Mayor Anthony A. Williams
“Fiscal Year 2004 Budget and Financial Plan”
Testimony to the US House of Representatives
Committee on Appropriations
Subcommittee on the District of Columbia
June 4, 2003

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GOVERNMENT OF THE DISTRICT OF COLUMBIA
EXECUTIVE OFFICE OF THE MAYOR

Subcommittee on the District of Columbia
Committee on Appropriations
United States House of Representatives

The Honorable Rodney P. Frelinghuysen, Chairman
The Honorable Chaka Fattah, Ranking Member

Fiscal Year 2004 Budget and Financial Plan
"Education, Public Safety, and Opportunity for All"

Statement of
Anthony A. Williams
Mayor
District of Columbia

Wednesday, June 4, 2003
H-140, Capitol
10:00 a.m.

Thank you Chairman Frelinghuysen, Ranking Minority Member Fattah, and members of the subcommittee for this opportunity to testify on the District's FY 2004 budget and financial plan. This subcommittee has been a partner in our city's renaissance over the last few years. As Mayor, I am grateful for the support and encouragement offered by the previous chair and the ranking minority member, and I am particularly pleased to have become acquainted with Representative Frelinghuysen since he became chair in January. The enthusiasm and energy he has brought to this assignment is gratifying. In just a few short months, he has traversed this city and immersed himself in understanding the special challenges we face. The citizens of our national capital can rest assured that the city's relationship with this subcommittee continues to be strong and will serve us well as we strive together to address the pressing needs of the District.

Specifically, this session of Congress could be pivotal in the evolution of the federalDistrict relationship:

fiscal challenges posed by the serious structural imbalance are becoming more acute, and there a number of proposals to help address the issue;
the disruption of service delivery caused by problems with the Congressional approval process can hopefully come to an erid through proposed legislation;
the education of our children can be enhanced through new partnerships between the District and federal governments; and
important infrastructure projects are at critical junctures at which they require additional federal support. These include the Combined Sewer Overflow system, the Unified Communications Center, and the Forensics Laboratory.

With all these advances hopefully in our grasp, it is indeed a time of great opportunities and great challenges. As you know, cities and states across the nation are facing the worst budgetary challenge of the last 60 pears, and the District is no exception. Due to the national economic downturn, the District experienced a decline in revenues of approximately $370 million in the first half of FY 2003. This decline equates to a 10% loss in our local operating budget. Because the economy has not yet recovered, these challenges continued into FY 2004, and the District began formulation of that budget with a projected gap of $114 million.

In facing these challenges, however, the District not only continued its record of sound fiscal management, we achieved a level of responsible and conservative budgeting found only among the most financially prudent governments. As a result, the FY 2004 budget transmitted today is balanced in the current and future years. More notably, the District's leaders balanced this budget entirely through budget reductions. No tax increases were adopted, and not one dollar of the $250 million in cash reserves was used.

Just as significant is the fact that this budget protects core services. In times of tight resources, some would set their goals aside in order to weather the storm, but I believe the opposite must be done: in these difficult times we must focus on our goals more than ever so that we may protect them and continue making forward progress.

The proposed FY 2004 budget reflects this approach by focusing resources in the areas of highest priorities for our residents. These are (1) education programs, including early childhood education, school choice, and adult literacy; (2) public safety, which includes providing greater police presence in neighborhoods and a vastly improved 911 emergency communications system; and (3) opportunity for all, which includes the housing, job-readiness, and health care needed for all residents to become productive and healthy members of the community and economy.

In order to protect these priorities, however, some reductions had to be made in other areas of the budget.

Sacrifices Made to Preserve Budgetary Balance

In many instances the District was able to reduce spending by using existing funds more wisely. In many other areas, however, significant sacrifices were required. Most notable among these is the deferral of key infrastructure investments. In FY 2003 the District eliminated funding for $250 million in approved capital construction, including transportation investments, recreation facilities, and important technology investments. An additional $87 million of funding for such projects was eliminated in FY 2004.

