one thing stands out in this table,
that over the years there is very, very little growth in local
revenue sources. If you let your eyes run down and you look at
total revenue, you will notice that in 1997, total revenue,
including the Federal payment, is $4.4 billion. In the year
2000, total revenue is $4.5 billion, virtually no growth.
And if you look at the principal local sources, you will
note that as far as property taxes are concerned, we estimate
that there will be a decline in the level of property tax
revenue over the period shown. If you look at sales taxes, you
will note similar stagnation or decline. Let me repeat again
that local source revenues under the current plan will grow
very little.
On the other hand, if you look at expenditures, and here we
have identified on a separate row those expenditures that are
highlighted in the President's program, the Medicaid, I will
call your attention to particularly. Under the current
arrangement, the Federal share of Medicaid expenditures would
go from $421 million to $459 million. The District's share
would also grow because it is 50/50. With respect to the
pension fund, we estimate that expenditures in 1997 would be
$321 million, would grow to $421 million by the year 2000.
Prisons, expenditures would rise from $268 to $283. Again,
I would summarize to say that the expenditures for the programs
for which the Federal Government would assume all or partial
responsibility would rise from $1.6 billion in 1997 to $1.8
billion in the year 2000, and you will notice what is happening
to other expenditures. That is the program without the
President's plan.
In chart 1, you will see that in every year, in every year
expenditures exceed revenue; and if you look at 1998, you will
see that the deficit is on the order of the magnitude of $136
million. You will note also that the deficit diminishes over
the out years, but there is still a deficit under the present
plan.
Next, I will call your attention to table No. 2. Here, we
have incorporated the budgetary effects of the President's
program. With respect to revenue, you will note that we have
eliminated the Federal payment as a source of revenue. You will
notice we have added additional Medicaid revenue because the
Federal Government would be assuming another 20 percent points
of that, and so we treat that as revenue, but here note what
happens.
Under this proposal, total revenue rises from $3.9 billion
in 1997, virtually the same in 1998, but only to $4.3 billion
in the year 2002. You will also note that in 1998, we have
included $400 million because we assume that there would be an
intermediate-term financing under the plan to refinance the
deficit, to borrow to cover the deficit.
Note again that with respect to total revenue, it rises
from--in the year 1998, it is $4.3 billion; in the year 2000,
it is essentially the same.
On the other hand, if you look at expenditures, you will
note again that the net result of the expenditures is that the
remaining expenditures left with the city after the Federal
Government has assumed certain costs, the expenditures will
remain, and this would be in the neighborhood of $4.7 billion
in 1997, $4.1 billion in 1998, and $4\1/2\ billion in the year
2002.
However, if you put aside the effect of the one time
borrowed in 1998, you will see that in every year the city runs
a sizable deficit. That is the result of the elimination of the
Federal payment. I want to stress again that the city, despite
the assumption of certain costs responsibilities by the Federal
Government, is still left with a high level of necessitous
spending.
Now, what we see here are expenditures that are either
mandated by courts or required to carry out an essential
function, such as the schools and so on. The net result is, as
you can see in chart No. 2, is that except for 1 year, total
expenditures exceed total revenue, so the deficits persist.
Let me summarize again, the President's program would
assume certain costs, but it would also erase certain revenue,
and the net impact is that the city, on the basis of the
figures available to us at this point, would be worse off than
it would otherwise be. I want to pin that down.
So the key for us at the control board is that if the
Federal payment is eliminated, the city must have some
additional source of revenue. And if you look at the revenue
sources described in the two tables, you will see that none of
the traditional sources, property, sales, will generate that
revenue.
The only tax base available to the city that will grow over
the years with a high degree of assurance is the income tax
base. It is the only source that is growing.
Moreover, as I explain in some detail in my written
statement, the personal income, the level of personal income in
the District has been growing; and, in fact, over the last
decade or so that growth rate has roughly paralleled the growth
rate of personal income in Maryland and Virginia.
The problem is that the entire tax base, personal income
revenue, is not available to be taxed by the city, and that is
because of the constraints imposed on the city by Congress with
respect to the taxation of income at the source, the city is
unable to share through its tax rate the growth in the one tax
base that is increasing.
So if the Federal payment disappears, then you will get
from us a strong recommendation that you lift the prohibition
on the city and allow the city to tax all income, if not at the
same rate, at some significant rate. And I am talking now about
taxation of income at the source. I am not talking about a
commuter tax of any kind.
Mr. Davis. What is the difference?
