[Senate Hearing 105-162]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 105-162


 
THE PRESIDENT'S PROPOSAL AND ALTERNATIVE APPROACHES FOR THE DISTRICT OF 
                                COLUMBIA

=======================================================================

                                HEARING

                               before the

                      SUBCOMMITTEE ON OVERSIGHT OF

                 GOVERNMENT MANAGEMENT, RESTRUCTURING,

                      AND THE DISTRICT OF COLUMBIA

                                 of the

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED FIFTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 13, 1997

                               __________

      Printed for the use of the Committee on Governmental Affairs


                               


                     U.S. GOVERNMENT PRINTING OFFICE
 40-710 cc                  WASHINGTON : 1997
_______________________________________________________________________
          For sale by the U.S. Government Printing Office, 
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                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware       JOHN GLENN, Ohio
TED STEVENS, Alaska                  CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine              JOSEPH I. LIEBERMAN, Connecticut
SAM BROWNBACK, Kansas                DANIEL K. AKAKA, Hawaii
PETE V. DOMENICI, New Mexico         RICHARD J. DURBIN, Illinois
THAD COCHRAN, Mississippi            ROBERT G. TORRICELLI, New Jersey
DON NICKLES, Oklahoma                MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania
             Hannah S. Sistare, Staff Director and Counsel
                 Leonard Weiss, Minority Staff Director
                    Michal Sue Prosser, Chief Clerk

                                 ------                                

SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT MANAGEMENT, RESTRUCTURING, AND 
                        THE DISTRICT OF COLUMBIA

                    SAM BROWNBACK, Kansas, Chairman
WILLIAM V. ROTH, Jr., Delaware       JOSEPH I. LIEBERMAN, Connecticut
ARLEN SPECTER, Pennsylvania          MAX CLELAND, Georgia
                        Ron Utt, Staff Director
      Laurie Rubenstein, Minority Staff Director and Chief Counsel
                      Esmeralda Amos, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Brownback............................................     1

                               WITNESSES
                         Tuesday, May 13, 1997

Hon. G. Edward DeSeve, Controller, Office of Financial 
  Management, U.S. Office of Management and Budget...............     3
Hon. Marion Barry, Mayor, District of Columbia...................    12
Linda W. Cropp, Acting Chair, District of Columbia City Council..    17

                     Alphabetical List of Witnesses

Barry, Hon. Marion:
    Testimony....................................................    12
    Prepared statement...........................................    43
Cropp, Linda W.:
    Testimony....................................................    17
    Prepared statement...........................................    76
DeSeve, Hon. G. Edward:
    Testimony....................................................     3
    Prepared statement...........................................    29

                                APPENDIX

Charts submitted by Mayor Barry..................................    65
A D.C. Council Resolution, 12-116, submitted by Mrs. Cropp.......    83
``The Orphaned Capital, Adopting a Revenue Plan for the District 
  of Columbia,'' January 1997, a Brookings Policy Brief by Carol 
  O'Cleiracain...................................................   119
``The Case for a More Fair and Predictable Federal Payment for 
  the District,'' November 2, 1995, a report by the D.C. 
  Appleseed Center...............................................   131
``The Necessity and Costs of District of Columbia Services,'' by 
  Philip M. Dearborn and Carol S. Meyers, Greater Washington 
  Research Center, January 1997..................................   174



THE PRESIDENT'S PROPOSAL AND ALTERNATIVE APPROACHES FOR THE DISTRICT OF 
                                COLUMBIA

                              ----------                              


                         TUESDAY, MAY 13, 1997

                                     U.S. Senate,  
                Subcommittee on Oversight of Government    
           Management, Restructuring, and the District of  
        Columbia, of the Committee on Governmental Affairs,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to notice, at 1:45 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Sam 
Brownback, Chairman of the Subcommittee, presiding.
    Present: Senator Brownback.
    Staff Present: Ron Utt, Staff Director; Esmeralda Amos, 
Chief Clerk; and Joyce Yamat, Professional Staff Member.

            OPENING STATEMENT OF CHAIRMAN BROWNBACK

    Senator Brownback. Welcome to the fifth hearing on the 
District of Columbia that this Subcommittee has held and what 
we in Congress should be doing about this issue of the District 
of Columbia and its future.
    Previously, we've covered topics on Federal tax relief, 
education and crime, and today we'll focus on the 
administration's plan and the city's reaction to it. Our 
witnesses today will include Edward DeSeve, Controller of the 
Office of Federal Financial Management of the Office of 
Management and Budget; Mayor Marion Barry; and Mrs. Linda 
Cropp, the Acting Chair of the District's City Council.
    I suppose this hearing could not be better timed given the 
agreement reached last week and thereby setting the stage for 
the Senate's review of the proposals, as well as alternatives 
that may be generated here and in the House.
    I should state at the beginning that I'm certainly partial 
to Delegate Norton's Federal tax relief plan with some 
adjustments and some amendments to that. On Thursday night of 
this week, I'll be introducing the Senate version of it at a 
town hall meeting in the Hart Building, and joining me will be 
Delegate Norton, Senators Lieberman, Mack, and Trent Lott, the 
Majority Leader.
    I also want to say that I think this is an important 
hearing from the standpoint of hearing from the administration 
and from the City Council on the agreement reached last week, 
the earlier vote where the Council had said, ``No, we don't 
agree with what the administration has put forward,'' and my 
own deep desire that we get at a real solution to what's been 
going on in the District of Columbia and the problems that 
we've heard in the last four hearings.
    We've got a lot of difficult problems that I don't think I 
have to tell anybody in this room about, whether it has to do 
with crime or education or welfare or other proposals or costs 
that the city has struggled under. You look at the overall 
picture and it's just not a pretty picture.
    It's been a very difficult situation and it's a very trying 
one. I've sat here at hearings where we've talked about the 
three police officers that have been murdered this past year in 
the District of Columbia, the same place I've sat here where 
we've talked in the hearings of 9-year-olds in the school 
system, at school involved in sexual activity.
    General Becton is trying and working very hard doing the 
best that he can in the school situation. I want to say as an 
aside on this as well, I went out last week and toured one of 
the public schools near Capitol Hill and they're doing a great 
job. I want to give them a pat where a pat is due on it because 
I went and toured a fine school where the students were doing 
an excellent job.
    Still, you look at the overall objective numbers and it's 
not a good picture. It's not a good picture on crime. I've had 
three of my own staff members who have been burglarized over 
the past year-and-a-half in Washington, D.C.
    And so, I say that to the administration, I say that to 
everybody present from the standpoint that I am not interested 
in any plan that is just a bandaid or a continuation of life as 
it is today because life as it is today is not tolerable in the 
District of Columbia and we shouldn't tolerate it. This is the 
Nation's capital, this is the Nation's city and it should be a 
shining light and it is not today.
    Eleanor Holmes Norton probably put it the best, that this 
isn't the District of Columbia she grew up in. This isn't 
Washington, D.C. as she knows it, nor as it can be. I'm not 
interested in any plan that just continues that or puts a 
little bit more money at it or says we're going to take a few 
of these away to the Federal Government but we're going to run 
basically the same. I'm just not interested.
    Now, Mr. DeSeve, you've got the responsibility here today 
to correct me that this is something different than just 
continuation of the problem as it is, because it is intolerable 
and it cannot be allowed to continue. I won't support it being 
that way.
    So I'm looking forward to your presentation and how you 
believe that the administration's proposal is going to address 
these crying and chronic problems in our Nation's city. I want 
to also, before we get started, introduce several other D.C. 
Council members that are here, along with the Mayor who will be 
testifying later, and Linda Cropp who I've mentioned.
    We have Carol Schwartz, Harry Thomas, and Charlene Drew 
Jarvis who are also D.C. Council members who are here and I 
appreciate very much your attendance and interest, obvious 
interest from being on the City Council and everything you're 
committed to do.
    I hope we'll be joined by Senator Lieberman later on. But, 
Mr. DeSeve, as Controller and the person in charge of this, I 
look forward to your presentation. If you'd like to summarize, 
you can, and I look forward to a good dialogue. The microphone 
is yours.

