[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]




                  DISTRICT OF COLUMBIA APPROPRIATIONS

                                FOR 2001

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS
                             SECOND SESSION

                                ________

           SUBCOMMITTEE ON DISTRICT OF COLUMBIA APPROPRIATIONS
                ERNEST J. ISTOOK, Jr., Oklahoma, Chairman
 RANDY ``DUKE'' CUNNINGHAM,          JAMES P. MORAN, Virginia
California                           JULIAN C. DIXON, California
 TODD TIAHRT, Kansas                 ALAN B. MOLLOHAN, West Virginia
 ROBERT B. ADERHOLT, Alabama
 JO ANN EMERSON, Missouri
 JOHN E. SUNUNU, New Hampshire      
                         
 NOTE: Under Committee Rules, Mr. Young, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
                   Americo S. Miconi, Staff Assistant

                                ________

                                 PART 1

                             (Pages 1-1077)
                                                                   Page
 Schools (Including Public Charter Schools).......................    1
 Corrections; Court Services and Offender Supervision;
   and Public Defender Service ...................................  195
 Anti-Deficiency Act Violation by DC Courts ......................  395 
 Justification Material ..........................................  471
     Corrections Trustee .........................................  472
     Court Services and Offender Supervision Agency ..............  485
     Public Defender Service .....................................  592
     Courts (including prepared statements) ......................  613
 Management Reform in the DC Government ..........................  727
 Appendix -- Management Reform ...................................  823 
 Budget for FY 2001 ..............................................  993
                                ________

         Printed for the use of the Committee on Appropriations

                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
 65-842 O                   WASHINGTON : 2000

                                  COMMITTEE ON APPROPRIATIONS

                   C. W. BILL YOUNG, Florida, Chairman

 RALPH REGULA, Ohio                  DAVID R. OBEY, Wisconsin
 JERRY LEWIS, California             JOHN P. MURTHA, Pennsylvania
 JOHN EDWARD PORTER, Illinois        NORMAN D. DICKS, Washington
 HAROLD ROGERS, Kentucky             MARTIN OLAV SABO, Minnesota
 JOE SKEEN, New Mexico               JULIAN C. DIXON, California
 FRANK R. WOLF, Virginia             STENY H. HOYER, Maryland
 TOM DeLAY, Texas                    ALAN B. MOLLOHAN, West Virginia
 JIM KOLBE, Arizona                  MARCY KAPTUR, Ohio
 RON PACKARD, California             NANCY PELOSI, California
 SONNY CALLAHAN, Alabama             PETER J. VISCLOSKY, Indiana
 JAMES T. WALSH, New York            NITA M. LOWEY, New York
 CHARLES H. TAYLOR, North Carolina   JOSE E. SERRANO, New York
 DAVID L. HOBSON, Ohio               ROSA L. DeLAURO, Connecticut
 ERNEST J. ISTOOK, Jr., Oklahoma     JAMES P. MORAN, Virginia
 HENRY BONILLA, Texas                JOHN W. OLVER, Massachusetts
 JOE KNOLLENBERG, Michigan           ED PASTOR, Arizona
 DAN MILLER, Florida                 CARRIE P. MEEK, Florida
 JAY DICKEY, Arkansas                DAVID E. PRICE, North Carolina
 JACK KINGSTON, Georgia              MICHAEL P. FORBES, New York
 RODNEY P. FRELINGHUYSEN, New Jersey CHET EDWARDS, Texas
 ROGER F. WICKER, Mississippi        ROBERT E. ``BUD'' CRAMER, Jr., 
 GEORGE R. NETHERCUTT, Jr.,          Alabama
Washington                           MAURICE D. HINCHEY, New York
 RANDY ``DUKE'' CUNNINGHAM,          LUCILLE ROYBAL-ALLARD, California
California                           SAM FARR, California
 TODD TIAHRT, Kansas                 JESSE L. JACKSON, Jr., Illinois
 ZACH WAMP, Tennessee                CAROLYN C. KILPATRICK, Michigan
 TOM LATHAM, Iowa                    ALLEN BOYD, Florida                 
 ANNE M. NORTHUP, Kentucky
 ROBERT B. ADERHOLT, Alabama
 JO ANN EMERSON, Missouri
 JOHN E. SUNUNU, New Hampshire
 KAY GRANGER, Texas
 JOHN E. PETERSON, Pennsylvania
 VIRGIL H. GOODE, Jr., Virginia     
                   
                 James W. Dyer, Clerk and Staff Director

                                  (ii)



 
              DISTRICT OF COLUMBIA APPROPRIATIONS FOR 2001

                              ----------                              

                                           Tuesday, March 21, 2000.

             D.C. PUBLIC SCHOOLS AND PUBLIC CHARTER SCHOOLS

                               WITNESSES

CONSTANCE NEWMAN, VICE CHAIR, D.C. FINANCIAL RESPONSIBILITY AND 
    MANAGEMENT ASSISTANCE AUTHORITY
ARLENE ACKERMAN, SUPERINTENDENT OF D.C. PUBLIC SCHOOLS
JOSEPHINE BAKER, CHAIR, D.C. PUBLIC CHARTER SCHOOL BOARD
MALCOLM PEABODY, CHAIR, D.C. PUBLIC CHARTER SCHOOL COALITION

                  Chairman Istook's Opening Statement

    Mr. Istook. The Committee would come to order, please. We 
appreciate having all of you here with us this afternoon.
    We are meeting this afternoon for testimony concerning the 
District of Columbia's public schools, including the charter 
schools, which are a part of the public school system. We look 
forward to a status report today on providing a better 
education for children in the District so that their lives will 
be enriched and their futures will be brighter. This is our 
first hearing of this year, and we look forward to learning 
more of what has happened since last year's hearing regarding 
education.
    Most of what we hear will, of necessity, be about the 
problems in public education in the District. We all know the 
school system has major problems, and we expect a frank and 
fair discussion of them. By necessity, I say most of the 
hearing will focus on things that are wrong because knowing and 
understanding what is wrong is necessary before you can fix it. 
I ask all of our witnesses not to hold back, but to be candid 
with us about these problems. Otherwise, we will never have the 
insights we need to work together to fix them. That means the 
future, if we fix them, is better, but the future for these 
students will be harmed, it will be dimmer and poorer if we and 
the witnesses fail to dig into these problems openly and 
candidly, or if then we fail to act positively and 
constructively on what we learn.
    Now, let us not let the focus on problems, however, become 
destructive. Nobody should mistake frankness for negativity. 
Negative attitudes become a barrier to working together to 
solve all that we can as fast as we can and as thoroughly as we 
can.


           LACK OF TRUST BETWEEN REGULAR AND CHARTER SCHOOLS


    I am disturbed that we do not yet have a solid level of 
trust and cooperation between the regular public schools and 
the charter public schools and the supporters of each. Often, 
there is too much focus on institutions and not enough focus on 
the students. Charter schools are not a threat to public 
education. They are public education, a vital part of it. 
Public schools are not a bad thing. They are a good thing. They 
are a necessity in a free Nation for people to govern 
themselves. An uneducated people cannot remain free for long.
    I am troubled when some supporters of charter schools dump 
on the very concept of a public school system. I am just as 
troubled when some supporters of a public school system dump on 
charter schools. Their rivalry should be no greater than what 
we want to see at sporting events--solid, healthy competition 
with a spirit of fair play and impartial referees. Yes, one of 
these, the charter schools, are the new kid on the block. They 
do not yet have equal access to all resources; although 
steadily that is being resolved.
    It is just as wrong for advocates of change to propose the 
end of a system of public schools, and I will do all in my 
power to ensure that we always have public education available 
to all. Just because there are major problems in many schools, 
that does not mean that the concept of public schools is 
somehow wrong. It is, however, absolutely wrong for the 
existing public school system to use its public resources to 
conduct a campaign against charter schools, especially in these 
critical early times for those schools. It might also be 
illegal.
    Efforts like that are wrong because they mistake the 
institutions of public schools for the purpose of public 
schools. The purpose is to make sure all children have equal 
opportunity for a quality education in a safe environment. The 
purpose is not to protect a rigid structure or bureaucracy. 
Educators who teach change must be willing to accept change. I 
will do all in my power to overcome any efforts to strangle the 
charter school movement.


                     RATIONALE FOR CHARTER SCHOOLS


    Charter schools exist because parents want them. Parents 
want them because their child needs a quality education today. 
They have heard promises before about how things will be better 
in the future, but by then their child will be grown and it 
will be too late for them. Charter schools offer something now 
and for the children of today. Thousands of parents here in the 
District have told us they want this and they need this. This 
is hardly a case of any outsiders forcing this on people who 
don't want it. In the instance, for example, of Paul Junior 
High School's conversion, over 500 parents publicly requested 
this change for their children. They want it so much they have 
worked hard for it, refusing to wilt in the face of sometimes 
harsh and insulting attacks.


               FEDERAL REQUIREMENT TO HAVE PUBLIC SCHOOLS


    Now, some say that government should get out of education. 
I disagree. Government of the people, for the people, and by 
the people would collapse if the people were not educated.
    In 1785, even before the Constitution replaced the Articles 
of the Confederation, Congress passed the Land Ordinance which 
required a survey of the land in the Northwest Territory that 
ultimately became Michigan, Illinois, Indiana, Ohio, Wisconsin 
and part of Minnesota. The public land was to be divided into 
sections of one square mile each. 36 sections made a township, 
and one section, one square mile in each township was for 
schools by act of Congress. That section could be sold to raise 
money for schools or used to build and run the school there. 
Two years later, in 1787, the Northwest Ordinance was passed to 
declare how people in that area could make their territory into 
a State. One requirement was to have public schools, and there 
were similar requirements as other States came into the Union 
as a condition for being a part of the United States and being 
a State, to have a system of public schools by acts of 
Congress.
    Now, some other time we can debate which level of 
government should be in charge of public education, but let us 
agree that America needs public education. The Founding Fathers 
understood that. We should too. Public education is right, not 
wrong. My wife and I are both graduates of public schools, and 
so are all five of our children. I will do all in my power to 
preserve a system of free and universal public education in 
every part of the United States, providing equal opportunity 
for all. That is right, not wrong. What is wrong is to put 
bureaucracy before students, when it gets a grip that becomes a 
stranglehold.

                    COMMENDATION OF ARLENE ACKERMAN

    I want to commend the District's school superintendent, 
Arlene Ackerman, for all of her efforts to get control over an 
entrenched bureaucracy, and I also agree with her that 
educators should not be blamed for all the problems.

             PARENTS ARE IN CHARGE OF CHILDREN'S EDUCATION

    Educators are not in charge of our children's education, 
parents are. This principle must be recognized by both 
educators and parents, and both groups have to accept the 
responsibility of recognizing it.
    I was fortunate to be raised in a home where parents acted 
on that principle. My mother not only was the president of the 
local elementary school PTA, but later president of the junior 
high PTA, and after that, president of the high school PTA. We 
had many, many meetings in our home between parents and 
teachers and administrators.

              REGULAR AND CHARTER SCHOOLS--NEED TO IMPROVE

    Today, though, I see and hear too many people, especially 
here in the District, being harsh and negative over the charter 
public school issue. I hope that will cease because neither is 
a threat to the other. The angry and insulting words that I 
have read and heard are a shame, and they hurt the students. 
Too much energy and attention is being drained by efforts to 
attack the other side, energy and attention that is sorely 
needed instead to dig in and improve the quality and safety of 
schools in Washington, D.C., both public and charter.

                 POSITIVE AND COOPERATIVE SPIRIT NEEDED

    We need what government cannot guarantee, a positive and 
cooperative spirit among everyone involved. We also need to 
talk about what is right, not just about what is wrong and talk 
about what is moving in the right direction, even if it is 
still not what it needs to be. I want to put some focus on the 
successes because they give us a foundation on which to build 
and the momentum to go farther and faster in improving the 
future for the children in our Nation's Capital, and that is 
what this hearing is about. It is about kids, their present and 
their future, and providing the best opportunity that we can 
for them, provided through the public purse in whatever ways 
will best serve the good and the future of those children.

                  CHAIRMAN ISTOOK'S PREPARED STATEMENT

    [Chairman Istook's prepared statement follows:]
                    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    Mr. Istook. Let me ask--Mr. Moran is not here but if he 
wants to make a statement for the record, of course we will be 
happy to have that. Mr. Cunningham, did you have any opening 
statement before we proceed to witnesses?

                CONGRESSMAN CUNNINGHAM'S OPENING REMARKS

    Mr. Cunningham. No. I would like to press on, but I would 
say that the whole focus for me is to make sure that we don't 
have children left behind in our schools. Everybody in this 
room can point to outstanding teachers and outstanding schools, 
but on the other hand, whether it is in the inner cities of Los 
Angeles, California, or San Diego or here in D.C., we have 
schools that don't perform for our children. We need to focus 
on those, and I am anxious to hear about them. I am a strong 
supporter of charter schools. Both my wife and my sister-in-law 
are public school teachers and administrators, as I was, and I 
think the focus should be on improving our public schools. 
Thank you, Mr. Chairman, for holding this hearing.
    Mr. Istook. Thank you.
    Mr. Moran, do you have an opening statement or remarks?
    Mr. Moran. I have some opening remarks. I am sure they are 
very thoughtful.
    Mr. Istook. I would be surprised if they were anything 
other than that.

                 CONGRESSMAN MORAN'S OPENING STATEMENT

    Mr. Moran. I suspect you may be joking Mr. Chairman, and I 
am sure that this is a very diplomatic statement that has been 
written for me. Actually, it is not a bad statement, but the 
point is that I support charter schools as I think a great many 
people in this room do, and certainly within the District of 
Columbia, but I want the charter school movement to work, and I 
don't think it is going to work if decisions and judgments and 
actions are precipitously taken. It will only work if there is 
sufficient effort at consensus and even compromise, and I don't 
think that charter schools are necessarily the silver bullet 
that is going to solve our educational problems, either in the 
District of Columbia or nationally, and Paul Junior High is a 
case in point.
    I think we have an extraordinarily competent superintendent 
of schools in Ms. Ackerman, and I would not want to be in her 
position because I think this situation puts her in an 
untenable position. We also have a good financial control 
board. I happen to know Ms. Newman and have known her for 25 
years, and there is no finer civil servant. There may be better 
politicians because she is probably more candid and honest than 
she should be at times, but there is no better civil servant 
than Ms. Newman. Both of them have been put in very difficult 
situations.
    And I have been anxious to see how the Paul Junior High 
controversy worked itself out, Mr. Chairman, and I say that 
because I wanted it to work itself out without our involvement. 
Some would use the word ``interference.'' What has happened, 
though, is that there has been at least the perception of a 
rush to judgment, and the school has been converted without 
real, or at least perceived broad-based support on the part of 
the neighborhood.

CHAIRMAN ISTOOK'S LETTER TO CONTROL BOARD ON PUBLIC AND CHARTER SCHOOLS 
   (SEE PP. 91-111 FOR CONTROL BOARD'S RESPONSE TO CHAIRMAN ISTOOK'S 
                      LETTER OF FEBRUARY 3, 2000)

    [CLERK'S NOTE.--See ``Clerk's Note'' on page 88A re: DC 
Inspector General's report on Paul Junior High conversion. The 
report concludes that the allegations against the principal of 
Paul Junior High School and the allegations against the DC 
Public Charter School Board are unsubstantiated.]

