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88–505 PDF 2003

BUDGET AUTONOMY FOR THE DISTRICT OF

COLUMBIA: RESTORING TRUST IN OUR

NATION’S CAPITAL

HEARING

BEFORE THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

JUNE 13, 2003

Serial No. 108–36

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpo.gov/congress/house

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

DAN BURTON, Indiana

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

DOUG OSE, California

RON LEWIS, Kentucky

JO ANN DAVIS, Virginia

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

ADAM H. PUTNAM, Florida

EDWARD L. SCHROCK, Virginia

JOHN J. DUNCAN, JR., Tennessee

JOHN SULLIVAN, Oklahoma

NATHAN DEAL, Georgia

CANDICE S. MILLER, Michigan

TIM MURPHY, Pennsylvania

MICHAEL R. TURNER, Ohio

JOHN R. CARTER, Texas

WILLIAM J. JANKLOW, South Dakota

MARSHA BLACKBURN, Tennessee

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. ‘‘DUTCH’’ RUPPERSBERGER, Maryland

ELEANOR HOLMES NORTON, District of

Columbia

JIM COOPER, Tennessee

CHRIS BELL, Texas

———

BERNARD SANDERS, Vermont

(Independent)

PETER SIRH, Staff Director

MELISSA WOJCIAK, Deputy Staff Director

ROB BORDEN, Parliamentarian

TERESA AUSTIN, Chief Clerk

PHILIP M. SCHILIRO, Minority Staff Director

(III)

C O N T E N T S

Page

Hearing held on June 13, 2003 ............................................................................... 1

Statement of:

Cropp, Linda, chairman, District of Columbia Council ................................. 16

Gandhi, Natwar, chief financial officer, District of Columbia Government 32

Williams, Anthony, Mayor, District of Columbia Government ..................... 9

Letters, statements, etc., submitted for the record by:

Cropp, Linda, chairman, District of Columbia Council, prepared statement of ........................................................................................................... 19

Davis, Chairman Tom, a Representative in Congress from the State of

Virginia, prepared statement of ................................................................... 3

Gandhi, Natwar, chief financial officer, District of Columbia Government,

prepared statement of ................................................................................... 34

Norton, Hon. Eleanor Holmes, a Delegate in Congress from the District

of Columbia, prepared statement of ............................................................ 7

Williams, Anthony, Mayor, District of Columbia Government, prepared

statement of ................................................................................................... 11

(1)

BUDGET AUTONOMY FOR THE DISTRICT OF

COLUMBIA: RESTORING TRUST IN OUR

NATION’S CAPITAL

FRIDAY, JUNE 13, 2003

HOUSE OF REPRESENTATIVES,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The committee met, pursuant to notice, at 10:04 a.m., in room

2154, Rayburn House Office Building, Hon. Tom Davis (chairman

of the committee) presiding.

Present: Representatives Tom Davis of Virginia, Carter, Van

Hollen and Norton.

Staff present: Peter Sirh, staff director; Melissa Wojciak, deputy

staff director; Keith Ausbrook, chief counsel; David Marin, director

of communications; Scott Kopple, deputy director of communications; Mason Alinger, professional staff member; Teresa Austin,

chief clerk; Joshua E. Gillespie, deputy clerk; Shalley Kim, legislative assistant; Leneal Scott, computer systems manager; Rosalind

Parker, minority counsel; Earley Green, minority chief clerk; Jean

Gosa, minority assistant clerk; and Cecelia Morton, minority office

manager.

Chairman TOM DAVIS. Good morning. The committee will come

to order.

I want to welcome everyone to today’s hearing to discuss options

for expediting congressional consideration of the District of Columbia’s local budget. After issuing six consecutive balanced budgets,

receiving clean, unqualified financial audits and building up a general surplus and cash reserves of over $1 billion, I believe the time

has come for Congress to consider relaxing some of its oversight

controls over the Nation’s Capital, having been instrumental in setting up those controls originally.

The District’s government has come a long way since March 1995

when this committee issued a report declaring that the District of

Columbia is insolvent, the city does not have enough cash to pay

its bills. It’s spending at a rate in fiscal year 1995 that would exceed its mandated expenditure limits by more than $600 million,

nearly 20 percent above its congressional appropriation.

Through legislation written in 1995 by me, along with Representative Eleanor Holmes Norton, called the District of Columbia Financial Responsibility and Management Assistance Act, Congress

established a financial control board and a Chief Financial Officer

essentially to take over city operations until the District could

stand on its own. I am pleased to say that, at a time when most

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municipalities throughout the country are resorting to massive

budget cuts in order to balance their budgets, the District has managed to stay its course of relative financial stability.

Now, after 6 years of governance under the financial control

board and 2 years in a fairly stable post-control board environment,

it is time for Congress to reconsider its oversight of the District.

Every year the District submits its roughly $5.8 billion budget of

locally raised funds to be approved by the U.S. Congress in conjunction with approximately $500 million in Federal contributions

that Congress appropriates to the District annually. While

Congress’s involvement in the District’s budget matters is the result of Congress’s responsibility to ensure the financial well-being

of our Nation’s Capital, the unfortunate reality is that the city’s

local budget can get tied up in political stalemates over congressional appropriations that rarely have anything to do with the District’s budget. In essence, we become part of the problem sometimes, and that is what we are trying to remedy today.

Now, we have worked with the Senate side, we have worked with

some of our appropriation colleagues who have some concerns

about this legislation as we move forward, but I think we are going

to be able to bail out of here that will give you autonomy—if Congress doesn’t act, will give you the protections that you need as a

city that every other city in the United States has. You have gone

through some tough times. We know the budget is still a little bit

out of whack, as they say; there are structural issues. I might add

that there are cities—our Commonwealth of Virginia has a structural issue as well that forces us to look at new strategies, and we

will be working alongside with you on that.

So, we are pleased to have you here today. I think you have

earned, the city has certainly earned, the right that other cities

have to budget autonomy particularly over its own budget, and Ms.

Norton and I are determined to move forward in a most expeditious

manner.

[The prepared statement of Chairman Tom Davis follows:]

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Chairman TOM DAVIS. And I yield to my colleague from the District, Eleanor Holmes Norton.

Ms. NORTON. Thank you very much, Mr. Chairman. I am pleased

to welcome today’s witnesses, congratulate them on the budget

they have just finished sending to the Congress. And I thank you,

Mr. Chairman, for convening this hearing on budget autonomy for

the District of Columbia, a measure of great importance for the

city.

In 30 years of home rule, the city has made many changes and

reforms on its own and many others required by the Congress.

However, the Congress continues to use essentially the same oversight processes it has used since the District was created as a functioning city more than 200 years ago. I cannot think of a single significant change Congress has made in its own processes, not even

changes that would help the District improve its own management

in all that time.

The approach to budget autonomy we have outlined would be an

important first step for the Congress and for the District. The approach you and I first announced in February, Mr. Chairman,

would still not resemble the self-contained and more efficient procedures used by every State and locality in our country; however, this

step would take the city a great distance toward functional budget

autonomy and away from a congressional process that adds large

dollar costs and incalculable waste and inefficiency directly traceable to the congressional appropriations process.

I have called this step toward fuller budget autonomy functional

budget autonomy not only because it would significantly streamline

and untangle the process, it also would eliminate the most inefficient and demeaning impediment to the local control every other

jurisdiction enjoys; namely, that the budget of a local jurisdiction,

the District of Columbia, is enacted by the Congress of the United

States just as Congress enacts the budgets of Federal agencies such

as the Interior Department and the Labor Department.

For most of my service in Congress, the enactment requirement

has usually kept the District from having a local annual budget

with which to operate and manage the city for months at a time.

The requirement of our bill that the D.C. budget always become operative at the start of the fiscal year in October would have large

effects on everything from the District’s bond rating to its ability

to more efficiently manage every function of the D.C. government.

