[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]
WHITE HOUSE PROPOSAL FOR THE DISTRICT OF COLUMBIA
=======================================================================
HEARING
before the
SUBCOMMITTEE ON THE
DISTRICT OF COLUMBIA
of the
COMMITTEE ON
GOVERNMENT REFORM
AND OVERSIGHT
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
FIRST SESSION
__________
FEBRUARY 20, 1997
__________
Serial No. 105-4
__________
Printed for the use of the Committee on Government Reform and Oversight
39-564 U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1997
____________________________________________________________________________
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COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
J. DENNIS HASTERT, Illinois TOM LANTOS, California
CONSTANCE A. MORELLA, Maryland ROBERT E. WISE, Jr., West Virginia
CHRISTOPHER SHAYS, Connecticut MAJOR R. OWENS, New York
STEVEN H. SCHIFF, New Mexico EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California PAUL E. KANJORSKI, Pennsylvania
ILEANA ROS-LEHTINEN, Florida GARY A. CONDIT, California
JOHN M. McHUGH, New York CAROLYN B. MALONEY, New York
STEPHEN HORN, California THOMAS M. BARRETT, Wisconsin
JOHN L. MICA, Florida ELEANOR HOLMES NORTON, Washington,
THOMAS M. DAVIS, Virginia DC
DAVID M. McINTOSH, Indiana CHAKA FATTAH, Pennsylvania
MARK E. SOUDER, Indiana TIM HOLDEN, Pennsylvania
JOE SCARBOROUGH, Florida ELIJAH E. CUMMINGS, Maryland
JOHN SHADEGG, Arizona DENNIS KUCINICH, Ohio
STEVEN C. LaTOURETTE, Ohio ROD R. BLAGOJEVICH, Illinois
MARSHALL ``MARK'' SANFORD, South DANNY K. DAVIS, Illinois
Carolina JOHN F. TIERNEY, Massachusetts
JOHN E. SUNUNU, New Hampshire JIM TURNER, Texas
PETE SESSIONS, Texas THOMAS H. ALLEN, Maine
MIKE PAPPAS, New Jersey ------
VINCE SNOWBARGER, Kansas BERNARD SANDERS, Vermont
BOB BARR, Georgia (Independent)
------ ------
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
Judith McCoy, Chief Clerk
Phil Schiliro, Minority Staff Director
------
Subcommittee on the District of Columbia
THOMAS M. DAVIS, Virginia, Chairman
CONSTANCE A. MORELLA, Maryland ELEANOR HOLMES NORTON, Washington,
ILEANA ROS-LEHTINEN, Florida DC
STEPHEN HORN, California THOMAS H. ALLEN, Maine
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
Ron Hamm, Staff Director
Roland Gunn, Professional Staff Member
Ellen Brown, Clerk
Cedric Hendricks, Minority Professional Staff
C O N T E N T S
----------
Page
Hearing held on February 20, 1997................................ 1
Statement of:
DeSeve, G. Edward, Controller, Office of Management and
Budget..................................................... 24
Raines, Frank, Director, Office of Management and Budget..... 7
Letters, statements, etc., submitted for the record by:
Raines, Frank, Director, Office of Management and Budget,
prepared statement of...................................... 11
WHITE HOUSE PROPOSAL FOR THE DISTRICT OF COLUMBIA
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THURSDAY, FEBRUARY 20, 1997
House of Representatives,
Subcommittee on the District of Columbia,
Committee on Government Reform and Oversight,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:35 a.m., in
room 2154, Rayburn House Office Building, Hon. Tom Davis
(chairman of the subcommittee) presiding.
Present: Representatives Davis, Morella, and Norton.
Also present: Representative Wynn.
Staff present: Ron Hamm, staff director; Howard Denis,
counsel; Roland Gunn, professional staff member; Ellen Brown,
clerk; Cedric Hendricks, minority professional staff; and Jean
G. Gosa, minority administrative staff.
Mr. Davis. Good morning and welcome to the first hearing of
the 105th Congress of the District of Columbia Subcommittee. I
would like to welcome back our ranking minority member, Eleanor
Holmes Norton, the Delegate from the District of Columbia, as
well as our new vice chairperson, Connie Morella of Maryland.
Because of scheduling factors, this hearing is taking place
during the President's Day recess. Therefore, the other members
of the subcommittee are unable to join us today. However, I can
assure everyone that Representative Steve Horn, who has had
several generations from his family born in Washington, DC;
Ileana Ros-Lehtinen; and Tom Allen are all highly committed to
the goal of making Washington, DC, the world's finest Capital
City.
Two years ago, the Congress and the Clinton administration,
acting together in a bipartisan effort, created the Financial
Responsibility and Management Assistance Authority, more
commonly referred to as the D.C. Financial Control Board. This
board was created in direct response to the overwhelming
financial difficulties that engulfed the District of Columbia.
It was the first major step in a long road to recovery.
During these past 2 years, the Control Board has
accomplished many important things. Among these are canceling
wasteful government contracts; stepping in to help the
beleaguered school system; moving to reform the police
department; and, most importantly, putting the city on a path
toward a balanced budget.
In addition to that, Congress has also acted to enable the
construction of the new MCI Arena, a new state-of-the-art
convention center, and created a new water and sewer authority,
thereby safeguarding the metropolitan region's drinking supply
and protecting taxpayers.
Everyone agrees that there is still a lot to be done. To
paraphrase Winston Churchill, we are only at the end of the
beginning. I believe we all must work to the best of our
ability this year to make Washington, DC, a shining example of
the best America has to offer. Many of you have heard me say
this before; this goal is not only in the best interest of the
District but also of the region and, indeed, the entire
country.
I strongly believe that the economic health and quality of
government in the District is of vital concern to the suburbs.
In fact, Dr. Stephen Fuller of George Mason University, the
leading regional economics expert, has just completed a new
study that confirms the view that the District is vital and
beneficial to the suburbs. Improving the economy and
governmental performance of the District of Columbia is crucial
to the continuing prosperity of the entire metropolitan region.
Ladies and gentlemen, we are at a crossroads. In fact, we
have reached a unique set of circumstances. Rarely do we face a
situation where all the major political winds are aligned in
one direction. The Clinton administration and the leadership of
both Houses of Congress, Republicans and Democrats, all
consider the situation in the District of Columbia one of our
top five national priorities. We must take advantage of this
positive environment.
Mr. Raines, I think you deserve a lot of credit for the
initiative that you have shown as the head of OMB. Our agenda
is ambitious. It builds on our work and on the work of the
Control Board that we created with the Clinton administration 2
years ago. I am encouraged that the President has put forth a
broad-based proposal to realign the relationship between the
District of Columbia and the Federal Government. The proposal
seeks to enhance the prospects of home rule by more closely
matching the District's resources and capabilities with its
responsibilities.
In other areas, however, the plan may not fully address the
concerns of others, most notably tax relief and economic
development for the city. I believe we should use the
President's plan as our starting point. Therefore, it is my
intent to work with this administration, the leadership in
Congress, city officials, and the Control Board to fashion a
bipartisan plan that will gain wide support.
I am under no illusions. This will take months of hard
work, patience, delicate negotiations, and many more committee
hearings. In fact, I intend to follow today's hearing with
testimony from the city and the Control Board and then from
interested parties from the District and the region.
After these hearings on this proposal, its key components,
significant alternatives, and any other issues, we will work to
design the best and most effective plan for the rebirth of our
Nation's Capitol. Our challenge is great, but we have no other
choice. If we fail to act now, Washington, DC, may never
recover. In short, it is our duty, our mission, and our
responsibility to give our collective best efforts for this
city.
In conclusion, I am pleased to have as our sole witness
today Franklin Raines, Director of the Office of Management and
Budget and the chief architect of the President's proposal for
the District. I look forward to hearing Mr. Raines' testimony
today and working with him and the President in the months
ahead.
At this point, I yield to my ranking member and ask if she
would like to make an opening statement.
Ms. Norton. Thank you very much, Mr. Chairman.
I want to welcome OMB Director Franklin Raines to the first
of several hearings on the National Capital Revitalization and
Self-Government Improvement Plan, as it is called, for the
District of Columbia. I also want to thank Chairman Tom Davis
for skillfully laying out a series of hearings designed to
explore the full details of the President's plan and the
implications for the District. The President of the United
States deserves the gratitude not only of District residents
but of other Americans as well for bringing forward a workable
and well-conceived plan that will help revive the Capital of
the United States.
Much of that gratitude belongs to Frank Raines, a
Washingtonian whose understanding of the District's finances
and operations is matched by the exceptional skill he is
bringing to national and Federal financial and economic issues.
Already his deft hand has been a major factor in steering us
toward a bipartisan solution to the budget deficit and to other
serious fiscal problems of the country. All the while he has
been designing a plan to help eliminate the most vexing
problems of the Nation's Capital. The plan's major strengths
are, first, its careful and principled conceptualization, based
on the Federal interest in certain State functions and in
eliminating congressionally created pension liability, and,
second, its recognition that the plan must address two
audiences at once: District residents, and a Congress whose
major focus this year is deficit reduction.
The President's plan is not perfect, but it surpasses the
expectations of most D.C. residents and analysts. It is the
best document from which to work because it is the only plan
for assistance to the D.C. government that stands any chance of
being seriously considered or enacted by this Congress this
year.
If the President had not offered a plan, I had intended to
offer a bill that created a quasi-State relationship between
the District and the Federal Government for financial purposes.
However, at every turn I encountered the same barrier that has
made most thinking about the District conventional and
unimaginative. That barrier is money.
Any plan, whatever its merits--if I may paraphrase--that
asks for $1 billion here and $1 billion there will soon end up
sounding like real money of the kind that Congress has
systematically denied to the District. This plan takes at least
some of the District's State functions and, by placing them in
larger appropriations, demonstrates how small a difference the
District's portion really makes.
