D.C. Proposal Meets With Resistance

President Clinton's D.C. aid proposal was criticized yesterday by key congressional Republicans, who said it would cost taxpayers billions of dollars, and by D.C. Council members, who don't want to give up the annual $660‚million federal payment to the city as part of the deal.

Under the plan, the federal government would run the city's prisons, collect D.C. personal income taxes, pay a bigger share of Medicaid costs, repair major problems with roads and bridges, and fund a city pension plan that has a shortfall of more than $4‚billion. But Clinton administration officials emphasized that city officials must agree to many details before new federal funds would flow to the District.

Franklin D. Raines, director of the federal Office of Management and Budget, called the package "the boldest plan for the District that any president has ever proposed" and said it would help the city regain financial stability while maintaining pressure for cost-cutting and management reforms. But Sen. Lauch Faircloth and Rep. Charles H. Taylor, the North Carolina Republicans who head the congressional subcommittees on D.C. spending, said the proposal is an ill-conceived effort to bail out a poorly managed city.

"I like a greater federal role in District affairs. However, this plan could be called the 'great ripoff,' not the 'great swap,'‚" Faircloth said. "How can we plausibly discuss cutting Medicare . . . and at the same time provide a multibillion-dollar bailout for a mismanaged city?"

While Faircloth's remarks raised questions about the political viability of the proposal, a spokeswoman for House Speaker Newt Gingrich (R-Ga.) reiterated his "strong commitment" to the District and said he wants to find bipartisan solutions to its problems. And Rep. Thomas M. Davis III (R-Va.), chairman of the House Government Oversight subcommittee on the District, called the White House proposal a "good start" and said he intends to hold extensive hearings.

Although President Clinton did not appear at the formal announcement of the plan yesterday, administration officials said he is firmly committed to helping the city and will push for the bill's approval. OMB spokesman Lawrence J. Haas said that in the last few months the D.C. package has been "among the top items" on the president's list. "He is committed to working with Congress, city officials and whoever else he needs to to see the plan enacted," Haas said.

Gingrich noted that the plan lacks radical income tax reductions to bring people back into the city, which has been losing residents and businesses to the suburbs. And both Gingrich and Taylor—who said his Appropriations subcommittee on the District will study the proposal carefully—said the plan would not combat major difficulties with schools, crime and other programs facing the city.

"Throwing money at difficult problems is not a unique recommendation in Washington," Taylor said, "but it is not the direction this Congress has been trying to steer the rest of America."

D.C. Mayor Marion Barry (D) said he supports the overall proposal, and Andrew F. Brimmer, chairman of the D.C. financial control board, gave it a favorable review, saying, "I see the president's program as a bold and constructive move to give meaningful assistance to the District."

Acting D.C. Council Chairman Charlene Drew Jarvis (D-Ward 4) called the proposal "a real step in the right direction," but most other other council members gave it mixed reviews and opposed key parts of the plan.

Council member Jack Evans (D-Ward 2) said giving up the federal payment would weaken the city financially, and Harold Brazil (D-At Large) said a federal takeover of key city functions should be avoided. "The overriding issue . . . for me is who will control the lion's share of life in the District," Brazil said.

At a White House news conference to announce the plan, Raines, the budget director, said it is time to redefine the federal government's "fundamentally flawed" relationship with the capital so that it receives the kind of support that other major cities get from state governments. He also said the federal government had burdened the city with too many costly and difficult-to-manage programs when it granted the District limited self-government in the 1970s.

Clinton's plan calls for the federal government to provide tax incentives to spur investment in the city and set up a D.C. improvement fund that local firms exempt from D.C. income or property taxes would be encouraged to support. The federal government also would take responsibility for a D.C. pension fund for police, firefighters, teachers and judges that has a shortfall of more than $4‚billion and could bankrupt the city.

"We are simply reshuffling the deck in a way that is fair," Raines said.

Raines said the proposal would give the city an additional $770‚million over five years. It would give the District about $42‚million more in fiscal 1998, the first year of the plan, when the city would be required to begin balancing its $5‚billion budget. But in the long term, Raines said, the proposal would provide billions of additional dollars for the city, most notably by making up for the giant pension shortfall. He said the White House would submit the D.C. plan to Congress as part of the president's balanced budget proposal next month.

Initial assessments of the deal by some D.C. financial specialists and labor leaders were positive. D.C. Chief Financial Officer Anthony A. Williams said federal help with financing the city's deficit of roughly $500‚million would provide significant relief, particularly if city officials move forward rapidly with cost cutting.

Joslyn N. Williams, president of the Metropolitan Washington Council of the AFL-CIO, said, "This will make it easier to manage D.C., because of the awesome burden that's been placed on it historically by the state functions."

Del. Eleanor Holmes Norton (D-D.C.) said she still intends to push for a major federal income tax cut to keep residents from leaving, a plan the White House opposes. Raines said there was no guarantee that the administration proposal would stop the District's tax base from eroding as people move to the suburbs, but both he and Treasury Secretary Robert E. Rubin said the city's economy should benefit from increased confidence that the White House is committed to bolstering the capital.

Numerous congressional Democrats hailed the administration's plan. Norton said Congress should adopt it because it would help the District without giving the city a free ride.

"This begins to get us out of the mud," she said.

Staff writers Todd Beamon, Hamil R. Harris, Michael Powell and Yolanda Woodlee contributed to this report.