    Now, I understand and I have seen a letter--I am sure I 
have it here someplace--where you sent a letter, Mr. Chairman--
an interrogatory actually more than a letter--and you asked for 
the names and addresses--I think telephone numbers of the 
people who objected to the Paul Junior High conversion. There 
are two problems with doing that, in my opinion, and while we 
try to be nonpartisan here, this may be perceived as partisan. 
It is not intended to be, but it is intended to show that there 
is a different point of view on this subcommittee.
    I have the letter here, that I am sure that your staff put 
this together because you would have been more sensitive I 
trust, but somebody using your signature sent this letter 
asking for names and telephone numbers of the people that were 
opposing the charter conversion. If it is not true I want you 
to tell me. Let us satisfy this first. Mr. Chairman, did you 
ask for the names and telephone numbers of the people who 
objected to the conversion of Paul School?
    Mr. Istook. I believe you will find that we asked to know 
what people had wanted to step forward, to be involved because 
unfortunately, we sometimes find that some people want to be a 
self-annointed spokesman for other people. They don't want you 
to talk with the people who actually have an interest in the 
issue. They just say, well, go through me and they elevate 
themselves, and I think it is very important just as you said, 
in having a consensus that you be able to talk to the people 
that are actually involved in this as opposed to only getting 
the filtered information. I think that is important if you want 
to build consensus.
    Mr. Moran. I certainly agree with that.
    Mr. Istook. I fail to see how having just the basic 
information on contacting people who, for example, might be 
witnesses before this subcommittee might somehow have a 
negative tone. That is just a common type of thing that you ask 
in order that you can be in touch with people.
    Mr. Moran. Well, Mr. Chairman, let me suggest, though, that 
your questions, how many parents of sixth grade students have 
complained, please provide us with the names and telephone 
numbers of these parents.
    Mr. Istook. The ones who would be incoming into Paul Junior 
High.
     Mr. Moran. You also asked how many parents of current Paul 
Junior High students have complained, please provide us with 
the names and telephone numbers of these parents.
    Mr. Istook. Mr. Moran, who do you think should 
communicate--if we are to be making decisions here, who should 
communicate with those who actually have children in the 
District? Should it be limited to some people who say well, I 
can talk to these people, but we don't want you to talk with 
the people whose children are actually involved in this? The 
effort to paint this as something sinister is, I think, an 
example of the negative partisanship that is being brought up 
in this case. It has nothing to do with making the best 
possible schools for the kids.
    Mr. Moran. I would suggest that it is not negative 
partisanship. I don't know, but this is not partisanship. If a 
Democrat had asked for the names and telephone numbers of 
people in a local community over which you have no 
jurisdiction, I would have objected as well. I think what you 
did was put the public school department in an untenable 
situation.
    Mr. Istook. Oh, I don't think so.
    Mr. Moran. You don't think so? To give the names and 
telephone numbers of individual parents and students?
    Mr. Istook. Mr. Moran, would you be in order, please.
    Mr. Moran. Yes.
    Mr. Istook. You were called upon for an opening statement, 
not a running debate. You can find throughout the history of 
this Congress when your party was chairing, as well as when our 
party has chaired committees, efforts to identify people that 
have an interest in an issue. You are a ranking member of this 
subcommittee regarding the District of Columbia, because the 
United States Constitution says that this Congress is in charge 
of all legislation whatsoever regarding the District of 
Columbia. It is a direct part of our authority, and I don't 
know if you make decisions in an information vacuum. We really 
try not to do so.
    Mr. Moran. Mr. Chairman, reclaiming my time, I think I did 
have the time, and the fact that it was a debate was not 
initiated by me. I was going to just go ahead and with 
unilateral discussion here of my concern, and it is deep 
concern. I think exercising our responsible authority over the 
District of Columbia's legislation and appropriations, while it 
may extend what many might consider appropriate authority, it 
was never intended, I am sure, to include the kinds of actions 
that would be reflected by a request, a demand for the names 
and telephone numbers of individual parents and students. The 
D.C. public school system can't provide those kind of 
interrogatories, and this subcommittee shouldn't be asking them 
to.
    I think we have to give a certain amount of credibility to 
the superintendent and the public school system. If they say 
there have been substantial complaints, we can go out into the 
community and inquire from people to determine that, but to 
require the public school system to provide this kind of 
information, I think, is out of line, and I think that Ms. 
Ackerman has tried to respect the views of the community.
    I know that Ms. Ackerman supports the charter school 
movement but not to the exclusion of the benefit of the entire 
public school system, and there are going to be families for 
which that particular charter school may not be appropriate, 
and many of those families who live in that neighborhood 
consider it to be their neighborhood. That is their 
neighborhood school, and to change that school, to change the 
purpose of the school, they have a right to be heard on that, 
and I am not at all surprised that a lot of them have been 
heard by it.
    Now I think that the financial control board deserves a lot 
of appreciation, more from you than by me, because I am less 
unequivocal about charter schools than you are, but I feel some 
ambivalence in situations such as the Paul School, but they 
went ahead and they ordered the conversion. If that is going to 
be done, then it is going to take an extra effort on our part 
to assuage the concerns of the neighborhood. That is what the 
hearing ought to be all about, and it certainly shouldn't be a 
matter of calling people on the carpet and doing a who struck 
John. We ought to be about constructive efforts and not 
divisive efforts, and I sense that this hearing is divisive, 
more divisive than it is constructive.
    At that point, I suspect I have more than used my time for 
my opening statement, but I think we are going to have further 
opportunity to explore this, Mr. Chairman.
    Mr. Istook. Thank you, Mr. Moran. I hope you do make up 
your mind which side you are on.
    Mr. Moran. I am on the side of the students and the 
parents, Mr. Chairman, and these things are not cut and dried, 
and I know enough to know what little I do know about what is 
in the best interests of individual school systems and 
individual neighborhoods. I at least know that we can't 
possibly know what is in the best interests of particular 
neighborhoods in the District of Columbia when we don't live 
there, we don't know the people, and we certainly don't have a 
right to represent their views unilaterally.
    Mr. Istook. And Mr. Moran, I would agree that no one should 
unilaterally represent the views of other people without 
providing you the opportunity to talk to those other people. If 
they say they are speaking for people and some people are 
trying to say, oh, this is what the community wants and that, 
Mr. Moran, we have a constitutional obligation not to make 
decisions in an information vacuum, and we have heard charges 
and countercharges that this is what people want and that is 
what people want.
    Why not talk to the people? Why not let them be heard? That 
is what is happening in the Paul Junior High conversion, where 
over 500 parents spent a couple of years working diligently to 
do what they believe is best for the future of their children 
and of the other children that are involved in that school. Now 
some people try to say, oh, they really didn't mean that. It is 
really absurd to hear people saying, Mr. Moran, that as a 
member of Congress with responsibility in this area, you should 
make your decisions based upon anonymous statements that you 
don't know where they came from as opposed to understanding 
what is going on with the schools and what is best for the 
future of the children, if what the parents believe is best for 
the future of their child.
    Mr. Moran. If I might say, Mr. Chairman, I don't suggest 
that we make decisions based upon hearsay, but I do suggest we 
make decisions based upon the believability of the school 
system. When they tell us that there have been a substantial 
number of parents, it seems to me we have no reason to 
disbelieve them, and that is your implication, that we need to 
find out who these people are to see whether the school system 
is telling us the truth. If the superintendent tells us that 
there are a great number of parents and families who disagree 
with this conversion, then I think we should take them at their 
word.

    [CLERK'S NOTE.--See pages 88A-88H for copy of the DC 
Inspector General's Report of Investigation into Alleged 
Fraudulent Activities Regarding the Paul Junior High Charter 
School Conversion Application, dated June 1, 2000; specifically 
the conclusions on pages 88G and 88H, which state that the 
allegations against the principal of Paul Junior High School 
and the DC Public Charter School Board are UNSUBSTANTIATED.]

    Mr. Istook. Thank you. Mr. Moran, I hope you will read a 
copy of my opening statement, because frankly, I am trying to 
ask everyone to quit doing this sniping back and forth that 
distracts and drains energy and attention and effort from where 
it should be going, namely, to help the children in Washington, 
D.C. to have a better education, a quality education, and a 
safe environment for a sound and bright future. I hope you will 
read that, Mr. Moran, and I hope that we could continue with 
the tone that I have tried to set of putting the accent on 
those things instead of media stories that allow people to 
think that the important thing is some back and forth comments 
on smaller issues. We ought to be spending this time discussing 
the future of education of the kids in Washington, and that is 
why we have the witnesses that we have this morning. And I 
would like to call them forward.

                            WITNESSES SWORN

    Our four principal witnesses, if I could have you all come 
up to the witness table, please. We have Ms. Constance Newman 
who is the vice chair of the D.C. control board. Ms. Ackerman, 
I am sorry I was not able to greet you since you were delayed, 
but we are very pleased that you are here. Ms. Ackerman, of 
course, is superintendent of D.C. public schools. We have 
Josephine Baker, chair of the D.C. public charter school board, 
and Malcolm Peabody who chairs the D.C. Public Charter School 
Coalition. If you all will just remain standing for one moment, 
we are continuing the standard procedure of swearing in all 
witnesses, and the rules authorize me as subcommittee chairman 
to administer the oath. So if you would raise your right hand.
    [Witnesses sworn.]
    Mr. Istook. I thank you. We would like to receive the 
opening statements in the order that I indicated with Ms. 
Newman, Ms. Ackerman, Ms. Baker and Mr. Peabody. Thank you all 
for taking the time to be here.

                 OPENING STATEMENT OF CONSTANCE NEWMAN

    Ms. Newman. Good afternoon, Mr. Chairman and Mr. Moran, and 
I noticed Congresswoman Eleanor Holmes-Norton here.
    Mr. Istook. Thank you, Ms. Newman, for that. I failed to 
recognize Ms. Holmes-Norton, and we are very glad you are here. 
Thank you.
    Ms. Newman. I think I am pleased to be here to testify.
    Mr. Istook. I am glad you are here.
    Ms. Newman. Testifying before this subcommittee on issues 
that are critical to ensuring the quality of education for the 
youth of the District of Columbia is important. Before 
providing a brief status report, though, I would like to go 
back and review some of the assumptions which I believe 
underlines the manner within which we have been considering 
these issues, some of which you have both spoken about this 
afternoon.

               THOMAS JEFFERSON AND EDUCATION IN DISTRICT

    Public education is a key principle of American democracy 
and should be preserved, albeit in a reformed manner. I am 
reminded that the principle grew out of the time of the 
American Revolution. Jefferson proposed that Americans give a 
high priority to crusade against ignorance, and he was the 
first American leader to suggest creating free schools for all 
persons. One reason I am dwelling on him is, you may be 
interested to know, that he was also the first President of the 
District of Columbia Board of Education. He accepted the 
position on the condition that it not interfere with his duties 
as President. Apparently it did not, and times certainly have 
changed. But his plans for universal education and for publicly 
funded schools form the basis of education systems developed in 
the 19th century. The citizens of this nation have not yet 
indicated that they want to move away from this core principle. 
Therefore, supporting effective reform efforts should be a high 
priority of the elected officials of the District of Columbia.

            PUBLIC CHARTER SCHOOLS REPRESENT REFORM APPROACH

    Public charter schools represent an important reform 
approach, but we all must remember that it is not the exclusive 
method of reform of the public education system. We understand 
that it represents choice for parents, innovative teaching 
principles, and removing regulatory bureaucratic barriers. It 
should be supported both by thought and deed.
    In the same vein, though, the District of Columbia, as it 
should be, is in the process of addressing issues similar to 
those facing all school system putting into place reform 
strategies through the public school system. In addressing 
these issues of reform, there are certain principles that must 
be honored, adherence to the law, inclusion of the community in 
decision-making, and uppermost in all considerations, providing 
a quality education for all children.
    The authority believes that the superintendent, Ms. Arlene 
Ackerman, has taken bold steps on the road to reform, but I am 
going to leave it up to her to give you more of the details.
    I am going to submit for the record much of my statement, 
but there are a few highlights on the status I would like to 
share so long as I still have time.

               SURPLUS PROPERTY LEASED TO CHARTER SCHOOLS

    With respect to disposition of surplus property, a total of 
54 properties have been designated as surplus school 
properties. Since January of 1997, the Authority has leased 17 
surplus properties to public charter schools. It continues to 
negotiate leases on three additional surplus properties with 
the public charter schools and one surplus property with a 
public charter hub facility. In total, the Authority has leased 
surplus property spaces to 17 of the 27 current public charter 
schools. I want to highlight that because there is too much of 
an impression out there that the school system has not made 
these properties available to the charter schools. If you look 
at the properties, many of the surplus properties have not been 
of interest to the charter schools. Where they have been of 
interest, I can show through the exchanges and through the 
statistics that the charter schools have had access to the 
surplus properties.

                     CONVERSION OF PAUL JUNIOR HIGH

    I do want to spend a few moments on a topic that I know is 
of great interest here, and that is the conversion of Paul 
Junior High. It was the Authority's view that significant 
questions have been raised about the effect of the law on the 
school system's disposition of property, the limited role of 
parents from feeder schools in the community, and the role of 
the larger community in decision making. The Authority does 
support the Emergency Board of Trustees' policy statement in 
October 1997 noting that it is consistent with statutes and 
common sense. Disposition of the facility housing a converson 
charter school must be made on a case-by-case basis with the 
long-term educational interests of all District children being 
taken into consideration.
    The Authority decided on this case not to set precedent. 
Part of the reason for deciding this case as we did, was 
recognition of the beginning of the school term approaching. We 
wanted the children, both those children who were going to go 
to Paul Charter School and the remaining children, to be able 
to make decisions. Their parents need to make decisions and 
take steps to ensure that they have a quality education this 
term.
    But frankly, we are not comfortable that all of the issues 
that should be resolved have been resolved. The Authority is 
pleased that the Council of the District of Columbia is 
crafting an immediate response to deal with some of the 
unanswered questions that delayed the disposition of this 
property. The District of Columbia Public School System now has 
the time and the resources to ensure that all students living 
in the community traditionally served by Paul Junior High will 
have access to a strong junior high school program.

             SUPPORT OF REGULAR AND CHARTER PUBLIC SCHOOLS

    I know you will have questions on funding, so I won't take 
time to talk about that now. I see the yellow light is on, but 
I just want to emphasize that we are very interested in the 
education of all of the children, and reform of the system. The 
charter schools are part of the public school system and should 
be treated that way. But they should not be given the ability 
to pull the rug out from under the traditional system and its 
way of bringing about reform. All of the children are not going 
to be going to charter schools, and those of us in decision-
making positions have an obligation to ensure that the system 
allows both the charter schools and the traditional system to 
flourish in the interests of the children.

                 PREPARED STATEMENT OF CONSTANCE NEWMAN

    [The prepared statement referred to follows:]
             [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Mr. Istook. Ms. Newman, I very much appreciate your 
testimony. We are going to defer questions until we have had 
the statements from everyone, and I very much appreciate your 
comments.
    Ms. Ackerman, as you and I both know, we have talked on the 
phone, but family situations have kept us from sitting down 
together as we want to. I am still looking forward to that. We 
are very happy to hear from you this afternoon.

                  OPENING STATEMENT OF ARLENE ACKERMAN

    Ms. Ackerman. Good afternoon, Mr. Chairman, Congressman 
Moran and Congresswoman Norton. My name is Arlene Ackerman. I'm 
a little nasal because I have a little congestion in my head, I 
apologize.
    I am Superintendent of Schools for the District of 
Columbia. I would like to thank you for the opportunity to 
share with you information on two important issues. Let me 
begin by saying that while I have served this District now for 
almost 3 years, I have been a committed servant for children in 
public schools for more than 31 years. I have served in 
communities that some people would be afraid to drive through 
in the daytime, and I have successfully educated hundreds of 
children that many people had given up on.
    In August 1997, I made a decision to come to Washington, 
D.C., the capital of our great Nation. I came on a mission and 
with a passionate commitment to make the schools in this urban 
city exemplary. I came with hope and confidence that if we 
could turn this troubled system around, there would be no 
excuse for other school districts in this country not to do the 
same. I came not fully grasping the depth and comprehensive 
nature of the challenge that I would encounter, and I came 
against the advice of nearly everyone I trusted. I turned my 
back on less challenging career choices and came willingly to 
Washington, D.C., committed to all of the children in this city 
who deserved so much more than I believed they were getting.

                      SCHOOL ACADEMICS 3 YEARS AGO

    No one, though, could have prepared me for what I found. In 
1997, more than 70 percent of the 10th graders could not read 
at the basic levels. Eighty-nine percent of those same 10th 
graders could not perform basic math problems. More than half 
of the children tested that year scored below basic in reading 
or math. Students were promoted whether they mastered skills or 
not, and there were no content or performance standards and no 
accountability systems. The basic infrastructure needed to 
support schools that I had taken for granted in other school 
districts were broken. The special education backlog for 
initial assessments was more than 3,000, and the Department of 
Education was withholding $8 million of Federal funds. Schools 
did not open on time for three years, and a month before I 
became superintendent a serious deficit reaching back more than 
5 years was discovered.
    These and other revelations too numerous to name would have 
caused the faint of heart to question whether sustained 
systemic reforms were possible, but I instead summoned my 
strength, my skills, my ability and my faith. Soon after my 
arrival, I recognized that in this school system there were 
also dedicated staff, good schools and programs, committed 
parents, strong community advocates and 77,000 beautiful 
children with unlimited potential waiting to be tapped. The 
charge for me was clear to make dramatic changes for the 
children's sake.

                  ACADEMIC PROGRESS OVER LAST 3 YEARS

    Now, almost 3 years later, Mr. Chairman, I am proud to say 
that even though we still have a long way to go before we reach 
exemplary status, we have made dramatic changes in the way we 
do business. Our number one goal is to improve the achievement 
of all of our students and to support victory in the classroom, 
and if you were to compare us to other districts undergoing 
major reform, I am confident that you, too, would find our 
progress remarkable.
    Please indulge me while I highlight a few of the noted 
areas of improvement since my arrival and then I'd ask you to 
read my statement and you will see others.
    Academic achievement is up. We have improved test scores 
for two years in a row. We have dramatic gains in the first 
year, modest gains in the second. A majority of our students 
now score at the basic levels in reading and math. We have 
designed and implemented a standards based system linking 
curriculum, instruction and assessment. We have provided 
summer, Saturday and after-school programs for more than 50,000 
students to improve achievement. We now have accountability 
systems in place that hold the adults responsible for results 
as well as the children. We have designed and implemented 
school-based accountability systems that hold principals 
accountable for school improvement and allow only 90 days to 
remove an ineffective teacher. We have strengthened promotion 
and graduation requirements for all of our students. We have 
implemented a system-wide instructional technology plan, and we 
have identified 51 schools with negative achievement trends and 
targeted them for support and additional resources.

           PERFORMANCE TARGETS AND REPLACEMENT OF PRINCIPALS

    We have put in place performance targets for all schools, 
paid for performance classes for teachers and principals, and 
we have put a 1-year contract in place for principals and 
replaced more than 40 of them in the last 2 years.
    We have opened school on time for 2 consecutive years, put 
in place a master facilities plan, upgraded phone systems. That 
may not seem like a big deal, but when I came 2 years ago, we 
still had rotary phones in our schools.
    We have initiated a variety of programs and especially 
focused on professional development.

                        CENTRAL OFFICE SPENDING

    We have reduced central office spending from more than 15 
percent to now less than 6 percent. Now, 90 percent of the 
District CPS budget goes directly to schools or to school 
operations. We have increased parent involvement, put in place 
school governance teams at all schools and initiated a new 
alliance with our business community.
    I could go on listing the reform initiatives that are 
turning this District's troubled history to a future of hope 
and promise for our students. I ask instead that you visit our 
schools and take a look for yourselves, and I believe you will 
be pleasantly surprised.