For example, analysts tell us that the District may be only
$25 million to $50 million ahead next year if the plan becomes
law. The most controversial aspects of the plan need to be
approached with a problem-solving attitude. Among the most
troublesome are the elimination of the Federal payment, which,
ironically, has both positive and negative consequences, and
the application of Federal criminal law to the District as the
price for absorbing Lorton inmates into the Federal system.
We have already made progress on both. For example, we can
now say that D.C. criminal law, not Federal criminal law, will
continue to apply in the District. There remain outstanding
issues here and in a number of other areas on the proposal. The
way to solve them is by methodically working them through.
The plan also must be subjected to further financial
analysis before I can fully embrace it. Will the District
consistently come out ahead, especially when compared with the
Federal payment, which has lost much of its value and is almost
never increased? Structural changes such as the President's
proposal should not be expected to endure more than a
generation unrevised. I am seeking an analysis of the plan on a
20-year time line to test its fiscal effectiveness and to
ensure that the District will not be left with unintended cash
shortfalls and other financial difficulties.
The administration has several working groups perfecting
the concept and the necessary legislation. I hope that they
will form a close relationship with the subcommittee. The
progress we have made on the criminal law matters is an
indication that even unacceptable parts of the plan can be
resolved. For example, I have met with Attorney General Janet
Reno, Chief Judge Eugene Hamilton, U.S. Attorney Eric Holder,
and Department of Corrections Director Margaret Moore. Mr.
Holder is continuing to work with Justice Department and Bureau
of Prison officials to resolve the remaining criminal law
issues, among them parole and determinant sentencing. I have
also met with Federal Highway Administration officials and
believe we are making headway in helping to shape the component
of the plan that would create a badly needed National Capital
infrastructure fund.
Chairman Davis has wisely found a way to keep the
President's plan from becoming an uncontrollable octopus,
spread across many committees, risking its necessary and useful
coherence.
The plan holds together like a well-wrought puzzle. This
subcommittee must help keep it together or it cannot do the
job. The first test for the Congress will be to facilitate
prompt and rapid participation of other specialized committees
without losing the plan's central purpose and functional
utility.
Chairman Davis is the impresario, but this is not the first
time he has been called upon to help lead such a complicated
task. The model for our work on the President's plan is the
financial authority legislation, where we worked in a
bipartisan and bicameral way to quickly put in place a control
board. The urgency of this plan now is just as great as the
financial authority statute was then.
I especially appreciate the interest of the members of this
subcommittee and of the region in this plan. Regional members
may want to take note of the experience of the Detroit region
as reported in yesterday's Washington Post. The article
recounted the recent and significant progress the city of
Detroit has made. Mayor Dennis Archer reported that the
estrangement between the suburbs and the city had become so
severe that there were often discussions among friends about
the last time they had been in Detroit. According to the
article, ``That began to change as Detroit area firms, even
those in the suburbs, realized the city's dismal image was
hurting their ability to attract employees from elsewhere.
Suburban parents began seeing their grown children leave for
jobs in other cities, and that became a pivotal issue for a lot
of people. You can try to separate yourself with a different
name, but Southeast Michigan, to most people in the world, is
Detroit. So how people view Detroit will have an impact on
economic development and investment elsewhere in the region.''
The President's plan is designed to help the District and
to help the region before the District gets to the point of no
return. As the Detroit suburbs have learned, the region can
neither run nor hide from its core city. The District is
prepared to pay a great price for the President's plan. The
plan offers the District scant immediate relief yet requires
the District to balance its budget a year earlier than the
financial authority law requires.
The city is already braced for more cuts in services on top
of draconian cuts that have already taken place and have helped
hasten the exit of middle-income taxpayers from the city at
frightening rates. The word ``suffering'' is not too strong to
indicate the effect of these cuts on residents. Yet the
District continues the painful work of rebuilding its
government first by cutting it, the President's plan is before
us, and only the Congress is missing.
Congress has left the city to revive alone, without the
undergirding support that New York State gave to New York City,
that Ohio gave to Cleveland, and that Pennsylvania gave to
Philadelphia when each of those cities became insolvent. It is
time for Congress, the last to step up to the plate, to now
come forward.
I welcome Mr. Raines, whose thoughtful work is designed to
help this body meet its constitutional obligations to the
Capital of the United States.
Mr. Davis. Thank you, Ms. Norton.
I yield now to the vice chairman of the committee and one
of our new members, Mrs. Morella of Maryland.
Mrs. Morella. Thank you very much, Mr. Chairman.
Although I have participated on this panel on several
occasions during the 104th Congress, this is my first hearing
as an official member of the District of Columbia Subcommittee,
and I am delighted to serve under your leadership and with the
ranking member.
As a representative from Montgomery County, MD, I am deeply
concerned about the future of the District of Columbia. The
District does not exist in a vacuum. The economic health of the
District is important to the economic health of Montgomery
County, of the whole Washington metropolitan region.
When I first came to Congress in the 1980's, the District
government was already showing signs of the deficiencies that
marked the beginning of a spiraling economic crisis. Services
in the District were deteriorating, businesses were relocating,
and middle-class residents were moving to the suburbs in search
of lower taxes, safer streets, better schools.
From 1990 to 1995, the District lost more than 22,000
households, most of them middle-class taxpayers. There has been
a lack of employment growth and a decline in retail sales and
the formation of small businesses.
For the past few years there has been a good deal of debate
here on Capitol Hill about how to resolve the District's
financial crisis. During the last Congress, under your
distinguished leadership, Mr. Chairman, on a bipartisan basis,
we established the District of Columbia Financial
Responsibility and Management Assistance Authority, commonly
called the Control Board, which represents a temporary
restructuring of the D.C. government and provides oversight and
support to improve the District's financial situation.
The President's plan would further restructure the District
government by allowing the Federal Government to fund the
District government, much in the same way as State governments
support their cities. The White House proposal would eliminate
the $660 million Federal payment to the District.
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.
If the Federal Government assumes some of the District's
administrative responsibilities, perhaps there will be more
time for the District of Columbia officials to concentrate on
the schools and services that have deteriorated to an alarming
degree.
It is the poor and vulnerable citizens of the District who
have suffered the most from the insufficient services that have
resulted from insufficient funds. The economic turmoil in the
District must be reversed, and that is what this first meeting
in the whole series is all about.
The downward spiral of deteriorating services and middle
class flight did not happen overnight. There is no quick and
easy solution. Consideration of the White House proposal is, as
you said, just a beginning. There will be many hours of debate.
Hopefully we will choose compromise over confrontation. If we
work hard, in the end we will take a large step toward creating
a new and revitalized District of Columbia.
I look forward to hearing more about the President's plan
from our expert witness, the craftsman of the plan, Frank
Raines, and look forward to working with members of this
subcommittee and the OMB Director on a plan that will benefit
the region and make the District a safe and thriving Capital
City that is the source of pride for the entire Nation.
Thank you, Mr. Chairman.
Mr. Davis. Thank you, Mrs. Morella.
Before I swear in our witness and we hear from the man of
the hour, Mr. Raines, I want to recognize a couple of members
of the city council here today: Charlene Drew Jarvis, chairman
pro tem of the city council. Charlene, thank you very much for
being here. You will have a chance to testify at a later
hearing, and we look forward to your comments on this and your
being an important part of this. And also Carol Schwartz, an
important and returning member of the city council. And Harold
Brazil just walked in, too. Harold, perfect timing. You are
here just in time to be introduced. He is also council member
at large from the city. We appreciate your being here as well.
Frank, at this point it is the committee's custom to swear
in its witnesses.
[Witness sworn.]
Mr. Davis. Thank you very much for being here and making
your time available. I just preface that you have been making
the rounds on Capitol Hill, speaking with key members of both
parties prior to this, and we are just very pleased to have you
here today.
STATEMENT OF FRANK RAINES, DIRECTOR, OFFICE OF MANAGEMENT AND
BUDGET
Mr. Raines. Thank you very much, Mr. Chairman. I thank the
members of the committee for having me appear before you today.
I am pleased to be here to discuss with you the President's
plan to revitalize Washington, DC, as the Nation's Capital, and
to improve the prospects for home rule to succeed. After I
conclude my remarks, I would be happy to take any questions
that the committee might have.
The Nation's Capital, which should serve as a symbol of
pride to all Americans, has fallen on hard times. It faces not
only serious budget problems, but even serious obstacles to
providing the most basic services to its residents.
As the President said recently, the District of Columbia
suffers from the ``not quite'' syndrome. That is, it is ``not
quite a State, not quite a city, not quite independent, not
quite dependent.''
The District is not like other cities, which receive
assistance from their States. In fact, the District has broad
responsibilities for what are--elsewhere in the Nation--State,
county, and local functions. And while Congress has voted to
give the city a lump sum annual payment in recent years, it has
kept the payment basically flat while imposing strict limits on
the District's budget and taxing powers.
Clearly, the current relationship between the Federal and
city governments does not work. As a result, the President has
proposed a landmark plan to significantly re-order that
relationship.
In developing his plan, the President had two goals in
mind--first, to revitalize Washington, DC, as the Nation's
Capital and, second, to improve the prospects for home rule to
succeed.
Under the plan, the Federal Government will invest nearly
$4 billion over the next 5 years in the Nation's Capital. In
exchange, the plan will end the yearly Federal appropriation
and other payments to the District, saving over $3.5 billion
over 5 years.
While net Federal costs come to nearly $400 million over 5
years, the plan will save the District over $800 million over
the same period. The difference results, in part, because the
Federal Government will assume responsibility for certain
pension payments and assets of the current pension system.
Congress will continue to perform oversight for the
District, and the Appropriations Committee will determine the
budgets for those functions that the Federal Government funds
directly. But Congress would no longer appropriate every detail
of the District's budget, which will, in the future, be funded
solely with local funds.
All Federal assistance will be conditioned on the District
taking specific steps to improve its budget and management. The
plan will require the District to submit a balanced budget for
1998 and thereafter. A Memorandum of Understanding among the
Federal and District governments and the Financial Authority
will outline other improvements in performance that the
District will have to meet.
