Michael Bindner's DC Blog

In this blog, I discuss DC politics and other issues of import to local government. I have posted several essays from my book, Musings from the Christian Left, on blog entreies dated June 2004.

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Location: Alexandria, Virginia, United States

Tuesday, June 01, 2004

DC Finance (Geocities Rescue)

My original intent was to include the various essays presented below appear in different chapters, with the section on D.C. finance in the previous chapter and an essay on the rights of District residents to self-government in the chapter before on Social Politics. After looking over my collected writings on the subject, however, I realized that this topic contained more than enough material to stand alone. The difficulties the District faces are as much to do with the national legislature, as they are to do with its own mistakes. Given the national passion for pointing out the human rights foibles of other nations, the treatment of the District is an international.

Some may wonder why I follow an essay on abortion with an essay on District of Columbia finance. Those who know about District politics easily guess, however. One key component in budget autonomy for the District of Columbia is the Hyde Amendment attached to the annual District of Columbia Appropriation, which is passed by Congress rather than being solely the province of the elected leaders of the District Government.

Abortion, Medicaid and Budgetary Autonomy
Legislation has recently been introduced to provide for budgetary autonomy for the District of Columbia. This legislation allows the locally passed budget to become law after the customary period of congressional review required of all District legislation. Congress passes, as appropriations legislation, any direct support for the District of Columbia, such as funding of the incarceration of its felons or its presidentially appointed court system. This act gives the District the same financial autonomy as any state or city. Many states have a much higher portion of federal land than the District, yet Congress does not pass their budgets directly. A main effect of this legislation is to allow the District Government to carry on its affairs, even during a federal budget crisis or in the face of a presidential veto of the congressional mischief that occurs when different parties control the Hill and the White House (and even when one party controls both houses, as the recent school voucher battle demonstrates). This improves the District’s position, shifting the balance of power between the District and Congress. For instance, a Democratic president has the freedom to veto a District Appropriation with school vouchers or other riders without shutting down the District Government. Of course, this provision may backfire on Democrats if they win back Congress in 2004 while the President is reelected. For instance, a voting rights bill attached as a budgetary rider passed in such circumstances draws a Bush veto without shutting down District services. It is no wonder that the President supports budgetary autonomy.

One rider that tends to inflame passions is the Hyde Amendment, which bans the use of Medicaid funding for abortion services. Budgetary autonomy means that the District Government could attempt to circumvent this provision by inserting it in the local budget and then securing enough Democratic votes in the Senate to block any joint resolution of disapproval. This change in the balance of power causes some in the Pro-Life/Anti-Choice community to oppose budgetary autonomy. To avoid such a step, and to stop what for years was the annual drama around the amendment to the District budget (which had more to do with fundraising than abortion), two options come to mind.

The more likely and less desirable option is to add the Hyde Amendment to the budgetary autonomy act itself, which is a killing amendment for Senate Democrats. The other preferred option is full federal funding of the District’s Medicaid expenditures. With the aging of the baby boomers and the District’s substantial elderly and poverty populations, Medicaid is a continuing cause of budgetary worry. The inability to tax all income earned in the District means that the biggest potential safety valve to a certain budgetary explosion is not available. The only other option is full federal funding of these expenditures. As you have probably already guessed, this also extends the Hyde Amendment prohibition to all District Medicaid costs, regardless of budgetary autonomy.

Mental Health Care and Corrections
Mental health care is a related issue. In 1978, as part of the District's assumption of St. Elizabeth's Hospital, the federal government agreed to make certain contributions toward the renovation of physical plant. The federal government never paid these obligations. This damages the ability of the District to provide adequate mental health services, especially to homeless individuals with mental illness and drug and alcohol addiction, to properly serve the citizens of the District. Many of these patients are in fact either federal or were originally regional, i.e. residents of Virginia or Maryland, although their care is now funded solely by District taxpayers and the District’s Medicaid entitlement. Ideally, the federal government and the region share in the cost of these services. St. Elizabeth’s Hospital is both a local and a national tragedy. It is better to close this facility and transfer its patients to regional and private facilities at federal and regional expense. (including the type of facility I have described elsewhere). Regional cost sharing on this matter goes a long way in compensating the District for taxes it has a right to collect.

Corrections for the District are now federally funded. These provisions need to be revisited, especially those provisions which require that these inmates be held in private, often for profit, prisons. Citizens of good conscience are right to oppose prisons that are operated for profit. They often result in cruel and unusual punishment for the inmates and that they create pressures for greater and greater penalties for offenders to keep these facilities full, which is a danger to all of our liberties. It is preferable to create an arrangement that trades corrections services for some of the inherent financial liability incurred by our neighboring state governments for their continued opposition to a non-resident income tax.

Education Finance
Education finance is a matter of continuing concern. In FY 1999, Senator Lauch Faircloth inserted a provision into the District Appropriation to further guarantee that parents from Prince Georges County who send their children to District schools be made to pay tuition. Meanwhile, white parents continue to move to Montgomery County rather than send their children to District Junior High and High Schools. It is time to solve both problems. Allow students to attend any public school in the region as if they lived in that school district. (including public and private charter schools). Have them report their true residence to the school district, which collects the cost of tuition from the County or District Government where they reside. This ends both the free rider problem in DCPS and the middle class and white flight from the District of parents of junior high school students.