 TESTIMONY OF HON. G. EDWARD DESEVE,\1\ CONTROLLER, OFFICE OF 
   FINANCIAL MANAGEMENT, U.S. OFFICE OF MANAGEMENT AND BUDGET

    Mr. DeSeve. Thank you, Mr. Chairman. I appreciate your 
having these hearings and applaud the Subcommittee for the 
interest it's shown over the last several months and before 
that certainly. I'd like to begin by briefly summarizing the 
President's National Capital Revitalization and Self-Government 
Improvement Plan. After I conclude my remarks, I'd be happy to 
take any questions that you have.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. DeSeve appears in the Appendix on 
page 29.
---------------------------------------------------------------------------
    As Franklin D. Raines, the Director of the Office of 
Management and Budget has stated, the current relationship 
between the District and Federal Governments is broken. Our 
Nation's capital faces not only structural financial problems, 
but serious obstacles to providing the most basic services to 
its residents.
    The President has presented a plan to reorder that 
relationship, putting our capital city on firmer financial 
ground, and improving home rule's prospects for success. The 
plan is not a panacea.
    The District Government and the financial responsibility 
authority will have to continue to do the hard work necessary 
to create a city where streets are safe, where children enjoy 
the quality education they deserve, where every resident has 
the chance to make the most of his or her own life, and where 
the government spends within its means.
    Through the plan, the Federal Government would assume over 
$4 billion of the District of Columbia's operating costs over 
the next 5 years. In exchange, the plan would end the $660 
million annual Federal Payment, saving the Federal Government 
about $3.6 billion over the next 5 years.
    While net Federal costs come to over $450 million over the 
5-year period, the plan would save D.C. nearly $700 million 
over the same period. Most of this difference results because 
pension assets, not other Federal budget resources, are used to 
pay beneficiaries until after 2002.
    The Federal Government would also invest well over $1 
billion in the District over the next 5 years for economic 
development, transportation, criminal justice improvements, and 
tax collection. Congress would continue its oversight 
responsibility as we're doing here today, but there would no 
longer be a need for the Congress to appropriate the locally-
funded aspects of the District Government.
    All Federal assistance would be conditioned on the District 
taking specific steps to improve its budget and management. The 
plan would require the District to submit a balanced budget for 
1998, 1 year earlier than under the Financial Responsibility 
Act, and thereafter.
    The President's plan would be memorialized in a Memorandum 
of Understanding between the District Government and the 
Executive Branch. The purpose of the MOU is to signal a 
willingness of the District to implement the plan elements 
should they become law.
    While there is not unanimity on all aspects of the plan, 
the District has indicated its sufficient acceptance of the 
President's plan to encourage the administration to submit 
legislation for its enactment. I have the MOU here with me 
today. I'd like to read the first paragraph that we've agreed 
upon because I think it gives you a better flavor for what the 
MOU was designed to do.
    The first sentence states, ``The parties respect the Home 
Rule Charter as the fundamental basis for governance of the 
District. The purpose of this memorandum is to strengthen home 
rule and to agree to work toward the revitalization of the 
District of Columbia. By providing for additional District 
Government functions to be taken over, the Federal Government 
will enable the District to focus its resources on the 
functions that remain.
    ``In some cases, however, this administration provides for 
assumption not only of funding for certain government 
functions, but also for assumption of management of those 
functions as well.
    ``While this is appropriate in limited circumstances, the 
parties generally favor the principle of local management over 
District Government functions regardless of the source of 
funding for these programs.''
    The President's plan would assist the District in four 
specific ways. First, the plan would relieve the District 
Government of major financial and managerial responsibilities 
that are beyond its financial capacity. The Federal 
Government's share of Medicaid would increase from 50 to 70 
percent.
    The Federal Government would assume responsibility for the 
vast majority of the District's existing pension liabilities. 
The Federal Government would take on responsibility for housing 
D.C. felons, offender supervision services, prison 
constructions, and funding of district courts, and the Treasury 
would help the city resolve its cash shortfall that stems from 
its accumulated deficit.
    Second, the Federal Government would invest in improving 
the city's transportation infrastructure. It would take on 
responsibility for the funding and oversight of certain 
national highway system capital projects, including roads, 
bridges, and transit, and national highway system operation and 
maintenance projects in consultation with the District.
    The District would continue to be responsible for the 
selection of NHS projects and the Secretary of Transportation 
would review the District's selection. To support NHS projects, 
the national capital infrastructure fund would be established 
in fiscal year 1998 for road, bridge, and transit capital 
projects and operation and maintenance.
    Third, the plan would draw on Federal technical expertise 
to make the City Government more effective in areas such as 
income tax collection, education and training, housing, 
transportation, and health care delivery.
    Fourth, the plan would spur economic development in the 
Nation's capital for a new economic development corporation by 
providing about $300 million in grants and tax incentives. The 
other sections of my testimony spell out in detail how these 
provisions would work.
    I'd like to conclude by saying that the President's plan is 
the most ambitious that any administration has ever proposed to 
deal with the problems of the Nation's capital. It would 
benefit the city, the region, and the Nation. It is a 
foundation that would benefit District residents by reducing 
the government's financial burden, improving delivery of 
services, and investing in criminal justice, economic 
development, and transportation.
    It would benefit the region because the city's economic 
recovery, the financial support given to the police, fire, 
teachers, and judge's pension fund, the strengthening of the 
District's criminal justice system are all key along with 
regional transportation infrastructure investments.
    It would improve the city's transportation system and help 
to ensure the safety of residents. Under the President's plan, 
the Nation would benefit because it would ensure a capital city 
we can all be proud of.
    Mr. Chairman, that concludes my testimony. I would be happy 
to answer any questions that you have.
    Senator Brownback. Thank you, Mr. DeSeve, and I appreciate 
your brevity with that and we'll put your complete statement in 
the record. Now, it looks as if, from what you're telling me, 
that the biggest thrust of what the President's plan is--and 
I've been through his plan--is for the Federal Government to 
take over management of certain functions and for the Federal 
Government to put more money into the District of Columbia. Is 
that the basic thrust of the President's proposal?
    Mr. DeSeve. Yes, sir.
    Senator Brownback. Now, you tell me where these figures are 
off because I've been looking at the issue of finances first. 
Let's look at that and then we're going to go through the rest 
of the proposal. The numbers I have here are that per person, 
per capita, there's more spending--and this is of total 
sources--here in Washington, D.C. than in most any other city 
across the country by a substantial difference.
    Now, let me just give you these numbers. I'm sure you've 
seen these before and I want to hear what your response to them 
is. Per capita, spending in Washington, D.C. is $7,285 per 
person compared to--well, let's look at St. Louis. That's 
$3,268 per person; Boston, $5,060 per person; New York is 
$6,671 per person. This is from all sources per capita. This is 
State, Federal, and local in those communities and the same 
with Washington, D.C. We're already spending more money per 
person from all sources on individuals in Washington, D.C. Why 
do we need to put more in on top of that?
    Mr. DeSeve. I think the figures that you cite--and I'm not 
familiar with that set, but I'm familiar with those that are 
similar to the ones you cite--don't focus on the fact that if 
you were to look at State spending in a particular jurisdiction 
as opposed to simply taking the number of residents in the 
State and dividing through or the number of residents in a city 
and dividing through, it would be very different.
    D.C. has concentrated within its boundaries the majority of 
the region's welfare population, the majority of the region's 
aging and poor population. It has concentrated a set of 
requirements on its City Government that are very unusual as to 
State and local functions.
    So I think that there is an apple and an orange problem. 
We've seen a series of analyses done by Carol O'Cleiracain at 
Brookings and done by others that begin to recognize the great 
disparity between need and resources in the District and I 
think what you're seeing is that reflection.
    Senator Brownback. Well, I want you to go back and look at 
those numbers in particular, because what I'm told, these are 
inclusive of State and county expenditures as well in those 
large, urban communities.
    Mr. DeSeve. I'd be very happy to do that.
    Senator Brownback. They're very similar and if they're 
accurate, they're saying we're spending $4,000 per person more 
total from all sources on a per capita basis in Washington, 
D.C. as we're spending in St. Louis. Now, that seems to me to 
