Ronald Reagan's campaign was built on the theme that the federal government should reduce excessive control over states and municipalities, and that all public enterprise should be managed more efficiently. There is no more appropriate place to start to achieve those goals than in his new home town. Our new residents have a large interest in developing with us a lively, safe and productive capital city. The District of Columbia is a vital metropolis, with increasing regional economic and social leadership. Every national administration has a stake in realizing the city's full potential.
The key to a constructive relationship is the person (or persons) appointed by the new president to be liaison between the White House and the city government. A presidential adviser both knowledgeable about the District and influential within the White House and with congressional leadership can assure a solid timetable of progress.
Our transition to an independent municipality is well under way. That clock cannot be turned back. But full independence and stability will o nly be achieved with some major and occasionally painful adjustments. Mayor Barry has not hesitated to face up to this need: his administration has for the first time attempted a full and open analysis of historic fiscal deficits and management deficiencies.
Many of our problems have their roots in our pre-home rule past as a federal agency; some are on the president-elect's own agenda for federal reform. Underfunded pension systems, lack of long-term financing for capital infrastructure renewal and spending beyond our revenues by unrealistic reliance on the federal Treasury and the old cash accounting system -- all are targets for correction.
The Reagan administration will find that commitment to sound fiscal and management principles is matched by that of the Barry administration. The mayor is installing a modern accounting system that, in spite of its imperfections, is already bringing the city dramatically forward into fiscal accountability. He is overseeing the first independent audit of the city's books. He has proposed a three-year plan that combines responsible borrowing to retire accumulated liabilities with reduced expenditures over a long period in order to repay both principal and interest on those debts. He has insitituted a new personnel system, which holds top civil servants more accountable for policy implementation and effectiveness. And he has committed this city to operating within a balanced budget.
This austerity is necessary to overcome past problems, and it should strike a responsive note among the president-elect's advisers. But austerity alone is not enough. We have already begun to share with representatives of the new administration the unavoidable arithmetic of this capital city. We would be willing to pay more of our own way on the road to independence, but that option is not yet open to us, because 1) two-thirds of our land cannot be taxed by the District government, and 2) two-thirds of the income generated here cannot be taxed by the District government. These federally mandated exemptions from District property taxes, diplomatic and military exemptions and congressional restraints on our taxing authority cost us more than $640 million a year.
The annual federal payment is not a handout. It is a logical participation in the financing of the federal government's home town. Although it represents only 20 percent of our local budget (down from 25 percent five years ago), it is a critical compensation for the extraordinary impact of the federal presence. The present payment ceiling is frozen at $300 million a year -- far less than the tax loss -- and in recent years the actual payment has been even lower. It is time to make the payment both equitable and predictable.
Responsible municipal budget management cannot be achieved until the federal payment is established on a stable formula basis, as legislation now before Congress would provide. This basic management principle should earn the support of the incoming administration, as should earn the support of the incoming administration, as should the provision for basing the formula on local tax effort and revenues, which precludes any dependence on a free ride.
A Republican administration can also be counted on to understand another problem created by longstanding federal limits on our local tax options. Every city depends to a large extent on the good health of its business sector. In the District, however, we are deprived of the authority to implement tax programs that properly balance the needs of citizens against an attractive climate for business. That problem was well demonstrated recently when we had to rescind a last-resort gasoline tax because it had such a negative effect on local service stations. Here the small geographic size of the District also counts heavily -- the normal effects of revenue policies are often distorted by the ability of earners and consumers to cross state lines at will. Again, responsible municipal fiscal management is impossible without the same taxing authority enjoyed by every state and city in the nation, including the ability to tax commuter income.
Another federal obligation that cannot be side-stepped is the pension liability. Before home rule, Congress mandated pensions for our police, fire fighters, teachers and judges, but it did not set aside money to fund them. By 1975, unfunded liabilities totaled over $2 billion. We propose to take over responsibility for pension benefits earned since home rule, but the federal government has a clear obligation to assume the burden of pensions earned during the years it was responsible for this program.
A large part of our agenda, however, has nothing to do with dollars. It has to do with the authority to manage our affairs efficiently and productively.
No one who believes in sound public management can make a case for the wasteful and expensive process by which the District budget is annually reviewed by Congress. Present law requires the mayor and council to fully review the District's budget, including full-scale public hearings, nearly a year before the beginning of the fiscal year, so that the District budget can join the president's federal budget request for additional review by OMB and both houses of Congress. Quite apart from the underlying issue of whether Congress should have the ability to change line items in the District budget after the local government's will has been expressed, the logistical nightmare continually works against responsible management.
City officials are occupied with three budgets at once; the cost in staff time and duplication of documents alone is extraordinary and unnecessary. The inevitable uncertainties and inflexibilities of planning so far ahead would never be tolerated in the business world -- and are not required in any other city. The further hazards in a congressional election year, which have just now delayed approval of our budget until two months into the fiscal year, produce another element of waste and confusion that has nothing to do with the District. Responsible public management cannot be delivered without real budget autonomy.
We also look to the new administration to complete the action begun in 1969 by a Republican administration, which proposed a state court system for the District of Columbia. Although we now have a state court, legislation currently before Congress is necessary to end the unique and cumbersome practice whereby the federal government prosecutes local crimes, and to vest the power of local judicial appointment in the mayor, with council confirmation.
Finally, on the matter of voting rights, the new president has so far expressed some opposition. We hope to take advantage of his neighborliness to change his mind on this point. District citizens have the same responsibilities as other Americans. We pay federal taxes, we die in wars, and we deserve the representation that is routinely enjoyed by every other U.S. citizen.
Overall, we are hopeful that President-elect Reagan's fundamental belief in the importance of local government, and its right to be both accountable and responsive to its own citizens, will determine his approach to District issues. He will understand the limited ability of the federal government to make responsible detailed decisions for citizens of this city.
Thousands of those citizens work for the federal government, it is true. But the vast majority of us do not, and Mr. Reagan's clear willingness to get to know the rest of this city and its people is a very positive sign. We can work together to protect the needs and interests of the federal government in our midst, as well as to complete the task of bringing full home rule to the citizens of the District of Columbia.