Mr. Brimmer. The difference is as follows, and in most
cases in Virginia and in Maryland, the income taxes are levied
at the source of earnings. I pay taxes in Maryland. I pay taxes
in Virginia because I have income earned in Maryland, and I
have income earned in Virginia. Now, from the District's point
of view, I get a tax credit, so I am not being taxed twice, but
it means that Virginia and Maryland, and by the way, this is
true for virtually every other jurisdiction in this country,
and I know of no exception, that income is taxed at the source.
Now, the reverse of that is as follows. Because the
District cannot tax all income earned, essentially that
prohibition permits Maryland and Virginia to reach into the
District and tax a share of the benefits of economic growth in
this city. It is almost as though Virginia or Maryland were, in
fact, in a position to levy a tax on property in the District.
Since the base is exactly analogous, this would mean that what
is happening now is that the incomes earned in the District by
residents of Maryland and Virginia are being taxed for the
benefit of Maryland and Virginia and not for the benefit of the
District.
And I want to work very hard to try to show the Members
that that is, in fact, the result of--whatever the intent was,
that is the consequence.
[The prepared statement of Mr. Brimmer follows:]
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Mr. Davis. I did not say anything during the Mayor's
comments today, because I think the source tax is a non-
starter. But let me just say, I think what would happen at that
point is companies that are currently in the District would
find a reason to move to the suburbs and it would hasten the
decline of business from the city, which is the wrong
direction.
But we are going to work with you to solve the revenue
problems in different ways, and I think that is critical. I do
not think we need a fight between the suburbs and the city;
that would not be productive.
Mrs. Morella. Mr. Chairman, could I just ask about the
figure?
Mr. Davis. Sure.
Mrs. Morella. Mr. Brimmer, I really appreciate these
charts. And when you factor in the deficit with the President's
plan, you have not factored in, though, mental health, have
you, St. Elizabeth's or UDC? So, I mean, is that correct? So, I
mean, if you wanted----
Mr. Brimmer. That is right.
Mrs. Morella [continuing]. To do something with their
health, then it would be an additional amount, a greater
deficit.
Mr. Brimmer. The District--I am sorry. The President's
program has no provision----
Mrs. Morella. Right.
Mr. Brimmer [continuing]. For the assumption of mental
health costs. If they were for the full amount we estimated in
that chart A, row 6, mental health, you will see we think the
first-year costs will be $114 million, and so you would need to
add that.
Mrs. Morella. So the deficit could be larger, then, too.
Mr. Brimmer. That is right.
Mrs. Morella. Right. Thank you. Thank you, Mr. Chairman.
Mr. Brimmer. Well, Mr. Chairman, those summarize my
comments.
Mr. Davis. Great. Thank you. We will have questions for you
in a moment. We will now hear from Tony Williams.
Tony, thank you for your patience.
Mr. Williams. Thank you, Mr. Chairman, and very, very
briefly, I feel under great pressure today, as the District's
chief financial officer, both because of our financial crisis
and also because I am the last speaker, and I feel a need to
abbreviate dramatically my comments, and I will do so.
I think the District is in a unique situation as we look at
the President's plan because the District is two things at one
time: The District is a unique entity, but at the same time it
is in a situation similar to many other cities. That is,
fundamentally, the District has to turn its economy around.
I always go back to the legislative history of the Control
Act, and in that legislative history it is pointed out that the
District faces really three problems: a financial problem--a
cash shortage, or cash deficit driven essentially by a
structural imbalance in our budget; a budget problem with a
growth of expenditures at a rate of anywhere from 6 to 10
percent while revenues remain essentially flat; and an economic
problem which compounds the budget problem.
And I think that the legislative history speaks volumes
about our present situation because essentially the District,
like many other cities around the country, has to find a way to
fundamentally reverse the trend in its economy. Cities went
through a first phase, up to the Great Depression, of
spectacular growth, movement from an agrarian economy to an
industrial economy. Beginning with the Great Depression and
World War II, basically there was stagnation, and in 1950, in
the District and elsewhere, you see essentially a spectacular
drop in population. The city of St. Louis, for example, a
population of over 800,000 in 1950 dropped to under 400,000 in
1990.
And essentially what the District has to do is find a way
to get competitive again and turn its economy around. I think
the charts that Dr. Brimmer illustrated for you and the chart
that we have also submitted into the record as part of our
testimony basically speak to the fact that while the
President's plan eases the structural imbalance in the city's
budget, it does not entirely eliminate that problem.