            PUBLIC CHARTER SCHOOLS--SUPERINTENDENT'S REMARKS

    The remainder of my remarks with your indulgence will 
briefly address the topic of public charter schools. Let me 
begin by saying that I hold no animosity for public charter 
schools. I have been working tirelessly to ensure all District 
students receive quality public education, since supporting 
effective reform is my highest priority. In this country we all 
know that competition is the American way. I welcome, and in 
fact, I thrive on it personally and professionally. I do 
believe that public charter schools are designed and 
implemented as alternatives or augmentations to public schools, 
and there are some that have supported the public schools 
providing services that we are not able to provide. For 
example, schools like the SEED program, Hospitality and ARE. 
Charter schools can create a climate of creativity, innovation 
and strong competition within a community, and they can offer 
parents the opportunity for real choice within the public 
school arena. I consider public charter schools as only one 
component of an agenda of reform.
    Early in my tenure as superintendent, I directed my staff 
to make sure that charter schools get their fair share of 
Federal dollars. To date, that has been approximately $10 
million. I asked them to provide technical assistance when 
needed, to make every effort to provide available facilities 
and to open all professional development opportunities to 
interested charter school staffs. Though my primary interest 
and energies have been dedicated to improving the achievement 
and the quality of educational opportunities for the vast 
majority of students who attend D.C. Schools, I believe that 
all of the city's children, whether they attend DCPS or the 
public charters, should have access to the best instructional 
programs available to them.
    I'd like to end by saying that I do believe that all public 
schools, including public charter schools, can thrive. It will 
take, however, careful inclusive planning that holds all 
schools accountable for the same results. It takes a great deal 
of communication with all stakeholders to ensure that everyone 
has a voice. It takes a willingness on both sides to cooperate 
and collaborate for the good of all the children. I am more 
than willing to work with the public charter school advocates 
who I believe have, as their priority, the advancement of 
educational opportunities for all, not just some, of this 
District's children, and I await your questions.

                 PREPARED STATEMENT OF ARLENE ACKERMAN

    [Ms. Ackerman's prepared statement follows:]
             [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


      APPRECIATION TO SUPERINTENDENT FOR HELPING CURRENT STUDENTS

    Mr. Istook. Ms. Ackerman, thank you very much for your 
statement. Of course, we will have questions for the whole 
panel, but I want to reiterate something that I have mentioned 
to you before. One part of your efforts that I most especially 
appreciate is what you have set in place and pushed to 
maintain, relating to after-school programs and weekend 
programs, trying to help those who were already behind when you 
came to the District to catch up as much as possible. What I'm 
saying is you have not limited your efforts to saying we are 
going to improve things so that the next generation of kids 
will have it better, or in 2 or 3 years they will have it 
better. You have focused, I think, very important attention on 
the kids that are in school right now to do as much as you can, 
to do things immediately, not just as they work up through the 
grades. I just want to, again, express my appreciation for 
that.
    Ms. Ackerman. Thank you.
    Mr. Istook. Ms. Baker.

                  OPENING STATEMENT OF JOSEPHINE BAKER

    Ms. Baker. Good afternoon, Chairman Istook, Congressman 
Moran, Congresswoman Norton. We meet at a time of great promise 
for public charter schools in the District. Nearly 7,000 
students now attend these independent public schools, about 10 
percent of all public school students here. Current projections 
indicate that these numbers will reach more than 11,000 in the 
coming academic year. This extraordinary growth has led to the 
first substantial increase in three decades in D.C.'s overall 
public school population. Perhaps most impressive, charter 
schools have begun bringing back into public education families 
who had left the system for private or parochial schools or 
moved out of the District altogether. We also are seeing a 
significant number of dropouts recovering their academic 
ambitions in schools like Maya Angelou and Carlos Rosario.
    Among the 12 operating schools chartered by our Board are 
an array of approaches from using the arts to reach learning 
disabled, early elementary students to helping adult immigrants 
acquire the skills and knowledge for productive citizenship. 
Next year, six new schools will expand these options even 
further. Among them will be a promising collaboration between 
Sasha Bruce Youth Works and the Outward Bound Expeditionary 
Learning program, one of the nationally-tested, new American 
schools reform models.

                      OBSTACLES TO CHARTER SCHOOLS

    I wish we could simply celebrate this good news, but we are 
finding far too many obstacles placed in the path of those who 
found and manage these schools. Although charter schools are 
funded through the same per-pupil formula as other public 
schools in the District, the actual process of appropriating 
and disbursing these funds for fiscal 2000 has been deeply 
flawed.
    Budget makers overlooked our well-grounded projections of 
steep enrollment growth, resulting in a drastic shortfall of 
charter school appropriations. The subsequent fix was a $30 
million set aside from the DCPS budget--which we think is the 
wrong way to go about it--but anyway, decisions about how to 
apportion these funds were delayed by the results of an 
enrollment audit that was riddled with procedural errors. To 
this day, several charter schools remain uncertain about how 
much of their requested FY 2000 budget will actually be coming 
to them.
    As we enter the FY 2001 budget cycle, there are ominous 
signs of history repeating itself. The city's budget office has 
released a budget providing just $50.6 million for charter 
schools next year, again providing nothing for growth. The 
Mayor has asked to make an additional $35 million available 
through the reserve fund, and we applaud his willingness to 
help resolve the problem. However, the reserve fund is for 
unexpected costs, which these are not. We will continue working 
with the Mayor and D.C. Council in hopes that full funding will 
be provided through the city's regular operating budget before 
it reaches you later this year.

      DCPS SLOW IN PROVIDING EXCESS PROPERTIES TO CHARTER SCHOOLS

    We are also concerned about the slow and uncertain process 
by which DCPS oversees disposition of excess school buildings. 
We have made clear in testimony before the City Council and in 
other venues that this process must improve if the charter 
preference provisions of the D.C. School Reform Act are to have 
meaning. There must be clear rules applied consistently, and 
ideally the disposition process should be in the hands of a 
neutral third party, whether the Mayor's Office or the proposed 
State Education Office. The District's FY 2000 appropriations 
bill required the Mayor, DCPS superintendent and control board 
to devise a new process within ninety days, and we await the 
news of those discussions.

                      PAUL JUNIOR HIGH CONVERSION

    Finally, I would like to say a few words about the subject 
of charter school conversions, specifically, the conversion of 
Paul Junior High to public charter status. The Paul community 
began this process in 1997. It took three tries, but last 
September, the D.C. Public Charter School Board finally 
approved the charter application. We did so because the 
application proposed an exciting educational vision, and 
because it was led by a distinguished principal who had already 
achieved a turnaround of this once dysfunctional school.
    We also approved this application because the founders had 
followed the requirements of the law, obtaining support from 
two-thirds of the parents and two-thirds of the teachers, and 
in every other way, complying with the dictates of the D.C. 
Reform Act.
    Since September, however, the conversion of Paul Junior 
High has been subjected to challenge after challenge. The 
school system sought to deny to charter its building. Political 
activists called a series of public meetings attempting to 
foment opposition. Finally, yesterday we were treated to a 
spectacle of students walking out of school, encouraged by 
irresponsible adults who apparently used classroom time to feed 
students misinformation about charter schools.
    Mr. Chairman, the Public Charter School Board is not 
seeking wholesale conversions of DCPS schools. If that were the 
case, we could have approved two conversions in our first cycle 
in 1997 and gone looking for more. Instead, we have waited 
until one school met the criteria for approval. One out of 146 
active DCPS schools has been approved for conversion. One out 
of the 18 we have approved has been a conversion--an approved 
conversion application. Yet, this one case has set off a wave 
of negative reaction from those who oversee the traditional 
school system.
    I want to take this opportunity to commend Dr. Rivlin, Ms. 
Newman and their colleagues in the Financial Authority for 
their wise and principled decision that DCPS should proceed 
with the leasing of the Paul facility to the charter school. 
The D.C. Council has passed a temporary moratorium on new 
conversions, which explicitly does not affect Paul. The Council 
will shortly consider other legislation that would set up new 
procedures for community notification and would give the 
Superintendent a formal role in evaluating the impact of a 
conversion on the surrounding neighborhood.
    We intend to work with the Council to make clear that there 
is a difference between legitimate community notification and 
measures that would effectively preclude any further 
conversions by tying them in procedural knots. We trust that 
the legislation the Council sends forward will preclude any 
need for Congress to underscore its intent in this area.
    I hope that we can keep one important point in mind. What 
is at stake here is not some abstract point about who has the 
legal right to a building or who has the power to hire 
teachers. We are talking about the lives of children. For the 
past 6 months, we have watched adults put their own turf and 
their own interests ahead of the young people who will be 
served by the Paul Public Charter Junior High School. September 
will be here soon. It is time for the adults in our community 
to act responsibly, follow the law and let this school have the 
opportunity it deserves.
    Thank you.
    Mr. Istook. Thank you, Ms. Baker. We appreciate your 
testimony and your time, and we will be speaking with you after 
the final statement.

                 PREPARED STATEMENT OF JOSEPHINE BAKER

    [The prepared statement of Josephine Baker follows:]
             [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

                  OPENING STATEMENT OF MALCOLM PEABODY

    Mr. Istook. Mr. Peabody.
    Mr. Peabody. Thank you, Chairman Istook and Congressman 
Moran and Congresswoman Norton. It is a privilege to testify 
here.
    I wish to report that the Public Charter School Program is 
beginning to achieve its goal of offering a better choice of 
education to D.C. parents. We are in touch with the parents of 
many of these schools, and overall they are enthusiastic about 
how their children are responding to these new schools. They 
report better attitudes of their children, that they want to go 
to school in the morning, and they can't wait to get there. 
They also report that teachers care more about them. They 
report that they have more homework. Overall parents are 
extremely favorable.
    Because of the success of these schools, more and more 
parents are crowding into the schools as new opportunities open 
up. This past year, 10 new schools started and an overall 
enrollment in public charter schools doubled from 3,500 to 
6,980 students spread over 30 campuses.

               SERIOUS PROBLEMS HINDERING CHARTER SCHOOLS

    However, there are serious problems which have evolved in 
the funding of these schools, and there is growing resistance 
stemming from the teachers' union and the DCPS bureaucracy 
trying to stop further expansion of this successful and popular 
program. The main weapons employed in this effort are shutting 
off access to unused and underused public school properties, 
and massive resistance to the provisions in the law allowing 
city-managed schools to convert to a charter school.

                      PAUL JUNIOR HIGH CONVERSION

    First, let me say a few words about Paul Junior High 
School, and again, I echo Ms. Baker's compliment to Ms. Newman 
and the control board for their decision to uphold Paul Junior 
High School's legal right to open as a charter school and in 
their own building.
    We understand the opposition of the school system to this 
right. However, over the past several years principals of D.C. 
schools have had a woeful experience with central 
administration bureaucrats who have hindered rather than helped 
them, and we believe there needs to be some escape hatch to 
prevent against that situation either continuing or coming back 
again, because we do recognize that Ms. Ackerman has made 
progress in this area. Most States with charter laws provide 
for conversion schools and for just this reason.

                   LEGAL REQUIREMENTS FOR CONVERSIONS

    We agree also that the bar to conversion should be high 
enough so that each case is considered extremely carefully. 
This law requires that two-thirds of the parents and two-thirds 
of the teachers must approve a proposal to apply for a charter 
and that is sound policy. And indeed, we certainly would 
consider additional input from the surrounding community but 
not some of the proposals that have been suggested where a--
two-thirds of the vote of the entire catchment area of a school 
be required.
    What we don't understand is--the organized attempt of those 
few teachers who opposed the conversion to subvert the law and 
the will of the much larger number of parents and teachers who 
supported and continue to support the conversion. Together with 
the teachers' union, they have spread malicious rumors within 
the community, and among these are that the charter school 
would exclude neighborhood children when they know such 
children, in fact, have an admissions preference, or the rumor 
that parents and teachers were coerced into signing the 
petition which they know to be totally untrue. And we have here 
in the audience Kathy Byrd and Bill Cappenhagen, who are 
teachers at the Paul Junior High School, who could be 
questioned by those of you who stay afterwards on this issue.

                       TEACHERS MISUSING CHILDREN

    And worst of all, those few teachers broke a cardinal rule 
yesterday which no educator should ever break. They used the 
children for their own ends by encouraging them to march out of 
school in protest of the charter school. These few teachers and 
their supporters claim it was spontaneous, but the television 
stations had been alerted to be there, and Ms. Bullock, the 
head of the teachers' union, was there to congratulate the 
students, who disobeyed their principal and walked out of the 
school.

                DISTRICT NOT FOLLOWING PER PUPIL FUNDING

    Let me move to the question of funding. The District is not 
following the per-pupil funding procedure set forth in the law. 
As you know the District budget for fiscal 2000 drastically 
underfunded public charter school students. We predicted in 
March last year it would double, but the Mayor's budget for 
public charter schools only provided the same amount as the 
previous year. It is the CFO's position that nothing in the law 
requires the city to fully budget for public charter school 
students. They are only required to budget in the baseline what 
was spent last year and that they are not allowed to predict 
what will occur in the coming year, which is necessary to fully 
fund the charter school budget.
    Last year this policy resulted in a $30 million gap, which 
was closed at the last minute by setting up an escrow fund, 
carving it out of the DCPS budget for charter schools to use as 
necessary. This only created a highly unstable situation, 
pitting DCPS and public charter schools against each other, 
when indeed, we have common cause to raise the per-pupil 
funding formula to a level which allows us both to educate 
children in the way they ought to be educated.

                      CONTROL BOARD WITHHELD FUNDS

    Following this unstable situation, the control board 
withheld the set-aside funds until January, causing nearly half 
the charter schools to scramble for private financing to cover 
Christmas payrolls. Later, the control board shifted $11 
million of the escrow fund back to the DCPS, but all of that 
was needed to fund the public charter school students, and nine 
of the 27 public charter schools unfortunately absorbed most of 
the shortfall, which has put them in especially bad financial 
straits.
    Something must be done to fix this broken process. The 
Mayor's proposed fiscal 2001 budget, again, budgets only a 
nominal increase for charter schools, based upon the same 
policy decision as I earlier mentioned, and now the Mayor's 
budget falls short by $50 million for next year's budget, which 
will require $100 million to finance the 11,100 students we 
predict will be enrolled.

         CHARTER SCHOOL ENROLLMENT PROJECTIONS ALWAYS ACCURATE

    Charter school enrollment is predictable months in advance, 
and our estimates have always been dead-on accurate, and we 
believe that the Mayor should have accepted them. They were 
also corroborated of course by the two chartering authorities. 
The Mayor has designated some of the money in the $150 million 
reserve fund for charter schools, but it is not enough to cover 
the shortfall, and as far as we understand, this is an 
inappropriate source for such funding.
    If last year's fiasco is repeated, it is likely that many 
of the public charter schools, well-managed public charter 
schools that are giving D.C. children a fighting chance, will 
not survive.

               ACCESS HINDERED TO DCPS EXCESS FACILITIES

    On facilities. There is still no workable policy which 
gives public charter schools access to unused or underused 
public school buildings. We hear and are delighted to hear that 
a new policy is now in process of being developed. However, 
unfortunately, the D.C. Public Charter School Coalition, which 
I chair and which is staffed by the Friends of Choice in Urban 
Schools, has not been brought to the table on this, and we 
question whether or not a policy can be adequately developed if 
the major stakeholders are not admitted to the planning 
process.

                     STATE EDUCATION AGENCY NEEDED

    On to governance. D.C. needs a State education agency to 
referee competition amongst public and public charter schools, 
as long as it does not add another layer of bureaucracy. DCPS 
currently acts as the District State education agency, but this 
is a conflict of interest. We do feel that some of the 
administrators in that office have done their best to 
distribute money fairly but it remains a conflict of interest.
    And we believe, therefore, that the District should be 
encouraged to set up a State education authority which reports 
to the Mayor and which will have oversight over public school 
properties and their disposition, will have oversight over 
long-range planning for all the schools--regular public and 
public charter schools--which will have oversight of all the 
statistics that are collected, but which should not have a 
direct relationship with the charter schools. That should 
remain the responsibility of the chartering authorities which 
do it very well.
    Thank you kindly.

                 PREPARED STATEMENT OF MALCOLM PEABODY

    [Mr. Peabody's prepared statement follows:]
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Mr. Istook. Thank you very much, Mr. Peabody. We appreciate 
the testimony of each of you.

          USE OF RESERVE FUND FOR REGULAR AND CHARTER SCHOOLS

    Let me ask first, because we have mixtures of things that 
relate to funding and things that relate to policy and plenty 
of overlap between the two, but we recognize that we do not yet 
have the District's budget proposal. It has not gone through 
the process, and that's still many weeks away. But we do know 
there is the proposal in the Mayor's budget relating to charter 
school funding, potentially being dependent in some way on the 
ability to tap this reserve fund, the $35 million or whatever 
figure it might be. Let me ask first of Ms. Ackerman and Ms. 
Newman, if--and we are not at that stage yet--but if school 
funding were to be, to some extent, dependent upon the ability 
to tap a reserve fund with its extra requirements, should that 
dependency on the reserve fund be apportioned both among the 
regular public schools and the charter public schools so that 
neither is advantaged or disadvantaged in their cash flow in 
the reliability of their funding stream?
    Ms. Newman. I'm probably about to get into a lot of 
trouble. But what happened this year could happen the next 
fiscal year, if the District and Congress together do not come 
to terms with the fact that the school system is costing much 
more than has shown up in either budget. There are major costs 
associated with special education. There are costs associated 
with transportation. If you are going to bring about reform, 
you are going to have to pay for it.

       INCREASE IN PUBLIC SCHOOL POPULATION AND FUNDING PROBLEMS

    There are also increases in students in charter schools 
which are not coming out of the regular school system, so there 
is additional cost for added students in the school system.
    Mr. Istook. People are coming back into the system?
    Ms. Newman. They are coming back into the system. So, if we 
pretend that the dollars will just move over to the charter 
schools from the regular school system, we are going to leave 
the whole system in a bind in this next year. What has to 
happen is that there have to be some honest discussions and 
some trade-offs that are made with other parts of the budget to 
deal with these issues. Frankly, I don't think using the 
reserve--and that's why I say I am about to get into trouble 
because I have had this discussion--is the answer. We had 
enough trouble this year, and you know, some day I will get 
with Mr. Peabody and correct his statement.
    Mr. Istook. I hope all of you will get together with each 
other on many occasions to cooperate and work together, 
absolutely.
    Ms. Newman. But just setting aside the $30 million, I 
agree, is not the right way to do it. That was a last minute 
recognition that there was not enough money in the budget to 
handle the increase in the children going into charter schools.
    So, what I'm saying to you is I am going to want to have a 
discussion, a tough discussion. I have started with 
representatives from the charter schools and the public school 
system just looking at the budget. Everybody looks at 
everybody's numbers together and knows where there is fluff and 
where there's not fluff. Frankly, there is not fluff in these 
budgets.