be a pretty fair chunk of change per person, if that's the 
equivalent basis, and I think we ought to look at that.
    Mr. DeSeve. I'll be happy to analyze them and get back to 
you with a response to that.
    Senator Brownback. OK. I mentioned at the outset the set of 
hearings that we've been going through and this is the fifth 
hearing that we've had on issues in the District of Columbia, 
and I really think this needs to be a great city. I really know 
it can be a great city, but the numbers just aren't there right 
now of this being that case.
    Let me give you some of these specifics, and I'm sure you 
know these, but I just want to give them again. The census 
projection is that the District of Columbia will lose almost 
three times as many residents in the 1990's than in the 1980's. 
The number of crimes per capita has increased in Washington, 
D.C. over 50 percent since 1985.
    Seventy-eight percent of the D.C. public school fourth 
graders are lacking basic reading skills. Twenty-five percent 
of the District's population is financially dependent on public 
assistance. Those aren't the statements or the facts of a great 
city.
    What in your plan changes fundamentally that view, because 
I don't want that to be our Nation's capital in 5 or 10 years. 
I don't want the numbers to be anywhere close to what those 
numbers are today, and they don't have to be and they don't 
need to be. What I'm not seeing in your plan is anything that 
major changes that other than the Federal Government takes over 
some of these functions and we put a little more money in.
    Mr. DeSeve. I think that's a really good question because 
when you look at our plan, you've got to look at several 
aspects. First, you have to look at the fundamental 
constitutional responsibility of Congress, which we do not want 
to jeopardize, for oversight of the District of Columbia. As 
the Executive Branch comes forward, we can do the things that 
we can do; that is, we can make proposals that are within our 
capacity to try to provide additional resources.
    But we also choose to respect local home rule, the people 
who are with us today on the City Council, the people who are 
elected officials in the City Government will have to face the 
challenges that you talk about. What we're trying to do is give 
them a level playing field, whether it was in pensions or 
whether it was in prisons or in other areas.
    The Federal Government didn't cut a good deal in 1979 with 
the District of Columbia when home rule was put in place. What 
we're trying to do is give home rule a chance to work and we 
believe that together with Congress, with more resources, with 
less to do, when you don't have to worry about a prison, when 
you don't have to worry about maintaining certain highways, 
when you don't have to worry about the Sword of Damocles, the 
pensions hanging over your head, it will be easier for District 
officials to manage.
    But we fully expect that Congress will step in, as they 
should constitutionally, and set standards, standards that they 
expect the District of Columbia Government to meet, that this 
Subcommittee thinks are appropriate for the District of 
Columbia Government.
    We're happy to work with you to do that. We don't believe 
that that is the role of the Executive Branch under the 
Constitution.
    Senator Brownback. So yours is just let's give them a 
little more money and free them up from some of these 
responsibilities and they'll figure out how to make this a 
great city?
    Mr. DeSeve. No, sir, that's not what I said. What I said 
was, we want to provide a foundation so that Congress, the 
District, and the Executive Branch can cooperate together to 
solve the problems that you're talking about.
    We're willing to do it by providing vast amounts of 
technical assistance from Executive Branch agencies, whether 
it's the General Services Administration helping buy things for 
the police department, whether it's Department of Health and 
Human Services helping to make payments for AIDs victims, 
whether it's GSA again doing the capital space line survey for 
spending needs in the schools.
    We'll be happy to make that resource available, but we want 
to do so in the context of an overall plan working with the 
Congress.
    Senator Brownback. OK. Let's go at one narrow area then on 
this instead of the over-arching. Let's look at creating jobs 
and opportunities in Washington, D.C. The administration is 
putting forward a bill or proposal for an economic development 
corporation, most of the appointees out of the White House to 
target in on enterprise zones and creating zones of 
opportunity. Is that correct?
    Mr. DeSeve. I'm going to answer the question directly. What 
you find in almost every city throughout America, whether it's 
in Atlanta or New York or Philadelphia, is a public/private 
partnership economic development structure that's been in place 
for 20, 30, or 40 years where both groups can work together 
with adequate resources to build the necessary fundamental 
infrastructure for the creation of jobs, whether it's the use 
of tax-exempt bonds or whether it's the use of direct 
subsidies.
    So what we're trying to do again is give the District of 
Columbia a tool to use in trying to deal with economic stimulus 
and economic development.
    Senator Brownback. But now, how are the members of this 
board appointed? How many are appointed by the President and 
how many are appointed by the D.C. Council?
    Mr. DeSeve. The President has the majority of the 
appointees from public--they're mostly private sector citizens 
either from the business community or the private non-profit 
community. They'll not be Executive Branch appointees, if you 
will. Again, constitutionally, we have the appointment power 
set with the President. If we could share it with the Congress 
constitutionally, we'd certainly be happy to do that, but we 
can't do that.
    Senator Brownback. I understand that, but a majority. I 
believe that seven of nine of these members are appointed by 
the President for this economic development corporation. Is 
that correct.
    Mr. DeSeve. But again, if you look at State and local 
government, it's not unusual for a State to have that kind of 
appointment responsibility, vis-a-vis, economic development 
entities.
    Senator Brownback. But if I'm looking at the issue of home 
rule where you're talking about, let's kind of back away from 
the city, it looks like this one is run out of the White House.
    Mr. DeSeve. We think it's going to be run out of the 
private sector.
    Senator Brownback. But seven of the nine are appointed by 
the President.
    Mr. DeSeve. From private sector individuals. They will not 
be Executive Branch employees.
    Senator Brownback. All right. But seven of the nine are 
appointed by the White House. Is that correct?
    Mr. DeSeve. Honestly, I'd have to look at the final piece 
of legislation. I think it will be slightly fewer. I think it 
may be 6 rather than seven.
    Senator Brownback. Six of the nine?
    Mr. DeSeve. Six.
    Senator Brownback. All right.
    Mr. DeSeve. Again, that's what's in the MOU and that's the 
legislation we'll be sending forward.
    Senator Brownback. All right. Then we will agree that six 
of the nine are appointed by the White House to this economic 
development corporation.
    Mr. DeSeve. Right.
    Senator Brownback. Now, don't you, Mr. DeSeve, really think 
that if we would lower or zero capital gains on real property 
in the District versus an economic development corporation, you 
attract far more growth and economic opportunity in the 
District of Columbia?
    Mr. DeSeve. Mr. Brownback, I'm a resident of the District 
of Columbia and own a home. I dearly hope to have a capital 
gain on it some day. At the moment, I'm not sure whether I do 
or don't because it's not the market. The Treasury Department 
doesn't let the people at OMB do tax policy. They draw a line 
around us, a little circle around us and say, ``You can do 
spending, you can do other fiscal policy, but you're not 
allowed to do tax policy.''
    So I wish I could comment and will be happy to take the 
question back to the Treasury, but I don't know whether a 
capital gains change would spur development in the District in 
the same way you're talking about it given the cost of that 
change.
    Senator Brownback. So you cannot appraise for me whether or 
not a zero capital gains on real property would do more for 
economic activity or the President's economic development 
corporation?
    Mr. DeSeve. I can't do that, again, within the cost of that 
zero capital gain because I haven't done the analysis and it's 
beyond the scope of my ability to do that.
    Senator Brownback. Well, I've got a real suspicion which 
way it would go.
    Mr. DeSeve. I've got a suspicion, too, but unfortunately, 
they don't let me have suspicions. I'm not allowed to do that.
    Senator Brownback. Well, neither here, but we have a lot of 
support for that and away from the President's plan because the 
President's plan is a corporation where the board of directors 
is appointed out of the White House for it and it's supposed to 
target particular areas, and again, this is running it out of 
the White House rather than giving people the opportunity.
    Mr. DeSeve. And we'd love to consider your proposals. We 
don't say that this is the end of the day. What we say is it's 
the beginning of the day. Our proposals are going forward as a 
plan. We fully expect to deal with Congress and consider other 
proposals as they're put on the table.
    Senator Brownback. OK. What does your proposal do about the 
issue of crime? It removes the operation of the prisons from 
the city. Now, do I understand in the Memorandum of 
Understanding you're backing away from the Federal Sentencing 
Guidelines being put forward to the city?
    Mr. DeSeve. What we want to assure is that there will be 
comparable sentencing among prisoners. The thing that we've 
always been concerned about is that if the Bureau of Prisons is 
going to absorb 3,000 or 4,000 or 5,000 inmates into the Bureau 
of Prisons' system or 7,000 inmates in some circumstances into 
the system, that there would be comparable sentences developed.
    Sentencing guidelines available to State and local 