To put it another way, it does not solve our
competitiveness problem. I think our competitiveness problem is
basically solved in three different ways, and I will talk about
the ways that we are contributing to it. First, there is a
management side, and on the management side I think right now
we have a couple of problems. One, we need to turn the
headlights on. We are not operating with the best information.
We desperately need a financial management system to give us
better information with which to make decisions.
Right now, it is as if you went out into your garden, you
blindfolded yourself with some pruning shears, and you started
cutting: you would reduce the size of your garden, but it would
not look very good. I think what we are doing right now is
essentially reducing the size of the District government, but
we are not making it look very good. We are not really
improving its efficiency at the velocity I think all of us
would like to see.
And what we are trying to do in the 1998 budget is to
provide in one document for the Mayor, the control board, the
council, and notably, the Congress, the legislation, as well as
information on not only the transformation plan and how we are
doing, but information on the level of our programs, our
priorities, what is essential, what is basic, what is
discretionary, so that we can make these critical management
decisions.
Moving along, I think something that we desperately need to
do in terms of bringing stakeholders to the table is, first and
foremost, move much more aggressively than we have in bringing
labor to the table in an overall agreement that corporations do
in their reorganizations, that other cities have done in their
reorganization, and, finally, bring the Federal Government to
the table. And I applaud the President's plan as a constructive
first step to do just that.
But in the sense that the President's plan does not address
this gap, this structural imbalance in long-term expenditures
and revenues, I think we are basically faced with two choices,
and that, I think, is the crux of the issue before us. One
choice is to provide additional revenue to the District
government to provide that structural balance.
Another choice--and I do not think these choices are
mutually exclusive--is presented by Congresswoman Norton and
others in terms of capital gains concessions. A key component
of the President's economic development plan is to invest in
the local economy with the objective that by investing in the
local economy, either in terms of businesses or private
investors, we are going to grow the tax base. And by growing
the tax base, grow revenues and erase that in balance.
I think what we can do on the local side is work with the
Tax Review Commission, in which we have invested an enormous
sum of money to continue its operation, to provide an overall
plan of how we can, in conjunction with these plans at the
Federal level, streamline and reduce the complexity of our tax
structure not only for administrative purposes, but also by way
of providing a needed incentive to the business community.
And I think another thing that we can do, and we are in the
process of doing--and I will close with this point--is continue
to work as we have with the Treasury and OMB, Mozelle Thompson,
and Ed DeSeve, respectively to provide the District with the
short- and immediate-term credit that we need to not only
continue in operation, but to finally get a handle around the
District's liquidity crisis.
There are really--and I will mention this--three issues
that we are addressing with the lack of the Federal payment,
and these are the financial issues as opposed to the budget
issues that Dr. Brimmer discussed. We have, first of all,
increased borrowing costs. When you lose that big chunk of
revenue at the beginning of the year, that changes your cycle,
and your schedule of borrowing can increase borrowing costs.
As with any troubled credit, and certainly in the situation
today, if you lose that Federal payment and you look for short-
term, intermediate-term financing, you always have credit
collateral issues, and that can impair the stake of existing
bondholders, and that is something that we are looking at as
well.
And, finally, as Chairwoman Jarvis pointed out, we also
have the debt-cap-limitation problem, in that we have a best
service limitation of 14 percent against local revenue. If you
reduce that Federal payment, and we have got to recalculate
that debt-cap position as well. But, again, these three things
are something that we are working with, the Treasury and OMB to
accomplish.
I think we will get a handle around the financial issues,
but we are still left with the overall fiscal structural
imbalance that we have got to find one way or another to
address. I thank you, Mr. Chairman.
[The prepared statement of Mr. Williams follows:]
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Mr. Davis. Tony, thank you very much. Let me just
summarize. The first of the three items you talked about before
shedding some light on the subject. Is the second area the
relationship between the Federal Government and the city and
structuring that relationship?
Mr. Williams. That is correct, sir.
Mr. Davis. And then the third area, of course, is moving
the tax base back in the city. I have the same analysis, and
would agree with you on that.
Let me start by asking Dr. Brimmer, and I will ask you,
Tony, too, after the control board legislation we passed last
year, and we have had now a couple of years to review it, are
there any additional functions, additions or subtractions that
either one of you would suggest to the legislation as we move
through this? I will start with you, Dr. Brimmer.
Mr. Brimmer. Mr. Chairman, some time ago, we did suggest
some modifications in our statute. I was pleased that the
Congress made those modifications and gave us those additional
authorities. We are putting together a list of additional
authority which we believe we should have. The list is not
complete. We have not thought through all of them, and so I am
reluctant at this time to describe them in detail, but there
are a couple which we will be asking the Congress to look at.