             MEETINGS OF DECISIONMAKERS TO RESOLVE PROBLEMS

    Mr. Istook. Is there any regular get-together or 
decisionmaking process on a scheduled basis, for example, to 
say that the people that are looking at the attendance numbers 
and the cash flow numbers in the regular schools and the 
charter schools get together to make sure they are both using 
the same definitions and receiving the same evenhanded 
treatment?
    Ms. Newman. Over the last 4 or 5 months, I have called 
together a group of the chief financial officer, the 
representatives from the school system, and the representatives 
from the two chartering authorities to try to understand what 
was their base for this fiscal year and what makes up the costs 
that are in the initiatives for the next year. For example, how 
did we get to the amount for the per pupil funding formula. 
Frankly, that's part of the problem. The formula amount was in 
effect discounted. When people start looking at budget 
formulation they really only consider the $5,588 which is only 
the foundational level. It is not the entire per-student cost. 
So we have all sat together and talked about some of these 
things. The problem that we're going to have is when we go into 
the room with everybody else and people are coming in with the 
health problems, or the need for economic development, for 
example, there is going to be the pressure to make tradeoffs. 
The only thing that I hope we all go to the table with is a 
statement that these are the true costs. Now, if you're going 
to reduce them, you have got to know what you're doing and the 
impact of doing so. We have got to go together.

             700 INCREASE IN TOTAL PUBLIC SCHOOL POPULATION

    Mr. Istook. Ms. Newman, you are saying that one error or 
fallacy in the projections was that there would not be a change 
in the overall base of the combined students, whether attending 
public school or charter school. You're saying that there has 
been an enrollment increase of people coming into charter 
schools that had not been in the public school system, either 
because they had dropped out, attended private schools or 
whatever. How many are we talking about?
    Ms. Newman. Oh, about 700, and that is a big difference.

              PROBLEMS IN FUNDING INCREASED STUDENT COUNT

    Mr. Istook. Let me ask Ms. Ackerman. You may have the same 
observation of that number, you may see it differently, but I 
would appreciate knowing from you, is it a proper standard, a 
fair standard to say that there would be some uncertainties of 
cash flow if you have to go through a reserve fund on charter 
schools that did not apply pro rata to the public schools?
    Ms. Ackerman. That certainly was the problem that we faced 
this year with the $30 million reserve. As a result of this and 
other factors we didn't lose as many students as was 
anticipated. In fact, there was a difference of about 1,500 
students who stayed within the public schools.
    Mr. Istook. You projected you would have 1,500 fewer?
    Ms. Ackerman. 3,000 was the projection that we were going 
to lose. Instead we lost about 1,500 instead to charter 
schools. The $10 million that we received from the reserves was 
not sufficient for the public schools either. I certainly would 
ask that we have an equitable distribution of available 
funding. We too are scrambling around for funds and we are 
having to reprogram dollars. Our initial budget, based on the 
formula should have been $627 million. From the reduced $601 
million, $30 million was escrowed for DCPS and charter schools. 
We have only received $10.7 million from the escrow account 
with the public charters receiving $19.3 million. So you can 
see there is a big difference in terms of where we started, 
just based on the formula and then, you know, going down to 
$601 million and then reduced by another $30 million.

                       PER PUPIL FORMULA NOT USED

    The fact that the formula was not used hurt both the 
District and the public charter schools.
    Mr. Istook. And of course, we know that timing is 
everything. You may have a teacher, or it may be a vendor. You 
can say, ``well, we will have the money to pay you when they 
get finished with the accounting and all that 60-days from 
now.'' That doesn't help you very much. But I did want to ask--
I want to know if we are talking about internal cash flow or if 
we are talking about anything that relates to the release of 
money from the Federal government. Is there any problem with 
the timing of those releases that complicates what you're 
describing?
    Ms. Newman. No. I think the problem that Mr. Peabody and 
Ms. Baker have been talking about was internal, and part of the 
problem was the law. The law holds that the prior year count is 
what governs. That makes it very difficult for everybody. There 
was nevertheless an effort to accommodate enrollment in excess 
of the prior year count by using the current year count from 
October. Therefore funding was delayed because you wait for the 
count and the verification. So you're already pushed down into 
a time period that makes it very difficult.

                  STUDENT RESIDENCY REQUIREMENT ISSUE

    We also, this time around, had many issues around the 
residency requirements. We found that there was not the best 
communication about what was expected. We have backed off of 
the requirement of three proofs of residency down to two, and 
have proposed waiving the requirement this time for two. Next 
year, we are going to insist that everybody follow that 
requirement. Otherwise we end up, or could end up providing 
education to children from another jurisdiction, and we are 
paying for it. Maybe that is something that somebody wants to 
do, but not in a time when we don't have enough money to take 
care of our own.
    Mr. Istook. I appreciate it. I'll have further questions. 
Mr. Moran.

               CONTROL BOARD--PAUL JUNIOR HIGH CONVERSION

    Mr. Moran. Thank you, Mr. Chairman. I would like to give 
Ms. Newman an opportunity to explain her rationale for the 
control board's decision to convert Paul Junior High. I know it 
was a difficult decision, but perhaps you should share with us 
some of the factors, and I'd like to ask a similar question of 
Ms. Ackerman.
    Ms. Newman. First of all, we did not make the decision to 
allow them to convert. It was the issue of whether or not the 
facility, the building that Paul Junior High School is in now, 
would be turned over to the charter school. The decision was a 
difficult one because we have to recognize that there has to be 
serious consideration of the children who are not going to go 
to the charter school. No one can or should be setting up a 
system where children are going to get a second class education 
in a public school because there's a charter school that has 
been able to get enough support. All right. So, it was 
difficult because the community needs an answer: what's going 
to happen to the children who will not be going to charter 
school?
    There also wasn't much consideration and isn't in the law 
about what happens to the children coming in from the feeder 
schools. What do they have to say about this, and then what 
does the general community have to say about it? We knew there 
were issues.
    So why did the Authority go ahead and agree on turning the 
building over? I will say this decision followed many, many 
discussions. It was my fervent hope, and always is when there's 
conflict, that some angel will come down. The angel just did 
not show up! It was getting late because both sets of children 
needed to know where they were going to be going to school. So, 
we decided on this one, stating this is not precedent. It's a 
case-by-case decision, and we welcome the Council's 
involvement. Now, the entire community is involved in a 
decision-making process that says these are the issues that 
need to be addressed when there's a conversion and a planned 
transfer of a facility. These are the people who need to be 
involved.
    I agree with Mr. Peabody, the test shouldn't be so onerous 
that it really is designed to have it not happen. That's not 
proper, but the right people ought to be involved in the 
process. So we frankly decided this issue, to take this one off 
the table because we were getting too close to decision time 
for where the children were going to go to school. We liked the 
idea of the moratorium in this period which allows time to come 
together and deal with this issue for future conversions.

              SUPERINTENDENT--PAUL JUNIOR HIGH CONVERSION

    Mr. Moran. I'd like then to hear from Ms. Ackerman's 
perspective on--that you saw a compromise solution.
    Ms. Ackerman. I was looking for a compromise because there 
were issues, and Ms. Newman and others have brought them up. My 
interest certainly was not in trying to thwart the efforts of 
this school to convert; to my knowledge, of the charter school 
laws in 35 States, only the District of Columbia allows for an 
existing public school within a school system to be chartered 
by a body outside of the public schools. Let me make clear 
there are other chartering approval processes, but D.C. is the 
only jurisdiction that provides for an outside chartering board 
to approve the conversion of an existing public school.
    The problem with this, as I see it, is there was no avenue 
for me to be involved in this process as the law currently 
reads. I was in contact with parents and others, but not until 
it was too late. As the law is written there is no requirement 
for me to act until the school requests the use of the 
building, and it is at this point that the school district can 
become involved in the process.
    In the States where charter conversions are allowed under 
school district approval, and I had a lot of discussions with 
other superintendents in other States about how this happens, 
there seems to be, for the most part, no real problem of 
existing schools converting to charter schools, but there's a 
clearly-articulated process, and it's aligned with the school 
district's needs and missions, and it's often integrated into 
the reform process so that their accountability standards are 
the same for both the public charter schools and the existing 
public schools.
    Furthermore there were issues raised in the neighborhood, 
and all of those issues needed to be resolved before we made 
this process final, even with Paul. At that point I did offer a 
compromise. I thought that, for at least the first year, we 
could compromise and work together for the benefit of the 
larger community. Then frankly, have the City Council work out 
the issues as it relates to the omissions that were in the 
Federal and the local laws.

           PUBLIC CHARTER BOARD--PAUL JUNIOR HIGH CONVERSION

    Mr. Moran. Ms. Baker, I think wants to add her two cents as 
well, and I know we would like to hear from her.
    Ms. Baker. There are a number of issues. I will try to stay 
focused. Of course we go by the law that is on the books, the 
School Reform Act, and we follow it to the letter, which we did 
in this case as well. In the process we did have hearings. They 
were indeed publicized, announced in the newspaper, notices 
sent. So that this application for a conversion should have 
been well-known across the community. We recognize that there 
needs to be some more procedure in the process, but we can't 
believe that it was not known to many people. This was the 
third year.
    We have heard about the sixth graders. The very first year 
the principal said that she would really like to be able to 
talk to sixth grade parents, because they will be her 7th 
graders the next year. Well, the law doesn't allow that. It 
specifically says students presently enrolled in the school. We 
have in previous years come through with various requests for 
changes, such as the sibling preference. I think these things 
don't really crystallize until they are before you as a natural 
item. In the second year, there was some discussion, as Ms. 
Ackerman said, there are some parents who don't want their 
children to go to Paul as a charter school. And of course, 
that's certainly within their right.
    We looked at the application last year, required a 
professional audit because we were not sure that the numbers 
were there, and the professional audit did say they were short. 
But they learned how in the process to really do a very precise 
process and they came through with the required numbers.
    So I think we have used every possible means to alert the 
community within the confines of the law, and certainly if the 
law can be adjusted. But I think two-thirds of the registered 
voters is a little out of proportion when you consider you 
can't get people to go vote in elections for Board of Education 
members or the President of the United States. I think that it 
has to be something that is realistic. But certainly it's 
appropriate that we consider the community.

               TWO-THIRDS APPROVAL REQUIREMENT EXCESSIVE

    Mr. Moran. I agree with you. I think the two-thirds is 
excessive. I don't think it's realistic.
    Ms. Baker. For the voters. We have no problems with the 
students.
    Mr. Moran. I totally agree with you. I think that is asking 
too much, and it would appear to be a deliberate hurdle that 
makes it extraordinarily difficult.

         ASCERTAINING OPPOSITION TO PAUL JUNIOR HIGH CONVERSION

    Ms. Ackerman, can you give us your best sense of how much 
opposition really exists within the community served by Paul 
Junior High, percentages or however you would like to measure 
it? Why is it that you felt compelled to object to the 
conversion this year?
    Ms. Ackerman. Well, I think it's difficult to put numbers 
on this, because the numbers now seem to be growing, I was 
trying to keep this from getting to the point of such public 
attention while we tried to work out some of these issues. But 
we do know that at least 19 teachers have raised concerns; that 
is almost half of the teachers at the school. I think there are 
43 teachers there. I don't remember the exact number of 
teachers. I know it's a significant number of teachers who I 
have talked to who are not in favor of the charter. There are 
parents who are now willing to come forward, and had I known 
they'd have an opportunity to testify--maybe some of them are 
in the audience and they would come up. I don't know, but there 
are significant numbers of parents who have said to me that 
they didn't understand the process.
    I think a major part of this problem is that people didn't 
understand the process. And, the process, as I understand it, 
should be that parents and the school staff have an opportunity 
to develop the charter school proposal, that they have a chance 
to review it, and then they vote on a ballot. That wasn't done. 
Parents were asked to sign petitions. They were asked to sign 
petitions, as I understand it, at the time that they picked up 
their report cards. So, if you're a parent and you're picking 
up a report card, it is not unusual that you sign your name 
when you're picking up a report card. Having been a principal 
before, I know that that's pretty common.
    So unless parents are brought together and staff brought 
together I think there could be a lot of misunderstanding. Some 
of the parents are saying they didn't understand that this 
meant that the school would no longer be available to the 
entire community. So there has been a lot of confusion. This 
was the first one, and I think that we certainly have learned 
from this, and we now have an opportunity to look at what 
happened here at Paul and put in place something that is going 
to be fair to all of the stakeholders.
    But in terms of percentages, I know there are at least 19 
teachers, and if you will allow me, I can look at some of the 
letters and petitions from parents and community people who are 
now coming forward to say that this is a problem for them. But, 
I think the community and many of the parents were really sort 
of sleeping when this happened because they didn't quite 
understand the process.
    Mr. Moran. So it was your judgment that there was 
substantial opposition, and that the process of garnering 
support throughout the community was flawed. That is the 
argument--if you would permit me, Mr. Chairman--that is the 
argument we have been presented with. We have the signatures 
of, let's see how many teachers we have here, well it's----
    Ms. Ackerman. I think there are 19 here.
    Mr. Moran. It says 20 here. Maybe one more joined. They 
suggest that some of their signatures were forged, that their 
signatures were forged in the initial petition process. I don't 
know if there were a number of signatures forged. They also 
suggest there were extraordinary incentives for signing the 
forms. I don't know how true that is.

                   TEACHER WALKOUT--PAUL JUNIOR HIGH

    I would be interested to know that if teachers walked off 
the job yesterday against the instructions of the principal, is 
that not a disciplinary action?
    Ms. Ackerman. I had not heard that teachers walked out. We 
sent staff members to the school when we heard there was a 
problem. There were students outside, but again, I believe all 
of the students eventually went in.
    Mr. Moran. What we were told was that teachers walked with 
students against the instructions of the principal, but that's 
not true. It was just some students. While they may have been 
encouraged by some teachers, it was not a walkout on the part 
of teachers?
    Ms. Ackerman. No. That was not my understanding. In fact, 
the teachers who went outside were trying to bring the students 
back in. They were not, to my knowledge, involved in a walkout.
    Mr. Moran. My time has expired, Mr. Chairman. Will we get 
another opportunity?
    Mr. Istook. Yes, absolutely. I have some questions I'd like 
to ask here at this time, but I need to let Mr. Tiahrt--I'm 
sorry, Ms. Newman, you wanted to say something in response?

 TEACHERS FORMALLY REQUESTED CONTROL BOARD INVESTIGATION OF CONVERSION

    Ms. Newman. Yes. I am just a little uncomfortable with this 
line of questioning for this reason. The teachers, many of 
them, did write a formal request of the Authority that we 
investigate this matter. As should be the case we did turn this 
over to the Inspector General. I am uncomfortable because I 
think then the questions ought to be asked of the 
superintendent and others through that process. I know your 
rights here, but I am just saying I hope we don't muddy the 
waters here with whatever the Inspector General might come up 
with.

    [CLERK'S NOTE.--See pages 88A-88H for DC Inspector 
General's Report, dated June 1, 2000; specifically the 
conclusions on pages 88G and 88H, which state that the 
allegations against the principal of Paul Junior High School 
and the DC Public Charter School Board are UNSUBSTANTIATED.]

            AUDIT OF SIGNATURES--PAUL JUNIOR HIGH CONVERSION

    Mr. Istook. I believe, Ms. Newman, you indicated in your 
testimony, there was an auditing of the request of the two-
thirds of the parents and two-thirds of the teachers back in 
the original certification.
    Ms. Newman. The Authority didn't do that.
    Ms. Baker. We did that last year, but we also had a 
committee or panel that actually looked very carefully at the 
parent signatures and at the teacher signatures.
    Mr. Istook. Anyone who claimed it was otherwise could have 
asserted so at that time rather than----

        PUBLIC CHARTER BOARD REVIEW--PAUL JUNIOR HIGH CONVERSION

    Ms. Baker. Last year there were a number of people who 
called saying ``is my name on the list of teachers''. This year 
we began to hear in December and January that there were 
teachers who felt that there was some irregularity. No one 
called the D.C. Public Charter School Board which was the 
chartering authority, however, and we are open to those kinds 
of calls. So we then began to wonder where is this impetus 
coming from, is it really coming from the teachers, is it 
really coming from the community? There were community 
meetings, and some of our staff were at all of them, and there 
was no great ground swell of parents. They were there to ask 
questions about that's going on. Some of them were sixth grade 
parents.
    Mr. Istook. So these claims are coming from?
    Ms. Baker. I really don't know.
    Mr. Istook. Anonymous or organization?
    Ms. Baker. We don't know because they have not come to us. 
Many of them have not shown up in the community meetings where 
many people just wanted to ask questions about ``what does this 
mean for my child.'' Some of them were sixth grade parents who 
wanted the information, which Paul was not allowed to take into 
the feeder schools. You know, we have a couple of Paul teachers 
here if you decide you want to----
    Mr. Istook. I need to let Mr. Tiahrt have his time to ask 
questions, and I don't know that we want to add witnesses to 
the formal process.

                       CHAIRMAN ISTOOK'S CONCERNS

    I do know there is a big difference between taking the 
experience that people have had and using that to fashion an 
improved process in the future. That's very different from 
people who might want to go back and try to use this to somehow 
reverse the decision that was previously made as you described 
in a regular manner for the conversion itself. And it troubles 
me that some people might try to do this as a way to attack 
charter schools rather than discussing it as a way to make sure 
the process is improved.
    Mr. Tiahrt.