The irony is that Congress almost never changes the District’s locally raised core budget. Even at its most intrusive, Congress has

realized that when it comes to the complexities of budget decisions

for city agencies, Congress is in foreign territory. This is only one

of the reasons I think some Members of the House and Senate have

been open to the changes we propose. I appreciate the support this

approach is already receiving in the Senate.

For years, Congress has seen the D.C. budget wreck the larger

appropriation process for the country. Too often the District appropriation, the smallest of the 13, has been, at worst, the largest impediment to the entire appropriation process and, at best, a major

cause of delay.

I am especially grateful for the way Chairman Bill Young has

worked with me to remove obstacles and often to rescue the D.C.

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budget altogether. And Speaker Dennis Hastert and former Speaker Newt Gingrich have become involved as a last resort when only

they could make the decision. I very much appreciate that they

have always responded when I have asked for their help. However,

the local balanced budget of a great city should not need extraordinary action by House Speakers or full appropriation Chairs.

Despite a national economy that has left States and local jurisdictions on their knees, the District has balanced its budget without raising taxes and without using its cash reserve funds. Because

the Mayor and the city council have been cautious and conservative

in their management of city finances and operations, the District

has avoided the budget chaos that plagues many jurisdictions

today. Most analysts agree that the District has managed its budget shortfall better than most jurisdictions, including those of our

neighbors.

After 200 years of unchanged procedures here in the Congress,

the city’s record and the bill we are considering today should be the

beginning of scrutiny and improvement of congressional processes

in aid of greater efficiency for the D.C. government. Even full city

autonomy over its local budget would not deprive the Congress of

the right to make changes by legislation. If the District’s local

budget did not come to Congress at all this very day, congressional

control would still resemble today’s processes because the Revitalization Act requires the Federal Government to fund courts and

prisons. Congressional control enactment of home rule after a century of struggle was a major breakthrough. However, Congress has

made no major step toward self-government since 1973. Surely the

place to begin is with the city’s budget process, the most critical

feature for financial and operational efficiency.

Today must mark a long-awaited step toward equal citizenship

and equal treatment by the Congress. At the very least, the District is owed a congressional response in kind to the very substantial improvements the city has made in its financial and operations

for 6 years. The way to begin is by matching the District’s greater

efficiency in managing its own finances and operations with the

same in our own processes. The way to begin is with budget autonomy.

Thank you very much, Mr. Chairman.

Chairman TOM DAVIS. Thank you very much.

[The prepared statement of Hon. Eleanor Holmes Norton follows:]

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Chairman TOM DAVIS. If there are no other statements, we will

give Members 5 legislative days to submit opening statements for

the record.

We now move to our distinguished witnesses. We have the Honorable Anthony Williams, the Mayor of the District of Columbia.

Tony, it is great to have you back here again. Honorable Linda

Cropp, chairman of the District of Columbia City Council. Good to

have you back again as well. And Dr. Natwar Gandhi, the chief financial officer of the District of Columbia.

It is the policy of the committee that we swear all witnesses before they testify. Would you rise with me and raise your right

hands.

[Witnesses sworn.]

Chairman TOM DAVIS. Thank you very much.

In order to allow time for more questions, if you’d try to limit

your testimony to 5 minutes, we do have one panel today, we will

be flexible on that to make sure you get your points across. But we

have read the submitted testimony, that is all part of the record,

and we want to get right into questions.

We will start with you, Mayor Williams, and move right down.

And, again, good to have you back.

STATEMENT OF ANTHONY WILLIAMS, MAYOR, DISTRICT OF

COLUMBIA GOVERNMENT

Mayor WILLIAMS. Thank you, Mr. Chairman, Congresswoman

Norton, Congressman Carter. Thank you all so much. I will abbreviate my remarks, recognizing they have been submitted for the

record, so we can have time for questions and answers.

I just leave you with the thought that, historically the District

has had the dual identity of being a local government and a Federal agency. And in our Federal system of government, this one-ofa-kind structure has created one-of-a-kind challenges. And at the

root of all these problems is the need identified by you, Mr. Chairman, and certainly by Congresswoman Norton for the appropriate

level of managerial discretion and flexibility for a government like

the District.

We are at the front line of service delivery like local governments

are across the country, and we need the ability to respond quickly

to locally changing needs, to locally changing economic circumstances.

I, along with Congresswoman Norton, certainly want to salute

Speaker Hastert, former Speaker Gingrich, full committee Chairman Young for their working with us to get their budgets through.

But she is right, it shouldn’t take extraordinary action for regular

government practice to move forward.

How does this requirement affect us? It affects us in a number

of ways. First of all, the requirement now for this extensive review

lengthens the time between the period of identifying a service need

and implementing a solution. In fiscal year 2001, for example, we

began cracking down on owners of slum properties to improve living conditions there. As we did so, however, we noted that residents of these properties needed to be relocated during the renovation process. Because of our lack of autonomy, however, we had to

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wait for over a year for the Federal Government to approve this

budgetary change in the local budget.

Service improvements are delayed by the continuing resolutions.

In recent history the average congressional delay has been almost

3 months, which is almost a full quarter of the fiscal year. During

these delays, critical new investments can’t be funded. In fiscal

year 2002, for example, these delayed investments included new

school nurses, prescription drug benefits, police equipment and

staffing. In fiscal year 2003, the delay—the congressional delay is

planned through—lasted through February, was almost half a year.

And ironically, as Chairman Cropp, has noted, the delay in this

last fiscal year actually prevented us from operating at a lower

level than the continuing resolution called for, which is quite ironic

and paradoxical, given the demand that we be fiscally responsible

with our funds.

Midyear budget reallocations require an act of Congress and disrupt service delivery. You, Mr. Chairman, and certainly Congresswoman Norton have spoken often about that. I am sure that CFO

Gandhi will talk about the effect this has on the marketability of

district bonds. They are looking for flexibility and the ability to

move quickly in this certain—and the current restrictions certainly

hamper that.

Finally, the lack of budget autonomy also has a paradoxical impact on us in that, perversely, program managers must use or lose

funding at the end of the fiscal year. Congressional approval for

spending expires at the end of the year, which punishes program

managers who save funds by allowing those funds to carry forward.

You know, the old traditional conventional use it or lose it is a rule,

and that is certainly not good government.

Mr. Chairman, you mentioned the fiscal crisis at the District

base. One of the things I’m proudest of, if you look at our city,

Cleveland, Philadelphia, New York, and other cities, I think when

you look back 50 years from now, you will see a city that has rebounded; it is in the front rank of American cities. And I think people will look back and they’ll say, you know, one thing about the

District during that time is they managed to get out of that fiscal

crisis, certainly with the tremendous help of the 1997 act, but they

did it without ever resorting to borrowing, to finance, their deficit.

They basically paid that deficit down the old-fashioned hard way.

And I think that is to our credit. I think, more than anything else,

I think that demonstrates our ability to be prudent, to be responsible, and, as you have said, to earn budget autonomy. Thank you.

Chairman TOM DAVIS. Thank you very much, Mr. Mayor.

[The prepared statement of Mayor Williams follows:]

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Chairman TOM DAVIS. Chairman Cropp.

STATEMENT OF LINDA CROPP, CHAIRMAN, DISTRICT OF

COLUMBIA COUNCIL

Ms. CROPP. Thank you very much, Mr. Chairman. And to Congresswoman Norton and Congressman Carter, let me say good

morning to all of you, and thank you very much, Mr. Chairman,

for holding this public hearing and for cointroducing with Congresswoman Norton the legislation under consideration here today

to provide greater autonomy to the locally elected Mayor and council over the locally funded portion of the District of Columbia budget. We also very much appreciate the support of the President for

this proposal and your efforts to make it happen.

I am just thrilled that we are here talking about this particular

piece of legislation. If enacted, it would be the first real advancement of home rule in the District of Columbia since congressional

enactment of the limited home rule 30 years ago. And, let me add,

it is about time.