governments are designed to assure a consistency of sentencing 
and designed to ensure truth of sentencing. That's what we did 
in the MOU. Federal sentencing standards are different than 
what are applied at the State and local level.
    When we ask a State, in return for giving that State 
capital grant monies to have determinative sentencing, that 
State chooses a set of guidelines that are essentially in 
conformity with Federal standards, but they are not identical 
and will not be identical. They could be identical, but they do 
not need to be identical.
    So what we're looking for are guidelines that provide 
determinative sentencing that is essentially comparable to the 
Federal Government standards. That's what's in the MOU.
    Senator Brownback. But now, you backed away from your 
earlier proposal, which were Federal guidelines.
    Mr. DeSeve. Sir, I believe Federal standards is the term of 
art. I don't believe we ever asserted Federal standards for the 
District of Columbia. That was not our proposal. People may 
have interpreted that as our proposal. That was not our 
proposal.
    Senator Brownback. OK. What do you do about education in 
your proposal for the District of Columbia?
    Mr. DeSeve. Again, I have to go back to my earlier mantra. 
Earlier this year, we gave $18 million of proceeds from the 
Connie Lee stock sale to educational construction. We've spent 
the last 2 years, the Education Department has and GSA have, 
trying to assist the Department to improve its capacity to deal 
with issues.
    By overall providing additional fiscal relief to the 
District, this council will have the ability to decide should 
the money go into education or is there a more fundamental 
reform needed in education. We don't intend to run the school 
district of the District of Columbia. The financial 
responsibility authority was set up by the Congress.
    The new trustees were set up by the financial 
responsibility authority within the congressional umbrella to 
deal with those specifics. We stand ready to help as much as we 
can with technical assistance for that purpose.
    Senator Brownback. But then the City Council or the school 
board, the District of Columbia school board would make any 
decision if there's fundamental restructuring, if they need 
more charter schools----
    Mr. DeSeve. Correct.
    Senator Brownback [continuing]. For scholarship or voucher 
program? It would all be left up at that level, so you would 
have no opinion----
    Mr. DeSeve. Under the supervision of Congress. As proposals 
come up, we'll voice opinions on those proposals as they are 
presented.
    Senator Brownback. But today you would have no opinion 
about should they go to a voucher program?
    Mr. DeSeve. I believe we've stated on the record, in 
response to legislation last year, our opposition to voucher 
programs. I would stand corrected on that, but I believe there 
is a specific statement of the administration policy. I'd have 
to check that, though. I don't want to be outside my own 
boundaries again.
    Senator Brownback. On the basis or you don't recall any 
basis as the opposition?
    Mr. DeSeve. I'd like to get the statement of the 
administration policy out and look at it. I just don't remember 
it. We don't have that in the President's plan.
    Senator Brownback. OK. What about the census projection the 
District of Columbia is going to continue to lose residents 
rapidly? What does your proposal do to address that issue of 
flight?
    Mr. DeSeve. The flight is a very difficult issue. The 
flight occurs in two different ways. One, it occurs as families 
get smaller. Over the last 40 years in metropolitan 
jurisdictions--St. Louis is a classic example. As families have 
gotten smaller, there have been fewer residents in a 
jurisdiction.
    But we're also losing families in the District of Columbia 
and we're losing middle class families and the fundamental 
reasons for losing the middle class families are poor 
education, high crime, and an increasing tax burden. You can go 
someplace else and have lower taxes, less crime, and better 
schools.
    So I think the only thing we can do together with the 
Congress is work to decrease crime, work to improve the school 
population, and work to have fiscal stability within the 
District so taxes can be kept as low as possible.
    Senator Brownback. And in your proposal, most of those 
decisions would be left up to the D.C. City Council to make 
those decisions as to what they should do to slow the flight 
down from occurring?
    Mr. DeSeve. Within the authorizing frame work imposed on 
the Congress under the Constitution, right.
    Senator Brownback. One other area I want to probe with you 
a little bit about is on the prison issue and the prison 
privatization. What is the administration's proposal as it is 
today on the prison issue?
    Mr. DeSeve. Our proposal now is to make the prison 
population of D.C.--the sentenced felons, not the youth 
offenders and others, but the sentenced felons--prisoners 
subject to the Bureau of Prisons' regulations after a 
transition period.
    There would be a trustee put in place for a transition 
period until new Federal facilities were constructed to take 
the prisoners over. The trustee would be responsible for 
running the current prison complex at Lorton and also diverting 
prisoners into the Bureau of Prisons' system in other places.
    The entire financial responsibility would be on the Federal 
Government. We would pay for it, we would have a trustee 
administer it for a transition period. We will work to 
rehabilitate or construct new facilities, and we would have 
those facilities staffed over time by Bureau of Prisons' 
employees after the transition period.
    Senator Brownback. And what about privatizing the prison 
facilities?
    Mr. DeSeve. The Justice Department has a privatization 
program which I'd be happy to provide you the information on. 
They believe that maximum security facilities are very 
difficult to privatize; that certain facilities, minimum 
security, women offender facilities are more open to 
privatization.
    To the extent that D.C. is within the context of BOP, we'd 
be happy to talk with the Congress about how to use 
privatization as one of the tools, but we still believe that 
new construction of Federal facilities, especially for maximum 
security prisoners, and using existing Federal facilities for 
some of the prisoners, will be necessary in addition to 
whatever privatization would occur.
    Senator Brownback. It's been drawn to my attention some 
studies of different maximum security facilities that have been 
successful in a privatized effort towards prisons, so that 
would certainly be something that I think we ought to be 
looking at.
    Mr. DeSeve, I appreciate your time and your willingness to 
come here and to explain this. I'm not persuaded that you've 
put forward a plan that addresses how we make Washington, D.C. 
a shining city, but now you have deferred a number of these 
questions to our next panel, which is the City Council and the 
Mayor and how they will address these issues of how do we bring 
people back to Washington, D.C.
    How do we reduce this crime rate, cut it in half? How do we 
get it to where our fourth graders, 78 percent of them having 
difficultly with basic reading skills now, to get that down to 
20 percent or lower where it should be? What do we do in 
getting this 25 percent of the District's population off of 
welfare?
    I just fundamentally believe that we have a chance now to 
really make this a different city, the city that Eleanor Holmes 
Norton grew up in that she cites, or the city that my 
predecessor, Frank Carlson before Senator Dole, lived in. I 
think we can do that now and I'm not persuaded that you're 
putting forward a plan that fundamentally addresses these 
crying problems in the city.
    Mr. DeSeve. And we agree that it can be done, sir, but the 
only way we believe it can be done is by Congress, the 
administration, and those local elected officials who are 
responsible working together and that's why this hearing is so 
important.
    Your skepticism is a healthy skepticism and it's one that 
we'd like to find ideas that you have that together with the 
elements of the President's plan create an entire whole. We 
said the plan was not a panacea; it is a foundation. We'd like 
to work with you to build the rest of the rooms and even a 
garage.
    Senator Brownback. Well, you put it very nicely and I'll 
look forward to engaging in that. Thank you very much.
    Mr. DeSeve. Thank you, Mr. Chairman.
    Senator Brownback. We'd like to get some written response 
on a couple of these items, as we've discussed.
    Mr. DeSeve. I'll look at the testimony, but I'd be happy to 
take whatever questions as well.
    Senator Brownback. Thanks.
    Mr. DeSeve. Thank you.
    Senator Brownback. The next panel up, the Hon. Marion 
Barry, Mayor of the District of Columbia, and the Hon. Linda W. 
Cropp, the Acting Chair of the District of Columbia City 
Council. I don't believe our two panelists need much 
introduction to this Subcommittee, although I would point 
something out that may not be well-known about Mayor Barry.
    He and I went to the same college at one point in time, the 
University of Kansas. During basketball season, we share a few 
comments about the University of Kansas and how well we're 
playing. We're going to win the Final Four this next time 
around, Mayor Barry.
    But with that, you've heard the testimony, you've heard the 
questions. What I'm after is, what are we going to do to make 
this the shining city? These numbers I've cited are 
intolerable, they cannot continue. We cannot allow these things 
to continue this way. I'm skeptical about whether just more 
money does it.
    You're going to have to convince me that more money is the 
issue with this, but I would appreciate a summary, if you 
could, of your testimony. We'll put all the written statement 
in the record, and then I'd like to have a good dialogue about 
how we're going to answer these questions because most of them 
got thrown to you about what we're going to do to make this the 
shining city.
    So, Mayor Barry, thanks again for coming here and I look 
forward to your testimony.