                  FIRST CHARTER SCHOOL OPENED IN 1997

    Mr. Tiahrt. Thank you, Mr. Chairman. How long have we had 
charter schools now? The law was passed in 1996. When did the 
first charter school open? Was it 1997?
    Ms. Baker. In 1997 the Board of Education opened two. And 
then in 1998 both the Board of Education and the D.C. Public 
Charter School Board, we opened eight.
    There are 27 now.
    Mr. Peabody. Twenty-seven, but there were 18 at the 
beginning of the second year, 27 at the beginning of the third.
    Mr. Tiahrt. Okay. So we are in the third year?
    Mr. Peabody. Correct.

                      PER PUPIL FUNDING ALLOCATION

    Mr. Tiahrt. All right. How are the funds distributed--is it 
by student? What's the measurement for funding?
    Ms. Baker. The measurement of funding is a per-pupil 
allocation, and then there are add-ons for special education, 
ESL--and that's one of the other issues. The special education 
allocation or add-on is not sufficient for the services that 
are provided for those students, but the schools are doing as 
much as they can to provide the services anyway.
    Mr. Tiahrt. That's the problem that public schools and 
charter schools and some private schools face. It's a big 
financial burden, and when you meet the kids, it's well worth 
it. We just need to find the resources for that.

            MEASURING PROGRESS--REGULAR AND CHARTER SCHOOLS

    Right now is there any comparison--how do you measure 
success? Is it Smith Barney that measures success one investor 
at a time?
    Ms. Baker. Not quite that way.
    Mr. Tiahrt. Is there some system that you are using to 
measure success, like test scores or entry into a specific 
college program or graduation rates or what?
    Ms. Baker. I would think that--of course, each school has 
its own charter. There is one thing that all charter school 
students take, and that's a SAT 9. With its own charter and its 
own application, there are other things they have said that 
they will achieve with the children that they serve. So that's 
one of the standards they are accountable for, that we look 
for, and down the road at year 5, we will be looking to see if 
those things have been achieved. That is the year in which 
their charters are renewed.
    Mr. Tiahrt. So you're really in the process then?
    Ms. Baker. Right, and last year was the first year for 
schools for this board. That's your benchmark. There's nothing 
yet to compare with, and you have to go 2 or 3 years before you 
can begin to see what happened in that first year.
    Mr. Tiahrt. Okay.
    Ms. Ackerman. Did you want me to answer?
    Mr. Tiahrt. Yes, I'm sorry.
    Ms. Ackerman. Okay. I compare our opportunities for 
progress using the same time since I came 3 years ago. We have 
had about the same amount of time as charter schools to begin 
to turn the District around.
    We have very clear performance standards for all of our 
schools also we have targets for them. Schools have to meet 
these targets.
    Mr. Tiahrt. What are these targets?
    Ms. Ackerman. The targets are our test scores. Also we have 
targets for attendance. We have targets for dropout rates. We 
have targets set for our schools, for parent and staff 
satisfaction. We have surveys that go out to parents, students 
and staff every year, and principals and staffs are measured 
against every year's progress. So they have to get better. We 
are making very clear progress and we are seeing it in all of 
the areas. I would encourage the public charter schools to do 
that because you can put the standards there. If you look 
across the country, all of our States are beginning to put 
these clear standards out for all of the school systems and say 
here are the benchmarks and we expect you to get there.
    Mr. Tiahrt. I would hope that we would have some kind of a 
yardstick. Yes, sir.

              OTHER PROGRESS MEASURES FOR CHARTER SCHOOLS

    Mr. Peabody. Charter schools have other checks as well. For 
one thing, charter schools are required to be accredited by an 
independent education agency within 5 years, and in addition to 
that, they are monitored by the chartering authorities and they 
also take the standard tests taken by DCPS. So those are three 
ways. But perhaps the best way they are held accountable is by 
the parents themselves who, if they choose not to send their 
children there, the schools quickly go bankrupt, and two of the 
schools that we have chartered in the community have indeed had 
their charters removed because they were unable to handle their 
finances properly, and because the parents didn't have 
confidence in them, and we believe that that is an effective 
part of the law.

                    NUMBER OF CHARTER SCHOOLS CLOSED

    Mr. Tiahrt. Thank you, Mr. Peabody. Are the two charter 
schools that in the District of Columbia school system or are 
they elsewhere in the Nation?
    Mr. Peabody. No, it was two in the District of Columbia. 
Nationwide there have been about 39 schools that have been 
closed out of a total of about 1,700.

                    GROWTH PLANS FOR CHARTER SCHOOLS

    Mr. Tiahrt. Perhaps Ms. Newman is best able to answer this 
next question. Is there a plan for a certain percentage or 
number of charter schools, and a certain number to be in public 
schools? What is the long term plan?
    Ms. Newman. The answer to that is no. I think there was in 
the law some contemplation of getting up to 30 in 3 years or, 
wasn't that it? There may have been some discussion at the time 
of passage, but no, we are all prepared to have the marketplace 
deal with the number of charter schools, and the number of 
children that maybe go back from the charter schools into the 
regular school system. We need to just determine what this 
system can bear and ensure that it is quality and not just 
numbers that controls what happens here. Staff informs me that 
the number is 20 a year.
    Ms. Baker. 10 for each authority. The law allows 20 a year 
total. However, in the first year we had 26 applications and we 
did approve 10. We have not approved 10 since that time. We did 
have 18 applications this year. We have six that may indeed 
open in the fall. So it's the quality of the application that 
is the guiding force, not an attempt to get to 10. That is not 
at all our goal.

                  COMMUNITY ACCESS TO CHARTER SCHOOLS

    Mr. Tiahrt. Okay.
    Something was said about Paul Junior High, I think the term 
was that the parents weren't aware that it wouldn't be open to 
the entire community. I am not sure I understand that statement 
because in Wichita, Kansas, in order to get access to a public 
school, even during the school day, parents can't walk in 
unless they have a visitor's tag, and you have to have a permit 
in order to use the school for any activity. So what's the 
basis for that comment?
    Ms. Baker. I know Superintendent Ackerman made the 
statement, but I would just say that Paul was the school in 
question, and the banner under which they have submitted their 
proposal is that the school is accessible. Also, the business 
of parents not having the understanding that any child who 
lives in the present boundaries automatically has the first 
preference as well as their siblings. As long as there are 
children in those boundaries, those children will have first 
preference to go to that school. It does not lose that status 
and it is available to the community. Here again, it's a 
question of communication and a question of miscommunication or 
the fact that, in some instances, there has been a play on 
negative things that might happen.
    Mr. Tiahrt. Mr. Chairman, maybe we could invest in some 
more microphones next time.
    Mr. Istook. We will try to make sure that's taken care of. 
The witnesses should not have to be dealing with that. We 
apologize.
    Ms. Ackerman. I made the statement, and it was based on the 
fact that I don't think parents were clear about what this 
process means. The neighborhood did not have an opportunity to 
voice their input into this. The fact is that the neighborhood 
children have preference for 5 years.
    Ms. Baker. Not in this charter. This one is for the life of 
the charter.

           GUIDELINES FOR COMMUNITY ACCESS TO PUBLIC SCHOOLS

    Mr. Tiahrt. In the D.C. public schools, let's say there's a 
gym for the elementary school or any school. What access does 
the public have to that gym? I would imagine there are certain 
guidelines for access, but what access is there and how would 
you obtain that access?
    Ms. Ackerman. In the D.C. public schools they simply ask 
for permission to go in. They do use our schools for a variety 
of purposes; they are granted the use of them as long as they 
are available. I don't think it's clear to the community 
whether that process would be in place or what process would be 
in place for them if it's a public charter. We would not 
determine those guidelines.
    Mr. Tiahrt. In regard to the public school, somebody would 
have to unlock the door?
    Ms. Ackerman. Right.
    Mr. Tiahrt. Somebody would have to be there to make sure 
they don't build a campfire in the center of the gym?
    Ms. Ackerman. Yes.
    Mr. Tiahrt. And then somebody would lock the door when 
they're done?
    Ms. Ackerman. Right.
    Mr. Tiahrt. Do you have to sign a form?
    Ms. Ackerman. They have to sign a form. They have to first 
sign a request and there are some charges depending on what 
kinds of services people want, but that's clear and the 
community knows that, but we don't determine those for public 
charter schools. Even if they're in our building, we don't 
determine those fees and those charges.
    Mr. Tiahrt. So a charter school would then have its own set 
of guidelines, say, for Paul Junior High, if it were a charter 
school?
    Ms. Ackerman. Yes.
    Mr. Tiahrt. Is my time up, Mr. Chairman?
    Mr. Istook. I think Mr. Peabody wanted to speak.

               PRESS RELEASE BY PAUL JUNIOR HIGH PARENTS

    Mr. Peabody. A good deal has been said about the parents of 
the Paul Junior High School not knowing what was going on, and 
of course the community as well, but there was a press 
statement by the parents of the Paul Junior High School 
supporting the conversion, and I'd like to read just a few 
lines from that. ``More than a year ago the parents of the 
school overwhelmingly endorsed the move to become a charter 
school. We were informed of what it means to become a charter 
school by the principal and the staff of the school. They did a 
thorough job of reaching out to the school community and 
explaining the reform that charter schools represent. Petitions 
were distributed that invited parents to approve or disapprove 
the conversion of the charter school. At that time, more than 
500 of us signed individual petitions, individual petitions.''
    This goes on, but it is signed by five parents of the Paul 
Junior High School, and they do give their names and they do 
give their telephone numbers, so that they can be contacted. 
And so I think this is good evidence that Cecile Middleton, who 
is the principal of Paul Junior High School, did a very 
credible job of at least explaining to her parents exactly what 
the charter school process was before they asked for the vote.
    Mr. Tiahrt. Thank you, Mr. Chairman.
    Mr. Istook. Thank you, Mr. Tiahrt.
    There are certainly several things that I'll want to ask 
for the record. For example, Ms. Ackerman, you mentioned that 
51 schools have been identified as having negative achievement 
trends. It would be useful to know what percentage of--it could 
be a percentage of the schools or a percentage of the student 
population that is represented in those 51 schools. But I 
wanted to focus first on a financial question, and then, I did 
want to ask something about a couple of things that have been 
said about Paul Junior High.

     DEFINITIONS OF ``CLASSROOM OPERATIONS'' AND ``CENTRAL OFFICE''

    In your testimony, Ms. Ackerman, you mentioned financial 
reform and reducing central office spending from more than 15 
percent to less than 6 percent, and you indicated that now more 
than 90 percent of the District's budget goes directly to 
schools or to school operations.
    Now, I realize the definitions are all important there, and 
being in the school is not the same as being, ``in the 
classroom'' or however people may wish to define it, and you're 
probably aware that many of us are trying to get a standard in 
place that 95 percent of the funding would get to the 
classroom. But that was your testimony. And I believe it was 
Ms. Baker--I am sorry, it was Ms. Newman, excuse me--indicated 
there were some costs that just weren't showing up. You 
mentioned transportation as one of them. You mentioned special 
education costs as another.
    And what I want to ask Ms. Newman and Ms. Ackerman is to 
give us some comparative idea, to the extent you know it, of 
the difference in overhead costs, teachers' salary, how much 
you're able to squeeze out of the same per-pupil allocation for 
things such as audio-visual equipment, computers, whatever it 
might be.
    Can you, Ms. Ackerman, expand a bit more on how you define 
school operations that constitute the 90 percent in your 
testimony and anything that you can tell us that might give us 
a basis for comparison about what each of these arrangements is 
getting out of each dollar?
    Ms. Ackerman. When I talk about 90 percent--and I separate 
school-based and I call the other category school operations. 
Under school operations, I am talking about staff--staff like 
food service workers, transportation workers, custodians. Those 
are all people who are involved in what we call school 
operations. They are in the schools. They are not in the 
central office.
    Mr. Istook. That's part of the 90 percent?
    Ms. Ackerman. That's part of the 90 percent, and it's 
important that people know that because in the past, they have 
been lumped in central office. When we're talking about central 
office administration, we are really talking about less than 6 
percent. Those are people who support what happens in schools. 
In the District of Columbia public schools, I am proud to say 
that all of our schools now, through the weighted student 
formula, get a per-pupil funding amount that gives them almost 
all of their money. With the exception of bus drivers and other 
things we couldn't include because not all schools need the 
specific services, especially around transportation. We only 
bus our special ed students. The bottom line is the schools get 
direct access to their money and we are talking about millions 
of dollars.
    They determine how to use it, not only for staffing, but 
they determine, very much like charter schools, how to use it 
for audio-visual equipment, etc. We have taken those dollars 
out of the central office and put them into the schools.
    When we talk about central operations, we are talking about 
things like testing materials and textbook adoption. Again, 
those are dollars that are centrally allocated because of the 
economy of scale in terms of securing and procuring those 
resources. And then they are distributed into the schools.
    We have separated our budgets, so you can clearly see that 
we have less than 6 percent on what you would normally call a 
bureaucracy, and it's probably one of the smallest central 
office functions or operations in the country.

           SPENDING COMPARISONS--REGULAR AND CHARTER SCHOOLS

    Mr. Istook. And you may not have a basis for this yet, but 
do you have any ability to compare what you pay, for example, 
for teachers' salaries in your district compared to charter 
schools or the amount of money that, after everything else is 
paid, is available for technology, equipment, whether it be for 
a computer science lab, equipment for a biology class, whatever 
it might be? Do you have any comparison that you can give to 
us?
    Ms. Ackerman. Not to charter schools. We could give you the 
amount that we are spending--and again, when we are talking 
about economy of scales, if we are buying computers for all of 
our schools, it is better to buy them in bulk, and so we will 
do that, but then it goes out to the schools. But we have not 
made any comparison to our spending, with charter schools. I'd 
be interested in that because I have been making those kind of 
comparisons to other school districts across the country, which 
is why I know that we have, in this point, crossed the bar in 
terms of a standard.
    Mr. Istook. And we realize it's difficult to get the 
definitions to match well enough that you can do the comparison 
you want to do.
    Ms. Newman or Ms. Baker.
    Ms. Newman. No, I don't have the answer. One myth, but 
maybe it's not a myth, is that the teachers in the charter 
schools have the ability to be paid more. I don't know if 
that's true given that they are being paid with funds based on 
the per-student formula. One of the statements that has been 
made is that the charter schools have been able to attract some 
of the teachers away from regular schools, based on the fact 
that they can pay them more. I don't know if it's true or not 
true, but it's something that needs to be addressed.
    Mr. Istook. I agree. We need to try to create a standard 
that will enable everyone to measure that so that we can 
benefit from the comparison. It's useful.

      SCHOOL RESOURCES USED TO DISTRIBUTE ``NEGATIVE'' INFORMATION

    Finally, I wanted to ask, Ms. Baker, you have in your 
testimony that at Paul Junior High yesterday the students 
walking out of school, you testified, were encouraged by 
irresponsible adults who apparently used classroom time to feed 
them misinformation about charter schools. Mr. Peabody made a 
related comment.
    I think it would be good for us to have--I don't want to go 
into all the details of it, but to know the basis of that and 
I'd like to know from Ms. Ackerman what are the standards, if 
you have them, that have been created about using resources, 
whether it be time or something else? There's been a concern 
with someone in your office distributing negative literature 
(see pp. 69-71). It even says negative information on it about 
charter schools, using those words, working out of your office, 
out of those public resources. So I am very concerned with what 
the District is doing, if its resources are being employed to 
mount campaigns against charter schools, just like I would be 
equally concerned if charter schools were using their resources 
to mount an attack upon the public schools.
    Ms. Baker.
    Ms. Baker. Yes. I think it was on Friday that Ms. 
Middleton, the principal, learned that children were beginning 
to ask questions that, ``you know, in my so-and-so class, I was 
told that we are going to protest,'' and she wasn't sure 
whether it was going to happen on Friday or when it was going 
to happen. So she did make an announcement over the PA system 
to her teachers saying this was not an appropriate process to 
take place in that school.
    Some of the things that children indicated that they had 
been told were that they would not be allowed to return to Paul 
if they didn't have good grades, which, of course, is not a 
part of it. Or that other family members will not be able to 
attend Paul in the future; that the current teachers are being 
forced out of Paul and will lose their jobs.
    Mr. Istook. The key thing here is who were making these 
statements?
    Ms. Baker. These were being said in the classroom to 
children.
    Mr. Istook. By whom?
    Ms. Baker. By other teachers. That is what we were told. I 
don't know who those teachers are, of course, and there was a 
bulletin that the principal then put out to indicate to the 
teachers that these things were being said and that 
instructional time should not be used, and even their time in 
school should not be used, this was not the manner in which 
they should be directed.

             ``NEGATIVE'' LETTER SENT OUT BY PUBLIC SCHOOLS

    Mr. Istook. And Ms. Ackerman, that's why I ask whether it 
be this or the media reports of your office personnel and 
resources being used to put out material. I'm looking for 
example at the December 21st letter from Leonard Haynes, which 
had attachments going out throughout the community and the 
attachment, the heading on it reads, ``the negative impact of 
charter school conversions on the District of Columbia public 
school system and your community.'' (See page 69 for copy of 
letter.)
    So I am interested to know if you have any insight into 
what Ms. Baker was describing, and I'd like to know what the 
standard is if you have one in place and what's being done with 
it to make sure that resources that ought to be going to teach 
kids are not diverted to a political disagreement instead.
    Ms. Ackerman. Well, I certainly don't condone any kind of 
negative campaign, and I can say that Dr. Haynes spends, I 
know, the majority of his time on a lot of other things. I 
think this was in response to an ANC meeting. I can't talk 
about his motives. We did talk about why he sent that out.

       DISCIPLINARY ACTION AGAINST AUTHOR OF ``NEGATIVE'' LETTER

    Mr. Istook. Was disciplinary action taken?
    Ms. Ackerman. I did talk with him.
    Mr. Istook. Was that disciplinary action?
    Ms. Ackerman. It was. It may not have been formal, but I 
talked with him and we discussed why he did that and why it 
went out on my stationery. I have to say, though, Congressman 
Istook, that a lot of this has gone both ways.
    Mr. Istook. That's why my concern goes both ways.