Submitted with my testimony is a proposed resolution signed by

all 13 members of the council in support of budget autonomy for

the District, which I will not read, but ask that it be included as

part of the record.

Chairman TOM DAVIS. Without objection, it will be.

Ms. CROPP. As you’ve requested in your letter of invitation to this

hearing, let me provide you with a few examples of the fiscal discipline exercised by locally elected officials since the Financial Authority became dormant and the mechanisms and safeguards in

place to prevent the District from lapsing into a fiscal crisis.

This past February we received the annual CAFR, which certified that the District’s fiscal year 2002 budget that ended on September 30 was our sixth consecutive balanced budget. Of course, it

was the fourth consecutive surplus 2 years ago that caused the dormancy of the Financial Authority. Nonetheless the District is struggling to maintain the current fiscal year 2003 budget and keep it

in balance primarily because of two factors beyond our control:

One, the continuing revenue loss, particularly income, but also

sales tax losses, due to the national downturn of the economy, and

also due to a continuing aftermath of September 11, the anthrax,

sniper, and terrorist alert; second, the continuing structural inequities in the District’s financial relationship with the Federal Government, which has been verified recently in the report released by

the U.S. General Accounting office, and which still exists despite

the budgetary benefits provided to the District under your leadership, Mr. Chairman, due to the passage of the 1997 Revitalization

Act.

In the face of these challenges, however, we have been able to

work together in closing a $323 million budget gap that occurred

within a short period after we had passed our budget last year, and

then we did it in record time in the 3-week period. Then on April

1, 6 months into the fiscal year, once again the council took emergency action after the Mayor’s recommendation to close a $134 million hole in this year’s budget. Of course, our counterparts in Virginia, Maryland, and across the Nation face the same and similar

challenges, although we think in the District that we have acted

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more quickly, effectively, and responsibility to balance our budget

without gimmicks or one-time savings in a very quick way.

Almost two-thirds of the District’s initial revenue shortfall, or

about $195 million, this year was closed through spending reductions, and the remainder was closed through revenue increases, but

no increase in income, general sales, or occupied property taxes.

We looked in areas where we had not made increases in a long

time. The most recent budget pressures and revenue shortfalls this

year required further programmatic reductions, a hiring freeze,

suspension of pay steps, and other measures; but we took whatever

measures were necessary to make sure that we stayed in place.

The council will continue to squarely face the challenge of fiscal

discipline and strict oversight of financial management while continuing to fulfill our commitment to targeting expenditures and investments on critical priorities. In the fiscal year 2004 budget that

we just forwarded to Congress, my colleagues and I, along with the

Mayor, worked extremely hard to avoid any tax increases. We

scrubbed the budget to identify surgical reductions in the growth

of spending and in the growth of consulting contracts to a level

closer to 4 percent of our budget.

For fiscal year 2005, we’ve mandated that there is limited growth

within the local funds expenditures not to expend more than 3.5

over the budget. So we are very careful to make sure that we do

not spend money more than what our revenues will bring in.

We have been vigilant in our oversight responsibilities, holding

more oversight hearings than ever before in an effort to keep all

of us accountable and living within our means while delivering the

services that are budgeted to deliver to our residents, our visitors,

and our businesses. The Chief Financial Officer has instituted an

early warning system that notifies the council and the Mayor of

budget pressures, whether on spending or on the revenue side of

the ledger, and enough time to consider and take the necessary actions on various identified options to address these pressures before

it is too late, and this has been going on constantly.

Another mechanism utilized by the District has been the pay-go

funding, which allows appropriated dollars to be spent only after

certain performance or other measurements are realized and certified. We have also worked with the Mayor and the CFO to craft

local legislation to assure the continued independence of the Office

of the Chief Financial Officer within the home rule context, which

requires amendments to the Home Rule Act, and we hope that you

will consider this.

Congressionally imposed reserve requirements, both budgeted

and cash reserves, have also served to cushion the impact of budget

shortfalls or to meet unanticipated needs in the District. Nonetheless, we think that the positive aspect of these reserves can be realized with somewhat more flexibility in how these reserves are set

up and operated, and hopefully we can look at that in the future.

Perhaps the best evidence of the fiscal discipline that has been

continually exercised by District officials for several years is that

we have finally been recognized and rewarded on Wall Street. And,

as you know, the District’s bond rating was recently upgraded from

stable to positive, and there is expectation for further upgrading.

This achievement, which will result in significant savings in our

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borrowing costs, has occurred at a time when other jurisdictions

throughout this country, their bond rating has been downgraded.

Our bond rating upgrades are occurring due to the hard work and

positive image of the District that has been fostered by local officials working in partnership with our congressional counterparts

and business community.

Mr. Chairman, although I think the District of Columbia has

clearly demonstrated that we have earned the right to local budget

autonomy, let me say, and I hope you would agree, that the fundamental right of self-determination in a representative democracy

should not have to be earned by good behavior, however. Indeed,

to be governed by the consent of the governed is the founding principle of the United States of America, and it is what this country

preaches around the world as a basic human right that is worth

fighting wars about. In fact, increased autonomy for locally elected

officials, budget autonomy, as well as legislative autonomy, which

we also hope you will consider, will necessarily increase accountability of the locally elected officials for their actions. Autonomy

and accountability are what our form of Constitutional government

is supposed to be all about. Having the District’s local funds of $3.8 billion in locally raised

revenues be subject to the Federal appropriations process, where

we do not have a vote, and the process of the Senate, where we do

not have an elected voice, highlights undemocratic, separate, and

unequal treatment of the District by the Federal Government. No

other local or State jurisdiction in the United States is burdened

by having the expenditure of its locally or State-raised revenue

subject to congressional review of approval. But even if local or

State government budgets are subject to congressional approval, at

least the citizens would have voting representation in the body controlling their own pursestrings.

The current budget process is not only undemocratic, which

should be enough reason by itself to enact budget autonomy legislation, the existing process is also a bad way to run government, as

the Mayor has stated.

I am going to put most of it into the record for the rest of my

testimony so that we can have time for questions and answers. But

I would say in summary, because the congressional review and approval of the District’s locals funds budget and local legislation is

undemocratic, unnecessary, and runs counter to the principles of

good government, I urge this committee and Congress to take expeditious action to provide both budgetary and legislative autonomy

to the Mayor and council of the District of Columbia.

We really do appreciate this hearing and your leadership in this

regard. We thank you again for holding this hearing today and for

the opportunity to testify in favor of greater self-determination for

the citizens of the District of Columbia. Thank you.

Chairman TOM DAVIS. Thank you very much.

[The prepared statement of Ms. Cropp follows:]

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Chairman TOM DAVIS. Dr. Gandhi.

STATEMENT OF NATWAR GANDHI, CHIEF FINANCIAL

OFFICER, DISTRICT OF COLUMBIA GOVERNMENT

Mr. GANDHI. Thank you, sir. Good morning, Mr. Chairman, Ms.

Norton, Mr. Carter. I will be very brief in my oral comments. I request that my written testimony be entered into the record.

Chairman TOM DAVIS. Without objection.

Mr. GANDHI. At the outset, let me say as both a citizen of the

District and its senior financial manager, I wholeheartedly endorse

expanding the District’s authority to manage its own financial affairs.

Currently, as you pointed out, Mr. Chairman, Congress authorizes all District of Columbia spending through the Federal appropriation process, irrespective of the source of revenue underwriting

such spending. In the District in fiscal year 2003, the budget was roughly $5.5

billion, of which 3.8, or 68 percent, was comprised of revenues

raised through local taxes, fees, fines, and user charges. Of the remaining $1.76 billion in Federal funds, about $1.7 billion was comprised of Federal transfer payments and grants. Only $47 million

was uniquely and especially appropriated from Federal revenues

for programs and projects peculiar to the District of Columbia.