TESTIMONY OF THE HON. MARION BARRY, JR.,\1\ MAYOR, DISTRICT OF 
                            COLUMBIA

    Mayor Barry. Thank you very much, Mr. Chairman. Let me ask 
that my statement in its entirety be entered into the record.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mayor Barry appears in the Appendix 
on page 43.
---------------------------------------------------------------------------
    Senator Brownback. Without objection.
    Mayor Barry. Let me start with some of the questions that 
you raised. When you started out, you cited a number of 
statistics which would suggest that per capita expenditures of 
public monies for D.C. residents are way higher than that of 
St. Louis or Baltimore or Boston or a number of other cities. 
Let me put that in perspective.
    What you're getting at is that we're spending all this 
money and we're not seeing any major results and we're spending 
much more than anybody else. If you take the City of St. Louis 
or Baltimore and you take all of the city functions that you 
spend city money on and then you take the county functions that 
the county that surrounds St. Louis or Baltimore County 
surrounding Baltimore or Kansas City or any other city, and 
take the number of people who are served by the county who live 
in St. Louis but not paid for by city funds, and then you take 
all of the State functions, mental institutions, prisons, motor 
vehicles, Medicaid, and I have a list here of all the State 
functions, which I'll share with you, and add that to what is 
being spent for the residents of St. Louis and Baltimore, 
that's one approach.
    Then you take the percentages. What is the percentage of 
people in St. Louis or any other city that's elderly that 
requires a subsidy of money? Is it 10 percent or 5 percent? You 
cannot just say elderly programs. What's the percentage of 
those who are mentally ill that the State is paying for? Go 
right down the line and I think when you do that--and someone 
did a study about 9 or 10 years ago.
    I don't know where it is at this point, I've seen it, it 
would suggest that you will end up with some cities per capita 
expenditures would be far greater than the District of 
Columbia. That's one thing we ought to do because where you're 
comparing it, unfortunately, it doesn't do that. It doesn't 
take all the State spending in consideration.
    Senator Brownback. Mayor, I've got to break in here and say 
I've asked them for that, to set that comparison because I 
agree with you. I don't think that's a fair way to look at it. 
If you just say, OK, we're going to take the District of 
Columbia and everything it provides and St. Louis and 
everything it provides, when you're providing a whole bunch 
more, that isn't a fair way to look at it. I've asked for this 
and they've added in the State and the Federal functions that 
are here in these other cities and I'm saying, ``Now, wait a 
minute. This is apples and apples.''
    Mayor Barry. Senator, I'd like to see----
    Senator Brownback. We'll show you the basis of those 
numbers and you can go at those.
    Mayor Barry. Yes, I'd like to see the specific numbers----
    Senator Brownback. Happy to do it.
    Mayor Barry [continuing]. Taking a specific city, and I 
again maintain that when you do that and then do the 
proportionality, you must admit, too, that if St. Louis has 
one-half the number of people who need mental health services, 
obviously the State will pay less per capita.
    But the big issue in terms of Washington, to get at the 
heart of your question, is that the President's plan, absent 
the Federal Payment, is only $60 million above what the Federal 
Government is doing now. I'm sure you know that, don't you? 
That we're talking about $60 million and we will take the 
borrowing, you're talking about $44 million or a net gain to 
the District without the Federal Payment, which many of us 
don't support not giving up, and so when you say that all of 
this money is being given, more money, that's not accurate.
    It's $44 million over what is being given now absent the 
Federal Payment. Now, many of us in Washington, including the 
Board of Trade and the City Council and the Financial Authority 
and the City Council, many of us don't believe that the Federal 
Payment should be eliminated. The Federal Payment must be an 
integral part of any revitalization plan.
    Mr. Chairman, when you look at the approach that I've tried 
to take, and the Council also, when we had this financial 
crisis, when I came in in January, the worst in the history of 
this city, I proposed a three-prong approach, that the City 
Government restructure itself, fine-tune itself, right-tune 
itself, eliminate programs, cut the cost of government.
    And in the first year between 1995 expenditures and 1996 
expenditures, because of that approach, the D.C. Government cut 
spending $151 million below the previous year, unprecedented, 
where you spend less the year after than the year before. We 
have done that.
    We have laid off and easy outed and early outed over 7,500 
people. Our employees have taken major wage reductions. We have 
privatized a number of entities to save money. So we have 
reduced the cost of government. We have made the government 
much more efficient, much more dependable.
    The second leg of that is to have cost of governance. Since 
we have all these State functions without the authority to tax 
revenue at its source, it means then that the suburbs are 
subsidizing the District of Columbia Government by at least 
$700--I'm sorry. The District is subsidizing the suburbs--thank 
you--the District citizens and our taxpayers are subsidizing 
Maryland and Virginia by almost $700 million because we can't 
tax the income at its source.
    So you have the State functions, which are about $2.4 
billion out of this $5 billion, which I'd like to enter into 
the record if you look at this chart here.\1\ It shows that 46 
percent of our money goes to State functions, $2.4 billion. But 
then you add to it, Mr. Chairman, the fact that St. Louis or 
Baltimore or no other city has to spend over $250 to $270 
million for a pension plan because it was unfunded by the 
Federal Government.
---------------------------------------------------------------------------
    \1\ The charts referred to by Mayor Barry appears in the Appendix 
on page 65.
---------------------------------------------------------------------------
    So you add all the numbers up and you get that kind of 
dynamic. So cost of governance ought to be a factor in bringing 
financial stability to the District Government. It happened in 
New York. When New York got in trouble, the State of New York 
took over the entire Medicaid program, took over the State 
education system, the City College of New York, and took over 
some of the State costs.
    When Baltimore was having some problems, the State of 
Maryland took over a significant number of its criminal justice 
system in terms of paying for it. So all over America where you 
had these problems, it's not unusual for the State, in our 
instance the Federal Government, to take over some of those 
costs.
    The third part of this was revenue enhancement/economic 
growth. I think the city has not focused enough on economic 
growth. I mean, what is it that we need to do as a city to 
create economic growth? We're landlocked, we're uncompetitive 
in terms of Maryland and Virginia because of these pressures 
that are financially on us. Our commercial taxes are higher 
than Maryland and Virginia. Unemployment taxes are higher, 
disability comp is higher. All those make us non-competitive.
    But the area which we could immediately jump-start this 
economy would be in the area of jobs. McKinsey and Company just 
did a report which shows that for each 100 D.C. residents that 
are employed in present jobs--when people leave them, put 
people in them that are qualified--we would get about $352,000 
in taxes.
    Suppose there are 617,000 jobs in the District, 189,000 are 
Federal jobs. Suppose that you could put 10,000 qualified D.C. 
residents to work in jobs as they become vacant in the staff of 
the Congress, in the Federal Government, in the private sector. 
You're talking immediately about $35 to $40 million of income 
that would be revenue that the District could use to reduce 
taxes in the areas we're talking about.
    If you took capital gains, I happen to agree with you. We 
ought to have zero capital gains not only for real estate, but 
for corporations that are doing business in the District of 
Columbia, zero. It would stimulate business. Then we need an 
equity infusion process. The Federal tax code could be changed 
where you allow equity to be attracted to the District without 
it being taxed the way it is around the country.
    Tom McMillan, who was formerly in the Congress, has a 
proposal to do that. And so, those three approaches have to be 
taken now. What do we do about schools? That's a question that 
urban educators in Baltimore, St. Louis, New York, Chicago, and 
Los Angeles--everywhere in America is asking, how do we get 
fourth graders reading?
    How do we get people graduated from high school who can 
compete in this world of work with the skills that are 
necessary? Our school system is undergoing the same kind of 
challenges. Unfortunately, neither Ms. Cropp or the Council nor 
myself have direct control over the schools, but I think we 
have to jump on the school system. We have to cajole it, we 
have to push it, we have to do all we can to help it to, first 
of all, become accountable to us, the citizens.
    I have a 16-year-old son in public school, so I see it 
first-hand, and right now there's very little accountability. 
Take the budget situation. The school system gets the same 
budget whether 40 percent of the students come every day or 90 
percent come every day. We ought to have some kind of formula 
as it is in Kansas or in Missouri or wherever.
    The State contributes to the school system based on an 
average daily attendance. Our school system only takes roll 
once a day. Most school systems take roll twice a day. These 
kids come at 9 o'clock; they leave at 10 and nobody knows that. 
And so, we need more accountability.
    We need to drastically change the way the school system 
operates. I'll give you an example of how I would advocate that 
we do that in the schools. We brought in Booz-Allen to the 
police department, Mr. Chairman, and examined the police 
department top to bottom and made analysis of what was wrong, 
what wasn't working, how many officers were on the streets, and 
you're beginning now to see a turn-around in how police are 
policing.
    Only 16 percent of the officers were on patrol, out of all 
these officers. We now have put over 400 officers out there. An 
additional 500 is on the way. And how do you solve crime? By 
getting the community involved, by having community policing, 
by more officers in uniform, by getting ministers and others 
involved, and in terms of D.C., it's beginning to work.
    In the month of March, there was a 30 percent reduction in 
Part 1 crimes in the District. Twenty-six murders in March of 
1996; 15 in March of 1997, a 43 percent reduction. Mr. 
Chairman, we're going to be vigilant. We're going to continue 
to drive this crime down. We're going to have more and more 
officers on the streets, more and more citizens involved with 
it.
    The school system needs the same kind of analysis. It needs 
somebody to come in and say, ``Look, all these paradigms that 
you all are talking about don't work. All these curriculum 
things that are in somebody's desk are not working.'' And 
demand accountability, demand drastic action, demand that they 
tell us on a monthly basis what the success of these students 
are, and make our school system student-centered.
    The school system now, Mr. Chairman, unfortunately--and 
Linda and I were on the school board--at this point is not 
student-centered. It's administration-centered. The budget is 
built around the administration. So what this Congress can do 
as it examines the budget for the school system, as the Council 
does it, is to make the budget, first of all, student-centered.
    If you make it student-centered, at least you've got a 
chance of demanding that the test scores increase, demanding 
that the graduation rate increase, demanding that the skill 
level increase, demanding that the SAT's go up. Mr. Chairman, 
it is happening in some of our schools already.
    Take Banneker, one of our academic high schools. Ninety-
nine percent of those students who started together in ninth 
grade graduated last year together. Lost one and that was to a 
murder in the streets by some domestic dispute. Ninety-five 
percent of those students are going to college or the military 
or have a job. Why can't that be duplicated throughout the 
District of Columbia?
    It will not happen unless you and the citizens and the 
Council and the parents demand it of the school system. Take 
Duke Ellington High School, a great high school, young people 
going into the arts and the culture, and 99 percent of them go 
somewhere when they leave Duke Ellington, that's in the area of 
whether singing or dance or art and culture. Why can't we have 
five Duke Ellington's in the District of Columbia?
    There are other schools that are doing that, so I guess I 
understand your question about it. It's not up to the Federal 
Government to do that. It's not up to the Congress to do that. 
It's up to those of us who live in this city and those of us 
who manage and govern this city to demand that accountability 
and those who can't bring it about ought not to be in that 
particular job in terms of education.
    Take the environment. We need to clean the city and it's 
beginning to get cleaned up. It's got potholes everywhere. It's 
up to us and the Council and the Mayor to figure out how we put 
the money into those areas.
    So what I'm saying is that if we're relieved of these 
pressures over here, the cost of governance, we can then focus 
our time and attention on the real thing, how do you make 
Washington the crown jewel we want it to be. We can't do it, 
though, when we're cutting the budget every year, cutting our 
vital services, when we're cutting out burial assistance, when 
we're cutting out things that are vital to our people.
    And so, as you look at this plan, look at this as cost of 
governance, not putting a lot of money from the Federal 
Government into the system. Also look at it in terms of a first 
step as we go forward. That's just sort of an overview of what 
we have to do. This plan is not perfect, but it ought to be 
looked at as a cost of governance. It's not giving us anything, 
it's not a gift.
    Look at it in terms of relieving the financial pressures on 
us so that we can focus our full time and attention on these 
programs. I spend 40 or 50 percent of my time on budget stuff 
every day trying to get the money here, trying to balance the 
budget here, trying to do that.
    If we had this plan in place, it would relieve some of that 
pressure on us and allow us to then do what you want us to do, 
what I want to do, is make the government work more 
efficiently, and reduce crime in our streets, drastically 
improve the education system for our students, make it student-
centered, get the environment, get our streets cleaner, get our 
potholes done, and I call upon you and the Congress to 
immediately look at the idea of hiring D.C. residents when 
vacancies occur.
    That's something you can do, that's something the private 
sector can do, that's something the Federal Government can do 
that would jump-start this economy immediately. Let me stop at 
this point and Mrs. Cropp can go on and then we'll have some 
dialogue back and forth.
    But finally, I urge you to look at my statement to see all 
the sacrifices and all the tough decisions that I've made to 
reduce the size of this government. Many of these decisions 
were very unpopular, very difficult. When you cut out a lot of 
services as we have done and reduce spending in areas that 
people like for you to spend it in, it's very unpopular, but 
it's there, this is real, and this is my commitment.
    But the Congress has to accept its part of it in terms of 
cost of governance and certainly needs to focus on economic 
growth.
    Senator Brownback. Thank you very much, Mayor Barry. I 
appreciate your testimony.
    Mrs. Cropp, I look forward to your presentation. You can 
summarize and, if you'd like to, put your written testimony 
into the record. Thanks for being here and the microphone is 
yours.

