gowdy it is my pleasure to recognize our second panel and welcome you and thank you for your patience and indulgence for being the second panel pursuant to committee rules all witnesses will be sworn before they testify so i would ask you to please rise with affirmative i will introduce the witnesses from my left to right your right to left first is dr hnatwar gandhi who is the chief financial officer of the district of columbia in the middle is before you on my left tells the story of the district's successful return to fiscal solvency and financial stability this turnaround is a case study in commitment to improved financial management and hchairman i would like to take the issue with those who proclaim that the district's finances are failing to the point that a reinstatement of a control board is imminent yes the elected leadership pledged to the rating agencies and to district residents that they will do what is necessary to balance the budget without the use of fund balance and limit borrowing to stay within the de harrisburg vallejo california so it is a real pleasure to spend some time and look at the district of columbia which has done so well in the financial crisis of managing largely through the practices from the management team like dr  i have to say that as things have gotten tighter as credit conditions and tax revenues have gotten thinner across the country the financial abilities of city managers across the country has been strained and it has begun to undermine willingness structure and because of its very high ratings was able to restructure a huge amount of that debt and now its exposure to variable rate is a very manageable hpercent so i have to say they have been very proactive in hitting the exact area where the talked about a lost decade for state revenues starting last year so two thousand and ten to two thousand and twenty are going to be a very difficult time for government managers everywhere so i think continuing to prepare for the fiscal crisis  market if you think about what happened just prior to the government shutdown you know the district because of its because of how their debt is structured is able to service most of its debt even without congressional authorization and without the city budget appropriation the city managers were doing all they could to make sure that that didn't happen but they were taking emergency steps to do so in theory they may not have been able to pay those interest payments which is something that even in the depth of a financial crisis the district did not miss a payment so you know in this current municipal bond market where there is an enormous amount of concern being put on credit quality of state and local issuers to have the district even incidentally miss a debt service payment thank you mr hchairman for inviting me to testify today i have been involved with the district's finances for a long time for more than hdecades over that period our nation's capital has gone from a financial basket case to a responsively managed and fiscally healthy city in my brief remarks i will try to put the district's situation in some historical context this year washington like most cities is dealing with difficult budget choices the deep recession and the extraordinary weakness of the housing market has cut city revenues especially property tax revenues and at the same time the increased needs of the jobless and homeless residents have put upward pressure on spending this combination has made balancing the budget far more challenging in the last hyears than earlier in the decade when things were going better that's true of all cities the impact of the recession on d c s finances has been considerably less serious than in many cities that were hit harder by the recession and the foreclosure crisis compared to other cities the d c economy is actually doing quite well jobs are up population is growing economic development is resuming and city revenues are beginning to edge up again however as the mayor and the council chair have emphasized washington is a bifurcated city with prosperous areas primarily on the western side of the city and high rates of poverty unemployment and under employment primarily on the eastern side so efforts to mitigate these problems make the d c budget challenging the district must provide both city and  statelike services and it has a narrow tax base mainly because congress prohibits the district from taxing the incomes earned in the city by nonresidents mayor grayhas proposed a combination of hbillion are locally raised funds there will be a debate about this budget in the council but i am confident that the final budget will be balanced in a fiscally responsible way the reason for my confidence is that the city has a strong record of fiscal responsibility stretching back to the end of the s more importantly the mayor the council and the chief financial officer are all committed to maintaining that record and avoiding any danger of the triggering of a new control period i was personally involved in that unfortunate period of  government had to step in and do what a state normally does put in place a control board i was president clinton's point person on doing that and i work bipartisan effort it had to be and it resulted in the creation of the control board and the office of the chief financial officer we wound up the control board successfully in two responsibility has continued to balance its budget built up its fund balance and cash reserves and improved its credit rating remarkably in the last several years as the recession reduced revenues the district has drawn down its fund balance that's what reserves are for but not to dangerous levels and it is now in a position to begin replenishing those reserves it is now past time i believe for the congress to recognize the district's exemplary fiscal behavior and pass legislation giving the district fiscal autonomy the ability to spend its locally raised revenues as its elected government sees fit this would represent your faith in representative democracy that works i've testified before on this subject and i attach my testimony of november make sure there is no interruption of health care services so at that time we took over the hospital