Were the Congress to modify the current law, a range of possibilities remains to exercise oversight over the District’s budget and

operations. These might include periodic audits, after-the-fact review of the District’s locally enacted budget, or review of the District’s locally enacted budget by the appropriate oversight group in

the Congress. Also, the Federal funds directly appropriated to the

District would remain within the Federal appropriation process.

There are several benefits of the autonomy to the District, and

I will mention just a few. First, faster enactment of budgets. Because the District currently receives all its authority to spend

funds through the Federal appropriations process, the District cannot enact its locally approved budget until Congress passes and the

President signs its appropriations bill. This situation guarantees a

5-month lag between local approval and Federal enactment. In

practice, Federal appropriation bills are often delayed beyond this

period.

There are adverse consequences for the District since it is tied

to the Federal appropriation cycle. Bond rating agencies take the

uncertainties of the Federal process into account in assessing the

District’s finances, and discount to a degree whatever ratings the

District might otherwise receive. In the case of new or expanded

programs approved and financed locally, no implementing action

can be taken until the Federal appropriation bill is enacted. This

delays program initiation and guarantees programs will not be executed as planned. Also, the more elapsed of time between the formulation of a budget and its execution, the more likely the operating assumptions underlying that budget will not hold true.

Second, the Federal appropriations cycle runs on an October/September fiscal year, a fiscal year cycle unsuited to local government.

Were the District to have autonomy to appropriate its own funds

like other local jurisdictions, my recommendation to the Mayor and

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the council would be to revise the fiscal year to a July/June cycle.

This would have two immediate advantages. First, it would conform the fiscal year to the school year, greatly enhancing the ability of the D.C. public schools and the University of the District of

Columbia to manage their funds effectively. Second, it would more

closely conform the District’s fiscal year to its revenue cycle. The

annual income tax payments are due in April, and the first semi

annual real property tax payment is due on March 31. Data on

these payments is used to update revenue projections for the upcoming fiscal year. Were the District to execute its fiscal year budget beginning in July, it would be proceeding on the most recently

available and, therefore, most accurate revenue information.

Finally providing the District with authority to direct the spending of its locally raised revenue would substantially increase the

District’s ability to react to changing program and financial conditions. Under the current law, the District follows the Federal supplemental appropriations process to appropriate additional revenues or to make any significant realignment in resources among its

appropriations. Program plans premised on supplemental appropriations are held in abeyance while Congress considers the request. The same problem is encountered on the other financial

transactions. For example, all reprogramming of funds from one object class of the expense to another in excess of $1 million requires

congressional review of 1 month before enactment.

The District has the financial infrastructure to permit it to manage its local funds effectively. We have a strong accounting system

linked to our budget oversight processes. Monthly closings and cash

reconciliation are in place. Financial managers have a clear understanding of expectations. Clean audit opinions by the District’s

independent auditors have become routine, and the number of

management findings are substantially reduced.

The Office of Chief Financial Officer provides an independent assessment of key financial data—comprehensive annual financial reports, revenue estimates, fiscal impact statements, and all other

consequential financial data. I believe a necessary corollary to increased local financial authority and autonomy is the inclusion of

the authorities and responsibilities of the Office of Chief Financial

Officer in organic law. Taken together, this legislative framework

is sufficient to ensure fiscal discipline without the added complexity

of putting local spending plans through the Federal appropriation

process.

Mr. Chairman, that concludes my oral comments. I will be

pleased to answer any questions you may have. Thank you, sir.

[The prepared statement of Mr. Gandhi follows:]

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Chairman TOM DAVIS. First of all, because of the Federal involvement, the District of Columbia’s budget plans are not even

congruent with the school budget fiscal year. Is that right? You’ve

set up different cycles to conform to Federal mandates in this case

that probably no other city or State in the Commonwealth that I’m

aware of has to conform to. Then you conform to that, and then we

still don’t give it to you on time usually because of issues unrelated

to the District of Columbia, partisan bickering, fights between Congress and the President. And, you know, the image up here that

some Members have that go back to the sheer impracticability barrier, that is not where the city is today. They don’t understand that

the number of employees have been reduced dramatically. There

are certainly problems running a big city, we read about them

every day here in the Washington Post, as there are in any city in

the United States.

But let me ask you, Dr. Gandhi, this is a different city than we

had a decade ago markedly, isn’t it, fiscally?

Mr. GANDHI. Absolutely right, Mr. Chairman. Just to give one example, and the Mayor often mentions this—I am just appropriating

from him, you know—in the mid 1990’s we had roughly one-half

billion dollars in deficits in our fund balance. Today, we have about

$865 million of positive fund balance. That is about a $1.3 billion

turnaround for the city. I think it speaks volumes of the effort that

the elected leaders have made to really lift the city from insolvency

to a financial height that is unparalleled in the records of the cities

that have gone through the same experience.

Chairman TOM DAVIS. Now, we have done some things up here

that have been helpful. The unfunded pension liability issue we addressed is a significant monkey off the back.

Mr. GANDHI. Absolutely.

Chairman TOM DAVIS. And realigning the felony prisoners and

Medicaid. But still, as you look at it, the city has a lot of issues,

as do most cities. But I think you have done well by and large.

Mr. GANDHI. And one more thing I would point out. I think in

the last year, we have gone through a substantial decline in the

revenues, and the Mayor and the council basically faced up to the

challenge. As Ms. Cropp pointed out, within record time, just about

3 weeks, we brought back the budget of 2003, sent it back with the

reconciliation of a $323 million problem.

Chairman TOM DAVIS. Well, let me give you my view, and it’s not

maybe one that is not shared across here, but, you know, democracy is not an automatic. We give democracy to a city, and then we

second-guess every decision you make. And for it to work, you have

to be allowed to make mistakes, the autonomy has to be there and

the responsibility for people making decisions, good decisions and

bad decisions. And one of the difficulties here is if we don’t get the

budget out on time, the city can’t let its contracts out that you need

to do, you can’t hire new police officers, you can’t hire teachers. All

of these things are held up because of the uncertainty. And, you

are right. From a bond rating perspective, this could end up costing

taxpayers more money because of the reluctance of bond houses,

and that’s, one of the telling issues here.

We are going to do something. I can just tell you that right now.

Ms. Norton and I are determined. We have been meeting. There is

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opposition to everything here. This area, Congress, is more bureaucratic sometimes than any other—and full of turf fights and everything else. But this is, in my opinion, a very modest but commonsense step to take to give the city more autonomy, more authority

over its own budget.

Ms. Cropp, it is not just that you’ve earned it. You are right, this

is a fundamental right. This is the capital of the free world here

in the District of Columbia, and we talk about we bemoan the fact

that when Hong Kong goes over to China and the city council is

changed, that in Iraq, setting up democracy; and here in the capital

of the free world, it is not what it is in any other place in the

United States for a lot of reasons.

But this is just a very modest step forward, as Ms. Norton noted,

to return some authority to a city that not only has earned it, but

has fundamental rights to it at this point, and I don’t think we are

taking a chance in doing that. We don’t theoretically give up any

oversight responsibility. That stays with us under the Constitution.

But we are saying to the local officials, we could have confidence

in the job you are doing.

And, Tony, I think as Mayor you have been a breath of fresh air

on a lot of these, and Ms. Cropp has as chairman of the council.

It has been a good team. I know you don’t always agree on everything, but we are getting the essential job done. The fights are

really over minutia items.

Mayor WILLIAMS. I also think, Mr. Chair, actually the fact that

we have a strong council is to the city’s benefit. I hate to say that,

but it’s true.

Chairman TOM DAVIS. It’s not always to your benefit, but that’s

the way it goes sometimes.

Mayor WILLIAMS. Definitely to the city’s benefit.

Ms. CROPP. If I could add, Mr. Chairman, I have said that I

think that this council is an excellent council. And, Mr. Mayor, if

it is any good feelings, it’s hard on the Chair, too, to keep the council together. But the fact that it is such a hard-working council, it

is to the benefit of the city.