SUPERINTENDENT'S RESPONSE TO ``NEGATIVE'' LETTER SENT OUT BY HER OFFICE

    Ms. Ackerman. I want to say that this is the only incident 
that I know of that we have been involved in, that is somebody 
on my staff has been involved in. Now, do they have opinions 
about things? Absolutely, and they certainly are free to say 
them. We have gotten attacks. Attacks on me personally about 
what I think about charter schools and my actions. Today, I 
started my testimony with my professional background. I wanted 
to give you a little bit of history on my own professional 
background so that you would know that I come to this about 
children.
    In terms of what happened yesterday, I am still trying to 
gather information. The version being discussed today is not 
what I heard about how this started, but I have asked one of 
the assistant superintendents who was there to provide me with 
a written summary of what happened. She has interviewed 
students and staff.
    We need to look at both sides of this, of course, and 
somewhere between both sides there's a middle. I am not going 
to tell you what I have heard, because I believe there is a 
middle, and it's on the other side of what Ms. Baker said. Also 
I do think we have to have standards, and I am concerned 
about--like I was concerned with Dr. Haynes and that particular 
incident. I am concerned about staff being used. You know, I 
have heard allegations of staff being used, for instance, in 
the school who are on the books as teachers but they are 
working towards the charter conversion. That's a real concern 
to me because when I give schools their dollars, I want to know 
that those teachers are indeed in classrooms.
    I think that when we look at this we are going to have to 
look at it on both sides and all issues, because I think, 
again, if I'm giving schools the latitude to decide how they 
use their dollars and if they are telling me that these are 
teachers, I expect them to be in classrooms, and I expect the 
dollars that are going to those schools now to be used in 
resources for teachers. I think this is a larger issue, and we 
need to look at every aspect of it.

              COPY OF DECEMBER 21, 1999 LETTER SIGNED BY 
                         LEONARD L. HAYNES III

    [The letter referred to and a related news article follow:]
                [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

             CHAIRMAN ISTOOK RECOMMENDS DIRECTIVE BE ISSUED

    Mr. Istook. I would recommend, and I am speaking to both 
the public schools and the charter schools, that it would 
probably be very helpful to have a directive go out to make it 
clear to people what is not a permitted use of public resources 
to, as I am going to say, dump on each other. I recognize that 
in conversions and so forth, there are certain things that 
overlap and are involved--I think we all know that. But there 
are some things that I believe could probably be specified in a 
directive that you're clearly out of bounds, if not potentially 
illegal, or perhaps a violation of criminal law. I would 
certainly urge all the persons involved to issue such a 
directive on the matters where it is abundantly clear, and 
maybe that would help to make people more cooperative on both 
sides.
    Mr. Moran, I need to excuse myself for just a minute. I 
will be right back.

        CONGRESSMAN MORAN'S SUPPORT FOR SUPERINTENDENT ACKERMAN

    Mr. Moran. Thank you, Mr. Chairman. Let me tell you where I 
am coming from here. First of all, I think that the decision to 
convert to a charter school was probably the right one, and I 
think that Ms. Newman made the right decision, and I think that 
the charter school authority went through the proper hoops and 
preparation. But I also feel that if this is going to 
compromise Ms. Ackerman's leadership of the school system or 
might jeopardize our ability to retain her as superintendent, 
it's not worth it, because we are talking about 10 percent of 
the student body now. We may be talking about 20 percent, maybe 
25 percent that would be going into charter schools ultimately. 
I am not sure it's going to be a whole lot more than that. So 
my principal concern is retaining the authority and the 
prerogatives of the superintendent.
    Now, there are some things that I want to understand 
better, and I am probably not going to get a completely candid 
answer and I understand that, but I am still going to ask.

           TEACHER OPPOSITION TO PAUL JUNIOR HIGH CONVERSION

    First of all, Ms. Ackerman, what do you think is the 
principal motivation for the teachers who are so adamantly 
opposed to the conversion at Paul?
    Ms. Ackerman. I have had the opportunity recently to talk 
to them. And, it was recent, within the last three weeks, 
before that time staff members handled that. As I talked with 
them, it appears that they are frustrated about a process that 
they think was not clear and certainly there were problems with 
it. And they voiced their opinion about this very early on. 
They made their first concerns known, it is my understanding, 
in September, late September or early October. They then wrote 
to the teachers' union. The union then wrote a letter to the 
public charter board. Because the initial letter from the union 
came to me, I had to clearly say I am not involved in this 
process, this is where it goes. It went to Ms. Baker. She sent 
back a letter saying that the teachers union had to go back to 
Ms. Middleton.
    They are frustrated because they feel that the system 
stalled in its move forward, and had there been some kind of 
intervention early on, that perhaps things would not have moved 
as they did and we could have had a process that was, they 
felt, more fair.
    Mr. Moran. That's process. Are they afraid of losing their 
jobs?
    Ms. Ackerman. No, they're not afraid of losing their jobs, 
and I don't think they are afraid of charter schools.
    Mr. Moran. You think all this adamant opposition is because 
they objected to the process?
    Ms. Ackerman. I think they have been fairly quiet. Lately, 
I mean the teachers' union has certainly been involved in 
supporting them, but there were months that went by that nobody 
said anything, and you know I wasn't tracking it at that time 
because it wasn't my issue, and it wasn't until about 2 months 
ago that they wrote another letter to me and asked for somebody 
to hear them. So it is a process thing but it also is a 
principle thing for them. And when people have principles, what 
can you do?

   SUPERINTENDENT ACKERMAN'S CONCERN THAT FACILITY REMAIN IN SCHOOL 
                               INVENTORY

    Mr. Moran. But you found that to be a compelling enough 
reason to object to the conversion?
    Ms. Ackerman. No. My objection to the conversion was not to 
the conversion. It was really around the school building, and 
to tell you the truth, it really very specifically is around 
what can happen to that building and losing the building to the 
school district inventory. Also, can a school that is leased, 
and it is in the school district inventory, be used as 
collateral? I mean, those are bigger issues for me than the 
chartering, what to do with that building and does it stay as 
part of the inventory. In other States where there is a 
conversion, the building stays within the inventory of the 
school district.
    Mr. Moran. You're saying you would have gone along--I don't 
mean to interrupt you. I want to get to the point though. In 
other school districts, you were going to say the school 
building would be retained as the property of the school 
system?
    Ms. Ackerman. Yes.
    Mr. Moran. But there would be some different line of 
control over it perhaps, but it would still ultimately be an 
asset within the school system.
    Ms. Ackerman. Yes.
    Mr. Moran. If it were to be retained as an asset of the 
school system, would you have been more receptive to the 
conversion?
    Ms. Ackerman. I think, yes, that, and making sure that the 
process was one that was fair and indeed, certified, like it 
was the year before. I mean, when parents question it, when 
teachers question it, if that were in any other district school 
I would have to investigate it. I could not ignore, even the 
process. I'd have to, and I would, and I have, on many 
occasions, on a number of things, and sometimes they bear out 
the allegations and sometimes they don't. But I would have felt 
comfortable.
    The big issue, though, if that process was one that we 
could verify everybody was comfortable with it, was then what 
happens to the school, do we lose it? Can you use it as 
collateral, what happens if there's a default, you know, should 
the school district then be put in a position of having to pay 
for a loan default on a building that we owned.

                       TEACHER UNION'S OPPOSITION

    Mr. Moran. Well, that sounds like a legitimate concern. I 
was interested to know how much of a factor was the teachers 
unions' opposition. That didn't enter into it at all, you're 
saying?
    Ms. Ackerman. No. My initial concern was around the loss of 
the building.

           ONE PARENT'S CONCERNS--PAUL JUNIOR HIGH CONVERSION

    Mr. Moran. The loss of the building.
    I know that there are some what I would consider to be 
legitimate concerns in the neighborhood. The former minority 
staff director for the D.C. authorizing committee, the very 
distinguished gentleman Cedric Hendricks, who is sitting right 
over here, happens to live here in the Paul neighborhood. He 
has two children and they go to Shepherd Elementary, which is a 
feeder to Paul. No one has yet asked him about his opinion nor 
does he particularly feel knowledgeable about what this 
transformation will do? I know you want to answer the question, 
Ms. Baker, and I am going to give you an opportunity to do 
that, but he is a parent.
    Now, the problem is one of the things you may want to tell 
me is that you can't bring the parents in if they are not 
existing parents of school children. He misses the cutoff, they 
are fifth grade kids, and apparently you can only deal with the 
parents directly affected. But he kind of liked the idea of the 
magnet school, that Ms. Ackerman suggested would be also part 
of the building. You'd be sharing it and this hybrid 
arrangement would seem to be a reasonable compromise.
    My kids go to a magnet school in an overwhelming minority 
low income neighborhood, and the magnet school is working very 
well, and the neighborhood likes it very much. It's 
representative of a wider Alexandria community. That sounds 
like a pretty good deal, particularly since it concentrates on 
science and math.
    But that option, which he would have preferred at Paul, is 
no longer available. He wants to know where they will go if 
they don't go to Paul. So those are legitimate questions. I can 
relate to those questions.
    Now, Ms. Baker, you want to answer, you want to respond and 
explain some of these things?
    Ms. Baker. Well, I can certainly try. In regard to the 
magnet: it started out not as a magnet, but just as an arts and 
technology program. It subsequently grew into the magnet, but 
the big problem there is that the principal of the school and 
the committee that designed the Paul charter school designed it 
with the idea that they would have full capacity of the 
building. As we have talked about the per-pupil allocation and 
how a school is funded; they are dependent upon the students in 
order to have the kinds of programs they want to have in the 
school. Also, the magnet program is very similar to the program 
that is already planned for the charter school. So you would 
have two schools with very much the same kind of program in the 
same building, with the kind of publicity that it has gotten, 
and some animosity being engendered in two camps, which maybe 
we can eventually do away with.
    I taught at Shepherd for about 18 years. I know that most 
of the time the children at Shepherd did not go to Paul. It is 
good to know that parents of the sixth graders there are 
considering Paul. I know a couple of parents at Shepherd who 
are sixth grade parents who have investigated the charter 
school idea, and some have already expressed an interest in 
doing the application process for it. So I think here again, 
there's an opportunity for sharing.
    As I have heard over and over again, our charter schools 
and our proposed charter schools do not have an opportunity to 
go into the elementary schools or the junior high schools to 
talk about their programs.

  CONVERSIONS--STATUTE DOES NOT ALLOW PARTICIPATION OF FEEDER SCHOOLS

    So here you have a conversion, and that conversion could 
not go to the sixth graders to say here is what my school will 
be like. So, yes, they are in the dark. Maybe the adverse 
publicity at least has made them aware of this as a process and 
hopefully we can turn that around into a positive.

  CONVERSIONS--FACILITIES ARE LEASED AND RETURNED TO SCHOOL INVENTORY

    As far as the leasing of the building is concerned, from 
all that we have read and from all that we have in documents, 
it is impossible for a conversion school to ever purchase the 
building. It is a lease arrangement. If the charter becomes 
defunct or whatever, if it's not renewed or if it's revoked, 
that building automatically goes back. No matter how much 
improvement has been done by the charter school, that building 
goes back. It's a part of the inventory. It doesn't leave.
    Mr. Moran. Ms. Ackerman, what's wrong with that? It remains 
an asset of the D.C. public school system, doesn't it?
    Ms. Ackerman. Well, technically it does in terms of the 
inventory, but we have the issue of using the building for 
collateral which is a major concern for me, and it's one that I 
think should happen inside of the school district. Again, 
that's on the outside of the school district.

        COMPELLING REASON TO OPPOSE PAUL CONVERSION NOT EVIDENT

    Mr. Moran. You caused--you stepped in like this because 
you're afraid you might not be able to use the school building 
for collateral? You're not using the other school buildings for 
collateral, are you?
    Ms. Ackerman. No, we are not using them for collateral.
    Mr. Moran. This seems like a pretty marginal reason to have 
stuck your head into a hornet's nest.
    Ms. Ackerman. That was one, certainly the building. The 
parents and what would be an alternative for them.
    Mr. Moran. There is a compelling reason and I just haven't 
found it yet. I think there's something else out there. I have 
to believe if we stepped outside you would tell me what it is, 
you can't tell me here. Maybe Ms. Newman is going to tell me.

    CHARTER CONVERSIONS MAY BE USED TO AVOID BEING HELD ACCOUNTABLE

    Ms. Newman. This is an opportunity to probably irritate 
some principals. I think we have to be certain that the 
chartering authorities are vigilant about this issue that I am 
about to put on the table, and I am certain they are aware of 
it. What you don't want is for principals to see conversions as 
a way out of being held accountable for certain standards, that 
principals who are unhappy with some sanctions that have been 
imposed for something that they have done could potentially 
misuse the opportunity. I am just saying that because I have 
heard of some principals that have talked about converting and 
taking over the building, and some of them have had some 
problems in the system. All I am suggesting is that this idea 
puts a great burden on the chartering authorities to be certain 
of the quality of the program and the rationale for the 
proposal. Otherwise you're going to see the superintendent 
losing her ability to leverage performance standards for the 
fear that anybody who doesn't like this is able to walk away 
and take the building.

              RATING OF PAUL JUNIOR HIGH SCHOOL PRINCIPAL

    Mr. Moran. Would you consider the current principal at Paul 
Junior High in the top tier of principals within the public 
system?
    Ms. Newman. Are you talking to me?
    Mr. Moran. Yes. You wouldn't be able to judge? Let's ask 
Ms. Ackerman. Would you consider her to be somebody you would 
nominate as principal of the year? That's a little extreme. 
Would you consider her to be in the top tier of principals?
    Ms. Ackerman. I think she's a good principal. I do believe 
that in looking at the achievements, I have some concerns if 
you look at the last three years. There are some achievement 
problems going on that, as superintendent, this year I would be 
asking questions about. I'd be looking at three.
    Mr. Moran. Thank you.

    POTENTIAL FOR DISGRUNTLED PRINCIPAL TO CONVERT SCHOOL TO CHARTER

    Mr. Chairman, if I could pursue this, I am trying to figure 
out what might this really be all about. Now, is it possible 
that a principal who is about to be held accountable for 
consistently underperforming in terms of overall student 
results at a school could threaten, or even follow through by 
getting their school chartered and thus coming under a 
different and less accountable system?
    Ms. Ackerman. I think it's certainly possible.
    Mr. Moran. It is a possible situation. Now, Ms. Baker, are 
you going to tell me it's impossible in this situation?
    Ms. Baker. ``Impossible'' is a word that I don't use. I 
think it's not wise. However, the process that we use took 3 
years. The first year we had two schools that did apply. They 
were basically reasonable in terms of their principalships, but 
there were other things that were missing. I think that's one 
of things we would look at. If that person, the founder of this 
chartering vision, does not have the kinds of principal skills 
that would provide leadership, then we very definitely would 
find that application to be lacking, because we do look at who 
the founders are, and, what the process is that they are using.
    Mr. Moran. Who hires and fires the principal? You have got 
a lot of problems with that.
    Ms. Baker. Boards of trustees. We also are being very 
vigilant in terms of governance. It's not that we dictate, but 
that we want to see credible boards, strong boards that indeed 
hold the principal accountable because they are held 
accountable to us.
    Mr. Moran. Which was the charter school that was closed 
down?
    Mr. Istook. I just want to ask one thing while you're on 
that line because we all recognize there are tons of things 
that are possible with charter schools, with public schools, 
with all sorts of things. But I think the fair question would 
be what are the mechanisms in place that would prevent a 
scenario such as Mr. Moran is describing?
    Ms. Baker. I'm sorry?
    Mr. Istook. I think he was describing a scenario where you 
have someone, let's say a principal, that's about to be 
disciplined, realizing that he says I'll get out from 
underneath the discipline by leading the effort to make this a 
charter school and putting myself in some position of authority 
over that. So I am asking what are the mechanisms, the 
procedures or whatever you have to go through that would make 
it extremely difficult, if indeed, they were to have the 
scenario that he is painting?
    Ms. Baker. I think that the review process is extremely 
rigorous. We look at all of the major participants in the 
application process. We do sort of an investigation, if you 
want to call it, maybe that's too strong a word, of the 
credentials that are presented. We do that kind of verification 
so that the people who are putting in this application are 
indeed----
    Mr. Istook. Talking about a conversion?
    Ms. Baker. Right. It might be that that principal's general 
performance over a time period would indeed be an integral part 
of that. I have no information here on Paul's ups and downs in 
terms of how the students are doing. I do know that that 
school's demographics have changed considerably in terms of the 
makeup of the school. So I am sure there are many adjustments 
that are going to have to be made to meet the needs of 
different students.
    Mr. Istook. Different requirements of the parents and 
teachers.
    Ms. Baker. That's for the conversion, yes.

           ACADEMIC PERFORMANCE PROBLEMS AT PAUL JUNIOR HIGH

    Mr. Moran. Mr. Chairman, I appreciate you asking those 
questions because that was targeting in on what I was trying to 
get at, and I appreciate that. Paul has had problems in terms 
of academic performance; that's a fair statement.
    Ms. Baker. Ten years ago when the principal went there, I 
was at Shepherd at that time. To say to a parent at Shepherd, 
``Paul is your neighborhood school,'' they looked at you and 
said ``no way.'' Gradually more of them have begun to go, still 
not in the numbers that you might want, but there are options. 
Junior high schools have somewhat open enrollment, so they do 
have those choices.