Currently, we can issue an order if we conclude that a
position is no longer necessary for the function of the
District government. We can issue an order and remove that
person from that position, but we cannot at this time simply
and automatically specify a replacement. So we are faced with a
situation in DHS, for an example, the Department of Human
Services, where at our urging, the Mayor removed that director
almost a year ago but the position is still not filled.
So we will be spelling out that proposal, and we will ask
the Congress to share that with them.
Another area to which I have given thought, not the whole
board, and that is the question of appointment of the chief
financial officer and the inspector general. As matters have
developed over the last year, we have been very pleased and
delighted in the way the appointment of the chief financial
officer has worked out. It took some time, but once there, as
you know, we have said many times, we are very pleased with the
way the chief financial officer has carried out his duties.
We are less so pleased--in fact, we are unhappy--with
respect to the inspector general, and we will have some
discussion of that further, and if I can persuade my
colleagues, we will probably ask for authority to make that
appointment. But this has not been fully developed. These are
my thoughts, and we will reach a conclusion on that later.
Mr. Davis. Dr. Brimmer, both Ms. Norton and I would like to
be involved in your thoughts on that, not out here, of course,
but as you work forward.
Mr. Brimmer. Yes. Thank you. But there are a few other,
minor, technical things. We will review them, and we will
submit a written request to you, Mr. Chairman. Thank you very
much.
Mr. Davis. Thank you very much.
Tony, you talked about cities moving from the agrarian into
the industrial economy. We are now moving into a third wave,
and that is technology, knowledge-based, service economy where
the city and a lot of cities have not taken advantage of what
is offered. Have you seen the city with any plans to take
advantage of this revolution coming at this point, or do you
have any thoughts on how we might involve the city?
It is going on all around the city, and the President's
plan does not specifically target that, and, in fact, some of
the incentives that they offer I do not think are likely to
attract those kind of companies to the city. And this is an
area to which I think we can add some value and work with our
suburban neighbors to make that happen.
Mr. Williams. I think, and Dr. Brimmer can speak to this, I
think the control board called for an economic development
strategy at the beginning of this year. I think the District,
in conjunction with the DC Agenda, came up with an economic
strategy which I think is good. The transformation plan as a
plan is good, but in terms of the rubber hitting the road, I
think one of the key, important features of the President's
economic plan that I think all would agree is a good thing is
having a corporation overseen by top professionals to actually
implement a plan, an entity that has the throw weight to
really, on a project-by-project basis, make something happen.
I think we have a traction problem. I know I sound like I
say that all the time, but we really do have a traction
problem. We have got good vision and objectives, but actually
getting down and getting some mileage has presented some
difficulty, and I think this development corporation is a good
way to see the plan that was presented to Dr. Brimmer actually
achieve something.
Mr. Davis. Well, I think, on an individual transaction deal
it can be helpful, but you have to look at the overall
competitiveness of the city in terms of bringing that in based
on its capabilities. We would look forward--if you do not have
to answer today--to any thoughts you have on how to make the
city more competitive, particularly for some of the kind of
businesses that are attracted to the region but have chosen not
to go in the city.
We know that the rent structures are something we may not
be able to control in a significant way, but we can control
some of the other costs of doing business and other
attractions. I think we have to realize that this is the only
chance we are going to have at the Federal level to address
this, so we look forward to any thoughts you have. Dr. Brimmer.
Mr. Brimmer. Mr. Chairman, as Mr. Williams indicated,
reminding us that in our strategy plan we do have a section on
economic development, and I am delighted to see that a number
of the elements in the plan the President announced a few days
ago correspond closely with what we had in mind.
So our reaction to the economic development component of
the President's program is a favorable one. We think it is
comprehensive, and I particularly like the stress on the
Economic Development Corp. I believe all of these efforts must
be owned by somebody. Someone must take responsibility, and the
device of the development corporation strikes me as a good way
to go.
I have some specific comments on various pieces of it, but
I would not want to take up the committee's time at this time.
Mr. Davis. Dr. Brimmer, I just want to point out that the
President's proposal can do it on a case-by-case basis, but,
again, the overall competitive level of the city has to be
addressed, and you cannot do that on a piecemeal basis. You
cannot do that with just a few incentives here and there.
We have to take a comprehensive look, and that means taxes
and regulation to me. It may also mean some other items. I
think we share that the strategy is, how we get there, given a
limited ability to make up the revenues elsewhere; that is the
missing piece.