And let me also put on the record, when we do have disagreements between the council and the Mayor, we understand that the

most important issue is for us to run the government. After a very

highlighted disagreement we had with regard to an issue of the inspector general, that very same day the Mayor and I were working

together on another very important issue. We were sitting down,

trying to resolve the issue. So, our disagreements, even though the

media may highlight it, I think all of us understand the importance

of good government and working together for that, and we are still

doing that.

Mr. GANDHI. And if I may add a point, Mr. Chairman. I think

one thing about which both the council Chair and the Mayor are

in complete agreement is the financial viability and the financial

credibility of the city. There is no doubt about that. And I can say

that from personal experience over the last year, the way they have

managed the revenue decline of $300 million plus.

Ms. CROPP. Mr. Chairman, you mentioned today—it is part of my

testimony, but I do want to highlight this issue for those in Congress who may be a little—drawing back a little bit from supportVerDate 11-MAY-2000 09:21 Aug 25, 2003 Jkt 000000 PO 00000 Frm 00051 Fmt 6633 Sfmt 6633 D:\DOCS\88505.TXT HGOVREF1 PsN: HGOVREF1
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ing this. As you stated, and my testimony has very clearly, Article

I, section 8 still is in effect. So if this bill passes, it does what is

right, but it still leaves Congress with power.

Chairman TOM DAVIS. Absolutely. We don’t—but what it does do

is, if we delay, you don’t—but you don’t get caught up in these

other petty squabbles. That is really what it does. It also moves

things on a timeframe where, if we want to act, we can act. But

if we don’t act in time, life goes on, and you are not held up while

we’re trying to make our decision or somebody puts a hold on something in the Senate or something like that.

Ms. CROPP. Do you know that there are—have been times—if I

just may add——

Chairman TOM DAVIS. Sure.

Ms. CROPP. It really is important. There have been times that because we have not had the congressional enactment on our budget,

we have had to go out and borrow money. So it is actually costing

the District money with the fact that our budget may not have

been passed on time.

Mr. GANDHI. And the amount of money, to supplement Ms.

Cropp’s point, is about $3 million in borrowing cost for short-term

borrowing.

Chairman TOM DAVIS. And I think the idea that it cuts your

whole schedule in terms of not just contracting out, but hiring police officers, hiring teachers. There is a ramification now. In terms

of hiring these meter maids, you can postpone that; I’ve had my

clashes with that office, and if I could write an amendment into

that, I would do that. But I think fundamentally that is right.

There is another issue that is below the surface here that we

need to face head on; and that is that Members—we all come from

different districts. Ms. Norton’s district is far different from mine

out in Fairfax and far different from Judge Carter’s down in Texas.

And the view of the world that comes from Judge Carter’s district

in Texas is a different view of the world than comes from my constituents in Fairfax and is far different from Ms. Norton’s. And

whenever the D.C. bill comes up to Congress, someone puts an

amendment on. And to defend a vote back home, D.C. wants to do

things different than my constituents do or Judge Carter’s, and

when we try to impose our values, Members end up having to vote

their home values instead of the city’s values. That is just the way

it is. That is politics. If you don’t, somebody attacks you back home.

You know, we went through this domestic partners, which I’m

not a big fan of, but I ended up over time—Congress split its time

and said, if that’s what the city wants to do, you’ve got hundreds

of other cities across the country doing it. Why are we standing in

the way of allowing this city to make that decision and basically

make insurance more available to its employees and families than

you would otherwise? And so, to me, it’s a local government issue,

not necessarily my affirmation of this or not, and I have mixed feelings about it, but Members having to go back home could be faced

in a primary or something, but they voted. And that makes it unattractive.

This still gives us the authority to do that, but I think it’s less

meddlesome when we have this time period on here than when we

would take our time before.

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I think that the writers that have traditionally been on abortions

at the hospital and that kind of issue, which traditionally cities

have taken different views than suburban and rural constituencies,

will probably stay. And I think we all understand that, and this

legislation allows that. But some of the more meddlesome issues

that come up at this point, I think if they are not addressed quickly, life goes on in the city. And I am not sure that we serve democracy when we start applying those values.

Now, there is the issue, it is the Nation’s Capital ought to represent the values. You know, we go through all that every day, and

you have to understand that is an issue that may surface to a lot

of Members when we start giving this up and trying to strike the

appropriate balance.

But this legislation, as Ms. Cropp knows, doesn’t take any authority away from Congress, but if we don’t act in a timely manner,

life goes on, and you can go ahead and hire your police officers and

keep the city safe. You can hire your teachers, get these kids the

education they deserve. You can get your contractors out there so

they can improve your computer systems and those kinds of issues,

and it’s not held up, and you don’t have to borrow and go out to

the bond houses and just good things result.

I don’t think there is any downside for critics the way the city

runs, and we are going to work hard getting it through here. I

think the chances are pretty good for success.

So I want to thank each of you for the job you are doing. Thanks

for being up here today. We’ve got other contentious issues on the

city that we’ll be facing over the next year here on this committee,

but this is one from, I think, Ms. Norton’s and my perspective and

from our leadership that I think is going to get resolved in fairly

short order.

Ms. Norton.

Ms. NORTON. Thank you very much, Mr. Chairman. It seems to

me your comments were so much to the point both as to efficiency

and to democracy that my inclination would be to stop while I am

ahead and rest on what you’ve said. And I really don’t think I could

have offered a better analysis.

I think really what I ought to do is to simply allow the witness

to elaborate some of the more important points that you’ve made.

For example, Mr. Mayor, I don’t think anybody up here, perhaps

except Tom and me, know—and you did, and you said it, but it is

so profound that I wish you would elaborate on it. You indicated—

and I remember when this happened, I think it was last year—that

you were prepared to operate at a lower level than I believe the

continuing resolution allowed, but you had to operate—no, I’m

sorry. You were prepared to operate at a lower level, but you had

to operate under continuing resolution and at that level. Would you

explain and lay that out on the record so that we can understand

how the local jurisdiction wanted to reduce its costs, but, by maintaining its budget up here, the Congress forced it to operate at

higher level of cost?

Mayor WILLIAMS. Right. And I will ask the council Chair on that

to join with me. But essentially, as we all know, with a continuing

resolution you go to the previous year’s budget mark. Obviously, in

a difficult fiscal situation, you are trying to reduce that previous

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year’s mark. If you are held at that previous year’s mark all the

way through January, you are essentially operating at a higher

level than you should be, and that’s what happened here in 2003.

Knowing in 2003 that we had a problem, we reduced it from 2002

to lower marks in some levels, and then we adjusted it again, as

council Chair Cropp has said, what, in October. But here we were

in January still operating back at the 2002 level, which doesn’t

make any sense.

I might also add, as you know, Congresswoman Norton, you have

taken a lead along with Majority Leader DeLay and others in getting us to improve—and Senator DeWine is another one—to improve children and family services. This is another example that

Chairman Davis is talking about. Everybody is saying improve children and family services, improve children and family services. In

the budget, we had a provision for hiring more social workers to

reduce the number of cases, you know, the social worker/client

caseload, and we were unable to do that because of the continuing

resolution.

Ms. NORTON. Mr. Mayor, that was going to be one of my questions. We had a hearing—I mean, the Chairman testified indeed on

a GAO report on this very issue. Yes, Mr. DeLay and I had a bill

so that Congress has continuing interest in this area. And your testimony says that for 6 months, almost half a year, you couldn’t hire

the critical personnel. And of course, social workers are among the

most critical personnel. And so here we call you up and say, why

haven’t you done what you are supposed to do on foster care? And

the budget process is never mentioned. I’ll bet it was never mentioned in that, during that hearing, because Congress is simply unaware of the consequences of its own actions.

By the way, your budget goes to the President of the United

States before it comes here, right?

Mayor WILLIAMS. Right.

Ms. NORTON. He never does anything with the budget, does he?

He just sends it up here. The President supports the budget autonomy that we are requesting; is that not correct?