            PRINCIPAL'S ROLE IN PAUL JUNIOR HIGH CONVERSION

    Mr. Moran. Is the principal, would you say, the driving 
force behind this conversion? She clearly feels strongly in 
favor of it.
    Ms. Baker. She feels strongly in favor of it. But we were 
also impressed with teachers who testified at the public 
hearing. Again, there was an opportunity for people to speak; 
maybe we need to do a better job of being sure that the entire 
community, the entire city knows about this. We thought we were 
doing that with notices in libraries, notices to ANCs and so 
forth.
    Mr. Moran. Well, oftentimes, the parents are the driving 
force.
    Ms. Baker. In fact, at the public hearing, I think Ms. 
Middleton had had some oral surgery or something and was not up 
to being at a hearing, and the teachers' presentation was most 
convincing. I mean, they knew everything about that 
application. They were very much involved.
    Mr. Moran. Some of the teachers made the presentation?
    Ms. Baker. Right, and we asked the kinds of questions that 
are required that you be very, very knowledgeable about that 
application.
    Mr. Moran. Did you have any parents urging conversion as 
well at the hearing?
    Ms. Baker. Well, that was through the petition process. At 
the hearing they did not have parents on the hearing panel, but 
generally, it's the people who are actually a part of the 
application process itself.

       ALLEGATIONS OF IRREGULARITIES--PAUL JUNIOR HIGH CONVERSION

        (see also dc inspector general's report on pp. 88a-88h)

    Mr. Moran. Well, the material that I have gotten here (see 
pages 83-88) signed by these 20 teachers or alleged teachers, 
says parents have signed charter petitions believing they were 
signing for report cards, attendance sheets at PTA meetings or 
to attend Paul because they do not live in the neighborhood. 
Children were told they could sign for their parents and were 
given T-shirts for bringing in signed letters for the charter. 
And then in terms of the teachers' signatures, teachers were 
approached several times and felt pressured to sign in order to 
secure their job--they signed in fear of a poor rating.
    ``We know of one teacher who believed that she was 
terminated at the end of last year because she did not sign/
support the charter.'' It also says at least two teachers' 
names were forged on the application. I am just reading from 
the material. I am trying to figure out what factors are really 
at play here. I don't have an axe to grind.
    Ms. Baker. I understand. I think that the thing that really 
made that particular document difficult to accept as a serious 
document was the fact that it indicates that there is a list 
where people signed and that parents thought they were signing 
for report cards. That is not the procedure that was used last 
year. There was an individual sheet on which each parent wrote 
his or her name at the top and then signed his or her name with 
a signature, and those were combined in a binder which is 
available for anyone to see. We then had a team of retired OCPS 
administrators who went through those sheets, sheet by sheet, 
and if there was any concern about the signature, did it look 
like a child's handwriting, could you be sure, they went to the 
school and went through the school records and matched 
signatures. If they had any concerns then they did not count 
them.
    Mr. Moran. So you're saying these are not credible charges?
    Ms. Baker. The charges concerning the petition, no.
    Mr. Moran. Actually, it was a letter that was sent to Ms. 
Newman. Do you consider these to be credible charges since you 
were in receipt of this?
    Ms. Newman. I'm not going to judge it, which is why I sent 
it to the Inspector General.
    Mr. Moran. That is a diplomatic answer, but it's an 
appropriate one. Ms. Ackerman, I guess did want to respond to 
that.

         SUPERINTENDENT ACKERMAN'S ISSUES WITH PAUL CONVERSION

    Ms. Ackerman. I didn't want to respond to that. What I 
wanted to respond to is the following: you asked me what 
initially got me involved, and it was the letter that came to 
me asking for the use of the building. Now there are a number 
of other issues that then became apparent to me that weren't 
apparent to me before about the process and the law. I would 
like us to stop thinking about Paul, although Paul is the place 
that we start. For me, as a superintendent, there were a number 
of issues. It started with the building because that was the 
first request, but if you think about a superintendent trying 
to do long-range reform, a master facilities plan not knowing 
from year to year--with no way of knowing from year to year 
what schools are going to be in the inventory, what schools are 
going to go charter and convert, how do you plan, how do you do 
any kind of planning, how do you hold people accountable when 
this process can go on outside of the superintendent and the 
District operations. There are a number of things that became 
very apparent after this process started.
    If given the choice, I would like to have the parents in 
that neighborhood have a choice, and a magnet school is a 
wonderful choice. If they had a choice what would have 
happened? Would they have chosen--we don't know because they 
never got a chance to choose.
    So there were issues that were raised and became apparent 
after the fact, but for me as a superintendent, I am now 
looking forward beyond Paul, and Paul just happened to be the 
touchstone for these issues, but I can tell you there is no 
superintendent in this country that has to deal with these kind 
of issues as it relates to the uncertainty of not only 
buildings, but the involvement of staff in this process, and 
how do you manage when you have no way into that process early 
on.
    Mr. Moran. So your principle objection to the conversion 
was the precedent that it might establish with regard to future 
conversions and future school buildings and student bodies?
    Ms. Ackerman. That's much better stated than I did a few 
minutes ago. I don't put my head in hornets' nests on purpose.
    Mr. Moran. That's helpful. Thank you, Ms. Ackerman.

 COPY OF MATERIAL ALLEGING IRREGULARITIES--PAUL JUNIOR HIGH CONVERSION

    [A copy of material referred to by Congressman Moran and by 
witnesses in the preceding testimony follows:]
              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


              RECOMMENDATION FOR STATE EDUCATION AUTHORITY

    Mr. Peabody. I might add something there, which is that the 
overall solution to this really is two things which I 
mentioned. One is to have a State education authority that does 
have overall planning responsibility and can, in fact, plan for 
the entire group of public schools charter and DCPS alike. That 
would be one enormous helpful thing.

       RECOMMENDATION FOR CLEAR POLICY ON FACILITIES DISPOSITION

    The other is to have a clear dispositions policy that we 
can follow with confidence, which we hope is on the verge 
within the control board at this time. Those are two essential 
elements that have been missing and we could well have another 
controversy like this if indeed we do not have those structures 
in place.
    Mr. Istook. Thank you, Mr. Moran. Thank you, Mr. Peabody. I 
appreciate the witnesses. As I mentioned before we will have 
some questions for the record.

             CHAIRMAN ISTOOK--FOCUS NEEDS TO BE ON CHILDREN

    I would like to make sure we bring the focus back to the 
children that we are concerned with--with their education and 
therefore, with their future. I recognize, Ms. Ackerman, what 
you're mentioning about the challenge of planning, and as you 
know, it's involving change within the public school system as 
well as the impact of charter schools on your planning models, 
but businesses have to do business plans with large elements of 
uncertainty and you have to learn the mechanisms that enable 
you to deal with that.
    The charter schools, of course, have a similar challenge, 
not quite the same, but with certain similarities. And we want 
to do what it takes to make sure that the public school system 
does not feel threatened by the charter schools and the charter 
schools do not feel threatened by the public schools. I 
recognize what you said, Ms. Ackerman, that it's unique because 
there is a separate board that Ms. Baker is with that makes the 
decisions as opposed to always coming through the same board 
that makes the other education decisions.
    I hope that the things that we are talking about here and 
reviewing what's happened with the Paul Junior High conversion 
are being discussed as how do we learn from experience and 
therefore improve things, improve the accountability, help with 
the planning ability, make sure that you're meeting the right 
needs, and not creating a false standard of saying, ``well, you 
have to have a consensus'' that turns out to be an unreachable 
consensus. I hope that we are talking about these things as a 
learning experience as opposed to talking about them for people 
to carry on some unending debate about the Paul Junior High 
conversion or an endless discussion of the manner in which two-
thirds of the parents and two-thirds of the teachers approved 
what they did, because I think we really need to focus on 
getting the charter schools and the public schools not to see 
each other as a threat but rather to work for the common good 
of the students' future.
    So I look forward to working with all of you in this effort 
and to getting further information. Thank you for taking the 
time this afternoon to be here with us.

                              Adjournment

    We are adjourned.

                  COMMITTEE'S QUESTIONS FOR THE RECORD

   AVAILABILITY OF EXCESS PUBLIC SCHOOL FACILITIES TO PUBLIC CHARTER 
                                SCHOOLS

    [CLERK'S NOTE.--The following material includes the 
Committee's questions to the control board concerning the 
availability of excess public school facilities to public 
charter schools and the control board's response:]
                 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

                  COMMITTEE'S QUESTIONS FOR THE RECORD

                           SPECIAL EDUCATION

    [The following material consists of the Committee's 
questions concerning the special education program and the D.C. 
Public Schools reponse to those questions:]
              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


                                          Thursday, March 23, 2000.

                              CORRECTIONS

             COURT SERVICES AND OFFENDER SUPERVISION AGENCY

                        PUBLIC DEFENDER SERVICE

                               WITNESSES

JOHN L. CLARK, TRUSTEE, DISTRICT OF COLUMBIA CORRECTIONS
JOHN A. CARVER, TRUSTEE, COURT SERVICES AND OFFENDER SUPERVISION AGENCY 
    FOR THE DISTRICT OF COLUMBIA
CYNTHIA E. JONES, DIRECTOR, PUBLIC DEFENDER SERVICE FOR THE DISTRICT OF 
    COLUMBIA

                       INTRODUCTION OF WITNESSES

    Mr. Istook. The Committee will come to order. I apologize 
for causing us to be starting late. It is my fault, nobody 
else's.
    We are meeting this afternoon to receive testimony from the 
Corrections Trustee, the Trustee for Court Services and 
Offender Supervision, and the Public Defender Service which are 
Federal responsibilities within the District of Columbia. The 
three principal witnesses are John Clark as District of 
Columbia Corrections Trustee; John Carver, Trustee for Court 
Services and Offender Supervision; and Cynthia Jones, Director, 
Public Defender Service.
    I am not going to make any opening remarks myself, but I 
don't want to curtail anyone else. Mr. Mollohan, I understand 
you are here in Mr. Moran's stead. Do you have any opening 
remarks?
    Mr. Mollohan. Thank you, Mr. Chairman. I have no opening 
statement, and I look forward to hearing from the witnesses.
    Mr. Istook. Mr. Cunningham.
    Mr. Cunningham. No. I also look forward to hearing from the 
witnesses.

                            WITNESSES SWORN

    Mr. Istook. The normal practice is to administer the oath 
to the witnesses so if each of you would stand and raise your 
right hand.
    [Witnesses sworn.]
    Mr. Istook. Mr. Clark, we are happy to hear from you first.

        OPENING STATEMENT OF JOHN L. CLARK, CORRECTIONS TRUSTEE

    Mr. Clark. It is a privilege to be here today and to 
discuss the fiscal year 2001 budget for the Office of the 
Corrections Trustee and also to report on what I think is 
excellent progress that has occurred in carrying out the 
correctional portions of the mandates of the 1997 
Revitalization Act. Since I appeared before you last year, 
significant changes have transpired and I will just try to 
highlight a few of them, in more detail in my testimony which 
has been submitted for the record.

                     THREE LORTON FACILITIES CLOSED

    Principally I am most happy to report that over the course 
of the last year we have closed three facilities at the Lorton 
complex. The Occoquan Facility was closed in early May, pretty 
much right on schedule. The Minimum Security Facility closed in 
July of 1999, two months ahead of schedule, and the Youth 
Facility closed at the end of January, just a few weeks ago, 
again about two months ahead of schedule. With the closure of 
those three facilities there are only two facilities of the 
original seven that are left in operation at Lorton.
    We have been able to accomplish this closure due partly to 
the transfer during the year of about 1,500 inmates into the 
Federal Bureau of Prisons and partly by the movement of large 
numbers of prisoners into private contracts and principally 
into a large contract at two facilities operated by the 
Virginia Department of Corrections.

                   TWO LORTON FACILITIES REMAIN OPEN

    The two facilities that remain open are the Central 
Facility, with about 2,000 prisoners, and the Maximum, with 
about 600 prisoners. Keeping in mind that compares with almost 
7,000 prisoners, that 2,600 is down from almost 7,000 prior to 
the passage of the Revitalization Act.
    I might say also that not only are the numbers down but the 
operations at Lorton have been running relatively smoothly 
during this period, and that is due to not only the excellent 
efforts of the staff at Lorton but also frankly to the fact 
that we were able to move out most of the higher security 
prisoners into the Federal Bureau of Prisons, who have taken a 
few, but primarily into this contract with the Virginia 
Department of Corrections.

          LORTON ON SCHEDULE FOR CLOSURE BY DECEMBER 31, 2001

    The only other thing I will say about the closure and the 
transition is that, the bottom line, we have every reason to 
believe and anticipate that the final closure of the Lorton 
complex will be accomplished in a timely fashion by December 31 
of 2001.

                      STAFFING REDUCTION AT LORTON

    Along with the movement of inmates and the closure of the 
institutions in the past year, there have been two RIFs, or 
reductions in force, which eliminated about 670 positions in 
the Department of Corrections, so that the total number of 
employees is down from well over 3,000 to almost 2,000 
employees at this point.
    The staffing issue, which I have testified about in the 
past, is one of the more difficult issues on a human level 
here. It has been facilitated by a committee that I have 
mentioned that we have put together, a priority consideration 
committee which is composed of representatives from several 
agencies, both the Department of Corrections and the Federal 
Bureau of Prisons, the D.C. Offices of Employment Services and 
Office of Personnel as well as the U.S. Office of Personnel 
Management, and they are doing a lot to not only facilitate the 
movement of some of these staff into Federal jobs but also into 
District jobs. Also there is a great deal of counseling that is 
going on, helping people develop new skills, some training but 
a lot of it also is just counseling and helping people to take 
control of their own lives and finding a new job. We can't find 
individual jobs for individual employees, but we have done a 
lot to help them develop personal capacity to help themselves 
in this process.
    Part of the difficulty with the transition is that the 
staff can see the handwriting on the walls and many are not 
waiting around to be RIFed at the end of the process, and 
unfortunately we are losing 20 or more uniformed staff a month 
which we have been accommodating by the redeployment of staff 
and the closure of the other facilities. Unfortunately in this 
regard, there will not be another closure for about a year. So 
staffing could get tight with staff attrition before we close 
the maximum security facility, which is scheduled to close at 
the end of March 2001.

       TRUSTEE WORKING TO REBUILD D.C. DEPARTMENT OF CORRECTIONS

    Mr. Chairman, to move on to just a couple of other points. 
One of the principal roles our office plays is working with 
Director Washington and the D.C. Department of Corrections in 
trying to reform and rebuild itself and work in a collaborative 
fashion to provide them with some training and expertise. One 
example that I would give is that we have put a lot of effort 
and resources into developing a system of internal audits and 
internal controls, so that the Department can identify its own 
weaknesses and remedy its own weaknesses.
    There is of course a long history of the courts and other 
experts coming in to help the Department run their system. We 
are trying to help them be able to identify their own 
weaknesses, identify a plan to remedy the weaknesses and move 
forward with that plan. So we have actually worked with them to 
develop audit standards in 12 different operational areas of 
prison management. We have trained over 150 Department of 
Corrections staff. We have used what is really the nationally 
recognized Government Auditing Institute, which is part of the 
Department of Agriculture, and then after they have been 
through all of these training processes, we are sending them 
out to the Federal Bureau of Prisons facilities with prison 
audit teams to participate in a correctional audit. I only want 
to go into a little detail on this, Mr. Chairman, to help the 
Committee understand the role that we play in trying to help 
rebuild the Department as well as the financial aspects and 
oversight aspects that we play.

                      STUDY OF SENTENCING PROBLEMS

    One other area that I would mention, and I have informed 
the Committee during the course of the year, is that the 
Trustee's Office responded to a request from the Deputy 
Attorney General late last summer and prepared a 280-page 
report on a review of inmates who were sentenced under both 
local and Federal statutes in the District and a number of 
areas that were problematic in the interagency and 
interjurisdictional issues that are unique to the District. 
This was in the wake of the well-publicized Elian Gonzalez 
Wright case in the District when the Federal judge in that case 
went to the Justice Department, who turned to our office to 
prepare this report. We delivered the report to the Attorney 
General in October, and included 24 major recommendations in 
that report.
    Again, this was not related solely or primarily to the 
Department of Corrections but rather to these 
interjurisdictional issues. As a result of that report the 
Deputy Attorney General requested our office to be heavily 
involved in the implementation of the 24 recommendations and 
requested us to form an interagency detention work group in the 
District. This group has been meeting for the last 3 months and 
has four subcommittees working on major areas. There are about 
15 different agencies, including both of the courts, Federal 
and D.C. Superior Court. In fact, we had a meeting yesterday 
and Chief Judge Norma Holloway Johnson has assigned three 
Federal judges to be on our committee.
    I only want to bring this example forward to highlight the 
kind of unique role our office is able to play in facilitating 
building bridges and fixing some of these interagency problems 
and intergovernmental problems between the Federal and local 
agencies and the District.

                     BUDGET FOR CORRECTIONS TRUSTEE

    So that brings me finally to a few comments on funding 
issues. In fiscal year 2001 the $134.2 million to meet the 
challenges that face our office and the Department of 
Corrections. Of this amount, approximately $60 million is 
requested to fund contract beds. I mentioned that we have moved 
out several thousand inmates out of the District on contract to 
both private and Virginia facilities. And $70 million is 
included for expenses of the Department of Corrections, 
including the operations of the two remaining facilities at 
Lorton. And finally there is about $2.3 million requested for 
the administrative expenses of our office.
    Mr. Chairman, this concludes my oral statement. I will be 
happy to take questions.

        PREPARED STATEMENT OF JOHN L. CLARK, CORRECTIONS TRUSTEE

    [The prepared statement of Mr. Clark follows:]
             [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Mr. Istook. Thank you, Mr. Clark. We are going to receive 
testimony from all three witnesses before we get into 
inquiries. I also had not mentioned before we are very pleased 
Eleanor Holmes Norton, the delegate from the District of 
Columbia, is here. We are always glad she is here for these 
meetings.
    Mr. Carver.