like any public h exempt properties properties where you have to provide the service but you can't collect any taxes do you have a strategy do you have a plan is there a means by which you can  adjust for that the fact that you're providing services to buildings and places where you can argue there's not a contribution towards the greater good mister gandhi that is one of the two major issues that we presently face in managing of our socalled constrained limited restricted tax base one is of course the inability to tax people who work here and don't live here and second is as i pointed out in my testimony a large chunk of real property is tax exempt as i pointed out the federal government the tax exempt institutions the world bank i am not so sure that that is going to work here but i think the federal government needs to take into account the fundamental limitation of our public tax base in spite of all of this our commitment to you sir and certainly of the independent chief financial officer despite this limitations on our taxes we will balance the budget even maintain our financial viability and financial representative clay has a markup that he's involved in i would ask that i switch time with him and let him go and then i will take his o fund we make sure that our budget is always balanced we have a very independent and vigorous office of independent chief financial officer that tracks our budget on a almost on a weekly basis fabian well i would agree also with dr hgandhi i think that the location of the federal government has been a tremendous economic stabilizer for the city in addition to its management practices looking forward you know one of the things that cities and states around the country have been very loath to do is to raise taxes to help balance the budgets the district is at least considering this and i think that you know from a wall street perspective having a city or a jurisdiction that is willing to look at all financial options to correct its structural down about the fiscal situation cheer up you could be mayor of detroit the situation in cities that were in trouble anyway because they were losing their manufacturing base is much worse than it is  seriously or the full committee take a serious look at representative norton's bill that gives the city control over its own tax dollars i think draft legislation earlier on and now i am reasonably confident that no we cannot accept budget autonomy fully but i am going to be offering an alternative that i hope the gentlelady will join with me on that provides a mechanism for a separate vote and separate consideration of the district's funds and that's what i was alluding to in my question with the mayor and what i hope to be able to work  on is an ability to have an earlyon annual vote to accept the budget what i would call a contingent budget the budget of exclusive jurisdiction of the district meaning what they do with their money as it shall come in i think that we would be hubris for us to assume that we could do anything about the appropriation process of other funds but i think by bifurcating them we can in you for your indulgence as all of us go back and forth to judiciary today doctor gandhi earlier on when i asked the mayor about contingent budget proposals i knew i was asking the wrong person but he was the right person to be asked first when you look at the finances of the city as a federal city with all of the responsibilities certainly we've met with your police chief many times and she has a responsibility like no other big city police chief because protests come here other activities come here which she must deal with first even though she has backup of federal agents do you believe that the district could produce an annual contingent budget now let's assume for a moment that we were a threequartersonequarter ratio of all federal funding to the district's selffunding for a moment do you believe you could produce a full funding document that would say we have a contingent capability for let's say hmonths meaning that if we receive substantially less we can continue operating if we receive nothing we can operate for hmonths and of course if it looks like for some reason there is no money coming you could adjust but do you believe that you could produce that contingency that would take us let's just say from this month to the end of the year on an annual basis  echoing what you're saying if we considered a d c money only and by the way that would include for example a school lunch program that you expect to have federal money for not getting it so i want to make sure that when we talk about no federal dollars that you would maintain that you believe you need if that were the case and we were to deliver you were to deliver us a budget by let's say march we were to forward it through the congress and have it passed before july as a freestanding separate from appropriations that would meet your needs very well recognizing that the dollars that would come from the federal government would come on a different schedule mister gandhi yeah i understand that and all again to repeat myself all we want is to make sure that we this side of the dais for myself has been that the district although it has done a very good job in recent years lacks an equivalenth los angeles does a good job but ultimately sacramento has a major role in education and so many other view is we don't have as major a role but we have a role and i think that's what you were saying mister fabian yes exactly absolutely ms rivlin yes i think this would be possible and that it is a very good idea and the congress would not be its ultimate oversight responsibility and the provisions that in extremis would bring back a control board chairman issa well it is the goal of this committee to have sufficient oversight and have sufficient good conduct that we will never of it but it is one i certainly very much would like to work with him on and to build on indeed during the shutdown i had a number of bills just to keep us open for the rest of the year but then i had one bill that said in the event of a shutdown in any year the district may spend its local funds so that we would not have to go through what we went through this time