Testimony of Linda W. Cropp Chairman The Council Of The District of Columbia Before the Senate Appropriations Subcommittee on the District of Columbia Hearing On The Budget Request Of The District Of Columbia For Fiscal Year 2005
May 19, 2004
Good morning, Chairman DeWine, Senator Landrieu and members of the Senate Appropriations Subcommittee on the District of Columbia. I am pleased to be here with my colleagues to testify on the District's budget for Fiscal Year 2005.
Introduction
The FY 2005 budget represents for the eighth year in a row, a fiscally sound and balanced budget. This budget is also a reflection of our resolve to stand as one good government that will remain fiscally prudent and responsible. The efforts of the Council and the Mayor, working together, has created a spending plan that continues to provide the services needed to make the District a better place in which to live, to work, to raise a family, and to visit. The Council and the Mayor will continue this collaborative effort throughout the year in order to manage government spending.
Fiscal discipline has always been and will always be a top priority on our legislative agenda. We not only demand it of the executive branch, we practice it. The various forms of fiscal discipline --- from rainy day savings, financial safeguards, insurance and investment policies, economic triggers to Pay-As-You-Go funds --- that we have demanded of, and imposed on ourselves in the past several years, have yielded significant returns to the District of Columbia. This is reflected in the District Government receiving for the seventh consecutive year an unqualified audit opinion and a FY 2003 Comprehensive Annual Financial Report (CAFR) showing a balanced budget. In addition, this year for the first time, the District received an “A” rating from all of the Wall Street financial rating agencies.
In 2004 the Council passed the Fiscal Year 2005 Budget Submission Requirements Resolution of 2004. It established the date for submission of the Mayor’s proposed budget. It required performance plans and reports, and certain information and documentation be submitted to the Council along with the proposed budget.
The Budget Process
During the Council’s fifty-day review period the Council conducted 54 hearings totaling 296 man-hours. These public hearings are an important part of the budget process. The public hearings provide the citizens and our workforce with an opportunity to comment and critique programmatic and funding needs, and agency performances that impact them. This feedback is essential in reaching the decisions and determining the recommendations of each committee in the mark-up of the budgets.
The Council worked diligently with the Mayor in aligning both sets of priorities and, put together a fiscally sound and responsible spending plan. The operating budget funds basic city services and programs. The capital budget, as a result of stringent oversight by the Council, was realigned. For example, funds were redirected and targeted for projects with higher priority and critical needs, such as schools for the children, housing for low and moderate income residents, and enhancing existing facilities for better public/Council interaction.
The Mayor submitted the budget to the Council on March 29. The proposed local budget was $4.17 billion, an increase of $282.8 million or 7.3 percent above the revised FY 2004 budget. The Council carefully reviewed the proposed expenditures to ensure that priority programs were properly funded. Adjustments were made through hard decisions between competing program preferences and by rooting out unnecessary budget cushions within the request.
Highlights of the FY 2005 Budget
On May 14 the Council approved the $4.16 billion spending plan that provides adequate funding for basic city services and programs. This funding level for FY 2005 represents a growth of 7.1% over the revised FY 2004 local budget and sets growth for next year’s budget at 4.6%. The budget provides $40 million for the production of low and moderate income housing and increases the funding for childcare, substance and drug abuse treatment, and health care for uninsured residents. In keeping with the seven goals on the Council’s legislative agenda, schools continue to receive full funding. The budget earmarks approximately a billion dollars for public schools and public chartered schools.
In order to address the Council’s concerns about the growth of spending in certain agencies while still wanting to finance programs important to the District's most vulnerable residents, a contingency fund was established. This fund would provide financial support from the District’s budget if other sources were not available for the Departments of Human Services, Child & Family Services, Mental Health, Health, Inspector General, Employment Services, Youth Services Administration and the Office of the Secretary. Requests to expend money from the contingency fund would require proof of need and approval by the CFO, the Mayor and the Council.
Federal Budget Request
The Council supports the Congressional budget request items included in the Mayor’s proposal. However, I would like to highlight two items included in that request. The Tuition Assistance Grant Program (TAG) and the Planning and Security costs associated with the federal presence. The TAG program has been extremely successful in the District. A total of 4,086 students are receiving funds this year from the program. TAG has had a significant impact on furthering the education of these students. Therefore, it is important that the additional $8.6 million be provided to continue to fully fund this program.
The need for funding Planning and Security costs related to the federal presence continues to rise. The requirements of Homeland Security have added to this cost. In the past two years the District has been reimbursed for the costs it has incurred for major events that are held in Washington. These costs have now been capped at $15 million. In the last two years, which have been non-inaugural years, the District has received the $15 million to cover its costs for providing safety at events. The District is now being asked to apply the $15 million to cover the costs for major events and the Presidential Inauguration. Historically the District has been directly reimbursed for the costs associated with the Presidential Inauguration. The costs for providing security during the 2001 inauguration were $6 million. With the addition of Homeland Security requirements this amount has grown to $10 million. The District Government is asking for the additional $10 million to cover the anticipated costs that will be incurred for the 2005 inauguration.
