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Clinton Proposes U.S. Run Many D.C. Services

By David A. Vise and Clay Chandler
Washington Post Staff Writers
Tuesday, January 14 1997; Page A01
The Washington Post

The Clinton administration yesterday proposed that the federal government take responsibility for billions of dollars of District programs in exchange for eliminating the $660 million annual federal payment to the city, part of a package that would fundamentally redefine the District's relationship with the federal government.

Under the far-reaching proposal, self-government in the District would retreat in important ways, with some federal agencies playing larger roles in D.C. affairs. For example, the Internal Revenue Service would collect the city's annual income taxes, the Justice Department would take charge of the District's prisons and courts, and federal agencies would maintain the city's roads and bridges. But in other respects, the District would gain a greater measure of home rule because Congress would no longer approve the city's annual budget.

If Congress approves the proposal, the federal government would begin funding the District more in the way that state governments support their cities. The federal government would take responsibility for the city's $5 billion shortfall in a retirement plan, pay a larger share of the District's annual Medicaid bills, pick up the cost of its prison system, put $1.4 billion into repairing local roads and bridges, help finance the city's $500 million budget deficit, and create tax incentives to spur investment downtown and in poor neighborhoods.

Mayor Marion Barry (D), who called on the federal government to pay for many D.C. services early last year, said he was encouraged by the administration proposal. Del. Eleanor Holmes Norton (D-D.C.) and D.C. financial control board Chairman Andrew F. Brimmer also reacted favorably, while acting D.C. Council Chairwoman Charlene Drew Jarvis (D-Ward 4) was cautious, saying the loss of the federal payment and other aspects of the proposal need to be scrutinized.

"It is heading in the right direction," Barry said. "These are righting the wrongs that have been there for too many years."

Norton called the plan "the most promising and certainly the most innovative approach yet to emerge for relieving the District government of costs it can no longer shoulder."

"Unlike every other plan that has come forward, this has a chance of passage because it bears in mind not only the District's needs but the congressional insistence that its own costs not rise dramatically," Norton said."

By ending the annual federal payment to the city and requiring the District to begin balancing its budget by fiscal 1998 -- a year earlier than Congress has required -- the Clinton administration's package has a better chance of being approved by the Republican-controlled Congress. Members from both parties have questioned whether they should give the District more money before the city makes deeper cuts in its $5 billion budget and implements management reforms.

Yesterday, a spokeswoman for House Speaker Newt Gingrich (R-Ga.) reiterated his support for revitalizing the nation's capital, which has been struggling with rising crime, underachieving schools and a flight of residents and businesses to the suburbs.

A senior Clinton administration official said the plan would provide $773 million in additional funds to the D.C. government over five years and increase the federal budget deficit by $339 million. But the plan is worth considerably more to the city in the long run because the federal government would pay a bigger share of increasing Medicaid expenses, as well as the rising cost of a pension plan for retired D.C. police, firefighters, teachers and judges, which the control board has warned could bankrupt the city.

Franklin D. Raines, director of the federal Office of Management and Budget, disclosed details of the proposal in a closed-door meeting yesterday with Norton, Barry, Brimmer and Jarvis.

Brimmer called the Clinton administration's package a "good deal for the District." He said that even after eliminating the $660 million federal payment to the city, the federal government would be providing the District with hundreds of millions of dollars in additional funds.

"I am supportive of this overall package," he said.

The arrangement outlined by Clinton administration officials yesterday would fundamentally restructure the relationship between the District and the federal government, restoring federal control over many of the financial and managerial responsibilities that were handed to the city in the 1970s.

"The deal struck in 1974 . . . has not worked," a senior Clinton administration official said last night. The official said part of the failure resulted because "local officials have not performed as well as they must in managing the city."

But the official also blamed the terms of the original deal. "The local, county and state responsibilities we gave this city in 1974 have proven beyond the city's resources to deal with them," the official said.

The Clinton proposal is the culmination of dozens of meetings involving members of the Cabinet, including Raines, Treasury Secretary Robert E. Rubin, Attorney General Janet Reno, outgoing Housing Secretary Henry Cisneros and national economic adviser Gene Sperling, in addition to First Lady Hillary Rodham Clinton. The proposal has an unwieldy official title: "The National Capital Revitalization and Self-Government Improvement Plan." A top Clinton aide called the new arrangement "the grand swap" -- a transaction in which both the District and the federal government could come out ahead.

The initiative also reflects a major shift in decision-making by the Clinton administration, which has been criticized locally for not aiding the city enough. Last month, the administration initially reacted coolly to a control board report that called on the federal government to pay for about $1 billion in D.C. programs. But within a day, the president, who had been urged to aid the city by Hillary Clinton, endorsed the report.

And Brimmer said the administration proposal addressed all of the major items cited in the control board report except for costly mental health programs.

Local business leaders praised the proposal. "The president's plan is a home run," said Susan Williams, chairwoman of the Greater Washington Board of Trade.

Aides said Clinton kept close tabs on the discussion about how to aid the District, scribbling on the margin of a December options memo from Raines, "I want to make the final call on these." Clinton received Raines's final decision memo just after Christmas, aides said. Final details of the plan, which may be formally announced today, were approved last weekend.

The proposal is contingent on the administration's reaching a "memorandum of understanding" with the control board and D.C. officials before it is submitted to Congress. But it will not come without strings attached.

In addition to taking charge of the city's troubled prison system, the federal government would run the D.C. courts and require that felons be sentenced according to federal guidelines. And some D.C. government employees would lose their jobs as federal officials turn some programs, such as prisons, over to private management and restructure how others, such as tax collections, are run.

A Clinton administration official sought to counter perceptions that the District was getting things too easy, saying, "We view this as a tough love approach."

© Copyright 1997 The Washington Post Company

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