The District is caught in a difficult transition between its former status as a federal government agency and its developing independence as a municipality. Many of our present difficulties arise from the fact that we are neither fish or fowl -- neither entirely dependent upon the federal government nor entirely independent.

The budgets of federal agencies are set each year by Congress, and a federal agency is considered to have lived within its budget if it does not spend more than the amount authorized and appropriated by Congress, and a federal agency is considered to have lived within its budget if it does not spend more than the amount authorized and appropriated by Congress. Although many fedeal agencies produce income, this income goes to the general Treasury and ordinarily has little bearing on the agency's spending authority. The District of Columbia, when it was a federal agency, never exceeded its authorized spending limits.

As an independent municipality, however, the District of Columbia must live within its income, regardless of its authorized spending ceiling. In this regard, it is like any other city or state, or the federal government itself. However, the District has a number of serious fiscal constraints not faced by fully independent states and cities:

In the course of changing over the District's accounting system from that of a federal agency to that of an independent municipality, it has become clear that while the District never exceeded its authorized funding level as a federal agency, it had for a number of years prior to home rule spent more than it was producing in the form of taxes. This "gap" between what it spent prior to home rule accounts for the major portion of the so-called $285-million deficit.

Estimating revenues is always a tricky business for any independent municipality, and typically cities will allow themselves a margin of error in budgeting their anticipated expenditures. The District of Columbia is not allowed to do this. Congress insists that the District's budget account for every nickel of anticipated expenditure. There can be no "cushion" to protect against unforeseen difficulties or unanticipated expenses.

Other municipalities have many more options available to them for raising revenues than does the District of Columbia. Most municipalities may borrow from the public by issuing bonds; the District may not, except for capital projects. Most municipalities can and do tax commuters; the District may not. All other municipalities have state governments behind them that can provide short-term or long-term financing when necessary; the District does not.

Finally, there is the federal payment itself. If the federal government were to pay taxes on its property in the city like any other taxpayer, it would pay far more than the currently authorized federal government payment of $300 million, and it is questionable whether the District will receive the authorized amount this year. It is this uncertainty, more than the basic inadequacy of the federal payment, that causes the District so much financial grief. Although Congress inists that the city budget every nickel of proposed expenditure, the city does not know until the very last minute what the federal payment will be, even though the federal payment makes up almost a third of the District's total revenues. Last year for example, the federal payment was not determined until two days before the end of that fiscal year -- far too late for the District to do anything at all about living within the available funds. It is extremely difficult to plan under such circumstances.

I do not mean the government bears no responsibility for the current fiscal crisis. We have been slow to come to grips with the realities of our situation, and our financial management system is still unable to produce the hard information we need to make intelligent judgements. At the same time, it is unfair to suggest that the city has ot been trying. The city employs more people now than it did before home rule, and further painful cuts are being made in the city's payroll. The mayor's plan, while lacking in detail and subject to questions and a certain amount of skepticism, is nevertheless an honest and forthright attempt to deal with a complex and difficult situation.