Mayor WILLIAMS. That is correct.

Ms. NORTON. Well, here we have, one example of how the budget

might be handled here. It’s not as if the Congress couldn’t double

back on the budget, but it could simply pass the budget through

and double back in its own time if that’s what it wanted to do.

Dr. Gandhi, I could not have been more intrigued than by what

you said, what you indicated in your testimony about the possibility of changing the District’s budget year to the same budget year

that everybody else in the United States uses, July to June, capturing, therefore, the great problems that our schools have. Here is

another agency that time and time again has been hit over the

head and shoulders, but of course it must operate on the school

year budget, and we are the only jurisdiction that operates on a different budget year from our school year.

First let me ask you, does your testimony imply that you think

this could be done even with the bill before us—sorry, with the bill

before us now, or that you think this is where we ought to move

toward?

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Mr. GANDHI. Well, I think what I would propose, if you have

budget autonomy, then I would recommend to the council and the

Mayor that we should have a budget cycle which is more attuned

to places where the local funds flow. One of them, of course, is the

schools, and 20 percent of our budget is education. And so what we

need to do is to make sure that we handle our cash-flows according

to that line. Further——

Ms. NORTON. Well, let me stop you, because, you know, that, of

course, would be an extraordinarily important change. Now, the

way in which this process would work under even our budget autonomy bill is that the final approval would still come through September 30.

Mr. GANDHI. Well, we would have to work out those details. But

all I’m saying is, the financial realities are such that our cash-flows

are more attuned to local government than the Federal appropriations process, like our real property inflow of cash, and income

taxes. All that basically has to be reconciled on a local basis. So we

will simply have to work out the details with the committee on

that.

Ms. NORTON. I would like to invite you to look at that issue.

Mr. GANDHI. Sure.

Ms. NORTON. And look closely at that issue on what we could do

either to this bill or to move us to that very important change. And

that, of course, has implications for your testimony with respect to

how long in advance you have to—how far in advance you have to

forecast budgets. Could I ask you how you’re able to do that?

Mr. GANDHI. You only have help on that front, to some extent,

in our ability to ‘‘advance’’ money to the schools at 10 percent of

their appropriation for the next fiscal year. But that really messes

up our accounting to some extent, so we will have to sort those

things out.

Ms. NORTON. Well, what I don’t understand—let me ask you all

what you do about contractors. Let’s say you look at your contracts.

You understand that your payments go up every year with inflation, so a contractor is due an increase, let’s say, for the next fiscal

year, but you are held here, let’s say, on a continuing resolution.

Are you able to meet your contractual obligations if, in fact, you are

held to last year’s contract in effect? And what does that do with

respect to your legal and contractual obligations to these contractors?

Mr. GANDHI. If I may comment on that, Ms. Norton. We cannot

start any new programs. We can continue at the level of the last

year. But initiating new——

Ms. NORTON. See, I understand that with respect to city programs. And as the Mayor said, with many of the programs, foster

care is—some of the foster care programs are examples. I’m talking

about now somebody outside the government that you have contracted for and he has a program, it is not a new program.

Ms. CROPP. I would suspect that if it’s part of the next year’s

budget, that approval rate would not go into effect until the budget

has been approved, and it may mean that later on we may have

to go back once the budget is approved and make adjustments. But

we may have said that we are going to fund this particular agency

at this level based on the approval of the budget, but until that

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budget is approved, we can’t make any changes in that funding

level.

Ms. NORTON. So here we are jeopardizing small businesses that

do business with the District as well.

Ms. CROPP. Very much so in the sense that, in some instances,

particularly in the human services area, over the past several years

we have reduced their contracts significantly. And there are areas,

when we finally do increase the contracts, they may need it very

desperately in the sense that they may be going from payroll to

payroll. And some businesses have said that if they could not get

the increases just to meet their costs, that it may make them go

under. So that is a twofold problem if that occurs. Not only are we

jeopardizing a business, but if, in fact, they go under, then it’s a

service that we may need that we will no longer have; and how do

we deal with the constituents who need that particular service?

Ms. NORTON. And the whole cost of then going out and getting

somebody else to do the service, contract and competing—I mean,

competing for contracts and so forth is just another cost that the

Congress would have put on you.

Mr. Mayor, I was very interested in what you had to say about

the use it or lose it notion. You know, you’d better hurry up and

use this money because you are coming to the end of the congressional fiscal year. What would be the alternative to that? And what

would you desire as the alternative to the use it or lose it?

Mayor WILLIAMS. Personally I think that we should keep our

strong cash reserve. I think it’s a sign of good fiscal standing, and

it has definitely helped us on Wall Street. I think we should keep

some restrictions on our accumulated balance so that keeps us on

a conservative track. But year to year, if there are funds that are

left over from year one, like every other State and local government

in the country, our government ought to be able to prudently use

those funds for business tax incentives. Maybe we can use them for

critical reserves. Maybe we can use them for schools and education.

Ms. NORTON. What kind of change would that require us to

make? Would this bill help that or solve that, or would we need

other changes to solve that?

Mayor WILLIAMS. I think this bill would do it.

Ms. CROPP. If not, we would ask that——

Mayor WILLIAMS. That would do it.

Ms. CROPP. Yeah, that it would do it; that no other business cannot carry over funds from 1 year to the next year.

Ms. NORTON. So tell me how you operate then. What do you do

if you are fortunate enough to have some funds at the end of the

year that you know you need somehow in the District of Columbia?

Mayor WILLIAMS. I can tell you as former CFO and now as kind

of chief program manager, if you will, if you are running an agency,

and you are down into now—and this happened when I was in the

Federal Government. If you’re down into, say, July, and you know

your agency still has funds that are going to lapse, you—unfortunately, you just start spending them on things that are colorable

and plausible under your different allocations, and so you end up

with not the smartest spending. So, in other words, you spend 9

months managing well, and then the last 2 or 3 months trying to

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throw everything you can into spending so you don’t end up losing

something.

Ms. NORTON. So, here, the Congress is making you spend money

that you might otherwise reserve for more prudent uses by holding

it over to another period.

Mayor WILLIAMS. That is correct.

Ms. CROPP. The other side of that, Congresswoman Norton, is

that, you know, at some point you can be cash rich and service

poor. The government has been extremely prudent in trying not to

increase taxes and trying to live within our means, but if money

keeps falling to the bottom line, at what point do we have too much

money? We have 7 percent of our money in cash reserve. I would

suspect that no other government in the country has that much

money in cash that is just sitting there. But in addition to the cash

reserve of 7 percent, it’s saying that any extra money you have, you

have to keep it in the bottom line in the fund balance, which is

growing at this alarming rate somewhat when we need to be able

to provide the service. It is just bad business sense, bad government, and bad for our constituents in the District of Columbia

when they may have needs for something, and the money is sitting

here, and we say, well, we’d like to do it, but we can’t carry this

excess money from 1 year to the other.

Mr. GANDHI. And just to give some numbers to what Ms. Cropp is saying here, we have as of now about $250 million in cash reserves. By 2007, we would have $420 million in cash reserves. So,

roughly 57 percent of our fund balance will be in cash, pure cash.

So the issue here is that to what extent——

Ms. NORTON. This has to be an unintended consequence.

Ms. CROPP. I think it’s an unintended consequence of the District

being at one point an agency of the Federal Government, but not

treating the District, and I think it was just an unintended consequence, and it is just bad business.

Mayor WILLIAMS. Well, the goal of having a cash reserve and

strong budget reserves, as you know, Congresswoman Norton, that

was a real push by Senator Hutchison when she was a Chair, and

we actually all agreed that we needed to take a strong prudent position. But the unintended consequence now is that we have set

this trajectory, and we really haven’t checked it. And now so as Nat

and I go around saying we are a reserve-happy jurisdiction, we

have a lot of reserves; we’ve got these cash reserves, accumulated

fund balance, we’ve got a budget reserve of $50 million that we

carry on top of this—which we haven’t even—I will give you an example. The recommendation to the council with the State bail-out

money that’s come from the tax bill, we are putting a lot of that

money into reserves to take a conservative course. But, you know,

while we may disagree on how conservative we may be, I think at

some point you’ve got to be able to put this money back into tax

incentives, put it back into critical services that your city needs

above a certain level.

