Former D.C. financial control board chairman Alice M. Rivlin called yesterday for a new federal payment of $300 million to $500 million a year to stabilize the national capital's otherwise permanently shaky finances, which she blamed on its unique constitutional status.
Rivlin and co-author Carol O'Cleireacain, former New York City budget director, said in a Brookings Institution report that the District's future as a "world-class" city is held hostage by federal limits on what it can tax, extra burdens that it bears as a city without a state, and a 30-year-plus backlog of costs to modernize schools, roads and sewers.
"The city of Washington has the potential to be a truly great capital city," stated the report, "A Sound Fiscal Footing for the Nation's Capital: A Federal Responsibility." "However, the unique status of the District of Columbia and the fiscal restrictions placed on it by the federal government prevent Washington from fully realizing its potential as a first-rate place to live, work and raise a family."
The report lays out five mechanisms a federal payment could take, but makes no recommendation, leaving the matter for negotiation. Options include a federal payment in lieu of taxes, redirection of federal income taxes paid by District commuters, compensation for the District's state-like costs, a per capita grant or state-like aid to public education.
Mayor Anthony A. Williams (D) and Chief Financial Officer Natwar M. Gandhi aided the study and supported its conclusions.
"We're looking for a new relationship," Williams spokesman Tony Bullock said. "We need to address the ongoing reality that the federal government imposes a huge financial burden on the District government and doesn't pay its way."
The study represents the most detailed rationale to date in a two-year campaign by Washington civic leaders to augment the $5.4 billion in local funds spent annually by the District government on programs and services, a campaign that is stirring debate among congressional overseers.
With the District forced to raise taxes and cut spending to fill a $323 million 2003 budget gap and with revenue forecast to be lower, the topic will percolate until a new Congress comes to work next spring.
Chris Close, spokesman for Rep. Joe Knollenberg (R-Mich.), chairman of the House Appropriations subcommittee on the District, welcomed the latest report. But Knollenberg "thinks the report that will carry the most weight on this issue will come from the nonpartisan General Accounting Office," Close said.
The GAO has launched a study of District finances, comparing them with those of other cities and considering ways to trim costs.
The Brookings report breaks little ground. But it marshals a host of numbers, estimates and projections indicating that the District will continue to limp along fiscally in coming years because it remains a service-hungry central city without a state to subsidize its costs.
"We accept that there is some degree of cost inefficiency built into the District's spending levels. We do not know how large that is. Neither does anyone else," the Brookings report said. "However, [that] does not eliminate the underlying fiscal crisis that threatens the health of the nation's capital."
The report reiterated that the District's major industry -- the federal government and related embassies and nonprofit organizations -- is tax-exempt, and two-thirds of those who work in the city cannot have their incomes taxed because of a federal ban on taxing commuters from surrounding states.
The District has estimated it forgoes $820 million in property, sales and other commercial tax revenue and $1.4 billion in income taxes a year.
The commuter tax ban "effectively transfers the bulk of the District's tax base to the treasuries of Maryland and Virginia," the study states.
By contrast, the study notes, the city of Baltimore, rather than subsidizing its wealthier suburban neighbors, funds 59 percent of its public school system with state revenue and 24 percent with local revenue. In the District, 78 percent of the schools' budget comes from local funds, the report states.
Rivlin, a former Clinton administration budget director, joined The Washington Post Co. board of directors in July.