   TESTIMONY OF LINDA W. CROPP,\1\ ACTING CHAIR, DISTRICT OF 
                     COLUMBIA CITY COUNCIL

    Mrs. Cropp. Thank you very much, Chairman Brownback, and it 
certainly is a pleasure to be here on behalf of the Council of 
the District of Columbia. I'm pleased to say that I'm 
accompanied by Council Members Jarvis, Schwartz, Thomas, and 
Mason.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mrs. Cropp appears in the Appendix on 
page 76.
---------------------------------------------------------------------------
    Senator Brownback. Excuse me. I didn't recognize Hilda 
Mason earlier; the other group I did earlier. Hilda, thank you 
very much for joining us.
    Mrs. Cropp. The President's proposal provides a historic 
opportunity to address the city's financial crisis in a way 
that begins to address the fundamental inequities which have 
long existed in relationship between the District of Columbia 
and the Federal Government. We, who represent the residents of 
the District, embrace this effort to address the expenditure 
side of the District's structural financial problems.
    We believe that slow but steady progress is being made to 
increase the accountability of the District Government for 
improved management of our finances, and much work needs to be 
done in this area. However, we also look forward to the day 
when the revenue side of the structural problem is addressed 
because if we do not find a way to revitalize the local economy 
and expand our revenue base, the District of Columbia will 
never get out from under its ongoing fiscal crisis.
    Although the District, under the 1973 Home Rule Charter, 
has attempted to perform State functions and to provide State-
like services, we have done so without the revenue base of a 
State. Our revenue base, as you know, has been constrained 
severely and primarily by the Federal presence and 
Congressionally-imposed restrictions, most notably by the 
inability to have a reciprocal tax on income at its source, 
which in effect, provides a subsidy from the District to our 
neighboring States of Maryland and Virginia.
    When you consider that over two-thirds of the personal 
income in the city is earned by non-residents and that over 50 
percent of the District Government's own employees live outside 
the city, you begin to get an idea of the effect of this 
restriction.
    Recognizing the unique status of the District as the 
national capital and the financial constraints uniquely 
applicable to the District, the President has proposed that the 
Federal Government increase its budgetary responsibility for 
several very costly District operations such as the Medicaid 
program and the incarceration of felons, which are State-like 
functions that virtually no other city in the Nation performs.
    The President has also proposed relief from burdens which 
the Federal Government itself created when it transferred to 
the District Government as part of our home rule deal, 
particularly the $5 billion unfunded pension liability. The 
Council strongly favors increased Federal budgetary support for 
these governmental functions without which the District 
Government cannot survive financially.
    The President's plan includes a requirement that the 
District approve a balanced budget for fiscal year 1998, 1 year 
earlier than required by the congressionally-approved financial 
plan for the District. As you may know, the Council, during 
this most recent budget cycle, assumed a leadership role in the 
successful effort to balance the budget in fiscal year 1998 and 
we will continue to make the painful but necessary cuts to 
right-size our government and redirect our resources to the 
priorities of public safety, public schools, and public works.
    The President's plan includes other provisions strongly 
opposed by the Council, particularly the elimination of the 
Federal Payment and the requirement that certain criminal code 
changes must be enacted in the District, including determinate 
sentencing and the abolishment of parole in order for the 
Federal Government to provide the Federal budgetary support for 
the criminal justice system.
    The proposed elimination of the Federal Payment is wrong 
because the Federal Payment is compensation to the District 
both for the cost of services rendered by the District to the 
Federal Government, and for revenues foregone due to the 
Federal presence and the congressionally-imposed restrictions 
in our ability to raise revenue.
    The Federal Payment has been $660 million for several 
years, an amount which two independent studies have concluded 
is only about one-half of what the Federal Payment should be, 
based on a formula that calculates (1) a payment in lieu of 
taxes not paid by federally-related properties and sales; (2) 
Federal aid in an amount that other cities receive from their 
States; and (3) compensation for those types of State-type 
services for which the District has budgetary responsibility.
    Without objection, Mr. Chairman, I would like to enter into 
the record of this public hearing two reports that 
independently conclude that a fair formula-based Federal 
Payment to the District would be calculated at approximately 
$1.2 billion, the Brookings policy. It was a brief published in 
January of this year by Carol O'Cleiracain, which is entitled, 
``The Orphaned Capital,'' and second, the D.C. Appleseed 
Center's report dated November 2, 1995 which is entitled, ``The 
Case for More Fair and Predictable Federal Payment.'' \1\
---------------------------------------------------------------------------
    \1\ The two reports appears in the Appendix on page 119 and 131 
respectively.
---------------------------------------------------------------------------
    Despite our concerns with certain aspects of the 
President's plan, the Council last week endorsed a Memorandum 
of Understanding on the plan accompanied by a Council 
resolution stating our concerns, both of which I would like to 
submit for the record.\2\
---------------------------------------------------------------------------
    \2\ A D.C. Council resolution, 12-116, appears in the Appendix on 
page 83.
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    Senator Brownback. Without objection.
    Mrs. Cropp. Thank you, Mr. Chairman.
    In conclusion, I'm going to summarize some of it so we can 
get to the questions, the Council believes that the key to 
economic recovery in the District depends on three systemic 
changes, each of which is vital, local management reforms and 
substantially improved delivery of essential and basic public 
services, whether we're talking about personnel, procurement, 
public safety, education, and the Council has introduced 
legislation in many of these particular areas.
    The enhanced enforcement effort with the Memorandum of 
Understanding for the police department in 2 months of its 
existence has already shown great success. Second, we need 
Federal budgetary support for State-like expenditures of the 
District Government along with the continued Federal Payment.
    And third, tax reform for both District residents and 
businesses, both Federal and local, to reverse the flight of 
residents and businesses and to restore a competitive revenue 
base.
    Mr. Chairman, in your earlier question, you gave some 
specifics with regard to cities like St. Louis and how the 
District is still spending much more. Let me suggest, just on 
the health-related issues. The District of Columbia has a 
population that is older, sicker, and poorer. It's not unlike 
any other city in this country. The difference, however, is 
that in other cities, with that older, sicker, and poorer 
population, they share the cost with the suburban areas of 
their States.
    Baltimore's, for example, age population is very similar, 
but they don't pay any Medicaid costs. The District of Columbia 
pays a substantial cost. Not only that, we have 110,000 
residents who are under-insured or uninsured and we have to pay 
the cost for them when necessary, and these individuals work. 
They are not people who live on the government.
    When you look at our pension, which is a problem that was 
not created by the District of Columbia, we pay $300 million 
annually into our pension fund due to a problem that wasn't 
created by us. A comparable city such as Baltimore only pays 
about $60 million in. That's a big difference when you look at 
that.
    When you look at the debt that we have, quite a bit of it 
was due to construction of Metro; whereas, the City of 
Washington paid for its Metro costs by itself, you have 
Virginia and Maryland with the whole State to help pay for 
their costs. Therefore, our debt is greatly out of line with 
some of the other cities.
    When you look at the cost of doing business in the District 
of Columbia, for the city just to run itself, once again, I 
would like to direct your attention to the O'Cleiracain report, 
``The Orphaned Capital,'' and also Phillip M. Dearborn and 
Carol S. Myers did a report which was not attached to my 
testimony, but I would like to submit it to you.\1\
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    \1\ The report by Mr. Dearborn and Ms. Myers appears on page 174 in 
the Appendix.
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    You're absolutely right, Mr. Chairman, that we have to look 
at some of the basic issues in order to prevent flight from 
this city. We are currently addressing that public safety 
issue. We are looking at a totally different plan to deal with 
our police force. We have increased the budget, we increased 
the number of officers that would be out on the streets to 
protect our citizens in their neighborhoods.
    We're looking at the equipment to make sure that they have 
up-to-date equipment. That will play a big role in helping the 
flight. Currently there is an awful lot going on with 
addressing our school system. We look at the needs in capital 
improvement for our educational system.
    Quite frankly, usually capital improvement for schools is a 
State function almost 100 percent, and if it is not 100 percent 
State function, you find the State taking on a Herculean share 
of capital improvements for schools in other cities throughout 
this country.
    We understand that we must stem this hemorrhage of the 
flight of our citizens, but we truly believe that Washington, 
D.C. is one of the most beautiful places in this country. We 
have an awful lot of work to do, but we're moving towards a 
solution to the problem in that we have identified the problem 
and we have started very slowly, but definitely and vigorously 
addressing some of those concerns.
    We sit before you now with our hands extended so that we 
can join in partnership so that we can address the problems 
that currently face the District of Columbia together. Not only 
is it a city where many of us live and raise our families, but 
it is also the capital of this country and, I would say, 
probably the best city in the whole world.
    If we join hands in partnership, recognize the structural 
problems that have been created not because of the District of 