Another area I would like for you to consider is funding to assist with the costs of correcting the problem of lead in the water. As you are aware the investigations to date have revealed that the various actions of the DC Waster And Sewer Authority (WASA), the Environmental Protection Agency (EPA) and the Washington Aqueduct may have all contributed to the problem. Therefore, it would appear to be appropriate for federal dollars to be made available to assist in the cost for the testing of water, the testing of lead levels in residents and for the replacement of lead service lines. It is our hope that through the joint effort of the District and Federal Governments we can resolve this problem and again make water safe in the District of Columbia.
I would also like to ask for your help in obtaining approval of the District’s tax incentives that expired at the end of last year. The First Time Homebuyer credit, the Enterprise Zone credit and the revenue bond program are important to economic development in the District. The First Time Homebuyer credit attracts residents to the District and assists persons in purchasing homes that might not otherwise have an opportunity to do so. The Enterprise Zone credit and the revenue bond program are real incentives for attracting businesses to operate within the District.
The District has not been able to offer these very important benefits for the past five months. It is important to our economic growth that these tax incentives we reauthorize.
Federal Contribution
Historically, the relationship between the District and the Federal Government has been a unique political and financial arrangement. Between 1879 and 1920, the Federal Government would provide assistance by paying half of all District expenditures. Subsequently, given the various federal prohibitions on taxing nonresident incomes, federal properties, federal purchase of goods and services, the District would receive a direct payment. This payment was stopped in 1997 when the Federal Government assumed responsibility for the cost of the contributions to the police, firefighters, and teachers retirement plans, various Court services and portions of other state functions.
It is worth recalling that when the 1997 Revitalization Act was passed, one recommendation was that Congress would not need to review or approve the District’s budget because the city would no longer receive any federal payments. At a minimum, Congress should no longer approve the local portion of the District’s budget. Just like the other 50 states, the District should be solely responsible for approving its own local spending. Achieving such budget autonomy will allow the District to implement its budget in a timely manner and will assist in improving the city’s fiscal management. I want to thank you Mr. Chairman, the Subcommittee and the Senate for supporting this initiative. It is my hope that the U.S. House of Representatives will soon join you in adopting this proposal.
The District Government is always challenged in developing its budget due to the ongoing structural imbalance that exists between its spending needs and its revenue generation capacity. As noted in the General Accounting Office’s May 2003 report the imbalance amounts to between $400 million to $1.143 billion per year. The report also noted that the cost of providing public services is much higher in the District than it is in the average state due to a relatively large poverty population, poor health indicators, high crime, and the high cost of living. The report stated that the District has a very high revenue capacity, and the city is already taxing toward the upper limit of our revenue capacity, thereby creating a punitive tax structure.
Congresswoman Eleanor Holmes Norton has introduced Bill H.R. 4269, the “District of Columbia Fair Federal Compensation Act of 2004. The bill outlines the unique situation of the District of Columbia as a federal city. It proposes an annual federal payment of $800 million with provisions to adjust the number in the future. The $800 million would be made available to address important structural needs of the city, which the District Government cannot fully fund from its current budget. Transportation and street maintenance, information technology and DCPS capital improvements are essential to the running of the city. I ask for this Subcommittee to support this legislation and encourage adoption by the Senate.
I would like to mention one other way that the Congress could assist the District Government in managing its funds. Dr. Gandhi has proposed changes to the requirements for the Emergency and Contingency Cash Reserve funds. The proposed changes would provide additional monies for local programming and the provision of services to the residents of the District of Columbia while still maintaining required reserve levels. Your support of the proposed changes would be of great benefit to developing and managing our budget.
Conclusion
Finally, as you consider our appropriations request, we ask that you support and pass the budget in time for the start of the new fiscal year and before the adjournment of the 108th Congress. Furthermore, we urge you to pass the budget as is, without any extraneous riders. This much anticipated FY 2005 budget is important because it shows how the Mayor and the Council can work together and underscores our commitment to make Washington D.C. one of the best governed cities in the nation.
Nonetheless, the Council will continue to oversee the Executive’s operations and expenditures. We will be responsive to our constituents who call the District their home. We will work with the Mayor, Congress, and the surrounding governments to achieve mutually shared goals. Together with the Mayor, we will produce good responsible budgets that invest dollars for the District and leave a legacy for future generations. Granted we do not always agree from time to time, but we will be at the table to assert ourselves as an institution and work for the betterment and future of our citizens.
I thank you for this opportunity to present the FY 2005 budget and these issues of major importance to the District of Columbia.
