Summary of Title XI, H.R. 2015
Provided by the House Subcommittee on the District of Columbia
("District of Columbia Revitalization")
Thursday, July 31, 1997
Explanation of Title XI of HR 2015,
Balanced Budget Act of 1997
District of Columbia Assistance package
Subtitle A - Unfunded Pension Liability
Subtitle A lifts the burden of the $4.8 billion unfunded pension liability for police and firefighters, teachers, and judges of the District of Columbia created when the federal government transferred those pensions plans to the District of Columbia in 1979.
The bill has the Secretary of Treasury assume the payment of benefits to currently retired DC teachers, police and firefighters. The judges become a separate federal plan under the federal takeover of the District courts (Chapter 4). There is a "freeze date" (June 30, 1997) mandating that no further benefits may be earned under the existing plan. Because of the freeze date there can be no "gaming" of the system where people retire normally or on disability and receive more benefits from the federal government than they would have otherwise.
The Secretary will transfer from the DC Retirement Board approximately $3.2 billion in assets and deposit them in a new DC Retirement Fund in the Treasury. Six months after enactment of this legislation the Treasury will set up another account, the DC Supplemental Fund, and begin to deposit Treasury bills in an amount amortized to pay off the liability in 30 years ( Secretary determines exact timing).
The Secretary hires an Agent to manage the assets and make the payments. The retirement benefits are paid out of the transferred assets until they are used up (approximately 8 years). After the assets are used up, benefits will be paid out of the Supplemental Fund which will have accumulated more than $3 billion in Treasury bills by that time.
Within one year of enactment, the DC government must adopt a Replacement Plan for currently active police and firefighters, and teachers. The legislation requires this new plan to meet ERISA standards and be fully funded. Current police and firefighters and teachers will then have retirement benefits under 2 pension plans - benefits earned up to the freeze date under the current plans; and benefits after the freeze date earned under the Replacement Plan.
The Secretary is instructed to contract with a consultant to study alternative methods of financing the federal obligation assumed in this Chapter. The study must be completed within one year of enactment.
Subtitle B - Management Reform Plans
The Financial Responsibility and Management Assistance Authority (control board) and the District of Columbia govermnent shall develop management reform plans for 9 1isted District agencies and for 4 citywide functions. The control board is to contract with consultants to develop the management reform plans and the plans will have to be finished within 90 days. The department heads will be responsible for implementing the reform plans within their departments and will report to the control board and to no one else. The control board will direct the implementation of the citywide reform plans. The heads of the nine named departments may only be dismissed by the control board. Upon enactment there is deemed to exist a vacancy at the head of each of the agencies. The mayor may reappoint current department heads or nominate new persons, but the control board must confirm those positions and if the mayor does not make a nomination within 30 days, the control board shall appoint the head of the nine agencies. The heads of the nine named agencies will have control and discretion on personnel matters within their agencies.
Subtitle C - Criminal Justice
The legislation takes over funding and operation of the District of Columbia sentenced felon population. A Trustee is set up to oversee the operation of the District Deparunent of Corrections operations at the Lorton Corrections Complex until all inmates are removed from the District facilities at Lorton and then Lorton is closed (no later than 2001). The federal Bureau of Prisons is responsible for housing all DC sentenced felons and is authorized to contract with other governments or private companies or to place them in federal facilities. The Bureau of Prisons is ordered to privatize at least 2,000 DC inmates by 1999 and at least 50% of the DC inmate population by 2003. The federal government will pay for the sentenced felon portion of the DC Department of Corrections, but DC will be responsible for the rest of the corrections system (juveniles, misdemeanant, etc) both during the Trusteeship and after BOP assumes responsibility for sentenced felons.
The "Truth-in-Sentencing" requirements of the 1994 Crime Bill must be met by the District for the takeover to occur. A Truth in Sentencing Commission, chaired by the Attorney General, is established and has 6 months to recommend amendments to the District of Columbia Code for sentencing certain felony crimes. If the District government has not enacted any recommended amendments or if the Commission fails to make any recommendation, the Attorney General is directed to promulgate amendments to the District Code as necessary under the provisions of this Subtitle.
The federal government will assume funding responsibility for the DC court system, including probation, public defender service, and pre-trial services, which will become a federal agency. The courts will continue to be self-managed. The District of Columbia parole, probation, and pre-trial services will be operated by a federal Trustee until those agencies meet federal standards and then will become a federal agency.
Subtitle D - Tax Administration
The District of Columbia Chief Financial Officer is authorized to contract up to the entire processing and collection of the DC tax system. Such contracting must be done with the approval of the control board.
Subtitle E - Financing Accumulated Operating Deficit
The District of Columbia will have accumulated an operating deficit of approximately $520 million between 1991 and September 30, 1997. Carrying this debt is severely impacting the District's cash position and holding down the ability of the District to access the private finance market. In other cities in financial crisis one of the first actions is to finance the operating deficit to get the city back on an even cash basis.
This legislation authorizes the District to finance its accumulated operating deficit (it does not have the authority to sell bonds for deficit financing otherwise). The legislation also provides that if no other source is available, the Treasury is authorized to lend to the District for this purpose up $300 million on terms up to 10 years. Additionally, Treasury is authorized to continue to make cash advances to the District for seasonal cash flow purposes on a term of not more than ll months.
All monies borrowed from the Treasury have to be repaid at the relevant Treasury rate plus l/8 of a percent interest. Treasury borrowing is more expensive that private market borrowing so it is anticipated that this authority would only be utilized as a last resort.
Subtitle F - District Government Borrowing Authority
The District of Columbia's borrowing authority, including the use of revenue bonds for economic development purposes, was written in the 1973 Home Rule Act and has not been substantially revised or modernized since. The District authority was also severely restricted because of its inexperience with the public borrowing. Since 1973 the whole world has changed regarding the use and structure of municipal bonds, including revenue bonds. Because of the District's restricted authority, the District has never been able to utilize all of its annual allocation of revenue bonds and has suffered reduced economic development and a competitive disadvantage to states and other cities. In addition, the District government has been less able than other jurisdictions to borrow funds for public purposes and this has contributed to the serious deterioration of its capital assets.
The legislation modernizes the District of Columbia's authority to issue both General Obligation and Revenue bonds and brings it into conformity with other jurisdictions. There is no effort to give the District more authority than other jurisdictions nor to continue to restrict or hinder the District in its ability to use this valuable economic development tool.
Subtitle G - District of Columbia Budget
The legislation eliminates the existing federal payment to the District of Columbia government. The District is required to balance its budget in FY 1998 as opposed to the current requirement that this be done by 1999. The debt service limitation in the Home Rule Act is mod)fied to account for the loss of the federal payment.
The legislation provides for a federal contribution to the operation of the government of the Nation's Capital with a 1998 level of $190 million.
Subtitle H - Miscellaneous
A number of miscellaneous provisions dealing with diverse aspects of the District of Columbia are contained in Subtitle H. The control board is directed to implement 2 levels of
regulatory reform in DC within 1 year:
1) Gives the control board 6 months to review and use its power to change regulations it finds to
be anti-competitive, anti-business, or unnecessarily complicated.
2) Gives the control board 1 year to determine why DC's application, permit, and inspection
programs are dysfunctional and take whatever action is needed (regulatory, personnel,
privatization) for DC's processes to be performed at or above the national average with a further
goal of making DC's permit and application processes the best in the nation.
Actions are taken concerning several federal and DC statutes and federal law enforcement agencies are allowed and encouraged to make agreements with the Metropolitan Police Department detailing how these federal agencies will assist MPD in increasing public safety in the Nation's Capital.
Back to the top