To achieve these goals, the President's plan proposes four
concrete steps.
First, the plan will relieve the District government of
major financial and managerial responsibilities--including
certain pension obligations and parts of the criminal justice
system--that are beyond its financial capacity, and help the
city resolve its cash shortfall that stems from its accumulated
deficit.
Beginning in fiscal 1998, the Federal Government will
assume both financial and administrative responsibility for the
District's retirement programs for law enforcement officers and
firefighters, teachers, and judges. Upon enactment of
legislation providing for the transfer, the Federal Government
will take responsibility for virtually all pension benefits
accrued under the plans for all active and retired employees as
of the date of transfer, contingent on the District
establishing replacement plans as specified in the MOU. The
Federal Government will pledge its full faith and credit to
meet its responsibilities to these beneficiaries. This action
will be conditioned on the District setting up new plans for
its current and future employees and providing adequate
employment records to a third-party trustee.
The Federal Government also will take direct responsibility
for funding the District Court system. The courts will remain
self-managed, because the current court system is well run.
But, court funding is a drain on the District's budget.
Therefore, the Federal Government will take responsibility for
it. The costs will total $129 million in the first year and
$685 million over 5 years.
Also the Federal Government will assume financial and
administrative responsibility for the District's felony
offenders, including substantial capital investment in
providing appropriate prison facilities. The Federal Government
will take responsibility for incarcerating the District's
sentenced felons, a function usually borne by States. During
the transition, the Federal Government will provide funds for
incarcerating the District's felons to a trustee appointed by
the Financial Authority. Funding will include capital for both
constructing new facilities and renovating existing ones. The
Bureau of Prisons will be responsible for determining how these
capital funds will be used. The trustee will oversee the D.C.
Department of Corrections operations related to the
incarcerated D.C. felons for 3 to 5 years, after which the
Bureau of Prisons will assume responsibility. The plan assumes
that a portion of the existing Lorton complex will continue to
serve as a prison facility. Necessary new construction will
take place at Lorton, at other locations, or both.
At the end of the transition period, the Federal Government
will accept all existing prisoners, as well as those new
prisoners sentenced in accordance with standards comparable to
Federal sentencing guidelines. To manage the inmate population,
the Bureau of Prisons will be able to transfer D.C. inmates
elsewhere in the Federal Prison System. The current D.C.
prisons staff will have to apply for positions with the Bureau
of Prisons and meet Federal standards. After the transition
period, the Federal Government will assume responsibility for
D.C.'s parole system and a portion of the community corrections
system.
In another matter, the Federal Government will increase its
share of the District's Medicaid payments from 50 to 70
percent. In essence, the Federal Government will pay both the
Federal and State share of Medicaid costs, reducing the
District's share to 30 percent--which is the most that
localities can pay in States with a 50 percent Federal match.
At the same time, the Department of Health and Human Services
will provide more intensive technical assistance to help the
District improve the management of its Medicaid program and
ensure that Federal funds are not mismanaged. The increased
Medicaid funding will be conditioned on the District following
various HHS suggestions for programmatic improvements.
Finally, the Federal Government will allow the District to
borrow from the Treasury to finance all or part of the
District's accumulated deficit of between $400 and $500
million. The terms and conditions for such loans are not yet
determined, but will likely enable the Federal Government to
offer Treasury-based interest rates for a maximum term of 15
years and enable the District to refinance the loan after the
District's credit picture improves.
Second, the Federal Government will invest considerable
resources to improve the city's capital infrastructure.
The Federal Government will establish a National Capital
Infrastructure Authority (NCIA) to benefit District residents
and commuters by funding the capital associated with repairing
and constructing roads and mass transit facilities. To
capitalize the fund in 1998, the administration will provide
$125 million in seed money from the Federal Highway Trust Fund.
Activities eligible for funds will include the construction of
roads and bridges, the local match for Federal-aid road and
bridge projects, and capital expenditures for the Washington
Metropolitan Area Transit Authority. In addition, the NCIA will
be able to accept contributions from other sources, such as
voluntary payments in lieu of taxes from tax-exempt
organizations, including universities and hospitals.
Third, the plan proposes a number of mechanisms to
strengthen the District's economic base.
The plan will create an Economic Development Corporation
(EDC) to revitalize the city's economy, with local planning and
control that leverages Federal and private resources. The EDC
will be capitalized with Federal funds. The program will be
designed to encourage jobs for disadvantaged D.C. residents and
revitalize District areas where development has been
inadequate. The plan includes a 5-year, $260 million tax
incentive program, with a series of targeted incentives to
build on the administration's Empower-ment Zone and Enterprise
Community programs.
Fourth, the plan will draw on Federal technical expertise
to help make the city government more effective in such areas
as income tax collection, education and training, housing,
transportation, and health care delivery.
For instance, the Internal Revenue Service will be able to
collect District income and payroll taxes. The plan will
simplify District residents' tax filing, allowing one form for
both District and Federal taxes, as well as improve enforcement
and collections. Other Federal agencies will work with the
District to identify other areas in which the Federal
Government might provide technical assistance to help the
District government improve the efficiency with which it
delivers services.
The President's plan is the most ambitious plan that any
administration has ever proposed to deal with the problems of
the Nation's Capital. It will benefit the city, the region, and
the Nation.
It benefits District residents by reducing their
government's financial burdens, improving the delivery of city
services, and investing in the criminal justice system,
economic development, and transportation.
It benefits the region because of the city's economic
recovery; the financial support given to police, fire,
teachers, and judges' pension funds; the rebuilding of the
District prison system; and the improvement of a key component
of the regional transportation infrastructure.
It benefits the Nation, because it begins to create a
Capital City that we can all be proud of, improves its
transportation system, and helps ensure the safety of residents
and visitors.
Mr. Chairman, that concludes my testimony. I would be happy
to answer any questions that the committee might have.
[The prepared statement of Mr. Raines follows:]
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Mr. Davis. Mr. Raines, thank you very much. I think it
shows the thoughtful preparation that has gone into that. We
will have a number of questions for you.
I am going to start the questioning with Mrs. Morella, who
I know has to leave a little early to go represent the Congress
reading George Washington's farewell address, as I understand
it. Connie, I will start with you.
Mrs. Morella. Thank you very much, Mr. Chairman. I
appreciate your giving me the opportunity to pose a few
questions, since, as you mentioned, I will be in the Capital
City laying the wreathe and giving the speech from Congress for
George Washington's commemoration.
Thanks, Mr. Raines, for the wonderful testimony that you
gave. There is something I feel was rather omitted in the plan
that you did not mention, either. Some questions have been
asked about where does St. Elizabeth's fit into this picture.
Do you see that as being something that the Federal Government
has a responsibility to operate, and maintain?
Mr. Raines. We do not see that as being an appropriate
activity for the Federal Government, primarily because we do
not have a lot of experience in running mental health
facilities of that size and complexity, and would find it
difficult to take over the operation of one such facility and
create a whole capacity to do that.
That is the distinction between--with the prisons and St.
Elizabeth's. With the prisons, we run a prison system. We have
experienced professionals who know how to do that. Therefore,
we view prisons as something that could be included in the
Federal operations. But St. Elizabeth's really would be in a
different category.
Mrs. Morella. But you do recognize there is a problem posed
by the fiscal situation at St. Elizabeth's?
Mr. Raines. Absolutely. Our plan we view as being one that
gives the city more flexibility and more resources for the city
to be able to deal directly with those areas that we are not
taking over.
Mrs. Morella. In your testimony, you note that the
District's accumulated deficit is between $400 million and $500
million, right?
Mr. Raines. Yes.
Mrs. Morella. Would you like to comment or explain the
impact of the District and its cash position from carrying this
kind of deficit?
Mr. Raines. As a result of the deficits run up by the city
over the last 5 or so years, the city has developed an
accumulated deficit. What that has meant is that the city has
not been able to pay its bills in a timely way, and it has had
to indirectly borrow from vendors by delaying payment of their
bills. It means that the city has periods of time in which it
is in a negative cash position, and therefore needs access to
borrowing.
Over the last year, the Treasury Department has been
providing funds to assist the city in meeting its cash-flow
needs. But as we go forward, there will be a need for a
permanent solution so that the city's cash position is
restored. That is why we are proposing to help the city by
financing that deficit over a period of years, so that the city
can recreate its cash balance and pay off that accumulated
deficit over a period of time.
Mrs. Morella. I wondered if you might explain why the
initial Treasury provision to finance this debt in 1995 was
dropped from the Control Board legislation?
Mr. Raines. I am unaware of the background on that, so I am
not sure what happened in that case.
Mrs. Morella. It would be interesting to look into that. In
your experience with cities in trouble, why is it important to
finance the accumulated debt, for the reasons that you gave,
and----
Mr. Raines. The primary need is for the city to be on a
sound financial basis, where it is making its payments in a
timely manner, so that it can attract the kind of vendors that
the city would like to be able to have perform its services.
The District, for example, had difficulty lining up
contractors to serve as part of the force dealing with
potential snowstorms because of a failure in the past to pay on
a timely basis. The city would be paying extra if vendors did
not believe they could be paid on a timely basis, so it is
important in that respect.
It is also important from a financial standpoint with
regard to the city's bond ratings. Failure to be able to
finance current operations with existing cash would be a major
negative in the review of the city's credit standing.
Mrs. Morella. If the Federal payment is done away with,
what will the Treasury use for collateral, and what is the
potential impact of that on outstanding bonds and/or new debt?
Mr. Raines. The Treasury is in the middle of working on
that very issue with the city and the Control Board at this
point. They have not come to a conclusion yet as to what form
of collateral they would be seeking, but we would be careful to
ensure that these loans would not impair the security on the
city's outstanding debt or future debt that the city issued for
capital purposes.
