THE RIVLIN Commission's report on the finances and programs of this city's government is not only a gold mine of specific facts and recommendations for a more efficient local operation but also an invaluable primer on the pre-home rule history of unfair financial treatment of the capital city by its federal/colonial overseers. There for all to read -- and members of Congress, please join in -- is a chapter detailing the long, lopsided relationship that left the city with impossible financial liabilities even before the first elected government was allowed to exist 15 years ago. The shortchanging has never stopped, either; it is today still grounds for lifting longstanding, severe restrictions on the city's financial health -- from inequitable limits on the federal obligations to the city to the unique charter restriction against any levy of a D.C. tax on income earned in the city by nonresidents.

Begin with two popular misconceptions: 1) that the federal payment is some kind of gift generously bestowed on a city above and beyond any federal obligations rendered to other American cities or states and 2) that the forbidden tax for the District is a "commuter tax."

The Federal Payment: The idea of some sort of federal compensation for the costs associated with the federal presence in the capital goes back to 1790 and on to an 1878 congressional agreement that the payment would cover half of the local government's expenditures. In 1921 this was revised to 40 percent and in 1925 to a lump sum, as it is today. It is the lump that was shrunk and made stagnant while the District's costs have risen dramatically. Though the commission does note that the city will have to show Congress a serious effort at making its operations efficient, some increase is necessary -- and deserved -- right away, at the first sign of what is sure to be a new climate in the District Building.

That Other Prohibited Tax: "Commuter tax" is a loaded term that should be dropped from any discussions of District revenue possibilities. What is in the charter is a prohibition against taxing of income earned in the city by nonresidents, no matter what similar taxes suburban Maryland or Virginia could raise on income earned there by District residents. What the commission is talking about -- and the only way this restriction is ever likely to be lifted -- is a regional tax at a uniform rate, raised by every jurisdiction on income earned by nonresidents, and similar provisions for deducting these payments in calculating home-jurisdiction income tax payments. This would treat every employee in the region fairly; the complaints would still come from the state governments of Maryland and Virginia, which would see shifts toward the District in the flow of total revenues. Realistically, you can scratch even this arrangement. A good start would be a regional tax raised for and used by a regional transportation authority. If not, the alternative is a still greater increase in the federal payment.

The Liabilities Dumped on D.C.: One huge horror dropped on the District when Congress allowed the first elected government under the charter was the collection of pension plans that Congress itself had established but never come close to covering financially. When Congress did finally recognize the federal obligation, it passed a bill in 1978 granting money -- but President Carter vetoed it. By 1979 the District was holding the bag to the tune of $2.65 billion in unfunded liability. Tack on a deficit in operating revenues that was inherited by the District government, and you have the makings of genuinely shaky financial start for home rule. To top it all off, the federal government transferred St. Elizabeths Hospital to the District government in 1985 but never came through with money that was supposed to cover necessary capital improvements for a consolidation of facilities (that never got made, anyway).

Now that all this history is detailed anew by a distinguished commission of experts and with a new local administration pledged to clean house and trim waste, Congress and President Bush should open their minds and books -- and play fair.