How do we get a work force involved in some of these
technology areas where currently UDC is not turning them out?
People are having to go to private colleges and universities,
Strayer and others, to get the training they need for the tens
of thousands of jobs that are available right now that the DC
residents are not utilizing, and neither are some of my
northern Virginia residents.
We keep preaching, this is the area of job opportunity. We
still have in Virginia more psychology majors coming out of our
universities than computer science majors. If you take a look
at the job growth, it does not make any sense.
But the city needs to be involved and engaged in this. That
will give the city some traction, and it will be an opportunity
and an additional rung on that ladder of opportunity for some
city students today that do not have the kind of futures in
mind that they think they can have. We are starting people out
of college at $40, $50,000 a year in the suburbs.
Mr. Brimmer. Mr. Chairman, in my written comments on the
economic development component of the President's plan, you put
your finger on exactly the area where I had some reservations,
as mentioned in this text. Competitiveness, and much of this,
of course, the anticompetitive takes the place of excessive
regulations and practices which discourage business.
Some 15 years ago, we did a study for the District in my
own company on business retention, and we asked, why are so
many businesses leaving? One of the things that stood out was
the burden of regulation and other anticompetitive devices.
In our own review over the last year, we have discovered
that basically nothing has changed, and so in administering the
various pieces of legislation that come before us, we always
put an emphasis on and ask the question--I particularly ask the
question, since economic development is my area at the board,
how will this affect the business environment? And we believe
that a great deal more has to be done, and we use our authority
to eradicate these obstacles whenever we can.
Mr. Davis. And I think Ms. Jarvis, who is behind you,
understands this, and as I asked earlier, you have got some
studies coming up. This time we have got to move, roll up our
sleeves, and put the rubber to the road.
If we get a little traction in these areas, you can get
some momentum, and you have got to create a critical mass, and
that will give you some momentum. We are not there yet, but
this is the time, and we are happy to help any way that we can.
I am going to now recognize the delegate from the District,
Ms. Norton.
Ms. Norton. Thank you very much, Mr. Chairman. Dr. Brimmer,
first of all, let me offer my congratulations on what must
surely be one of the most significant developments in your
entire life. I have met your beautiful and smart daughter, so I
know what this must mean to the family.
Mr. Brimmer. Thank you. Thank you.
Ms. Norton. Dr. Brimmer's testimony, your testimony, sir,
is not only very useful, but it is a wakeup call that casts
great skepticism over the viability of the President's plan, as
far as I am concerned. First of all, when the Federal payment
was first proposed in my discussions back and forth--and this
was before the plan was made public--to be eliminated, it was
after that point that OMB talked about financing the
accumulated deficit.
If I may read from the part of your testimony that I think
could blow up the President's plan, it is the following.
``Absent the Federal payment, our projections show that the
District will experience a surplus only by the financing of the
accumulated deficit. In fiscal year 1999, 1 year after the
financing, the District will not only have spent through its
positive fund balance created by the borrowing, but it will
start to experience an operating deficit that increases to
approximately $112 million by fiscal year 2000.''
This part of your testimony in so many words restates what
you went through with us when you were going through the charts
so helpfully. In going through those charts, I kept looking for
something, having seen this sentence and having seen the
charts, that might preserve some basis for believing that there
was any life left in the notion of getting rid of Federal
payment.
Then I recalled that OMB is, of course, working with the
city to find some kind of way, some kind of proxy, I guess, for
the borrowing. I do not understand how that would help us,
unless we were going to be relying on the Treasury forever.
They have not, in fact, come forward with any notion about
collateral, so what you do in your charts, you just eliminate
the Federal payment because you do not see any collateral; and
if I am hearing them talk, the only collateral they have is,
you know, they will lend it to us, which just gets us back more
dependent than we have been in a very long time.
In other words, I have to ask you, do you see any way that
the OMB can get around this problem of the Federal payment as
they are now trying to do by finding somewhere else, some other
source of a borrowing that would leave us permanently stable or
some other collateral, or is that chasing our tail, and we just
as well face it now and try to find something else?
Mr. Brimmer. Congresswoman, I do think they are chasing
their tails. The key point is that, from the point of view of
the budget, we need to deal with sustained and predictable
revenue sources available to finance sustained and predictable
expenditure requirements. And if you look at the chart again,
you will notice that the traditional sources of revenue will
not grow, so they have to find some substitute for the Federal
payment, and I stress that has been the second largest source
of revenue available to the city. If you get rid of it, then
you must find some equally predictable and sustainable source
of revenue.