In making these sacrifices the District preserved existing funding for existing schools and libraries, but could allocate no new funding for the next phase of modernization. As a result, current 10-year plans for renovating neglected schools and libraries must be scaled back dramatically, leaving a major challenge for the education of our children. This sacrifice, coupled with even greater reductions in roads, bridges, and other buildings, present one of the greatest challenges that the District faces today and, if not addressed, into the foreseeable future.

Is this challenge purely the result of our national economic woes? In fact, it is not. Even during times of economic growth, the District's can not support the level of investment required to compensate for the many decades of neglect from which our infrastructure has suffered. This is true not because of any factor under the District's control, however, but because of the uniquely unfair constraints placed on the District's tax base by the federal government.

Federal Constraints on Revenue Collection Resulting in Structural Imbalance

The federal government requires that the District provide services like a state, but unlike every other state in the nation, the District is prohibited by the Congress from collecting a nonresident income tax. As a result, the District must fund expenditures far greater than the revenues provided through a reasonable level of taxation. Faced with this clash between expenditure needs and revenue capacity, the District has maintained a balanced budget through several strategies that have provided solvency in the short term, but cannot be maintained. These strategies are:

Producing service improvements within existing constraints. The District has aggressively improved service delivery through more focused use of existing resources. Having capitalized on the major opportunities for such efficiencies, however, the District cannot expect to solve its structural imbalance through this strategy.
Taxing local residents and businesses at high levels. With a severely limited tax base, the District has had no choice but to rely on local residents and businesses to provide revenues for government services, resulting in many tax rates that far exceed those of surrounding jurisdictions. This translates into additional hurdles to attracting and retaining residents and businesses that could help stabilize our fragile economic base.
Deferring spending on critical infrastructure and services. At present, the District is deferring each year hundreds of millions of dollars in critical investments. These include funding for school buildings, transportation systems, water and sewer projects, economic development, and social services.

Although these strategies have temporarily addressed the imbalance between expenditures and revenues, they cannot be employed much longer. The overtaxing of our citizens and deferral of critical investments continues to damage the viability of the District as a place to live and operate a business. As a result, the financial and operational recovery underway will falter and the District will lose the important ground that it and its federal partners have worked to gain.

In specific terms, the amount of the structural imbalance is more than $400 million per year. This estimate has been thoroughly analyzed and documented by the Rivhn Commission, the Brookings Institute, and McKinsey and Co. To independently assess this matter, the members of Congress have requested that the U.S. General Accounting Office conduct a fullscale analysis. Upon release of this study, the District remains very hopeful that this Congress will remove the federal barriers that prevent the District or otherwise help the city maintain the ability to invest in critical service improvements and maintain a balanced budget.

In addition to this matter of finances, the District also faces a procedural barrier in the federal appropriations process.

Disruptions Resulting from Federal Review of the District's Budget

Unlike any other state or local jurisdiction in the nation, the District must have its locally-raised revenues appropriated to it through an act of Congress. Aside from the obvious issues related to government by consent of the governed, this process creates major disruptions in the delivery and improvement of basic government services. Specifically, there are several key reasons why the President and Congress should change the current process:

The current system denies the District the capacity to adapt quickly to changing needs for front line services. The federal government requires the District to formulate its budget a year in advance in order to accommodate the federal review process.
Congressional delays disrupt critical new improvements. Virtually every year, Congress fails to approve the District's budget by the beginning of the fiscal year, most recently more than three months later.
Mid year budget reallocations require an act of Congress, and disrupt service delivery. As discussed, local governments need the flexibility to respond to rapid changes in their needs.
The city must "use or lose" funding at the end of each year. Congressional approval for spending expires at the end of the year, which punishes program managers who save funds by not allowing the city to carry them over for one-time uses.

Last January, the President's statement in favor of budget autonomy for the District was transmitted to the Congress, and is greatly appreciated by the District. At present, the House and Senate oversight committees on the District of Columbia are developing legislation that would begin the process of reforming the federal approval process for the District's budget: Of course, the process for federal funds for the city and relevant oversight would be unchanged. As Congress pursues passage of this legislation, the District looks to you for leadership in affecting this change that will remove the impediments to the District's continued financial and operational recovery.

