The Reagan administration's proposed freeze on the federal payment to the District and funds for St. Elizabeths Hospital could throw a big monkey wrench into Mayor Marion Barry's plans to balance next year's budget without a tax increase.
What's more, the freeze could undermine the painstakingly crafted legislation passed by Congress in October to gradually transfer the mental hospital in Southeast Washington from the federal government to the District by 1991.
Under that agreement, the city would receive a total of $219 million in funding and special assistance to operate the hospital during the next six years, before assuming total responsibility.
"Any freeze of any kind at this point will be absolutely devastating," said Ronald C. Willis, the senior mental health specialist for the House District Committee. " . . . There is no way to cut any further without undermining direct patient care."
The freeze on the federal payment and funds for St. Elizabeths -- part of $34 billion in fiscal 1986 budget cuts and savings to which President Reagan has provisionally agreed -- appeared to have caught some District officials by surprise.
Last month, Barry told reporters that a tax increase would not be necessary to balance the District's soon-to-be-unveiled 1986 budget, primarily because of a projected 5 to 7 percent growth in D.C. revenues due to an improving economy.
But yesterday, an aide to the mayor strongly hinted that the city had assumed there would be some type of increase in federal payments to the District when Barry made his no-tax-increase pledge.
"Since Mr. Reagan did not discuss a freeze prior to the election, this is a new development," the aide said.
D.C. Budget Director Betsy Reveal said yesterday that the city routinely considers all possibilities in preparing a budget proposal, including the possibility of no growth in the federal payment, but declined to say whether the freeze proposal had been anticipated.
"We have considered many possibilities and zero increase in the federal payment was one of them, but I have no comment on the assumptions underlying the city's fiscal 1986 budget," Reveal said.
The annual federal payment to the District, in lieu of taxes, is a crucial part of the city's overall budget. Last year, the federal payment totaled $386 million or 16 percent of the city's general fund revenues. Congress approved a federal payment totaling $425 million for the current fiscal year.
A freeze on both the federal payment and funding for St. Elizabeths next year would put a double financial whammy on the District, possibly forcing the mayor to consider seeking City Council approval of additional taxes.
Under the congressionally approved agreement covering the gradual transfer of St. Elizabeths, federal assistance to the hospital in fiscal 1986 would include $48 million in regular appropriations -- an increase of about a third over this year's level -- plus $25 million in special funds to help in the transition.
Willis said that a freeze on either the regular appropriation or the special funds would throw off the plan for the transfer and assure a sharp reduction in the quality of care for patients and the possible loss of accreditation.
"It's a very, very serious thing," Willis said.