Borrowing is not that. Borrowing is not a source of
revenue. It enables you to finance the deficit but not to avoid
the deficit.
Mr. Davis. If the gentlelady will yield?
Ms. Norton. I will yield to the chairman.
Mr. Davis. I would say when we had Mr. Raines up here
explaining the administration's proposal, I was very skeptical
of some of the numbers you supplied concerning what this does
to cash-flow, so I will continue to pursue it.
But the reason there would be no Federal payment was really
twofold. Mr. Raines said, first of all, he felt it would be
more attractive to Congress. That does not appear to be the
case as I canvass other Members and particularly the
appropriators, who like being involved in this process. So,
that is not flying the way it was intended.
Second, it was to give the city a sense of accountability,
that the final decision is being made at that level. We can do
that in other ways and still make a payment come forward. It
seems to me, if you meet those two objectives, I do not know
why the administration would not be flexible on this. I think
we are going to need some kind of annual payment from the
information I am hearing today. I will be happy to yield back.
Ms. Norton. Thank you, Mr. Chairman. The problem is that I
really see this as a major stumbling block, and that is why I
look forward to this testimony, because until this testimony,
what we had heard was characterizations: The Federal payment is
for services rendered. That does not wash. If, in fact, we got
a whole lot more revenue on one side, then who in the world
would care what you call it, so long as we came out truly
ahead?
But this, I think, is a major, major impediment to the plan
going forward, and with due regard to my chairman, he will be
the first to say that what we are required to do is to pay for
this. And essentially what it looks like is OMB was trying to
find a way to pay for it, the Federal payment.
If there had been enough of a tradeoff, might have been--
your figures, it seems to me, unless they are wrong,
definitively show that nowhere near enough tradeoff to make up
for it because you have, in fact, done your figures with their
new takeover costs included, and I really believe that we
should not go much further without sitting down with the OMB.
And I recognize that they have given off to some of the
staff there to try to patch together something that will
continue to make this fly, and what I do not want to see happen
is, you know, we get to what, May, and this problem, which you
have raised early, is still a cloud over us, and the CBO or
somebody comes back and says, ``This does not wash, this does
not fly,'' we are left with nothing.
Mr. Brimmer. Well, I am delighted to hear you say that, Ms.
Norton. And, again, I stress, revenue, revenue, revenue. That
is the key for the Federal payment, and let me go on to say
that the expenditures which you see here which will be rising,
even under the President's program, do not provide for the
kinds of claims that will be rising.
I mention one in particular. There is nothing here for
capital expenditures, and capital expenditures, which have been
neglected, will become even more pressing. And I name
particularly the schools. There is a backlog of maintenance and
expansion for school construction that will not go away.
Earlier, Mrs. Morella mentioned the Duke Ellington School.
That is only typical. School construction will continue to
expand, and as a matter of fact, for the current fiscal year,
we will most likely come to the Congress and ask for a
supplemental because the backlog of construction necessary just
for the schools to open next September is so large and the city
is going to have to pay for them in some way, and the city has
no money.
So, let me repeat. The expenditures you see here with which
the city will be left after the Federal Government takes more
than a billion dollars of expenditures on an annual basis,
those expenditures are substantial, they are necessitous, and
they will grow. So we are going to need revenue from some
source.
Ms. Norton. And if we keep having to shut down schools like
Duke Ellington in the middle of the year, we are done. There
will be nobody here who pays taxes. I keep trying to figure if
there is anything that can be done there. I think that the
second semester has been ruined for those students when you
consider the special effects they need just to, in fact, have
their program at that school. And yet I understand that now
that the court is in it, it is almost no way around that.
Mr. Brimmer. Madam Chair, may I----
Ms. Norton. Yes, sir.
Mr. Brimmer. This is one thing I would like for the
committee to think about, and we are going to make this before
the Appropriations Subcommittee over and over. A large fraction
of the expenditures in the District government today is court
mandated. So even before you get to the discretionary
questions, a growing share is being mandated. I read today of
another one that might be coming down the pike. A judge, I was
told, is considering taking over the bus system, the school bus
system and turning that over to a master or someone and
mandating expenditures.
That is happening over and over, and so the flexibility
available to the city is diminishing rapidly.
Ms. Norton. I had always hoped that once the city got into
the mode it is now, that we could somehow bargain our way out
of those mandates, but in order to do so, we would have to show
very substantially improved management, so that obviously is
going to take some time to do. And you are right. That puts
everything else behind the line because those mandated costs
come first.
