- The Washington Times - Friday, June 6, 2003

D.C. officials could relieve some of the city government’s fiscal problems by cutting spending, eliminating waste and better managing its agencies, according to a congressional report released yesterday.

But the District’s biggest fiscal problem is beyond city officials’ control — a lack of adequate funding from tax revenue and the federal government, the report states.

The General Accounting Office, the investigative arm of Congress, analyzed the District’s fiscal structure and found that the city could avoid a $144 million budget deficit in fiscal 2004 by improving its revenue collection and its management of services. Yet even at peak efficiency, the city government would eventually face a deficit of at least $470 million due to an imbalance between what the District is able to collect in taxes and what it must spend to provide services.

“If this imbalance is to be addressed, in the near term, it may be necessary to change federal policies to expand the District’s tax base or to provide additional financial support,” the GAO report “District of Columbia: Structural Imbalance and Management Issues” states.

The report was requested last year by Sen. Mary L. Landrieu, Louisiana Democrat; former Rep. Constance A. Morella, Maryland Republican; and D.C. Delegate Eleanor Holmes Norton, a Democrat and the District’s nonvoting congressional representative.

The District last year received from the federal government about $1.2 billion in grants and entitlements and $512 million for operating expenses to round out its $5.3 billion budget. Under the 1997 Reorganization Act, Congress funds and manages the city’s courts, prisons and U.S. Attorney’s Office, which acts as the local prosecutor.

Mrs. Landrieu, chairman of the Senate Appropriations subcommittee on the District, said yesterday that the GAO report noted the District’s federal receipts in its analysis.

“The city is a unique case … the tax burden is very high, almost at capacity, for property, franchise and income taxes and service fees,” Mrs. Landrieu said. “There are not many obvious places to go for new revenue sources.”

She said she will use the GAO findings to “open the eyes” of Congress in hopes of finding a quick, lasting solution to the city’s fiscal imbalance.

Mrs. Landrieu and Mrs. Norton held a press conference about the report at the U.S. Capitol yesterday.

Mrs. Norton said the report supports the findings of two previous fiscal studies that she has cited for more than a decade in advocating a larger federal contribution to city coffers.

“If the saying ‘three strikes, you’re out’ means something, then I hope I can say ‘three strikes, you’re in’ with the findings of this report,” Mrs. Norton said. “Reading the report, even obvious [revenue] options are off the table. … By process of elimination the only way to go is towards a federal contribution.”

The GAO report states that some poorly managed city agencies and programs waste so many resources that it hinders the District’s ability to provide “even an average level of services.

“Examples include inadequate financial management, billing systems and internal controls, resulting in tens of millions of dollars being wasted, and hindering its ability to receive federal funding,” the report states.

Though better management would not correct the city’s underlying fiscal problems, it “would help offset [the city governments] current budget gap or increase service levels,” the report says.

The report says the city over the past two years has deferred major infrastructure improvements such as building schools, upgrading the stormwater/sewer system and repairing roads to balance the budget. The city also has eliminated the usual revenue generators — cutting services and raising taxes — as options to address the structural deficit.

The city’s fiscal structural imbalance and high debt levels “make it difficult for the District to raise taxes, cut services, or assume additional debt,” the report states.

Mrs. Landrieu and Mrs. Norton said it is too early to pinpoint specific revenue options or congressional measures to deal with the structural deficit. But Mayor Anthony A. Williams yesterday came up with a few options in response to the report.

“There are a host of state-level functions that would be very appropriate for the federal government to fund directly, including the Metro system, Medicaid and special education,” Mr. Williams said in a statement released by his communications office.

Mrs. Landrieu said there can be no doubt that the federal government must accept responsibility for the continued upkeep of the city.

“The GAO is [Congress] gold standard for auditing research and has found there is an imbalance. … We will be optimistic that something will be done to correct the problem,” she said.

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