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42–281 CC 1997

THE WHITE HOUSE PROPOSAL FOR THE DISTRICT

OF COLUMBIA

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

(

(II)

COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT 

DAN BURTON, Indiana, Chairman 

BENJAMIN A. GILMAN, New York 

J. DENNIS HASTERT, Illinois 

CONSTANCE A. MORELLA, Maryland 

CHRISTOPHER SHAYS, Connecticut 

STEVEN SCHIFF, New Mexico 

CHRISTOPHER COX, California 

ILEANA ROS-LEHTINEN, Florida 

JOHN M. MCHUGH, New York 

STEPHEN HORN, California 

JOHN L. MICA, Florida 

THOMAS M. DAVIS, Virginia 

DAVID M. MCINTOSH, Indiana 

MARK E. SOUDER, Indiana 

JOE SCARBOROUGH, Florida 

JOHN B. SHADEGG, Arizona 

STEVEN C. LATOURETTE, Ohio 

MARSHALL ‘‘MARK’’ SANFORD, South 

Carolina 

JOHN E. SUNUNU, New Hampshire 

PETE SESSIONS, Texas 

MIKE PAPPAS, New Jersey 

VINCE SNOWBARGER, Kansas 

BOB BARR, Georgia 

——— ———

HENRY A. WAXMAN, California 

TOM LANTOS, California 

ROBERT E. WISE, JR., West Virginia 

MAJOR R. OWENS, New York 

EDOLPHUS TOWNS, New York 

PAUL E. KANJORSKI, Pennsylvania 

GARY A. CONDIT, California 

CAROLYN B. MALONEY, New York 

THOMAS M. BARRETT, Wisconsin 

ELEANOR HOLMES NORTON, Washington, 

DC 

CHAKA FATTAH, Pennsylvania 

TIM HOLDEN, Pennsylvania 

ELIJAH E. CUMMINGS, Maryland 

DENNIS KUCINICH, Ohio 

ROD R. BLAGOJEVICH, Illinois 

DANNY K. DAVIS, Illinois 

JOHN F. TIERNEY, Massachusetts 

JIM TURNER, Texas 

THOMAS H. ALLEN, Maine 

———

BERNARD SANDERS, Vermont 

(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 

ILEANA ROS-LEHTINEN, Florida 

STEPHEN HORN, California 

ELEANOR HOLMES NORTON, District of 

Columbia 

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 

(III)

COMMITTEE ON GOVERNMENTAL AFFAIRS 

FRED THOMPSON, Tennessee, Chairman 

WILLIAM V. ROTH, JR., Delaware 

TED STEVENS, Alaska 

SUSAN M. COLLINS, Maine 

SAM BROWNBACK, Kansas 

PETE V. DOMENICI, New Mexico 

THAD COCHRAN, Mississippi 

DON NICKLES, Oklahoma 

ARLEN SPECTER, Pennsylvania 

JOHN GLENN, Ohio 

CARL LEVIN, Michigan 

JOSEPH I. LIEBERMAN, Connecticut 

DANIEL K. AKAKA, Hawaii 

RICHARD J. DURBIN, Illinois 

ROBERT G. TORRICELLI, New Jersey 

MAX CLELAND, Georgia 

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 

ARLEN SPECTER, Pennsylvania 

JOSEPH I. LIEBERMAN, Connecticut 

MAX CLELAND, Georgia 

RON UTT, Staff Director 

LAURIE RUBENSTEIN, Minority Staff Director and Chief Counsel 

ESMERALDA AMOS, Chief Clerk 

(V)

C O N T E N T S 

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

(1)

THE WHITE HOUSE PROPOSAL FOR THE 

DISTRICT OF COLUMBIA 

THURSDAY, MARCH 13, 1997 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON THE

DISTRICT OF COLUMBIA, COMMITTEE ON GOVERNMENT

REFORM AND OVERSIGHT, JOINT WITH THE U.S. SEN- ATE, 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 SelfGovernment 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 

2

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 

3

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. 

4

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 incentivebased 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. 

5

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 

6

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 

7

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 

8

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:]

9


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11

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 Brownback, 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 

12

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 subcommittee. I am pleased to appear before you today at this joint hearing 

on President Clinton’s National Capital Revitalization and SelfGovernment 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 

13

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 

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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 wellthought-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. 

15

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 

60

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 

61

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. 

62

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 AfricanAmerican 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. 

63

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 

64

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 cer- tainly $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 PresiVerDate jun 06 2002 11:49 Jul 09, 2002 Jkt 010199 PO 00000 Frm 00089 Fmt 6633 Sfmt 6602 W:\DISC\42281 pfrm15 PsN: 42281
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dent’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 Dis- trict 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 Statelike 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 

85

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 Infrastruc- ture 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 coun- cil 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, 

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ment 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 

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be released for decades. Thus, even if the goal is to have a singlesentencing 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 

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ing 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. 

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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 

117

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 selfinterest 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. 

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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. 

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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 

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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 

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sequences 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——

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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 

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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 

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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. 

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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:]

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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. 

128

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. 

129

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 

130

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 

131

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 $21⁄2 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——

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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 

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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 

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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. 

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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, 

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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 

149

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. 

150

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 

151

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 essen- tially different. Over 5 years, we believe that about $11⁄2 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 $11⁄2 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 availVerDate jun 06 2002 11:49 Jul 09, 2002 Jkt 010199 PO 00000 Frm 00157 Fmt 6633 Sfmt 6602 W:\DISC\42281 pfrm15 PsN: 42281
152

able 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. 

153

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 $41⁄2 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 beVerDate jun 06 2002 11:49 Jul 09, 2002 Jkt 010199 PO 00000 Frm 00159 Fmt 6633 Sfmt 6602 W:\DISC\42281 pfrm15 PsN: 42281
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cause 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. 

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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. 

181

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 shortand 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. 

191

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. 

192

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. 

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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 

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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. 

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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? 

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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 

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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. 

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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. 

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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.]

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