I was surprised to learn--actually I was briefed in some
detail by Mr. Williams on the way in which our budget process
works so that it is not a reconciliation process. And as I
understand it, unlike the Congress where the bills and the
budget come at the same time, in the District the bills do not
come at the same time, which means that almost automatically
there is not going to be the bill to carry out what the budget
says.
Could I ask Mr. Williams where we are on that, because
apparently that is a source of your $85 million hole that arose
at the very beginning of the year?
Mr. Williams. Congressman Davis, the CFO staff, the control
board staff, and the council staff got together at the
beginning of the year and worked together on developing a
consensus budget process, a key component of which would
involve all the legislation necessary to implement the budget
being adopted when the budget was approved by the control
board, sent to the Congress. This facet of the consensus
process has been incorporated in the Authority's guidance, and
we are pleased to say that in our March 18 submission, we are
going to have a large part of that legislation as part of the
submission.
Now, it will need some further work, but we are confident
that when the budget is actually passed, we will actually have
the legislation to get it under way immediately on October 1,
and that is a real departure.
Ms. Norton. This problem is going to be gone then.
Mr. Williams. Pardon me?
Ms. Norton. This problem is going to be gone then.
Mr. Williams. I think we will have solved a lot of the
implementation problem that way. Another thing we are asking
for, and, again, this is in conjunction with the board, is that
as we move through the remainder of this year in the 1998
budget cycle, we work with all the agencies in adopting a 2-
year obligation plan, so that when we begin the year next year,
they also have the benefit of a full-year program of
expenditures.
It is another thing we did not have in 1997 and certainly
did not have in 1996. We did not even have a budget. So we are
making progress on both of those fronts.
Ms. Norton. The assessment process, I think, which you
wisely suspended rather than have the confusion continue; where
are we on a new process there?
Mr. Williams. We have asked the Mayor and consulted with
him, and he has transmitted to the council legislation that
would move the District to a triennial assessment process, and
we believe--this is something that Maryland does, for example--
we believe that this is going to allow our assessment people to
do a better job not only--once we have cleaned up the
assessment data base to do a better job not only in doing the
assessments one-third per year, but also handling at an
administrative level the personal and commercial reviews that
now are automatically thrown up to an appeals board and
routinely result in a rejection of the city's position.
Ms. Norton. Dr. Brimmer, the process that apparently the
Financial Authority took the leadership on with respect to the
police department, whereby you got the city and all, the police
chief and all to sign a Memorandum of Understanding so that
nobody would try to block a process of reform; that process,
which has resulted in some early action in the police
department, I think has had a very beneficial effect on the
city. Seeing that change occur was a very recognizable change
and the kind of change that heartens people about changing the
whole city.
I am so much impressed by that kind of change, sending some
consultants in, giving them a date by which to come back with
their recommendations, and then pursuing that, that I am--my
question really has to do with whether or not you might repeat
that process in agencies that have been languishing in the way
the police department was.
I mean, I have in mind what we do not know, I suppose, in
the fire department, says this granddaughter of a DC fireman,
might surprise us. And we would not want an emergency to happen
before we decided to send consultants in there or DPW, where
recycling has had to be suspended. We do not know if
consultants had been in there, whether or not that might have
been changed or, God help us, the Department of Social
Services.
Is there a way that, using the process that you are now
apparently successfully using for the police department, state-
of-the-art consultants with respect to other city services
could now go in and do the same thing there?
Mr. Brimmer. Ms. Norton, I believe that the process which
we adopted vis-a-vis the police could be used if future
circumstances are similar. What we had here with the police was
a scattering of responsibility. If you look, the signers of the
MOU are all responsible for various pieces of the problem, and
so getting them together and to get them to sign, and, above
all, to agree on the procedure of hiring the consultant and so
on and waiting for the results of the consultant's work before
they took a position was very helpful.
With respect to other agencies, take DHS, for example, and
by the way, when you look at the management questions, the big
task for us was the schools. The next one was police. The next
one in line is DHS, and we have had a preliminary survey. We
have had some consultants in working on contracting various
pieces, but our own staff has done a substantial amount of
work, and we have reached the following conclusion, that DHS
needs to be in the--should be the responsibility of a chief
executive officer.
So we have recommended to the Mayor that he appoint someone
to own the department, to take responsibility, with the
authority to run it. The Mayor has indicated that he agrees
with this notion, and he is looking for someone to be CEO. I
think that would produce the kind of results which we expect.
I would be reluctant to say that we should search for an
MOU in every case because in some of these cases there are not
many parties, a multiplicity of parties. Basically, that has to
come directly from the administration.