Mrs. Morella. I would like to also ask you, jumping to
another topic, about whether or not this plan envisions the use
of so-called empowerment zones or enterprise zones or whatever
the current language is that is used for that in the District
of Columbia.
Mr. Raines. The city already qualifies as an enterprise
community, and has received certain benefits from that. But our
plan goes further and proposes the creation of an Economic
Development Corporation that has authority to operate in the
downtown areas as well as in the low-income communities of the
city, that will have additional powers that are similar to but
different in some respects from what is included in the other
programs that we believe can begin to provide the kinds of
incentives necessary for increasing economic development in the
city.
Mrs. Morella. Can you see that there could be an increase
in the Federal payment to the District, or there could be some
amount in addition to this plan, or do you think that this
totally handles it; in other words, total elimination of----
Mr. Davis. Would the gentlewoman yield?
Mrs. Morella. Yes.
Mr. Davis. Mr. Raines, I would also ask as part of that
question, would the administration remain flexible if Congress,
in looking at this, felt that the city still needed some cash
to operate? Is this an area we are willing to look at together
and move forward, or is it fixed? As Ms. Norton had said
earlier, there are pluses and minuses to having this plan for
the city. One is you get the annual appropriations process, and
the baggage that comes with it. On the other hand, you are
having that cash involved, and this is something that I know
the Control Board has expressed some concern about. I just want
to understand, I think as Mrs. Morella does, the flexibility we
have in dealing with this.
Mr. Raines. Sure. We put this plan together with the idea
that the city had to come out ahead in any plan such as this,
and that there had to be a net benefit to the city in the first
year and an increasing benefit in future years. We believe that
the plan meets that test, and therefore the city is better off
under the plan than they are with the Federal payment alone.
We also believe there are important benefits to the city in
having the city have final authority over its own budget, and
final responsibility for that budget. We thought that was an
important improvement in home rule, but also one that would
increase management responsibility. But we understand that the
committee may have additional ideas that it would like to put
forward, and we would be happy to talk to the committee about
those in your deliberations.
Mrs. Morella. I think the concept of the subcommittee is
the fact that this is a beginning, and it is worth looking
into, and we may come up with a package, I hope that we do,
that is going to encompass all of the concerns we have.
Thank you very much, Mr. Chairman. I would like to also be
able to submit questions for Mr. Raines.
Mr. Davis. Without objection.
Mr. Raines. I would be happy to answer them.
Mr. Davis. Let me just ask, I don't think there is any
question that the city is better off under the plan the
administration has submitted than under the current situation.
If we can add value to that, as we hope to do as it moves
forward, I think you will join us in looking at ways we can do
that. But when you add it up, one of the difficulties is the
cash situation may not be improved on day one when you lose
that payment. I think that is part of the concern. But that is
why we are going to have this dialog and continue to work
together and hear from everybody, because I think we all want
the same result at the end of the day.
This is just a great improvement. I think it has been given
a lot of thought.
I yield to my ranking member, Ms. Norton.
Ms. Norton. Thank you, Mr. Chairman. To follow on the
Federal payment concern, perhaps you can be as candid with us
as you have been, why had you incorporated in your plan the
necessity to forego the Federal payment in the first place? Why
has it become a necessary element of your plan?
Mr. Raines. There are several reasons. I think the most
important one is that, as we looked forward over the next 5
years, it appeared to us that the likelihood of the Federal
payment meeting the various purposes for which it has been
created were small and maybe decreasing. The pressures on the
budget would be very heavy, and it would be difficult to see
increases in the Federal payment. If we looked back at the last
5 years, we could see that the payment has been basically
static during that period, so that when we came to the
conclusion that the Federal payment was unlikely to be, in
reality, a significant part of a new plan, because of those
fiscal realities, we began to look to alternatives, and the
alternatives we looked to were for the Federal Government to
relieve the District of financial responsibilities that were
burdening it, and that inherently involved increasing expenses
for the city over time, so if we could not index the Federal
payment, we could take over responsibilities which were
inherently indexed because their costs were rising over time.
So we think that we have managed to move from a situation
of a static Federal role with regard to the city to one that is
dynamic, and one that we have included in the President's
balanced budget plan within the agencies that would be taking
over these responsibilities. So that was our thinking in how we
looked at the Federal payment and how we structured the plan,
and as I mentioned before, the home rule aspects of not having
the entire District budget appropriated by Congress we believe
to be attractive as well. We do not believe that you get the
best out of decisionmakers if they do not believe their
decisions are final, and therefore, we think there is a real
benefit in having the city be responsible for its own
resources.
There is a major benefit in not having the Federal payment
in that all the city's resources would then be local, and the
local officials would be responsible for those resources, and
would not harbor in the back of their minds that somehow the
Congress would relieve them of the need to make tough choices.
Mr. Davis. Ms. Norton, will you yield?
Ms. Norton. Yes.
Mr. Davis. You make a good statement. We will ask if the
city council agrees with this when they come here. But it seems
to me one of the problems is that the decisions the Mayor and
council make sometimes are not final decisions, and that allows
you sometimes not to be quite as responsible in what you are
doing because you are not firing real bullets, so to speak,
because somebody else will make tougher decisions, and that is
part of the difficulty when we build a strong civil service in
government.
There has been no tradition in making final decisions and
being accountable for the final result, because Congress has
always been there, to overturn inadequate policies. To me that
ought not be. That is for somebody in local government.
I am going to be interested in the reaction of the Mayor
and council at the appropriate time. With that responsibility
and accountability, I think there is a downside to that. But
not having Congress looking over your shoulder on every
decision has some advantages as well. We will be interested in
how they react. I just think it is a very good point and
something that the city has lacked, and maybe one of the
reasons they have not developed the culture of accountability
that most other jurisdictions have.
I thank the gentlewoman for yielding.
Ms. Norton. Thank you, Mr. Chairman. The concern, of
course, about the Federal payment is well placed, because the
District is in such a precarious financial position. We have
had some numbers run on the Federal payment, though, and I must
say, I have very serious concerns about the Federal payment as
it is.
During my first term, we got a very large increase in the
Federal payment. However, that was to make up for no increases
for 5 previous years. Every year there is no increase there is
a cut, and yet the District acts as though the Federal payment
is something important. Well, it is important, but it is
important for cash reasons. I want to move there.
By the way, when we had the numbers run on the over $700
million Federal payment, it turned out it was worth today about
half a billion dollars. And that may also contribute to the
shortfall.
I want to say for the record that it has been all that I
could do to get the Federal payment out every year. Members do
not enjoy voting for a payment for a single district, and what
they have done instead is, over the past 5 years when we got
the increase, we have had caps on the Federal payment. So the
Federal payment has not only lost value in inflationary terms,
but Congress has actually cut the Federal payment. It is a red
flag. It is the one thing that people can cut or not vote for
that does not harm them at home.
One of the things that we are all going to have to do as we
look at this plan is to try to think more deeply so that we get
over some of the problems and don't simply build in the same
problems that we have had all along. And the 5-year deficit
reduction plan does not bode well for the Federal payment.
I can say without fear of being contradicted that if I
haven't been able to get increases before deficit reduction
became the only issue for the Congress, I cannot imagine what
it will take for me to hold on to the Federal payment in this
body.
The District's concern about cash is important. Any large
entity has periods of shortfalls in revenue where borrowing is
necessary.
I guess I have two questions. One has to do with whether or
not there are going to be cash shortfalls at all, and the other
has to do with collateral and what kind of thinking about
collateral has gone on given how borrowed-up the District is
and the limits on its borrowing authority.
Mr. Raines. Well, as you mentioned, most cities have
periods of cash shortfalls and surpluses because certain taxes,
such as property taxes, only are paid twice a year, whereas
most expenditures are on a monthly basis. So the city is going
to have to monitor its cash-flow after the plan is in effect to
ensure that it can even out those periods.
But we are aware that, from a cash standpoint, the city
will start off in the hole. That is why we are proposing to
assist the city in financing its accumulated deficit so it will
have the cash on hand, and that will help the city meet its
cash needs.
Ms. Norton. Would you describe how having the cash from the
accumulated deficit. Many people have overlooked altogether
your proposal to fund the accumulated deficit, even the Control
Board, in its strategic plan, left the accumulated deficit out
altogether. Which would mean that we would arrive at year 4,
when we are supposed to be balanced, still carrying half a
billion dollars in deficit, which would mean that we have the
Control Board here for a long time trying to get rid of that
accumulated deficit.
How would borrowing to fund the accumulated deficit help
the District with its cash shortfall, and how long would that
be available, in your judgment?
Mr. Raines. Well, if the city--the exact amount of the
accumulated deficit will depend on the financial operations of
the city through this year. But let's assume that the city has
a $400 million accumulated deficit. What that means is that
they spent $400 million more than they brought in over prior
years, and the way that they have been financing that is by not
paying vendors.
If you hold enough bills, it is like any of us if we don't
have enough money in our paycheck to pay all of our bills that
month, we let a couple of them ride over to the next month. And
that caused a real crisis in the city for a lot of vendors, not
just businesses, but also churches, nonprofit groups who had
contracts with the city.
By financing the deficit, the city would get $400 million
that would permit them to pay its bills on a timely basis. But
the city would have to then repay that, and we propose to give
them up to 15 years to repay it. So every year--it would be as
though the city were atoning for the prior deficits by now
appropriating sufficient funds to repay the borrowing. So past
deficits would be financed, and they would be repaid over a
period of years.
I believe that financing the deficit will go a long way
toward, or will totally meet, the cash-flow needs of the city.
But that is something we are going to have to work out with the
Financial Authority to ensure that either--that deals totally
with the cash-flow needs or we have an alternative vehicle
available for the city to meet small, intra-year cash-flow
shortfalls.
Ms. Norton. Many residents point up that the Federal
payment is, at least theoretically, to account for the fact
that there is a Federal presence and a large Federal impact,
because the District has a height limitation, it has more
zoning strictures than any city in the United States, and of
course the most expensive land it can't build on at all.