Critical Federal Financial Support

In addition to the process points I have discussed, there are several specific financial proposals in the FY 2004 budget before this committee. Last year, Congress allocated $50 million for the Combined Sewer Overflow project, which was matched with local funds. This was a very welcome down payment on a bilIion-dollar-plus multiyear project. Updating our antiquated sewer system, which was built originally by the federal government, is an integral part of our Anacostia Waterfront Initiative. Therefore we are seeking an additional $50 million in FY 2004. The President's budget includes $15 million for this purpose and another $10 million for the Anacostia Bike Trail. I strongly urge the subcommittee to accept the President's proposal, and add $35 million to the sewer project to match last year's commitment.

The President has also included $15 million for the Public Safety Event Fund, which reimburses the city for various security costs of demonstrations and other events related to our status as the nation's capital. This fund helps shift the unfair burden of covering these costs from District taxpayers and allows the District to better balance our duties to protect residential neighborhoods and the nation's capital. I strongly urge the subcommittee to provide these important resources.

In addition, thanks to the generosity of this subcommittee, the Tuition Assistance Grant Program has provided thousands of District residents with tremendously expanded options for post-secondary education. Indeed, many of these people might not have otherwise attended college. In FY 2003, the program will use all its allotted funding and will require an additional $17 million in FY 2004.

In FY `03 Congress provided $4 million for a family literacy program. Since receiving this payment just three months ago, we have an ambitious program underway that will soon have at least 20 Literacy Leaders dispatched around the city to help community-based providers, government agencies, and the faith-based community expand the network of adult learners. We will also have a training symposium this summer begin to "train the trainers". My goal is to reverse the city's destiny in this area by transforming ourselves from a city with a shockingly high rate of adult literacy challenges to a city where the right to read is sacred. Adults will have a harder time fulfilling opportunities for health care, employment, and stable family life as long as they lack basic reading skills. It is time that the stigma associated with adult learning challenges be eradicated and all of Washington make this a priority. With an additional $4 million in FY `04 the subcommittee can sustain our efforts.

And finally, before I conclude this testimony there are several specific points that must be made clear for the record. First, I ask that the District's appropriation be passed without the undemocratic "riders" that are sometimes included. These non-budgetary provisions subvert the will of District citizens and their only elected representatives. If the elected leadership of the city has decided to use local funds for various purposes, we ask only for you to grant us the same prerogatives and liberties that cities in your own districts enjoy.

Second, because quality education for our children is a critical priority for the city, I strongly urge the Congress to appropriate additional funding above whatever this subcommittee it allocated for other District projects to support our public schools and expand opportunities for parents to consider nonpublic educational settings.

The District of Columbia Public School system is making headway in reform, including the very promising Transformation initiative for 15 low-performing schools. It also has a liberal out-of-boundary program that affords parents opportunities to consider public schools across the city. Our robust charter school system is a national model for public school choice whose expansion is limited largely by a lack of adequate facilities. In addition, dozens of private and parochial schools are assets for our children. Consequently, I want to reiterate my support for school choice - both within the public system and between public and private schools. Additional support from the federal government will greatly enhance the quality of options available to all children.

In addition, I would also like to note for the committee that the city continues to be vigilant in its emergency preparedness responsibilities and is expeditiously drawing down on federal funds provided for this purpose. We are making great progress working with surrounding jurisdictions and federal agencies in developing effective regional responses. Similarly, working with local hospitals, our capacities in the areas of preventing and responding to bioterrorism are greatly expanded. Through partnership with the federal government, the District is rapidly becoming one of the best prepared jurisdictions in the nation.

And finally, no discussion of District-federal partnership is complete without a discussion of voting representation in Congress. The District is the capital of the world's greatest democracy, and it is the ultimate hypocrisy that its citizens suffer from the exact disenfranchisement this nation was founded to end. Like all of us in this hearing room, I was filled with great pride and gratitude watching the young men and women of our armed forces help bring democracy closer to the people of Iraq. At the same time, however, I was struck with the irony that those among them who hail from our great city do not enjoy full democracy here.

Again, Chairman Frelinghuysen and members of the committee, I thank you for your support of the District and I thank you for this opportunity to testify before you today. After the testimony of Chairman Cropp and Dr. Gandhi, I will gladly answer any questions you may have.