Ms. Norton. How about--leave us out of the MOU for a
moment--the notion of consultants who have an understanding,
perhaps based on comparisons with other cities, of how a DPW or
how a Department of Human Services, the best that we now know,
or a fire department? Could not that help us regardless of
whether an MOU is necessary?
Mr. Brimmer. I agree wholeheartedly, and we have
recommended that in a number of cases and will be doing so in
the future. And we, ourselves, as you know, at the control
board, we have brought in consultants of many of our problems.
We concluded very early that there was no point in our trying
to hire and put on our staff permanently the levels of
expertise and the variety of expertise which we require, so we
relied on consultants. They do the job. When they are no longer
needed, then they move on, and another group comes in to help
us.
That approach, I believe, is the one that ought to be
encouraged across the government.
Ms. Norton. Working with the city, and I emphasize working
with the city, the kind of model you have established in the
police department I think would have a measurable effect if
that was done in a number of other departments as well.
For example, the UDC, which went through one crisis and now
is in the middle of another crisis, I know that you were
working on a report for February 1. I wonder where that is and
whether you think what has happened already at UDC is enough or
whether there are going to be further recommendations on UDC
and what you see as its future as a 4-year university and the
like.
Mr. Brimmer. All right. This is an example where we are
relying on consultants. The control board asked me to take the
lead in having a thorough review of UDC, not only its structure
and management, but also its programs. To help in that, we
engaged a number of consultants to work with our staff, and
there are three consultants now engaged. We have a preliminary
report, which we did get by February 1. That was the target.
That has been reviewed. Additional assignments were made, and
the consultants are now expected to respond by April 1, with
another series of reports.
I would anticipate that we would examine those, and I have
committed to the rest of the board to have not only reports,
but a set of recommendations for the board to consider by May
1. And we will meet those deadlines because we are well on the
track to do so. And for the time being, I have been reluctant
to reach any conclusions about what reforms ought to be in
place until we see them, but there are several issues that we
already know must be examined.
One of these has to do--leave aside the budget, and by the
way, what is in place now will correct the situation for this
year. But the University has to make up its mind how it will
carry out what is, on the one hand, a very complex teaching
arrangement and, on the other, very simple. A large fraction of
the UDC students need remedial work, and so that is one of the
questions that has to be dealt with. We will do so over the
next month.
Ms. Norton. Mr. Chairman, I have one more question. I am
simply going to ask the chairman, because I am sure Chairman
Brimmer can straighten this out. Perhaps because the Congress
did not give any guidance, hoping that there would never have
to be a consultation process, it has been since December that
the chairman's staff has been unable to get the appropriate
meeting with your staff on the lottery board.
Let me just indicate that I believe that a mistake was made
that the members of the council who I think were inclined to
try to come onto the same page with the Authority were not
given a meeting either with the Authority or their staff. I
understand that the Authority cannot always meet, but I do not
even think this would have taken the Authority.
And thus, I do not think this ever would have had to go to
consultation; and then when we read in the paper that they
cannot get a meeting, that is very bothersome to this Member of
Congress because these are matters that I am sure intelligent
people sitting together could have figured out.
I certainly have no position on the lottery board. I have
not looked at it. All I know is I do not think it should have
gone to consultation. It has. Once it goes to consultation,
this body must be involved. That is a part of the way the
process works. I am told that your staff has been unwilling to
meet with the chairman's staff simply to go through the process
and see where the lottery board is, that we have been unwilling
to set up a meeting. And I am simply asking, would you instruct
the staff to, in fact, set up a meeting with the chairman's
staff so that we can come to a mutual understanding on the
consultation process?
It is very minor, as far as we are concerned. We have no
interest in--we have no knowledge of the issue. We are
concerned with how the issue was handled.
Mr. Brimmer. Ms. Norton, I had no knowledge of the
difficulties you have just described, rest assured. The staff
will be instructed immediately today to do that, and I am quite
certain they will respond positively very quickly.
Mr. Davis. Thank you very much.
Ms. Norton. Thank you very much, Dr. Brimmer.
Mr. Davis. Thank you, Ms. Norton, for that last question. I
have a number of other questions, but you have been here a long
time, and I will submit them in writing and give you some time.
Without objection, all written statements and submissions will
be included in the record.
Without objection, I also order that the record of this
hearing be kept open for 60 days for further written
submissions, including a submission we will request from OMB to
respond to Dr. Brimmer's questions. This hearing is adjourned.
Thank you very much.
[Whereupon, at 1:45 p.m., the subcommittees were
adjourned.]