What is your response to those who say that we are still
left with this impact and with whatever services we provide the
Federal Government?
Mr. Raines. Well, the Federal payment over the years has
been pointed to as the compensation for a wide variety of
limitations on the city, and the value of those limitations has
always greatly exceeded the amount of the Federal payment.
What we have tried to do is change the paradigm. What we
tried to say is that this Federal payment can't carry all of
that weight and what we need to do is, instead of compensating
the city by giving an annual lump sum payment, we should
compensate the city by taking over some of its expenses, and if
we take over more expenses than the value of the Federal
payment, then this is a better deal for the city.
But it will take a while, I think, before people
reconceptualize the Federal payment and see that what we are
proposing is a new deal. It is not a preservation of the deal
cut in home rule, but it is a new deal that says that the
Federal payment is inherently going to be an inadequate measure
over time of compensating the city for restrictions. We need
another method of balancing the responsibilities of the city
and the limitation on the resources that the city has.
So our approach is just an alternative way of doing it and,
we believe, one that is better for the city. But I can
understand why people who have grown up with thinking that the
Federal payment was the compensation for a variety of things
would have difficulty moving to a new paradigm, but that is
what we are hoping that they will do.
Ms. Norton. Mr. Raines, I appreciate that you came and
spoke patiently and heard all the questions at my town meeting
on the President's plan. Perhaps you would like to respond here
as well, for the record, to the fact that many residents came
forward to ask why there was not direct assistance to the two
issues of which--or the two functions which many residents
regard as paramount today: Public safety and education.
Mr. Raines. The structure of our plan is to relieve the
District budget of certain of its very extensive
responsibilities and thereby provide more room in that budget
for the city to tackle those responsibilities that are
inherently local. Education and police protection are
inherently local responsibilities. We believe that by relieving
the city of the other financial burdens that they face, that
the city officials now will have more room in which to deal
with the issues of education and police within their own
resources.
We believe it is very important for the future of the city
that the city leadership take dramatic action with regard to
public safety and education. There is no prospect of a
financial revitalization and an economic revitalization of the
city unless citizens and visitors feel safe and unless the
young people in the city are trained to join the work force of
the 21st century.
And so there is no higher important issues for the city
government than dealing with those. But we believe they are
inherently local, and we believe we are providing additional
resources for them to deal with those issues by removing
certain other expenses from their budget.
Ms. Norton. During this round--I have just one more
question during this round for you, Mr. Raines. Your plan would
have the District government come into balance a year earlier
than the financial authority statute. And you, of course, have
watched the District go through excruciating pain just getting
to balance year by year and then retread itself just to keep
from overspending each year.
Why did you think it was important for the District to
balance its budget this year, in fiscal year 1998, rather than
in fiscal year 1999 as the original authority statute
indicated?
Mr. Raines. There are several reasons for our view on that.
First, any additional deficit that is run up is more money that
the District is going to have to borrow and repay with interest
going forward, and it adds to the cash problem that the city
has.
Second, it has been my experience that taking decisive
action to balance a budget in as short a time as possible is
more likely to lead to an enduring balance than struggling each
year and doing only what is necessary to move toward a balanced
budget without actually balancing.
Third, I think it is an important symbol and signal to
Congress that the city is taking decisive action, moving ahead
of schedule to deal with the city's financial problems, and I
believe it puts the city in the position of taking aggressive
action on its own that I think is--I know is certainly
appreciated within the administration, and I would think would
be appreciated by the Members here, that the city is doing
everything it can to bring its affairs in order as quickly as
possible.
Ms. Norton. Mr. Chairman, before I relinquish the
microphone, in response to what Mr. Raines has just said, there
is a thought here in the Congress, the notion that this is a
bailout.
You indicated that one reason for wanting us to come into
balance early is to show that the District has stepped forward
to do something that is equally painful as the Congress will
find it painful to come up with any additional money. How would
you respond to Congress when it says that this is a bailout?
Mr. Raines. Well, I think that this is definitely not a
bailout in this sense. First, the Federal Government has an
interest in the Nation's Capital, and the services that we have
targeted for the Federal Government to finance are services and
government programs that directly relate to that Federal
interest, and therefore our first step is in protecting the
Federal interest. That we need to do for ourselves and for the
Nation and not simply for the citizens of the District.
Second, we do provide some additional room for the city by
relieving it of some of these responsibilities, but by no means
are we obviating the need for the city to make very difficult
financial choices. The city is going to have to significantly
rethink everything it does in order to reach structural
balance. This is not just a matter of not spending certain
dollars in a year, it is not a problem that will be solved by
furloughs or deferrals, the city will need to fundamentally
rethink what it does, and therefore I don't think anyone in the
city will view this as a bailout, as keeping them from having
to make tough choices. Indeed, it merely highlights the need
for those tough choices.
So it is anything but a bailout, it is an opportunity for
the city, but I believe it is a necessity for the national
government that we have to have a well-functioning Nation's
Capital. So the national interest requires us to act, and our
concern about home rule and the well-being of the residents of
the District requires us to do it in the way that increases
their chances of success.
Ms. Norton. Thank you.
Thank you, Mr. Chairman.
Mr. Davis. Thank you.
I have a few questions I want to go through with you as
well. First of all, I don't think there is any question--I will
just say this again--that the city is much better off with this
proposal than they are today, whether you have a Federal
payment or not; the city is much better off financially under
this proposal. It is not even a close call.
In addition to that, you have taken some of the fastest
growing elements of the budget that will increase the deficit
in later years and helped the city by providing a better
percent on Medicaid; taking over corrections where there is
huge cost avoidance built into the city that they have not
invested; and on the unfunded pension liability, that stops in
the year 2004. If something is not done, it is going to be 15
percent of the city budget. So this not only helps the city
today, but over the long term. I think this is critical to the
city's success.
You have clearly given this a lot of thought. You have even
thought of some of the cultural changes and incentives and
disincentives as you have worked through this. And I even
understand it better now sitting here. I think we are going to
be adding some and moving the plan around a little bit, as it
often happens when it comes here, but you have clearly given
this a lot of thought. I think it hangs together fairly clearly
at this point, and we will be hearing from other perspectives
as we proceed. I want to congratulate you on your efforts.
I also want to recognize our colleague from Prince
Georges's County. Congressman Wynn has just come in, and we
will give him an opportunity to ask questions later.
Let me move to a couple of issues. Mrs. Morella had asked
why the initial Treasury provision to finance the debt in 1995
was dropped from the Control Board legislation. Mr. DeSeve, who
is sitting behind you, has been so helpful in that and other
matters, can answer that more clearly. But as I recollect, that
was a scoring problem as to how that would be scored under the
Budget Act. I would ask Mr. DeSeve if he might want to, just
for the record, answer that more fully.
STATEMENT OF G. EDWARD DeSEVE, CONTROLLER, OFFICE OF MANAGEMENT
AND BUDGET
Mr. DeSeve. During the process of creating the financial
responsibility and management assistance authority legislation,
Treasury and the committee staff proposed the terming out of
the deficit over a period of time, a 15-year period of time.
There were two concerns raised at that point.
No. 1, without the existence of the Financial
Responsibility Authority, people were concerned that the city,
having the ability before the Authority had a chance to work
and demonstrate what real fiscal restraint was like, might be
inappropriate.
Second, there was and there remains today the likelihood
that under the Credit Reform Act that a loan of that length, 15
years, would have scoring implications. There are other similar
kinds of loans that are made by various agencies to State and
local governments that have that same characteristic. So let
the Authority work was concern No. 1. Concern two was that
there was and will be a scoring component to that particular
loan. And for those reasons it was agreed by the administration
and the Congress to allow those provisions not to be included
in the Financial Responsibility and Management Assistance Act.
Ms. Norton. Will the gentleman yield?
Mr. Davis. Happy to yield.
Ms. Norton. This plan is paid for. Is that not the case at
this time with all of its provisions?
Mr. Davis. It is in the President's budget. Now Congress
has to adopt its own resolutions. But it is.
Mr. Raines. Yes.
Mr. Davis. Thank you very much.
I would like to, if I could, spend this part of my
questions on the corrections issues, which have not only the
interest of the Virginia delegation but for all of us because
of the crime issues in the city. The proposal is going to
affect crime in the city and the region.
What do you mean by comparable sentences to Federal
sentencing guidelines? Does the President's proposal
contemplate the straight imposition of Federal sentencing
guidelines on the District courts?
Mr. Raines. We have been meeting extensively with District
officials, and there have been meetings within the Justice
Department to further define our call for sentencing guidelines
that meet Federal standards. We are proposing the creation of a
set of standards that reflect Federal policies with regard to
determinant sentences. We also are proposing that they be
enacted by the D.C. council as a part of D.C. law.
They need not be the same as Federal sentencing guidelines,
but they need to reflect a difference in philosophy about
sentencing, which primarily involves determinant sentences, so
that if someone is sentenced for 2 years, they serve for 2
years. There also need to be a much more restrictive use of
parole in the sentencing process.
We think it is important for prisons to serve their
purposes. It is also important to have some consistency with
the procedures that affect Federal prisoners, because it is
clear that some District prisoners will need to be in
facilities other than those in the local area, and therefore we
are concerned that there be some consistency in sentences. But
there is not a requirement that they be identical to the
Federal sentencing guidelines.
Mr. Davis. Thank you very much.
There are many District crimes that fit into the municipal
or State category and have no comparable Federal statute. Would
you envision the Federal Sentencing Commission determining new
guidelines for each of these crimes, or how would this----
Mr. Raines. We envision setting up a Federal/District
process to recommend new sentencing guidelines that would be
included in law by the D.C. council. So these would be
sentences that were created to be applicable to the District of
Columbia, and that would fill in any gaps that may exist as
between how the Federal Government has conceived of sentencing
and how the local government has. But we view these would be a
unique set of guidelines affecting the District of Columbia.
Mr. Davis. What is the timeframe for that? Would we be
doing that as part of this legislation as we move through, or
would that come after?
