From a Dec. 21 memorandum to Mayor-elect Dixon by Franklin D. Raines, chairman of her Transition Financial Management Committee:

You might reasonably ask how the District could have gotten into such a terrible condition with a mayor, city council, OMB and Congress all approving the District's budgets.

Certainly District officials must take a major share of the responsibility for the current financial situation. The mayor has not been willing to undertake the difficult cuts in the budget required by deteriorating economic conditions. The council has modified proposed budgets in unrealistic fashion, virtually building in deficits at the outset, and has failed to enact revenue measures promised in the budget.

But the federal government must also take a major share of the responsibility. The Rivlin Commission said it was "appalled by the federal government's lack of fairness in its fiscal relationship with the District." The commission found that the federal government had imposed special costs on the District, such as the pre-home rule financial liabilities and St. Elizabeths Hospital, and "severely restricted the District's revenue raising capacity without providing adequate compensation."

District taxpayers and workers have paid heavily for the unwillingness of the past two administrations to increase the federal payment. More is required of the District while the federal government has reduced its relative contribution to paying the costs. In addition, the federal government has refused to put the federal payment on a predictable, fair formula basis.

Also, the congressional appropriations process is not well suited to the financial management of a large local government.