Mr. Speaker, today, for the first time, I am not alone in introducing a bill for a federal contribution to address the District's structural imbalance. I am grateful to my Republican and Democratic colleagues who, in generously joining me…
Mr. Speaker, today, for the first time, I am not alone in introducing a bill for a federal contribution to address the District's structural imbalance. I am grateful to my Republican and Democratic colleagues who, in generously joining me today, have made this the first structural imbalance bill to have critical bipartisan regional support. Their sponsorship is particularly valuable because these are the members of Congress who know the District best because they are from the region--Government Reform Chair Tom Davis, Appropriations Subcommittee Chair Frank Wolf, Congressional Black Caucus Chair Elijah Cummings and Representatives Jim Moran, Chris Van Hollen, and Albert Wynn. Montgomery County Council Executive Doug Duncan has authorized me to say that he supports the bill as well. These Members recognize the importance of federal support to compensate the District for federally imposed requirements in order to forestall another fiscal crisis in the nation's capital, while the District itself continues on the path of improvement of its finances and services that the Congress has acknowledged.
This bill ranks as one of the most important I have introduced during my seven terms in Congress. Because of its significance, I have delayed introducing other bills this year until I achieved bipartisan support in order to make the Fair Federal Compensation Act my first bill of 2004. Without this bill, the long-term viability of the District of Columbia is at risk. This risk arises from a structural imbalance caused by expenditures rising faster than revenues. Notwithstanding this dangerous situation, the District is able to balance its budget every year and avoid operating deficits by maintaining tax rates and debt that are among the highest in the nation. District of Columbia Chief Financial Officer Natwar M. Gandhi has issued forecasts that show that in the out years, the structural deficit will overtake the city's diminished and inadequate tax base, not because of overspending by the D.C. government but because of the cost of federal requirements and statutes imposed on the District.
Today's bill is different from structural imbalance bills I have introduced in the past. This bill has as its predicate a May 2003 Government Accounting Office (GAO) report, which made three major findings--the first concerning the size of the imbalance, the second concerning its federal origin, and the third regarding the unavailability of options internal to the D.C. government.
First, the GAO confirmed that the District has a structural imbalance that it found is between $470,000,000 and $1,100,000,000 annually, the first determination that is based on a precise methodology for valuing, documenting and calculating the imbalance. This congressional report confines two prior privately commissioned reports that arrived at similar conclusions, a 2002 McKenzie study commissioned by the Federal City Council (an organization of regional and local business leaders) and a Brookings Institution study under the leadership of former Congressional Budget Office Director, Alice Rivlin, who also served as a chair of the former D.C. Control Board (Financial Management and Assistance Authority).
The GAO's second finding was that D.C.'s structural imbalance is caused by federal mandates and is therefore beyond the reach of D.C. government officials and taxpayers. The federal government retains 42 percent of real property, the most valuable in the city, for its own use; requires the city alone to provide costly state services, such as special education, although the District is not a state and lacks a broad state tax base; requires the District to provide services to more than 200,000 federal employees, who earn 66 percent of the income produced here; and prohibits taxation of federal workers to help pay for these services. These costs to the city trace directly to the federal government and only the federal government.
The GAO's third finding is that the only two options available to the District government are raising taxes and cutting services, each of which the GAO said it could not recommend. Rather, the options are to ``change Federal procedures and expand the District's tax base or provide additional financial support and a
greater role by the Federal government to help the District maintain fiscal balance,'' according to the GAO.
The bill I introduce today is based on these three GAO findings. The bill offsets part, though not all, of the annual structural imbalance, by providing for an annual federal contribution of $800 million. These funds are to be deposited into a D.C. infrastructure support fund that cannot be used for operating expenses but only for the specifically stated infrastructure purposes.
The bill removes some of the harm to the District's investment bond rating and the resulting high interest payments by requiring that federal contribution funds go only to the District Infrastructure Fund to be used exclusively for infrastructure and for debt service, most of which is debt from infrastructure costs. The focus on infrastructure is deliberate because the District's infrastructure is used by the entire region, where 80% of the vehicles originate and includes Metro, used overwhelmingly by regional residents. Regional complaints about the District's roads, bridges and tunnels are justified, but there is no reasonable hope of repair and maintenance if the District's taxpayer- raised budget is the only source. The focus on debt service is calculated to reduce the District's debt, the highest per capita in the country. With some relief from the structural imbalance through a federal contribution, the District will gradually be able not only to reduce its debt but also to lower the high tax rates that the imbalance forces on D.C. residents and businesses. This bill also takes into account past federal contribution failures. This bill does not allow the contribution to wither away by a failure to increase gradually with inflation but provides for annual increases tied to the Consumer Price Index.
In 1995 Congress came to grips with the reality that a city whose structure assumes it is a state although it lacks a broad tax base can no longer be responsible for the full set of costs shouldered by states. However, Congress relieved the District of the cost of some but not all state functions and left the unique federal structural impediments described in the GAO report. The District has made remarkable progress by maintaining balanced budgets and surpluses every year despite adverse national economic conditions and by improving city services. It would be tragic for Congress to allow this progress to be retracted because of uncompensated federal burdens. This bill allows the District to avoid great risks and to continue to build fiscal strength.