Mr. Raines. What we will be asking is an authorization for
us to begin that process. We would see it being completed
during that 3- to 5-year transition period with the prisons, so
that it would be completed prior to the Bureau of Prisons
taking control of the facilities.
Mr. Davis. Thanks. I couldn't help but notice that the
proposal recommends that the Lorton complex be renovated where
possible and even expanded. That was called to my attention by
interested constituents. Is this something that the President
intends to insist on, or are we willing to negotiate on whether
Lorton should be retained or moved to a new location?
I know that you have some new cost data coming your way
with the NCCD report that is in your office at this point. Is
the administration going to be flexible on this, in working
with this committee and with Congress?
Mr. Raines. Mr. Chairman, we will certainly be flexible in
working with the committee on the specifics of how the plan is
implemented. Our major concern is to ensure that adequate
facilities will exist for the prison and, as far as possible,
that these facilities are as close to the District of Columbia
as possible.
It is our preference to have these facilities renovated and
constructed on the Lorton property, because that exists. But we
will be happy to work with the committee on any ideas that the
committee might have.
Mr. Davis. Thank you. Lorton is there. The land is there.
You don't have to find new land, and for that reason it is very
convenient. And I understand that, and I think that the burden
on us is to go and find that we can do this in a cost-effective
manner and still meet the guidelines that we all want to meet,
because Lorton, as currently constituted, has failed, and I
think we all recognize that.
The numbers that I have seen point to almost $1 billion for
replacement of that facility where it is now, but as we get new
cost estimates we want to continue this dialog with you as
well. We appreciate the administration's being willing to take
a flexible view as long as we can meet the final goal that I
think we share with you.
In one of the briefings I received on the proposal, I heard
a figure of 10,000 inmates used as a basis of a cost estimate
of $850 million in capital costs. Now my understanding is that
there is a new study currently under final review in OMB that
concludes that in the year 2006 there will be 7,400 felons
sentenced from the District. I don't know how you conclude what
you will have in 2006, but they have people that do that.
Do you know what the rationale is for a 33 percent increase
in population estimate that was concomitant cost increases over
the NCCD estimates that were consensus estimates? Have you
gotten that far in looking at this?
Mr. Raines. Yes, the study you referred to assumes that
there is no change in sentencing practice. Our estimate of
10,000 assumes that there is a change and that there will
therefore be more inmates who are actually in the facilities.
Now, there was a lot of ups and downs in this because there
may be more prisoners but they may be serving, in some cases,
shorter sentences, and therefore it is not clear all of the
details of that. But we think that the 10,000 estimate is a
good planning estimate at this point, given the changes in
sentencing.
Mr. Davis. What about the prison privatization issue? The
Federal Bureau of Prisons generally does not get into that, it
is my understanding. As you know, the District is already
moving toward privatizing at least a large portion of its
inmate population control, and it has a long-range plan to do
more in that direction. Does that remain a viable alternative?
Mr. Raines. Well, the Bureau of Prisons has spent a lot of
time studying the issue of privatization, and particularly in
the context of a couple of facilities in California. The
Department of Justice has some serious concerns about
privatizing prison facilities, given the extraordinary powers
that prison guards and officials have over the lives of the
prisoners and the need to take and to use the police power to
maintain order in prisons.
But we did not rule out privatization of some parts of the
system should the Bureau of Prisons believe that that is the
most effective way to go and that it is consistent with the
need for the maintenance of order.
Mr. Davis. So as we look at these numbers and deal with
them, we could find that it could make sense for the Federal
Government to take over D.C. Corrections and perhaps privatize
them ourselves rather than incur higher BOP costs. We need to
work through those issues?
Mr. Raines. We need to work through it. I am not sure that
there is going to be a major cost difference here, but again,
the Bureau of Prisons has done quite a bit of work on this and
has some fairly strong feelings about the concerns about what
happens, for example, in the case of prisoner disorders and the
need for the guards on the premises to exercise police powers.
If it is a purely private facility, questions arise as to the
appropriateness of the use of force and other measures that
have caused them some concern as they look at the issue.
But I am sure that the representatives from the Bureau of
Prisons would be happy to meet with the committee and go over
their concerns as well as provide the committee with the
benefit of the work they have done.
Mr. Davis. Just a couple of other questions before I yield
to the gentleman from Maryland. Who would administer the courts
under your proposal, and who administers them now?
Mr. Raines. The courts are essentially self-administered
now, although financed by the city government. The city
government provides a lump sum to the courts, and the courts
then utilize those funds to finance themselves.
Under our plan, the management of the courts would remain
the same. We would simply have the funds come from the Federal
Government through the Administrative Office of the Courts--of
the Federal Courts, and then to the local court system. So
there would not be a substantial change in how the courts are
managed.
Mr. Davis. Are there real policy or principal reasons that
the Administrative Office of the Courts couldn't and shouldn't
oversee the District courts?
Mr. Raines. Well, we have had a number of discussions with
them. They are quite busy. They have a full plate in
administering the Federal courts, but we believe they are the
most appropriate administrative agent for funds for the D.C.
courts.
It would be difficult to do it through the Justice
Department because the Justice Department appears before the
courts so extensively that some might believe that there was a
conflict of interest if the Justice Department also controlled
the funding for the courts.
Mr. Davis. Thank you very much.
Well, before I yield to the gentleman from Maryland, I just
want to note that we have had some suburban Members here. I
think the great thing about what you have proposed and the way
we hope to conduct this is that we no longer have suburbs
versus city in these conflicts. We are going to try to move out
of this and move to the fact that our destinies are intertwined
and we are one region and we all have a strong investment in
making the central city work. And I know that Mr. Wynn shares
that with me, and in that regard I am happy to recognize the
gentleman from Maryland.
Mr. Wynn. Thank you, Mr. Chairman. And I concur with your
sentiments about the interdependence of our region. And I thank
Mr. Raines for appearing today.
I apologize for not being here for the beginning of your
presentation. I have a couple of questions that I hope have not
been covered or explained.
One of the fundamental issues of concern to me has to do
with law enforcement. I understand and heard your comments with
regard to the takeover of the court system. My first question
is: Is there any direct assistance for the District of Columbia
Police Department? Is there any aid going to the D.C. Police
Department under this proposal?
Mr. Raines. Under our plan, we are taking over certain
functions that will provide additional budget room within the
District's budget, that the local officials can choose to
invest in the police department.
But we are also quite interested in working with the
Financial Authority on their efforts to try to improve
management in the police department, and we will be working
with them and providing whatever technical assistance we can
from any of the Federal law enforcement agencies to help
improve the functioning of the police department.
And so the benefits for the police department come from
expanded room in the District budget and technical assistance
that we have offered to make available.
Ms. Norton. Will the gentleman yield on the police
department question?
Mr. Wynn. Certainly.
Ms. Norton. I just want to indicate to the gentleman that
the Congress negotiated a plan for an additional $42 million
for the police department last year. Working with Senator
Hatch, the chairman of the Judiciary Committee in the Senate we
were able to get $15 million. The needs of the police
department are immediate. I believe that the Federal Government
now owes us $27 million and that we cannot wait for this plan
or any plan to get that money. And I intend to use the next few
weeks to get the additional $27 million that I think we have
coming to us.
Mr. Wynn. Well, I certainly share your concern, and have a
similar sense of urgency with respect to funds for the police
department, which actually led to my next question. I
understand that basically by assuming certain pension liability
for the police department, that that would be the basis on
which these additional funds, additional space if you will,
would be created to provide. How much money approximately would
be available to the D.C. government as a result of the takeover
of the pension liability that could be used in whole or in part
for the police department?
Mr. Raines. We have not divided the dollars by the
components of the plan, but I believe we begin, in the first
year, in the range of $60 or $70 million and that rises over
time. That is the net value of what we are taking over minus
the Federal payment.
Mr. Wynn. Sixty million? OK. And you mentioned that there
were certain management improvements with respect to the police
department that you thought were necessary. Could you comment
briefly on that?
Mr. Raines. Our plan does not have extensive detail on
that, but let me just say this. The experience in a number of
other cities has been that using information technology,
changing patrol practices, and maximizing the number of
officers on the street have a significant impact on crime. And
these kinds of changes have been introduced in part in the
District, but not as aggressively as in other cities. We
strongly encourage the city to use the most advanced thinking
on deployment of police resources as they deal with the issues
of crime.
The Control Board has just received a study that I have not
yet seen, but I have read the press reports, and I think it
begins to address some of these issues. I look forward to
working with the Control Board to see what additional help the
Federal Government might provide to assist the police
department in becoming one of the best in the Nation, and in
using the most modern techniques to have a very direct impact
on crime.
Mr. Wynn. Well, I agree. I noted in recent reports that New
York City had had significant success by dramatically
increasing the number of officers on the street and that would
be something that I think could work in this area as well.
Let me ask briefly in the area of economic development, I
understand that there is some consideration or proposal for a
tax incentive program to spur economic development. Could you
comment a little bit about the specifics of what would be
envisioned in terms of the tax incentives?
Mr. Raines. We have proposed the creation of an Economic
Development Corporation that would have certain powers. Among
those, the ability to provide tax incentives to businesses. The
actual details of that are not yet available. I hope that they
will be in the next week or so we will be able to give you the
specific items and what the tax advantages are, how they would
work, and who would qualify. But I think we are still about a
week away on that.
Mr. Wynn. Would capital gains relief be included?
Mr. Raines. It is not our current plan to include any
capital gains provision in the proposal.
Mr. Wynn. All right. Thank you, Mr. Chairman. At this time,
I wouldn't have any further questions. I would like the
opportunity to perhaps submit some written questions at a later
date.
Mr. Davis. Happy to. Thank you.
Ms. Norton.
Ms. Norton. Thank you very much, Mr. Chairman. Mr. Raines,
as you know, when District employees were Federal employees,
Congress saw fit never to set up a trust fund for pensions.