Columbia, but because of many other factors, I think together 
we can find solutions to many of the problems that face us now. 
Thank you very much and I would like my entire testimony to be 
entered into the record.
    Senator Brownback. And it will be placed there and thank 
you for that statement and for your spirit, both of you.
    It strikes me, we're sitting here and we're going to 
wrestle back and forth about dollars, and I guess that's what 
budget negotiations and talks are about.
    But really, whenever we've turned things around in this 
country, it's always been the spirit that precedes the actions. 
I went down to the FDR exhibit not this past weekend, but the 
weekend before with my 11-year-old daughter and it was really 
striking that as you enter into that, it was him telling the 
Nation, ``We can, we can, we can,'' at the outset.
    I think he created some programs that later on grew so big 
that we had some difficulties, but he was out there first 
saying, ``We can,'' and that's really how you turn something 
around, is convincing people in just the spirit of it that we 
can do this, we can make this difference, and that's what I'm 
after here.
    I've been coming back and forth to this city since 1974 and 
I think it's a glorious city, beautiful city, and then you want 
to look at these numbers and we've had all these hearings and 
I'm saying, ``What's gone wrong that we have these types of 
problems here?''
    I don't need to repeat them again for you. You know what 
these problems are and they're systemic and they're endemic and 
they're here and we've got to change it and it's the sort of 
thing--you don't solve these problems by just putting more 
money at it.
    Let's say if we gave you all the money that you wanted, you 
still don't solve these problems with more money. You've got to 
radically reform things to solve the sorts of problems that 
we've cited here of flight, of crime, of public school issues, 
of people on public assistance. That's not a minor surgery 
issue. We're talking radical surgery to be able to get that 
changed to make this shining example that I truly believe that 
it can be.
    I appreciate what you've put forward in some of your 
concepts here and I want to go down through some of these 
specific ones here so we can talk about what it is that we can 
do together on some of these areas, and I appreciate your 
spirit in coming forward with this because that's first.
    On creating jobs in the District, the President's put 
forward a plan of an economic development corporation. I don't 
think that's the way to go, but I think you ought to create a 
much more encouraging capital formation atmosphere in 
Washington, D.C. Now, if you're given a choice between those 
two, because each of them cost resources, which do you go with 
that will produce in Washington, D.C.?
    Mayor Barry. Mr. Chairman, I think we all recognize--let me 
just say, Mr. Chairman, in terms of the spirit, you're right, 
we have to have it, but there's also something that says faith 
without works is nil and work without faith is nil, and if the 
D.C. Government every day or every week is doing very little 
except having to, because of the financial reality, cut 
budgets, cut programs, cut, cut, cut, cut, it tends to break 
the spirit of not only those who have to do the cutting, but of 
those who are the recipients of this cutting.
    If you have to cut out home care aides for seniors who need 
them because the money is not there and you can't get them any 
other place, to me that breaks the spirit. So I think the cost 
of governance part of this allows the spirit to flow even 
better now.
    In terms of the specifics, I happen to think that the 
President's plan, in terms of economic development, is a small 
step, but it doesn't produce any jobs in 1998, additional jobs, 
maybe a few in 1999. I think the capital formation approach, 
capital formation, capital and credit, those kind of techniques 
will produce, in my view, a faster flow of jobs than the 
traditional tax credits, which are OK.
    In addition, the taking of land and putting structures on 
it, is OK, but it's capital, I think, that's built this country 
strong and it will build Washington, also. Let me say, Mr. 
Chairman, that unfortunately, Washington in terms of its flight 
is no different than St. Louis or Baltimore. They're having 
people leaving inner cities every day going to the suburbs.
    But on the other hand, the good news is, the latest numbers 
I've seen from the Census Bureau is that we're beginning to 
turn that around. That is, the flight is slowing, the 
percentage of flight is slowing down, and the number of people 
moving into the District is increasing.
    The only problem with that, most of those who are coming 
into the District don't have many children, maybe one or two, 
at the most, or they're single households; whereas, those who 
are leaving leave with two or three children. But that flight 
is being slowed down. But capital formation, to me, is a much 
more powerful engine to drive the economy than just an economic 
development corporation.
    Senator Brownback. Mrs. Cropp.
    Mrs. Cropp. Yes. Mr. Chairman, let me say that the spirit 
of the Council of the District of Columbia is stronger than 
ever. Over the past few years, we have seen some very tough 
budget cuts, but our resolve to make this city function is 
stronger.
    The Council of the District of Columbia, in concert with 
other leaders, the Mayor of this city, we are prepared to roll 
up our sleeves and do the hard work necessary to bring this 
city back to its true strength and vitality. We have made some 
serious budget cuts, but we have also made some very hard 
decisions and introduced new legislation so that a new day will 
dawn, so that we will be able to do business a bit differently 
than we have in the past.
    We understand very clearly that just by having money, it 
will not be the solution to the total problem. We understand 
that we need to change how we have managed, how we have done 
business, and we are prepared to, in fact, do that.
    Recent legislation that has been introduced is testament to 
the direction that we plan on taking. We have swallowed some 
very bitter pills. If you ask what is the best solution and the 
best approach to solve our economic problem, I think it's a 
two-prong approach. We must look at the immediate and we must 
also look at long-range goals.
    The President's plan deals with an immediate solution, 
where it will give an immediate infusion of dollars, and 
hopefully spur the economic growth of this city. I think what 
you along with Congresswoman Norton introduced with regards to 
the taxes for the District of Columbia gives us a long-range 
solution to our problems.
    As we deal with both, it's a way in which we can help to 
bring businesses back into this city. We need to reduce some of 
the taxes for the businesses. Carol O'Cleiracain in her report, 
``The Orphaned Capital,'' talked about the need to reduce, for 
example, four different business taxes. We need to look at ways 
in which we can bring small businesses into this city.
    For even though we'd all like to have big, major businesses 
here, we understand clearly on the Council that it is the small 
business, not only here but across the Nation, that does an 
awful lot and we want to do the things that will strengthen 
that and both of those will do it.
    Senator Brownback. Mrs. Cropp, you're saying that both of 
those will do that. Which is higher priority for you? Would it 
be zero in the capital gains or the economic development 
corporation? We're going to have to make budgetary choices and 
each costs Federal revenues.
    Mrs. Cropp. I think a tax program for the District probably 
would be on higher priority, but we need a two-prong approach.
    Senator Brownback. I know if you offered to the people in 
Kansas, OK, we're going to give you this economic development 
corporation or you can zero capital gains on real property, I 
think I have a pretty good idea how the vote would go on this. 
They'd say, ``Give me the zero capital gains. I'll figure it 
out on my own.''
    Mrs. Cropp. The tax plan, I think, would be a higher 
priority, but a two-prong approach is a stronger one.
    Senator Brownback. Let me go to schools, and both of you 
have stated this kind of--well, I guess, particularly, Mayor, 
you've stated this is a bit out of our hands. I've been 
disappointed, very disappointed with the hearings and the 
information, although as I wanted to mention, I was at Stuart-
Hobson magnet school the other day, an excellent school.
    There you could see the problem. The principal told me they 
are full or up to capacity and I think she has 200 students 
waiting to get into it. And so, she's got a great school and 
it's full. What about the others, the kids that can't get in 
then in that school system?
    You know the debate that a lot of people put forward. We've 
heard in this Subcommittee about charter schools and they 
passed legislation for charter schools in the District of 
Columbia. The statements that we heard in testimony was, ``Yes, 
the legislation is there and there's some big resistance in the 
system to creating them because they're not happening.''
    And you know the argument about a vouchers program. That's 
a more radical approach. It strikes me that there's some 
validity in doing that, particularly for students that can't 
get into one of the better schools, that you provide them a 
broader option.
    Now, I'd like for each of you to narrow in on that issue 
and tell me your thoughts, even though I recognize what you're 
saying, that these are, to a great degree, outside of our 
control.
    Mayor Barry. Mr. Chairman, if you support charter schools, 
as I do, that's one approach. Then there's vouchers, a lot of 
controversy about that. But I'm not convinced that the argument 
is that if you have vouchers you give people an opportunity to 
choose and put pressure on the school system. I don't think it 
does.
    I think we have to put pressure on the school system of 
accountability, raising public issues. I was at Stuart-Hobson 
myself about 2 weeks ago. Ms. Lewis is the principal over there 
and these young people are just excited. The question is, why 
can't we demand, as people are demanding of me that we reduce 
crime, that we restructure the police department, which we've 
done, that we do something about human services.
    Why can't we put a greater demand on the system to 
replicate the Stuart-Hobson's of the world and keep that 
pressure on and if General Becton and his administrators can't 
do it, let's keep trying somebody else who can do it.
    Senator Brownback. Let me narrow you in on a real narrow 
question. Let's say that a student wants to get into a 
different magnet school and it's filled and he's trapped in a 
school that they don't feel like is up to snuff of what they 
want to do, or by some objective factor is not. What about 
creating for them a scholarship to go where they want to 
outside, private or public school? Mrs. Cropp.
    Mrs. Cropp. Let me say, the Council is on record in support 
