President Reagan proposed yesterday increasing the federal payment to the District by $19.5 million in fiscal 1987, defusing dire predictions of a major cut in the crucial payment that makes up about 20 percent of the city's annual budget.
Alphonse G. Hill, deputy mayor for finance, said the president's budget proposal for the fiscal year beginning Oct. 1 reflected a "scalpel approach rather than the meat cleaver."
He said that other adjustments in the federal budget proposal would effectively offset the proposed increase in the federal payment, which totaled $425 million this year.
Part of the proposed federal payment gain would be reduced by a proposed increase in the city's contribution to the federal retirement system, which covers some District employes. The city's share would rise from 7 percent to 9 percent of the employes' wages, at a cost of about $10 million, according to Hill. The employes' share would rise from 7 percent to 9 percent as well.
Another factor that would offset the gain in the federal payment is a proposal calling for a contribution by the city toward health benefit costs for retirees. The cost to the city would be $8 million, Hill estimated.
In addition, the Reagan budget blueprint would slightly reduce the federal contribution to the city for water and sewer services, from $30.1 million in the current fiscal year to $28.8 million in 1987.
"They giveth and they taketh away," Hill said.
Funding for St. Elizabeths Hospital, which is scheduled to be transferred from federal to District control in 1987, was unchanged from a current phased funding plan and no budget changes were proposed in a $30 million authorization for building a new prison in the District.
Mayor Marion Barry anticipated the $19.5 million increase in his own fiscal 1987 budget proposal that he submitted to the D.C. City Council last week. However, private budget analysts had suggested that the push this year to reduce the federal deficit could cut sharply into the federal payment to the city.
The D.C. budget office, in an analysis released last week, estimated that if automatic cuts triggered by Gramm-Rudman-Hollings legislation took effect in fiscal 1987, the result could be an $85 million reduction in the federal payment. In another study by Fiscal Planning Services Inc., the estimated cut would be $115 million.
The automatic cuts in federal spending in fiscal 1987 would be avoided if the president and Congress can agree on a budget that meets the targeted $144 billion deficit level mandated by the law. Reagan's proposal yesterday would leave a $143.6 billion deficit.
Reductions in federal spending in the current fiscal year under Gramm-Rudman-Hollings apparently are unavoidable. The first round of reductions under the deficit-reducing legislation, slated to take effect March 1, will trim $16.8 million from the federal payment and other related federal expenditures to the District for fiscal 1986.
Hill emphasized yesterday that the federal payment increase proposed by Reagan shows that the city clearly stands to benefit if the president and Congress can lower the deficit without triggering across-the-board Gramm-Rudman-Hollings cuts.
In addition to proposing increases in retirement contributions by employes and the city, the Reagan blueprint calls for legislation that would discontinue retirement, life and health insurance coverage for employes hired by the city after Sept. 30, 1986.