When pensions were finally transferred in 1980, the Congress
set up--the Congress required the District to set up a trust
fund and to contribute amounts such that now our pensions since
home rule are significantly overfunded.
In that regard, would you indicate why transferring that
entire amount--why it is that your plan calls for transferring
that entire amount to the Federal Government?
Mr. Raines. Well, our plan involves taking over virtually
all of the unfunded liability of the District pension plans,
and that unfunded liability is considerable. It is in excess of
$4 billion. The total liability is in excess of $7 billion. And
so that the funding that has been generated since 1979 has kept
the unfunded liability from growing totally out of control, but
the liability is still quite large.
Rather than trying to find a methodology of sharing that
unfunded liability, or of coming up with new Federal dollars to
go into the pension plan, it struck us that it was more
consistent with our overall approach to simply relieve the city
of the full responsibility. And if we are going to relieve them
of the responsibility for those benefits, we need, as well, to
acquire the assets that are now offsetting part of that
liability. And that is what we propose to do.
You should recall that the assets are an estimate of what
will be available to fund the liability. But if for any reason
the performance of the economy and the performance of the stock
market doesn't meet the estimates, then the unfunded liability
would be larger. If we take it over, the pensioners will be
assured with the full faith and credit of the United States
that they will receive their benefits, regardless of the
performance of the stock market. So that from the standpoint of
beneficiaries we believe this is a very--it is very important,
and from the standpoint of the city, removing this entire
liability and giving the city a fresh start, we think, is
important to the long-term financial health of the city and to
its credit ratings.
Ms. Norton. You propose that the present pension plan would
be closed with no further accruals to that plan, and that a new
plan would be instituted for the very same employees who are
here and so they would be subject to two plans. Do you envision
that an employee would risk final receipts of pensions in the
amount that she would have had had there been only one pension
plan? In other words, will going to two pension plans in and of
itself diminish the pension of individual employees?
Mr. Raines. No, it should have no impact on the individual
employee. They will receive credit for their time served under
the existing plan. They will receive a benefit that is
calculated based on looking at their terminal pay, just as they
would under the current plan. So there is nothing in our plan
that by itself would result in any diminished benefits to
employees.
And as I mentioned, there is an added improvement in that
the payments would no longer be subject to the vagaries, at
least on the older plan, or whether or not the District would,
in fact, be able to meet that unfunded liability.
One of the issues, I think, that has not been addressed by
many, but Chairman Davis mentioned, the increase in the
requirement for the city contributions to the pension plan in
2004 are enormous. And I don't believe anyone has identified a
plan whereby the city would actually be able to make those
payments. We think that our plan forestalls that issue and does
so before pensioners and others would become concerned about
the fact that the city does not have the financial wherewithal
to increase its payments by the amount now required in law.
Ms. Norton. I can certainly tell you that having worked
very hard on a pension bill last year that I grow very nervous
if anyone in the District thinks that the Congress has any
interest in stepping up on this issue. It is frightening. It
has been frightening to see how little response I get when I
talk about what would really be the biggest catastrophe of the
city and that is either not doing it or waiting so long to do
it that you have untold repercussions on our bond and on
everything else that the District has.
This is a very, very troublesome issue because the Congress
is 100 percent responsible and has shown not the slightest
interest in doing anything about it. This is a 100 percent
congressionally created liability.
May I ask one more question, and that is about the notion
that the Internal Revenue Service collect taxes for the
District, including local taxes. First, how would this occur?
What are the mechanics of how this would occur, especially for
the ordinary taxpayer?
Second, what efficiency does this build in for the District
government? And third, if this is already available to the
States, why do other States not also do it at this point?
Mr. Raines. From the efficiency standpoint for taxpayers,
this would be a major breakthrough. They would no longer have
to file separate returns with the city, but they could
calculate their city income taxes as well as their Federal
income taxes on the same form. And that would be a major
efficiency for the city.
Also, the city, being a small part of a larger region, has
some unique enforcement problems and that is that it is not
able to determine what jurisdiction people may be living in and
has not been able to take advantage of some of the matching
programs that the States use in working with the Internal
Revenue Service ensuring enforcement of their tax laws.
Third, I believe that the economic incentives that we will
be suggesting as part of the Economic Development Corporation
will depend greatly on residence of employees. And one of the
ways of ensuring that the city gets the benefit from these
incentives in its tax system is to ensure that those new
employees are, in fact, paying District taxes.
The experience elsewhere with this option has been, at
least my experience in the couple of States that I am aware of
who have looked at this question, has been that those States
were large enough in general and sufficiently isolated in
particular from surrounding jurisdictions that they didn't have
these cross-border problems that were of concern and they are
large enough to afford the kind of system that you need to
enforce an income tax jurisdiction.
The District is a relatively small jurisdiction and does
not have access to a lot of the tax tools that other agencies
have, and therefore I think the city would uniquely benefit
here. Both that the citizens would have a more simplified tax
return, but also the Internal Revenue Service enforcement
mechanisms would be available and we believe it could have a
salutary impact on the total amount of taxes actually paid to
the city.
Ms. Norton. The District has a reputation for inefficiency.
No inefficiency, though, is greater in the District than the
notorious inability to collect the taxes that it enacts into
law and apparently doesn't see. To the extent this would help
this, I would be interested in exploring it further. Thank you,
Mr. Chairman.
Mr. Davis. Frank, I just have a few more questions on the
Economic Development Corporation. Two things to flush out on
that and I am sure that will have the option of a lot of give
and take as we move through it. I want to make sure I
understand what you have in mind.
Could you explain what would the geographical area of
operation be for the Economic Development Corporation? Would it
be the whole city; what authorities it is intended to have and
what is the funding source and the level?
Mr. Raines. Well, the primary area of activity of the
corporation will be the central business district and those
communities outside of the central business district that have
a large percentage of low-income people. It is not our current
thinking that it would be active in the higher income areas
where there is substantial amount of economic activity
currently taking place.
We intend to fund the corporation with up-front money to
capitalize it, but also making available tax credits that could
be part of its program. We also think that the corporation
should have an extensive involvement with the private sector,
since economic development in this city as well as any other
city, has to be really driven by private investment, private
job creation, and so that there will be a close tie to private
economic activity.
And it is our desire to attract private capital as well to
the corporation to supplement the funds made available by the
Federal Government in the initial capitalization so that
activities ranging from major development projects to job
training and job creation would be effective under the
corporation.
Mr. Davis. OK. Is this at all similar to the Pennsylvania
Avenue Development Corporation and the proposed New York Avenue
Development Corporation?
Mr. Raines. It is really not as geographically focused.
They may well decide to have a focus on a particular area, but
it would not be the entire focus on any one particular area.
Second, there would be more reliance on the tax system and tax
incentives as opposed to direct Federal appropriations.
Mr. Davis. What about the redevelopment land authority?
Would this corporation assume or be capable of assuming some or
all of that responsibility?
Mr. Raines. Well, that is one issue that we have had some
discussions on and really don't have a conclusion. I could see
the city deciding, or this committee deciding, that combining
certain other economic development activities as part of the
corporation might be beneficial. We really haven't come to a
conclusion there. But the more that we can have a coordinated
effort, I think, the better.
Mr. Davis. What about the corporation assuming control over
existing District-owned land that is determined to be surplus?
For example, you could have a number of school sites perhaps
coming available with General Becton looking at some school
closings. That could be a good catalyst if it is put under some
central authority.
Mr. Raines. We think it would be beneficial for the
corporation to have access to land that it could include in its
development plans. Indeed, it would be our hope to make
available where we could Federal lands that had been declared
surplus that might be available for economic development and
the extent to which the city could do the same thing, I think
that it might be helpful.
The private sector orientation of the corporation, I think,
would be important. There is something of a history of land
being allocated for certain developments and those developments
not happening for many, many years. And I think it would be
necessary to ensure that development projects could move
expeditiously as the result of the corporation's activities.
Mr. Davis. OK. Do you think it would be helpful for the
city to have one agency authorized and responsible for all
surplus district properties so that it could put together
adequate parcels for development? Is that not a determination
that this proposal makes?
Mr. Raines. We have made no determination on that as part
of this plan.
Mr. Davis. Many District government buildings, public
housing, schools, police stations, are built on federally owned
land. Would the administration support transferring these
parcels, most of which were acquired for District-only purposes
over the years, to District ownership?
Mr. Raines. We would be happy to work with the committee in
looking at the particulars to see the extent to which that
would make a difference in the success of the plan.
Mr. Davis. Finally, how would this corporation be governed?
Is it intended to have District participation but not
domination? Would it be charged with protecting Federal
interests as well as District interests? Any conclusion on that
yet?
Mr. Raines. Our view is that the corporation ought to be
primarily made up of private sector individuals appointed by
some combination of the Federal Government and the local
government.
Mr. Davis. OK. And moving to the last topic. As you know,
all of the District's general obligation debt carries a proviso
that if other funds are not available, the Federal payment can
be used as security for the debt. We ran into considerable
discomfort from the existing bondholders on this issue 2 years
ago when we allowed the Federal Treasury to use the Federal
payment as collateral for short-term loans.
How do you expect the elimination of the Federal payment to
affect the value and liquidity of outstanding District debt and
on the District's future bond rating? I don't know if you want
to answer that or Mr. DeSeve. He doesn't want to take it.
Mr. Raines. Well, Mr. Chairman, I actually wrote the bond
indenture for the District of Columbia many years ago, and I
believe it is a very strong indenture. As I recall, the actual
reference is that the Federal payment, if any, is available for
support of the bonds.
I think the most important thing we can do in supporting
the value of the District's bonds is to remove the financial
cloud over the city, particularly by eliminating the concerns
about the pension liability. So if you take the plan as a
whole, I believe it would be a very strong net positive for the
bonds, far more than the prospect of using the Federal payment
to meet the payments. Currently, the bonds have a very strong
security in the property tax and, as long as that security is
respected and enforced by the courts, I think it should be
adequate security for bondholders.