Regional Finance
It is past time to commission a joint study by the Congressional Budget Office and the Internal Revenue Service on the current impact of current prohibition on non-resident income taxes. Explore the possibility that some services be regionally funded, such as education, corrections, Temporary Aid to Needy Families and mental health, in lieu of the establishment of non-resident income taxes.

Examine the impact of current commuting patterns. Such a study likely exposes a large flow of income from the Tyson’s Corner technology center to the Maryland suburbs. This circumstance, as well as the loss of revenue from the personal property tax on vehicles, has plunged Northern Virginia counties into a fiscal crisis that exceeds the one from which the District has recently recovered. Armed with these results, form regional authorities and tax structures and jointly forestall many of our common problems from Loudon County to Baltimore City.

Jim Moran of Alexandria put such a study in the fiscal year 2001 budget. Tom Davis, in what was undoubtedly a short-sited move, took the study out. Such a move is short –sighted because it shows that many commuters from Maryland to Northern Virginia who are liable for the payment of non-resident income taxes to the Commonwealth don’t pay them. Of course, Northern Virginia developers don’t want this fact in the public domain, since it makes their location less attractive to business.

Infrastructure and the Federal Payment
It is also past time for further study of a regional transportation authority to set a uniform gas tax for road repairs and improvements in mass transit, reducing gridlock and smog. Such an authority benefits the entire region, not just the District, although the infrastructure deficit in the District is most telling and not entirely the District’s fault.

During the later part of the 1980s and the early 1990s, a large portion of the District budget went to fund a pension liability that was transferred to the District without the assets which had been paid into the pension system by covered teachers, fire fighters and police officers. During the time of this obligation, District taxpayers funded $2.2 billion in pension assets which were not there responsibility to accumulate in the first place, and which have since been raided to fund non-District spending priorities. The drain of the unfunded pension liability led to disinvestment in infrastructure, which in turn has resulted in a large infrastructure deficit, which the current Mayor estimated at over $2 billion.

Some federal payment is appropriate for services rendered to the federal government. It is interesting to note that the National Park Service receives reimbursement from the Secret Service for coverage of presidential motorcades, while the Metropolitan Police Department does not. When the federal payment existed, it was understood to include these costs, as well as the costs of roads and fire protection for federal buildings. Since that payment has been withdrawn, no such provision exists. It is time to restore it.

It is time to audit of all expenses incurred by the District that serve the Federal Government since Home Rule. Many of these may be reimbursable, including those instances where the federal payment was cut in violation of the home rule act formula accepted by the citizens. Compare these expenses to the various federal monies received, including the federal payment the District appropriation, impact aid in the Defense Appropriation and the Payment in Lieu of Taxes in the Interior appropriation. It is likely that the District is owed money. Send an invoice for this amount to the National Capital Planning Commission, which is the agent of the President in administering the National Capital Service Area. Include promised but unappropriated sums for accepting St. Elizabeth’s plus a reconsideration of how much the District gave up due to the transfer of the pension liability (it is absurd that it ever had to pay it in the first place). One possible form of repayment is the assumption of a portion of the District’s General Obligation Debt and a mechanism to bill additional NCSA support costs in the future.

A Legacy of Broken Promises
The financial history of the District is a serious of broken congressional promises. Over the past two hundred plus years, local investors and taxpayers have consistently been called upon to make up for the lack of federal financing for what are arguably federal expenditures.

Congress has a history of inadequately funding D.C. public works. Lack of adequate federal support began with the sale of land to finance the construction of public buildings, rather than direct financing or borrowing to accomplish this purpose. From the start, the federal government refused to adequately fund the construction of roads. (See Constance McLaughlin Green, Washington, A History of the Capital 1800-1950, pp. 39-41). It was not until the territorial government period that an adequate program of civil engineering was undertaken. While there was regrettable corruption in the contracting process associated with these improvements, these irregularities were no more or no less prevalent then those found in similar cities at the time (for example, Republican Boss Tweed in New York). Of note, while the Commissioners did install extensive waterworks, these were then allowed to decay over much of their administration, leading to the current need for mass replacement of pipes and sewers.

Federal support has been decidedly inadequate to fund the District, despite adequate federal taxes received from the District. This century has seen a declining level of federal support, from 50% of District tax revenues shortly after the turn of the century to no direct unencumbered support in the current fiscal year. While a large percentage of the District budget comes from federal funds, the same can be said for the budgets of all states and many cities. With the advent of home rule, a formula based federal payment was established to compensate the District for lost revenue, and additional expense, due to the federal presence. Despite the inadequacy of the formula from DC’s perspective, this methodology did not survive for long. It was replaced with several other methods that, with one exception, led to lesser and lesser discretionary federal payments, without a lifting of federal restrictions on the District's ability to raise revenue. This payment was finally eliminated as part of the re-assumption of the pension liability for certain employees previously funded under the federal system.

Since the institution of Home Rule, the Congress of the United States has abrogated its agreement to provide an adequate federal payment based on factors accepted by District voters. District voters, after having agreed to certain conditions, were promised certain compensations. The Congress has unilaterally reduced this compensation without first obtaining the consent of these voters and must therefore repay District taxpayers for the shortfall. It must do more than that, however. It must cease meddling in District affairs.

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