Mr. GANDHI. And the conditions of using those reserves are so

onerous; that is, you have to put it back, replenish it the following

year.

Chairman TOM DAVIS. Well, let me ask. We’re just talking. Do

you know any other city that has that level of reserves? We always

54

had a balance reserve in Fairfax that we budgeted, and we kept

our triple A bond rate, but it wasn’t to this extent.

Mr. GANDHI. And we have done some surveys of that. I do not

know of any city with that kind of reserves in cash. Only one State,

Mississippi, has a 7.5 percent requirement. But, again, the replenishment conditions are never as onerous as we have it here. Basically what this means is that the cash is untouchable unless you

have a real emergency, like a FEMA-type energy.

Ms. NORTON. Well, for example, Mississippi is it that you don’t

have to replace the whole thing?

Mr. GANDHI. Not immediately, as we have to do it.

Ms. NORTON. And you have been unable to get any relaxation on

that?

Mr. GANDHI. Right. We have a very strict access requirement.

Ms. CROPP. One of the——

Chairman TOM DAVIS. We don’t want you to emulate Mississippi.

That’s not a Federal mandate here. I just want to say that.

Ms. CROPP. The council did introduce a bill, and the Mayor and

the CFO, we’ve been talking about a bill, that on our replacement

requirement—it is not part of this year’s budget, but we are looking

at it—that we look at a replacement that would make much better

sense, that instead of having to replace it the next year—if there

is a financial crisis that loomed ahead quickly, more than likely

you’re—the scene, the environment is not going to change in a very

short period of time. So we are looking at a longer period where

we have to replace it; maybe not immediately the next year, but

perhaps in a couple of years, 2 or 3 or 4 years, that we should be

able to replace it.

Ms. NORTON. I would request that you look at—often there are

model laws. I mean, I’m not even sure. Still it continues to accumulate apparently ad infinitim. There must be a point at which one

is held, based on the budget itself, to have a good and sufficient

accumulated reserve. There must be examples of model laws that

we could pattern on, and I’d very much like to work with the city.

I think the chairman would work with me on that with the Appropriations Committee.

Ms. CROPP. Ms. Norton, there is one other issue I think that is

important. We all know that a good bond rating is extremely important, and to the extent that our bond rating goes up, our debt

service goes down, and we can take money that we would just be

paying for borrowing money to provide services to our citizens, this

budget process that we have is really an impediment for our bond

rating getting improved. Every time we go to Wall Street, the one

thing that they cite that is detrimental to the city’s getting a higher bond rating, would you believe, is our process of our budget coming through Federal Government each year.

Mr. GANDHI. And again, to supplement Ms. Cropp’s point, over

the last 10 Federal budgets, only twice were they on time, enacted

1995 and 1997. Those were the years where we were on time.

The other fundamental point that we still want to keep in mind

here about our bond rating is that as long as the structural imbalance is there, to the tune of $500 million to $1 billion, as GAO

pointed out recently, we will have that fundamental issue hanging

over us from the bond agencies.

55

Ms. NORTON. We certainly don’t need to add to it through the

congressional appropriation process.

Would you explain, Dr. Gandhi, what’s happened to the District

bond rating? One of you indicated in your testimony that it had recently gone into positive. We thought it was positive before that.

So would you explain what has happened to the District’s bond rating in recent years?

Mr. GANDHI. Right. As Ms. Cropp and the Mayor pointed out,

that during our control period we were basically junk bonds. Since

then we had two upgrades. Now we are triple B plus, investment

grade—investment grade rating from the bond agencies, bonds rating agencies.

Again, what we want to remember, this is a time when hundreds

of municipalities, States and counties are put on a negative outlook, meaning possibly leading to a downgrade, and several have

been already downgraded. At that time the city, the District of Columbia, is put on a positive outlook, which may mean that next

time we go borrow, there be an upgrade to an ‘‘A’’ category. I think

it is a great tribute to our elected leaders that they are able to

manage the city’s finances in such a responsible fashion.

Ms. NORTON. You recommend kind of as a safeguard to move us

forward toward budget autonomy that you, Mr. Gandhi, Dr. Gandhi, would recommend that we adopt existing Federal appropriations law for local use. What do you mean by that, and how would

that be different from what you are already doing? How would that

add any safeguards?

Mr. GANDHI. I think we have already begun that process, Ms.

Norton. The council just passed and Mayor signed a local

antideficiency law, which supplements the Federal antideficiency

law and is far stricter. The Mayor has already issued an administrative order alerting all agency managers of their responsibility—

the senior manager as well as the middle-level manager, and the

chief financial officers of each of these agencies—that they would

be held personally liable in terms of their performance if the agency were to come up with deficits at the end of the year. So they

are monitoring on a quarterly basis, to make sure that this kind

of budgetary situation which results in deficits, does not occur. So

we have already begun that process of emulating the Federal appropriation process.

Ms. NORTON. It was Ms. Cropp’s—is it Ms. Cropp’s testimony—

yes—that you outlined council rule 443(c), which sounds very stringent to me, that there has to be a fiscal impact statement on every

bill that comes through the council, including what its effect will

be 5 years up the line. Is this council rule essentially taken from

what the control board did during the control period?

Ms. CROPP. No, it is not. I am pleased to say that this is the

council rule that the council placed on itself. When the council was

trying to get a handle of why we had so many problems in the District of Columbia, one of the things that came to mind was that legislation would be passed that was unfunded. So in order to make

sure that the council would not be a part of future problems, as in

the past, we passed a law ourselves on ourselves that said that any

piece of legislation that would move forward must be funded and

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must have a fiscal impact statement, that we couldn’t just pass a

law without coming up with the dollars to finance it.

Ms. NORTON. Were you able to do that without substantial delay

to go through that process with each and every bill? Because it’s

very extensive. Identification of revenues currently and would be

available up the line, you are able to do that quickly?

Ms. CROPP. We do that with each and every bill, and if something comes forward that is questionable, if my budget director or

if the CFO says there are problems, I have ruled it out of order and

taken it off where we could not vote on it. The council has policed

itself very strictly on that.

I will say that there is one issue. It still holds true that we don’t

pass unfunded bills, but we will add, in some instances, subject to

the availability or the appropriation of funds, so that a piece of legislation will not go into effect until the funding has been appropriated.

Ms. NORTON. So there are no unfunded mandates from the council?

Ms. CROPP. Not at all. I will rule them out of order. Sometimes

I will allow a discussion and a debate on them. We have one, for

example, that is before us right now where I have enabled a debate, but as we talked about it on the debate, I very clearly stated

that I will rule it out of order unless I saw the financing, and the

council has been very strict on policing itself on that.

Mr. GANDHI. If I may supplement, we just don’t look at 1 year.

It is a 5-year process, so——

Ms. NORTON. The next 4 fiscal years, it says.

Mr. GANDHI. Yes. So we have a long-term——

Ms. CROPP. And not only that, there is another very important

point to that we also look at, and the Mayor and the council have

been very strong on this issue. We have been looking at money as

to whether or not it is one-time money or whether or not it’s money

that will continue, and if it’s one-time money, we have been extremely strict in making sure that we do not build those costs into

the base. We would have to look for some type of program or product or something that will also be one time.

Ms. NORTON. This really may have gone a long way from saving

you from being a victim of the roaring economy of the late 1990’s

the way some jurisdictions have been. If they’ve done this, it may

have stopped them from going ahead with programs that they enacted without sufficient thought.

I have only one more question. And while we are on legislative

budget autonomy, I’d like you to discuss the kind of autonomy that

I think would be even easier for the Congress to grant, and that

is legislative autonomy. I’d like to know what difficulties are posed

for the city that you do not have legislative autonomy, and what

it means not to have legislative autonomy.