of charter schools. Mr. Chairman, may I put another suggestion 
to you? By giving the voucher to one student, we have helped 
that one. There are 99 other students that I firmly believe 
that we must also help.
    Perhaps the approach that we have taken with regard to 
education is one that needs to be changed and looked at. I 
truly believe we need to take an integrated approach to dealing 
with the school system. We tend to say the school system needs 
to this and this is their responsibility. Quite frankly, the 
schools are a reflection of society as a whole and their near 
community.
    It means that if we want to see a difference and if we want 
to see a duplication of other Hobson's and other Banneker's 
across the city, then those of us who are not just 
intrinsically involved with the schools must become involved 
with the education of our students outside of the school.
    The students at Hobson, and I'm familiar with that school 
very well, they have an environment such when that child goes 
to school at a young age--they already know their alphabet, 
they can count from 1 to 10, they know their colors. Many other 
students don't know that.
    Data strongly suggests that if a child goes to school, if 
they can't count to 10, if they can't tell you their parent's 
name, if they can't tell you their address, their phone number 
or the colors, they are already 3 years behind and unless they 
have an infusion of support, they will never catch up.
    I suggest to you then what we need to do is deal with early 
childhood education. We need to look at the education of our 
young people outside of that schoolhouse so that we can have an 
impact on the 99 others who may not get a voucher. I think if 
all of us start looking at education as not only the 6 hours 
that the children are in school, because young people learn 
from their total environment, and if they're only in school for 
6 hours, we're already behind because there are more hours in 
the day outside of school that they're learning.
    What they're learning is what we can have an impact on. I 
would like our approach to the education system to be for us to 
do things more outside of the school. Let the educators do the 
basics of reading and writing, for us to do some other things 
outside of it and integrate it.
    Human services in the school system shouldn't be separated. 
Public safety in the school system should be united, the 
courts, all of it, and in doing that, I think we will have an 
improved system and then we won't have to worry about the 
voucher for one or two students, but we will be able to help, 
hopefully, the vast majority of students.
    Senator Brownback. Let me summarize because we're at the 
end of the time for this hearing and I want to be cognizant of 
people's time. I've got some other areas I'd like to go down 
with you, but I'm concerned that you enter into the Memorandum 
of Understanding with the administration. Now, are you bound 
that you have to support the administration proposal? Is that 
the quid pro quo on this MOU or are you going to be open for 
further discussion on some of these other items?
    Mrs. Cropp. Mr. Chairman, we're very open. In fact, the 
Council has a resolution that is attached to the Memorandum of 
Understanding and we would offer ourselves to come up and meet 
with you and other Members of Congress to talk about the best 
approach that we can take for bringing the District to 
financial solvency.
    The Federal Payment is a very crucial point for the 
District and we have stated in the Memorandum of Understanding 
that we think that it ought to continue. The Memorandum of 
Understanding is a starting point for us and we would like to 
be at the table with you and with your colleagues as we work 
and massage and develop the final product.
    Senator Brownback. I guess here's what I'm worried about. 
Last week, you voted it down, the administration proposal.
    Mrs. Cropp. We did not take a vote on it.
    Senator Brownback. Well now, Wednesday of last week, there 
was a vote taken on the administration's proposal.
    Mrs. Cropp. No, Mr. Chairman. We discussed it at a Council 
meeting. We only had one vote on Friday. It was discussed, but 
there was no formal vote taken.
    Senator Brownback. OK. Here's the headline for the 
Washington Post of May 7, Wednesday of last week.
    Mrs. Cropp. I would suggest, Mr. Chairman, that you look at 
the actions of the Council.
    Senator Brownback. All right. Are you telling me the 
Washington Post is not accurate?
    Mrs. Cropp. Can you believe that can happen sometimes? We 
did not take a formal vote. There was discussion. It was 
withdrawn.
    Senator Brownback. OK. What happened between Wednesday, 
when the Council refused to endorse a White House rescue plan--
that's what the lead of the article is--and Saturday when 
there's a ``D.C. Council Approves U.S. Aid Plan?'' What else 
was added to the deal to get the Council to----
    Mrs. Cropp. Mr. Chairman, there were a couple of things 
that happened. I believe there was some initial unreadiness on 
Wednesday when we first started the debate. One of the issues 
that the Council had great concern was with regard to the 
Federal Payment that I've tried to articulate and, I hope, 
forcefully here, that there be some reference to the Federal 
Payment within the Memorandum of Understanding, that the 
Council did not agree that that be removed.
    Senator Brownback. Did the administration promise you to 
continue that payment then?
    Mrs. Cropp. No, the administration did not; however, there 
is reference to it in the Memorandum of Understanding to make 
it clear that the Council is not in support of the Federal 
Payment being deleted. The administration did not promise to 
continue it.
    Senator Brownback. What did they promise you then?
    Mrs. Cropp. It was a change, one, with regard to a 
reference to it in the Memorandum of Understanding, and second, 
I think, it helped with some Council members to get some 
additional information that they needed in some other areas of 
the plan, some clarity or some information that they did not 
have on Wednesday, and after doing further research and getting 
that information, they were then prepared on Friday to do a 
vote that they were not prepared to vote for on Wednesday.
    Senator Brownback. So, you're telling me there's nothing 
else orally that's been promised to the D.C. Council that the 
administration would try to pursue in order to get the 
Council's support other than what's in the written plan?
    Mrs. Cropp. I think the only thing I could say, Mr. 
Chairman, is that the administration said they would come to 
the Hill and work with us in trying to get support for the 
District as laid out in the Memorandum of Understanding. We had 
no endorsement of them at all, unfortunately, for the Federal 
Payment. I would have loved to have had that.
    Senator Brownback. So that they will work with you to get 
more things that you want, but they didn't add to their 
particular package?
    Mrs. Cropp. The only thing was the insertion of the 
language with regard to the Memorandum of Understanding. I 
believe that's in Section 1 under the purpose. It's the last 
sentence in the first paragraph, I believe.
    Senator Brownback. But they'll go with you to the Hill to 
get more things in addition to the plan, or they won't oppose 
you at the Hill in getting these additional things?
    Mrs. Cropp. We agreed to disagree on the need for the 
Federal Payment.
    Senator Brownback. OK. I'm reading these things and I'm 
saying, ``OK. Now, what else was agreed to here where their 
Council is reluctant to endorse and then does the same plan,'' 
when I think we need to be looking at a much broader set of 
reforms that haven't been included thus far in this discussion.
    We've had a lot of hearings and I want to bring those 
proposals on forward and I'm trying to determine, has the 
Council already rejected and said, ``We're going with the 
administration's proposal,'' which I think there has some 
flaws. I think you're going from maybe some difficulties in 
managing this from the District of Columbia to we're going to 
manage it at the Federal Government, which I think is flawed, 
on a number of these functions.
    So I want you to keep an open mind on a broader set of 
reforms to look at these areas, and I'm trying to get from you 
that yes, you are going to be looking at those carefully and 
critically and, hopefully, supportively.
    Mrs. Cropp. Mr. Chairman, let me assure you that that is 
the direction that the Council of the District of Columbia is 
taking. We would like to have continued dialogue with you. For 
example, I'm quite aware, as the Council is, of our plan with 
regard to taxes in the District of Columbia. It's something 
that we support. We would love to continue dialogue with that, 
and we're open.
    We would like what is best for the District of Columbia, so 
let me assure you that we are open.
    Senator Brownback. And that's what we're all after. I thank 
you both very much.
    Mayor Barry. Mr. Chairman, let me say, for the record, that 
one of the big differences, when this Memorandum of 
Understanding idea started, it was the idea of trying to make 
sure we knew what was on the table. There was a section which 
bound both parties to vigorously support the items in the 
Memorandum of Understanding. That was deleted, which gave 
certainly myself and the Council an opportunity to support that 
part of the program that we could vigorously support and try to 
find alternatives to those that we did not support.
    For instance, the criminal justice system, to me, has a 
number of philosophical and program problems, from my 
perspective. The same is true of the Federal Payment and 
there's some problem with the economic development corporation 
in terms of eminent domain and whether or not you're going to 
really get what you get with it.
    So we're willing, and I'm sure the Council, as Mrs. Cropp 
has stated, I'm certainly willing to work with you and your 
colleagues and others in the House to round out this in 
different ways to look at it. As long as we can get some cost 
of governance relief, as long as we can get some economic 
growth generators in this plan, as long as we commit ourselves 
to making the D.C. Government much more efficient, much more 
dependable, then that's the kind of deal we want to get.
    Senator Brownback. Good. Well, I appreciate it very much, 
and appreciate this panel. There's been several places noted 
that this plan is not a panacea. Well, I'm looking for a 
panacea to address some of these problems, and I think we can 
find some things that will truly address it in a major league 
way because we all want to make this place better. Thank you 
all for your work. I'd also recognize Harold Brazil as a 
Council member that's here as well. Appreciate you coming.
    Thank you all for this hearing and you'll be hearing more 
from us. Meeting adjourned.
    [Whereupon, at 3:15 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

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