Mr. Davis. Thank you very much. Mr. Wynn, do you have any
additional questions?
Mr. Wynn. Thank you, yes, just one. Going back to the issue
of the Federal Government assuming responsibility for prisons,
I note that prison staff would not be automatically integrated
into the Federal Government system, but would have to reapply
based on their ability to meet Federal standards. That gives me
some concern. What exactly is the difference between the
current Federal standards and the District of Columbia's
standards now?
Mr. Raines. Well, they were developed separately, and I
think the Bureau of Prisons wants to ensure that all of their
employees have met the standards, have had similar training,
and will be able to be successful.
I think there would be a reluctance, as I think there is a
reluctance in any of these cases, to simply have a blanket
promise that everyone will be hired who is currently employed.
It is one of the things that will have to be worked out during
this transition period, is what is the necessary employment
levels; is the structure of the work force that is currently in
the prison system the same as the one that the Bureau of
Prisons would like to operate? What is the level of supervision
and the number of supervisory personnel?
So there are a lot of issues that are going to have to be
worked out, but I think the Bureau would be very reluctant to
give a blanket promise that everyone who is currently employed
would have a job under the new system.
Mr. Wynn. Would it make sense to provide for a transition
period so that if the issue was training and a number of hours
of training or something like that, that existing personnel
could obtain that training without being immediately discharged
purely because they lack this specific training component that
the Bureau of Prisons personnel had that they had never been
offered?
Mr. Davis. Will the gentleman yield? We would be very happy
to work with the administration on those kinds of things to
bring people up to the required hours and so on on this. I
would think that would be a possibility and would be very
helpful. You could retrain people instead of hiring new people
with a proven record.
Mr. Raines. Absolutely. And we provide for a 3 to 5-year
transition period and during that period it would be my hope
that not only would the physical facilities be improved, but
also any training necessary that would be comparable to that
provided to the Bureau of Prisons would also be provided so
that the vast majority of employees would know on the first day
that they had been retained once the Bureau of Prisons takes
control. So we don't view there would be an abrupt moment. We
view this 3 to 5-year period as not only dealing with physical
capital, but also human capital in the system.
Mr. Wynn. It sounds like between your comments and those of
Chairman Davis that this issue could be resolved without the
loss of prison personnel that could otherwise be qualified to
be employed by the Bureau of Prisons.
Mr. Davis. I would think that the prison employees who have
the experience and would accept the training would be a great
asset, obviously. These are issues that we need to think and
work through together. You have a number of affected
constituents, but on the other hand, the Bureau of Prisons has
to ultimately make this determination or they are not going to
want to be involved. But I would think there would be room for
most of the people.
Ms. Norton.
Ms. Norton. To my good friend from Maryland, I should say
for the record that the nature of his questions say all that
needs to be said about where District employees live.
Mr. Wynn. Throughout the region, it is my understanding.
Mr. Davis. Is that your question?
Ms. Norton. No, it is not, and I appreciate his help on
that issue because at least a few of them live in the District.
I have only one question, and that is about an element of
the proposal that your working group is having some difficulty
with, and they are trying very hard and working very well, and
that is the National Capital Infrastructure Fund. Anybody who
goes outside now, even after the District has been struggling
on the streets, finds that the potholes have reappeared.
I mean, this is one of the reasons why the morale of
citizens cannot be raised. It is what you see and feel and
touch. There has just not been enough of what you see and feel
and touch that has changed in this city to keep people here and
to keep their morale up so they believe something is going to
happen.
So, though this amount is small, it is very welcomed
because it is an acknowledgment that the care of roads is also
a State function or of many roads is also a State function.
The problem here, and I understand the amount, but the
problem here is that we are talking about only $125 million,
and with the thought and forethought and careful craftsmanship
that have you given every part of this proposal, you see this
as seed money, not as money just to be spent on some roads
during the next 5 years.
The problem is that it has to be seed money for something,
and you indicate something that the city council could do right
now, and I still don't understand why it has not been done. You
indicate one thing that could be done that was. It would be
payment in lieu of taxes that right now the city council and
the Mayor could, in fact, be negotiating with the multitude of
nonprofits that are in the city. I know that the National
Education Association stepped forward itself and said here we
are, negotiate with us. And I still don't know if their offer
to pay 40 percent of the tax that they would otherwise pay has
been accepted. All I know is that they have offered it.
You put that in your proposal, except of course it is not
directly related to roads. So it is seed money and perhaps
would mean that that fund would grow because that amount would,
I take it, would come into that fund over time.
Now, if we were a city of another type, the amount could
grow because of a revenue function that might be connected to
roads and bridges themselves, such as tolls for example. That,
of course, is not going to be possible, certainly within the
city. And I wonder whether or not you believe that an amount of
this kind can, in fact, be leveraged sufficiently to help us
with local roads and with capital funds as your proposal says,
with capital funding so much less, or whether the amount is
simply too small to ultimately be leveraged for a purpose
beyond, for example, the 5 years.
Mr. Raines. Well, we would be very desirous of working with
the committee on this issue. It is--in our view it is very
important for the Nation's Capital and for the region and for
the city that the city's transportation infrastructure be first
rate. And the investment in that transportation infrastructure
has lagged over a number of years to the extent that we now
have had to waive the local match for highway funds because the
city otherwise would not be able to move forward on very
important projects that affect the whole region. And we view
this National Capital Infrastructure Fund as a first step in
dealing with transportation issues in the city, but also ones
that intimately affect the region.
So many of the employees in the city come from outside the
city that there is a tremendous reliance on this system, on the
Federal Government for its own employees relying on it
substantially. Metro is the heart of our regional
transportation system and we believe we have to find ways to
increase the investment in that infrastructure. So we believe
that this fund is a first step in that direction.
We have suggested that others may be interested in
contributing to this fund because of the regional impact. There
has been some reluctance by entities to provide funds to the
city because they were concerned as to whether or not the funds
would be used for anything that was relevant to their own
interest. But because the roads and bridges and Metro are so
clearly of interest to the employers in the city, whether they
are for-profit or nonprofit, because it is of such importance
to the region because if the city is unable to pay its share of
these costs, then the Metro and other facilities would
deteriorate to the detriment of the region as a whole, that we
are encouraging as many thoughts as possible about how can we
attract other funds to this fund. And how can we deal with
regional transportation issues generally through a mechanism
such as this and starting with the District of Columbia?
Ms. Norton. So consistent with your plan might be a
regional fund that would be dedicated solely to regional
transportation issues without prejudice to one or another
aspect of those issues? For example, when you say there should
be a gas tax and then people say, ``No, I want it for Metro,''
and when you say, ``It is for Metro,'' people in other parts of
the region say, ``I can't use Metro because of where I live,
no, I still need roads.''
Do you envision that this fund could be the beginning of a
larger regional fund that could be a win-win for the entire
region contributing to transportation needs wherever they may
be, whether in rapid transportation or in roads?
Mr. Raines. Well, as you know, in my role as the Budget
Director, I have the opportunity to visit with people in the
region about special regional needs, and the Federal Government
has had a special relationship with this region. The most
notable example is Metro, which has its own stream of funding
from the Federal Government quite separate from the funding
that is made available through the national programs. And so I,
from time to time, hear about special regional needs, and I
think it would be highly desirable if the region were to find a
mechanism to deal with regional transportation concerns that
provided capital funds on a continuing basis for these
endeavors.
The region has more in common than in some cases the
suburbs in the region have with other parts of the State that
they are in.
So it strikes me that if the local leadership in the region
could conceive of a means of financing capital for
transportation, it would be indebted to the region, and, as the
Federal budget director, I could well see how there is a
national interest in ensuring that that mechanism worked well
enough because of the impact on the Nation's Capital and the
National Capital region.
We have employees throughout the region; we have facilities
throughout the region. If the transportation system does not
work, then that is a problem for the Federal Government.
Ms. Norton. This may be a very important opportunity for
the region to get hold of some of the issues that were raised
at the recent metro conference, where the bus system, for
example, has broken off to such an extent that there is very
serious concern about the future of Metro.
I hope that the kind of imaginative thinking you have
brought to District matters will encourage the region to bring
the same to its own transportation matters.
Thank you very much, Mr. Chairman.
Mr. Davis. Thank you very much.
Do you want to add anything in summarization of anything
you have missed or something you would like to respond to?
Mr. Raines. Mr. Chairman, I would just like to thank the
committee for your interest in this proposal, your moving
expeditiously with hearings, and the opportunity to have worked
with the Members as we developed and presented the proposal.
I think it bodes well for the future of the District that
Congress has taken up this issue in such a forthright manner,
and I look forward to working with you to see if we can get
legislation as expeditiously as possible, so all the work that
will be needed to move this plan into actuality in the next
fiscal year, which begins October 1, can begin as soon as
possible.
Mr. Davis. I think we should be able to meet that deadline
in working together. Today you have acquitted yourself and have
shown that the administration has planned very well; I think,
as is appropriate in the legislative process where we need to
do that. I am personally energized by the attitude and
initiative from the White House and from congressional leaders.
We have a once-in-a-generation opportunity to make things
happen. We have the Republicans and Democrats, Congress and the
administration, city and suburbs, working together, recognizing
we have some structural tasks ahead of us.
I think the Control Board, who we did not talk about today,
have brought about a lot of the changes. Although we read about
bad news, a lot of this has been uncovered by the work they are
doing. The Control Board should be working with the Mayor and
council on the day-to-day functions. Congress should not be
doing that. I think you have correctly focused on the larger
structural issues that have to be addressed if the city is
going to be successful.
I also would just note the newly emboldened city council,
and the fact that they are showing some initiative on this
cannot help but make this a very satisfactory answer at the end
of our journey. I will look forward to hearing from the Mayor
and council in the near future, and I thank my colleagues for
being with us today.
The hearing is adjourned. Thank you very much.
[Whereupon, at 11:35 a.m., the subcommittee was adjourned.]