Ms. CROPP. Well, a city sometimes needs to act extremely quickly

in order to resolve a problem. If—without legislative autonomy, our

bills have to come up here, they have to have layovers, and sometimes we just can’t get the appropriate action taken immediately.

It does not enable us to meet the needs of our citizens and our constituents in a timely manner, and it’s extremely important that the

locally elected leadership with legislation that the Mayor may inVerDate 11-MAY-2000 09:21 Aug 25, 2003 Jkt 000000 PO 00000 Frm 00060 Fmt 6633 Sfmt 6633 D:\DOCS\88505.TXT HGOVREF1 PsN: HGOVREF1
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troduce and I then introduce it on his behalf, that we be able to

enact the laws that would be able to help us move this government

along.

Ms. NORTON. If I could just indicate, Mr. Chairman, you and I

have not, in fact, overturned D.C. law and even—before you became chairman, there were only three or four D.C. laws overturned. So this looks like a law that’s obsolete on its face, and to

the extent that the District—Congress thinks it needs some failsafe, I would like to work with the chairman on legislative autonomy in the same way that he and I have worked on budget autonomy.

Mayor WILLIAMS. Just to add to that, Congresswoman Norton,

periodically the aide comes to my office with a packet of bills to

sign, and I just say to myself, have we just enacted the Great Society or something, because you’ll have like 20 or 30 bills, 40 bills.

I’m saying, Lord have mercy, what is going on? Most of these bills

are basically we’ve got to pass an emergency, and we’ve got to pass

a temporary, and then we’ve got to pass a permanent. We just go

through this cycle over and over and over, an enormous amount of

paperwork, in order to meet this requirement.

Ms. CROPP. You would——

Mayor WILLIAMS. From alley closings all the way up to big

things.

Ms. CROPP. You would probably be surprised to just look at the

legislative agenda of the council and sometimes see the enormous

number of bills that have congressional review, and it’s just that

we’ve passed it once, we have to come back and pass it again, because the time period or whatever reason we did not have the appropriate congressional review, come back again, the same bill. We

pass it two or three times. It’s also difficult for—sometimes people

see some of the bills just keep coming, coming, coming, but it’s congressional review.

Ms. NORTON. Mr. Chairman, one of the ways to deal with this,

in this bill we do not have—in the bill you and I are considering,

the District’s budget would go into effect in 30 days. It does not say

30 legislative days. It is the 30-day legislative day problem, I think,

that is at the center of this issue.

Chairman TOM DAVIS. My counsel would be let’s get this bill

done; then we’ll talk about the next one. I don’t want to take my

eye off this. You want to move the ball down the field here, but I

want to get a win here. But I think your points are well taken.

Ms. NORTON. Thank you, Mr. Chairman.

Chairman TOM DAVIS. Thank you very much.

Judge Carter.

Mr. CARTER. Thank you, Mr. Chairman.

This is a new world to me, so I’m looking at this from the eyes

that I bring from Texas. You’ve heard about those eyes before. And

at first glance I think I need to start by commending you. I know

what it takes to get a bond rating up. It means that somebody has

been doing some good management. So you ought to be commended

for that because I used to be in the practice back when I was practicing law now almost 30 years ago of working with a lot of bond

counsel, and we worked hard to bring the bond ratings up on

projects that we were working on. I know how difficult that is and

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what that entails. So I want to first congratulate you on being able

to do that. I think that’s great.

And, Mayor, I want to tell you that if you figure out a way to

get government to get away from the use it or lose it mentality, I

hope that you will lecture governments around the United States

so that—because since the first day I got in government right out

of law school, almost 40 years ago now, I was shocked by the lose

it if you don’t use it mentality that we passed down to our departments, and our departments say you’ve got to spend it or you’re

going to lose it. It looks like to me sometime somebody ought to figure out how to save it.

So if you can get this worked out, God bless you. I hope you do,

and teach us how to do it, because every government I’ve ever been

involved with has had a problem with that, and I commend you for

at least setting that as a target to not only get out of that situation

as you deal with us, but hopefully as you deal with those under

you, you will also be able to figure out a way to get out of that situation, because I’ve found that appalling since I was a young dumb

lawyer straight out of law school.

And finally, anybody that can get themselves out of deficit spending is to be congratulated by the folks up here; so I want to congratulate you on that. From what I’ve been able to hear today, it

sounds like to me this is a bill that needs to be done, and it needs

to be done right away. It’s interesting—and as I told the chairman,

I’m not going to say a whole lot because I’m in the learning process

here, and I’ve learned a lot today. It’s interesting how your relationship with the Federal Government is peculiar to you and you

alone, and you have to work your way through it. I think your

management is well in good hands, and I think you’ve done a good

job. My only comment is to commend you.

I will support this bill, and I think it’s long overdue. We need to

get this going. I would hope, and I think you’ve got it in place, that

this type of management will be continued and will be encouraged

to continue, and you establish it, and it’s so well entrenched that

it will continue on as the political process and the waves of political

process change in the District so that we lock it in and continue

the good management process.

So those are the only comments I’d like to make as it looks like

to me you’re doing a good job, and somebody needs to say thank

you; so I’m doing it. Thanks.

Mayor WILLIAMS. Thank you, Congressman.

Chairman TOM DAVIS. Let me just thank all the Members.

Mr. Van Hollen just walked in. Do you have any questions, any

comments you’d like to make?

Mr. VAN HOLLEN. Yes. Thank you, Mr. Chairman.

First I want to welcome an old friend, the Mayor of Washington,

DC; and the chairman of the city council Ms. Cropp; and Dr. Gandhi. Congratulations to all of you on your work over the years, really, to put the District of Columbia on sound financial footing. I

think you all deserve a tremendous amount of credit, and I want

to thank Ms. Norton for her leadership over so many years on this.

And I’m really here just to say to Ms. Norton and Mr. Davis that

as the other Representative—as the Representative representing

the other neighboring area in the State of Maryland, neighbor of

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the District of Columbia, I wholeheartedly support this legislation

and look forward to working with you to see it through. So thank

you for your initiative.

Chairman TOM DAVIS. Thank you very much.

Let me just add one other item. We’re going to probably need to

use—how do you envision the CFO being structured and statured

as we go forward with this bill? Because as we move out of—the

CFO, in noncontrol board years we need to look at reauthorizing

that, and I just want to know how you envision this. Any thoughts?

Ms. CROPP. Yes. Mr. Chairman, actually we have a bill that I believe is before you. It’s up here in Congress, and our intent is for

us to have an independent CFO. And we did the bill I believe it

was a couple of years ago, so we are ready to move on having a

strong CFO, having an independent CFO is what we want, and we

would ask that as you pass this piece of legislation, that you also

pass the independent CFO piece of legislation that the council

passed and that the Mayor signed and is up here waiting.

Mayor WILLIAMS. I would agree. I ultimately think that offices

like the CFO ought to be independent in the charter. They’re that

important to the city and provisions in local law, honored year by

year, as Congressman Carter was saying, beyond us, conservative

estimate of expenditures and revenues as well, it’s absolutely important.

Ms. NORTON. Mr. Chairman, we’ve also been talking with the

Senate about this. To the city’s credit they have enacted a stronger

CFO law than the Congress enacted in the control board statute,

a term, for example, for the CFO which we did not have before, and

we are only waiting for the appropriate vehicle. We had thought

this bill might be a good vehicle.

Chairman TOM DAVIS. We’ll discuss that.

Thank you all for testifying.

I’ve just got one other thing to say. Today is a very, very important day, of course, because it’s Ms. Norton’s birthday, and I just

wanted to, on behalf of all of us here, wish you a happy birthday,

Ms. Norton.

And we thank our witnesses, and the hearing is closed.

[Whereupon, at 11:24 a.m., the committee was adjourned.]

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