A House subcommittee yesterday approved a bill to establish a formula for setting the level of the government's annual federal payment to the District of Columbia, now proposed each year by the president using a loose set of criteria.
The legislation would use the fiscal year 1984 payment of $386 million as a base that would be adjusted each year according to the Consumer Price Index. This would determine only the authorized level of the payment. Congress still would approve appropriations for the payment separately.
The federal payment now equals about one-fifth of the city's total operating budget.
Before the action by the House District subcommittee on fiscal affairs and health, city officials testified that the bill would improve the District's ability to budget and would improve the city's position in the bond market by making the payment more predictable.
". . . The lack of predictability in the congressional phase of our budgetary process and, particularly, the inherent lack of predictability in the annual appropriation of the federal payment remain significant drawbacks likely to adversely affect the District's bond rating, resulting in higher interest cost to District citizens," said Alphonse G. Hill, D.C. deputy mayor for finance.
The city for the first time is trying to go to the bond market for both short-term and long-term borrowing to finance capital projects. In the past, most of the city's borrowing has been from the U.S. Treasury. Getting a good bond rating, and therefore lower interest rates, requires an ability to show a stable source of revenue, Hill said.
Currently, the president recommends a federal payment as part of the federal budget each year, and Congress approves both an authorization for the payment and a separate appropriation.
This means that city officials have to guess what the federal payment will be each year when it does its own fiscal year budgeting. The formula would give the city a better guide for estimating the federal payment, though the actual appropriation could still end up lower than the authorized level.
Del. Walter Fauntroy (D-D.C.) said he would have preferred for the appropriations level to be set by formula as well but that appropriations committee members were strongly opposed. He called the legislation "a very modest bill" and predicted it can get through the full House before the end of the year.
If the CPI formula had applied in the past, the city would have received increases of 11.3 rather than 8.7 percent in fiscal 1981; 13.5 percent rather than 12.2 percent in fiscal 1982; and 10.3 percent rather than 7.2 percent in fiscal 1983.
The formula also can work the other way, particularly now that the rate of inflation has dropped significantly. The payment for fiscal 1984, for example, represents a 6.9 percent increase, compared with the 6.1 percent that a CPI formula would have established.