      OPENING STATEMENT OF JOHN A. CARVER, COURT SERVICES TRUSTEE

    Mr. Carver. Thank you, Mr. Chairman and members of the 
Committee. I am pleased to appear before the committee to 
present the fiscal year 2001 budget, and I ask that my written 
statement be submitted for the record. In the interest of time 
I would like to spend a few minutes highlighting the approach 
that we are taking as we build a performance based agency that 
cuts crime.
    I would also like to share a little bit of our progress to 
date as we have implemented some of the reforms that we will be 
talking about. As you know, the mission of CSOSA is a public 
safety mission, and we have a major role to play as a court 
services agency in supporting the fair administration of 
justice.

                        STRATEGIC PLAN DEVELOPED

    Over the course of the last year we have engaged in a 
multiyear performance management initiative, and with this 
initiative we are trying to set the direction for the agency. 
We have developed a strategic plan. This strategic plan is 
going to be the blueprint or the anchor for our performance 
management system that we are putting into place.

           BUDGET FOR COURT SERVICES AND OFFENDER SUPERVISION

    I would like to spend a few minutes talking about that, but 
first our overall budget request is in the amount of $103 
million for Court Services and Offender Supervision Agency, 
which includes the budget of $18.4 million for the Public 
Defender Service which Ms. Jones will discuss; $23.4 million 
for Pretrial services; and $61.5 million for the Community 
Supervision Program, the post conviction, community supervision 
component of the agency. There is also a $17 million request 
through an earmark in the Community Oriented Policing Services, 
or the COPS grant program, which we can discuss.

                      AGENCY MISSION, GOALS, ETC.

    There is a chart in the back of my statement in the beige 
folder and I would direct your attention to the chart (see page 
261 for chart). One of the things that I like about it is that 
it captures on one page our mission, anticipated outcomes in 
cutting crime and, more importantly, the specific strategies or 
critical success factors we are employing to accomplish what 
are admittedly ambitious goals.
    You see on the far right-hand part of the chart our 5-year 
anticipated outcome, which is a 50 percent reduction over 5 
years in recidivism for violent and drug related crimes among 
offenders under supervision.
    At the left-hand part of the chart you see the goals that 
we plan to use to accomplish these anticipated outcomes. The 
first goal of course is to establish a level of accountability 
in the supervision of offenders and defendants so that we can 
prevent the population that we supervise from engaging in 
criminal activity.
    The second major goal goes to enhancing the quality of 
justice. The notion here is that there are judicial and 
criminal justice decision makers across the spectrum of 
criminal justice that have to make decisions. To the extent 
that we can inform those decisions with good solid information, 
classifications, recommendations and background information, 
those decisions will better serve the interest of justice.

                 STRATEGIES TO REDUCE CRIME 50 PERCENT

    The center of the chart describes our strategies. At this 
point I am going to ask the assistance of my staff to help me 
with a series of displays. You see here in the center of this 
document chart 1 (see page 261) we have five strategies or five 
critical success factors. This represents a coherent set of 
inter-related steps or strategies that if implemented will 
result in the anticipated outcomes of a 50 percent reduction in 
crime.
    The other thing that we have tried to do, Mr. Chairman, is 
to align our resources with each of these critical success 
factors. This is something that in all my years in the District 
of Columbia as head of an agency we were never able to do, and 
I am very excited about this prospect. We are taking the budget 
process and making that our blueprint, our operating plan for 
how we are going to accomplish our goal to cut crime and to 
make this city a better city.
    When you walk through this chart, you will see our five 
critical success factors. The first deals with improved risks 
and needs assessment. That is factor number one. It takes up 
about 10 percent of the resources. What we are talking about 
here, Mr. Chairman and members of the Committee, is the process 
by which we will assess risks and needs and make 
recommendations to the appropriate decision maker at whatever 
level the offender happens to be. This is, for example, where 
we have allocated our drug testing funds, since so much of our 
strategy deals with drug control and the fact that drug testing 
as an assessment tool is a very useful piece of information to 
have in developing supervision strategies.
    That brings me to the second critical success factor or 
operational strategy, which is the supervision of individuals. 
Critical success factor number two takes up almost half of our 
resources. This includes the case management functions, the 
probation officers, the parole officers, and the sanction 
center, which is a very important element in our overall 
strategy.
    The third strategy is treatment. We have 28 percent of our 
budget allocated for treatment. With the support of Ms. Norton 
and of this committee we have made good progress toward 
building the kind of treatment infrastructure that we need if 
we are to be effective in getting a handle on drug use and 
cutting crime.
    Partnership is the very small sliver you see and represents 
our fourth critical success factor. We only have 2 percent of 
our budget allocated to partnerships. This in some ways is the 
most significant reform that we are engaged in. This is where 
we team up with other criminal justice agencies, specifically 
the Police Department as well as other governmental agencies, 
citizens, churches and community based organizations so that we 
can enhance our own effectiveness, put more eyes in the 
community, and exert greater impact on individuals under our 
supervision. In a minute we will run through the results of 
this partnership and team approach which links up our community 
supervision officers with community police officers.
    Finally, the fifth critical success factor goes to 
providing timely information, not only to our staff, but to all 
of the criminal justice decision makers across the spectrum, 
from judges to members of the U.S. parole commission.
    I would now like to turn to a quick overview of how we are 
putting our investment dollars to work and to share some of the 
outcomes to date.

            60 PERCENT OF OFFENDERS TEST POSITIVE FOR DRUGS

    You will recall last year when I testified before the 
Committee I stressed the need to build an infrastructure that 
will permit us to have the kind of impact that we want. A major 
piece of that infrastructure was drug testing. We all know that 
60 percent of offenders in the criminal justice supervision 
test positive when they come into the system or have a history 
of substance abuse, and we know that we did not have a very 
extensive capacity to deal with that. The first chart is the 
projected expansion in drug testing capability agencywide. This 
next chart, chart 2 (see page 263) includes pretrial services, 
which of course has had a fairly well developed capability for 
drug testing going back to 1984, but the fiscal year 2000 and 
the fiscal year 2001 projection indicates the overall expansion 
agencywide.

            POST CONVICTION PROBATION AND PAROLE SUPERVISION

    The next chart, chart 3 (see page 264) focuses precisely on 
that area of infrastructure building that needed the most work, 
and that is in the post conviction probation and parole 
supervision area. You may recall that when I testified before 
the committee last year, we talked about the need to triple the 
amount of drug testing being done in the city given the number 
of individuals under supervision and the extent of drug use. 
This chart shows that we are on track toward that projection as 
we described it last year. Over this 3-year period, you do see 
a four fold increase in the amount of post conviction testing 
that is now possible with the opening of the new lab which you 
helped us dedicate a couple of months ago, Mr. Chairman.

                    DRUG TREATMENT CAPACITY VS. NEED

    I would now like to turn to some of the progress that we 
have made, having discussed what our operational strategies 
are. This Committee was very supportive last year in providing 
funds to build a treatment capacity. As a report card back to 
the Committee, what chart 4 (see page 265) attempts to do is to 
show our baseline from fiscal year 1999 to show how this 
investment in our community is being applied, and to relate 
that to the need for various kinds of treatment services as are 
displayed on this chart.
    I should say that the annual projected need does 
underestimate the true need for treatment services because this 
is based on the number of cases for which either a judge or a 
member of the U.S. Parole Commission has ordered some form of 
treatment for a releasee. As you can see, we have made very 
significant strides toward building the kind of treatment 
capacity that is described in this coherent set of operational 
strategies, and we are on track for utilizing the funds that 
were appropriated to us for this year.

                         QUALITY CONTROL UNITS

    I should also say that we are doing much more than simply 
buying treatment slots. We have created a small quality control 
unit that specifically is tasked with visiting each of the 
vendors that we have under contract to ensure that the 
treatment services they are delivering are not only consistent 
with the contract, but consistent with the overall framework 
and philosophy of supervision within the agency.

           RECIDIVISM--D.C. PAROLEES PICKED UP ON NEW CHARGES

    We have talked about being a performance based agency. We 
have talked about our overall goal of cutting crime and 
recidivism. We know that there are techniques that work. Chart 
5 (see page 266) is one measure representing reductions in 
crime as measured by parolees under supervision picked up on 
new charges. There are many measures of crime and as we go 
along we will develop others and perfect those that we have. 
But this is really an extension of the chart I presented to the 
Committee last year.
    Last year I think there might have been 8 or 10 bars on the 
chart and I wanted to update the Committee on where we have 
been since then. We did two very important things that are 
leading to this very significant reduction in at least one 
measure of crime. One was to develop a community correction 
system which Mr. Clark and I and agency heads spent a lot of 
time hammering out, so that individuals coming out of 
institutions would not simply be dumped off into a community, 
but would have to transition through a community correction 
center where there are strict guidelines and support to ease 
the transition back into the community. Those new procedures 
were implemented in June of 1998.

        QUICKER RESPONSES WHEN PAROLEES PICKED UP ON NEW CHARGES

    The other thing we did, which predates this by about 6 
months, was to streamline procedures so there could be quicker 
responses when parolees were picked up on new charges. I think 
the combination of these two reforms are responsible for this 
very significant reduction. As we discussed last year, the 
other element of this strategy was to actually station parole 
officers in halfway houses to ensure that the case management 
and accountability is there.

                        GEOMAPPING--FIELD SITES

    We have used geomapping (see chart 6 on page 267) in 
planning our strategic direction for the agency. What this map 
represents is the residence of everyone that we have on post 
conviction supervision right now. As we have discussed before, 
part of our approach is to get our probation officers and our 
parole officers out of downtown offices, to get away from 
office supervision, and to actually engage the community where 
probationers and parolees live.
    In carrying out this changed philosophy, we have made an 
effort to first of all map where offenders are living and then 
locate staff in those particular areas. There are five stars on 
this map. Each star represents either an existing satellite 
facility or one where we have signed a lease. As you can see, 
these locations are right in areas of heaviest concentration of 
offenders. Again, I think this is important. A lot of what we 
have to do is to work with community members. It is important 
for people to understand that we are not importing criminals 
into the community, rather we are locating our officers and our 
services where offenders already live and work because it 
increases our effectiveness.

               PARTNERSHIPS WITH POLICE/WEED & SEED SITES

    We talked about partnerships and this represents linking up 
our community based efforts with similar efforts taking place 
within the Police Department and within the U.S. Attorney's 
Office.
    This chart, chart 7 (see page 268) illustrates the location 
of Weed & Seed sites, which is a program administered by the 
U.S. Attorney's Office and has been ongoing for 6 years. It 
also tracks the configuration of the police districts by PSA. 
It includes the Mayor's capital community designations, 
specific neighborhoods targeted for community revitalization, 
and the purple areas are the Police Service Areas, or PSAs, 
where we have teamed up our supervision officers with community 
police officers. You can see where we have made a real 
collaborative effort to get the most impact by concentrating 
resources in a strategic way.

                  CRIME REDUCED 36 PERCENT IN PSA 704

    We are now operating in tandem with the Police Department 
in 12 PSAs. The oldest is in PSA 704 in the 7th district.
    What I wanted to show with chart 8 (see page 269) is the 
impact of this kind of teamwork over time. The main chart you 
have describes our strategic plan. You will note that you have 
some comparisons by month, and in fact, the longer we go, the 
bigger impact we are having. This chart, when you compare 
October 1999 with October 1998, month to month, you see a 60 
percent reduction in Part I crimes in that particular PSA. What 
this chart does is take an entire year's worth of reported Part 
I crimes during the year in which we were operating as a team, 
and compare that to the prior year. And so you do see a 36 
percent reduction in this area where the team has been 
operating the longest. This is the kind of outcome that we 
think supports the general approach that we have described here 
and which the Committee has funded. As we gain experience, and 
as we expand this approach, neighborhood by neighborhood, to 
the rest of the city, we believe this is the kind of outcome 
that we are going to see, not just in PSA 704, but throughout 
the city.
    With that I will conclude my oral testimony and look 
forward to questions.

      PREPARED STATEMENT OF JOHN A. CARVER, COURT SERVICES TRUSTEE

    [Mr. Carver's prepared statement follows:]
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    Mr. Istook. Thank you, Mr. Carver. We are going to come 
back to questions. Ms. Jones.

         OPENING STATEMENT OF CYNTHIA E. JONES, PUBLIC DEFENDER

    Ms. Jones. Good afternoon, Congressman Istook, and members 
of the Committee. I would also ask that my written statement be 
submitted for the record.
    I am pleased to come before the Committee to discuss the 
fiscal year 2001 budget for the Public Defender Service for the 
District of Columbia. I have only been the Director for 1 
month, but already we have begun to implement many of the 
initiatives funded by this Committee in the fiscal year 2000 
budget.

            30TH ANNIVERSARY OF D.C. PUBLIC DEFENDER SERVICE

    Before I address our one initiative for fiscal year 2001, I 
would like to speak very briefly about the Public Defender 
Service. This year marks the 30th anniversary of the Public 
Defender Service. When our agency was created three decades 
ago, it was envisioned that the Public Defender Service would 
handle a portion of the cases involving indigent defendants in 
the criminal cases, the private court-appointed lawyers would 
handle another portion of the cases, and the Public Defender 
Service would serve as an anchor, providing technical 
assistance and training to the private bar.
    The Public Defender Service attorneys were supposed to be 
the criminal law experts handling the most complex felony cases 
involving the most serious offenses. We were supposed to do 
that in the most cost-efficient way, and this is exactly what 
has happened over the last 30 years. Our experienced group of 
attorneys are uniquely qualified to handle these very high-
profile, multi-count cases. We are able to do this with the 
level of efficiency and skill envisioned when our agency was 
created. We are able to do this without recreating the wheel 
and doing hours and hours of expensive research. We have the 
institutional knowledge that helps us negotiate our way through 
some of the most complex criminal issues in the country.

                      CATEGORIES OF CASES HANDLED

    The overwhelming majority of the cases we handle are 
criminal division cases in the D.C. Superior Court. However, a 
large portion of the cases we handle are also in other 
divisions. For example, we have an appellate division which has 
helped shape and define the law in the District of Columbia 
over the last 30 years. Our appellate division is often called 
upon by the D.C. Court of Appeals to address novel and unique 
legal issues when they arise.

        DIVISION CREATED TO REPRESENT SPECIAL EDUCATION STUDENTS

    We also represent children in the delinquency system, and 
we have just developed a division to handle the special 
educational needs of children with learning disabilities and 
special education needs. We also represent people suffering 
from mental illness who are institutionalized; we have an 
entire division responsible for making sure they receive the 
proper care and treatment during their period of 
institutionalization.
    In these areas the Public Defender Service has taken the 
lead in providing services to indigent criminal defendants. 
Thus, our representation has a significant impact on the 
overall improvement of the criminal justice system. It is the 
mission of the Public Defender Service to provide quality legal 
services to indigent people in order to prevent them from 
coming into the criminal justice system and to make sure that 
they are completely and permanently out of the criminal justice 
system if they have been arrested.

                               RECIDIVISM

    If we are successful, our clients will not become repeat 
customers. They may not require the new and impressive array of 
services offered by the CSOSA, and they will not become a drain 
on the budget of the Department of Corrections or the courts.
    Like the Court Services and Offender Supervision Agency, it 
is our goal to reduce the recidivism rate among the people that 
we serve in the criminal justice system. As public defenders we 
know that we are often the most influential people in the lives 
of our clients. We have a responsibility to encourage them to 
address the problems that prevent them from becoming productive 
members of the community. We have an obligation to inform them 
of their legal rights and their responsibilities and we embrace 
this challenge as part of the mission of the Public Defender 
Service.

             ONE INITIATIVE FOR FY 2001--PAROLE REVOCATIONS

    We have only one initiative for fiscal year 2001 and that 
is the Lorton Closure Act. Specifically we are requesting 
additional positions to provide representation to parolees who 
are facing revocation. The CSOSA has received funding to begin 
very aggressive efforts to provide optimal community 
supervision. This Committee has been very supportive in the 
past in recognizing that the criminal justice system cannot be 
truly reformed if funding is only provided for one agency; that 
no true reform will affect only one agency in the system, and 
that is exactly what our Lorton Closure Act initiative 
addresses.
    When the Court Services and Offender Supervision Agency 
began aggressively monitoring parolees in the community and 
providing strict accountability, as illustrated by Mr. Carver's 
charts, many people began facing parole revocation hearings. 
And of the 3,000 people under parole supervision, approximately 
half of those individuals will be subject to parole revocation 
hearings in the next year. Currently there are only two 
attorneys in the PDS who, on a full-time basis, handle parole 
revocation hearings. In 1998, we received over 232 requests for 
representation, and we could not handle even half of that 
population of people.
    Michael Gaines, who is the chairman of the U.S. Parole 
Commission, has written a letter in support of our request for 
the additional positions, and that letter is attached to my 
written statement. Mr. Gaines notes that the additional funding 
requested by the Public Defender Service would allow us to 
handle the additional parolees facing revocation in the most 
cost-efficient manner. He also notes that under Federal law, 
parolees facing revocation are entitled to representation of 
counsel. This is consistent with the goal of the Revitalization 
Act, bringing the District of Columbia up to Federal standards.
    Mr. Carver has also written a letter in support of our 
initiative. Mr. Carver notes that the Public Defender Service 
initiative to provide representation at parole revocation 
hearings is cost efficient, consistent with the goals of the 
Revitalization Act, and will help the Court Services and 
Offender Supervision Agency fully implement its own 
initiatives. As public defenders, we are not always aligned 
with the U.S. Parole Commission and the CSOSA, but this is one 
of those unique occasions.
    For these reasons, as well as those in my written 
statement, I would request that our single fiscal year 2001 
initiative, which is $545,000, be granted. This concludes my 
prepared statement. I would like to thank the Committee and I 
will entertain any questions you might have.

        PREPARED STATEMENT OF CYNTHIA E. JONES, PUBLIC DEFENDER

    [Ms. Jones prepared statement follows:]
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             ADEQUATE RESOURCES FOR PUBLIC DEFENDER SERVICE

    Mr. Istook. Thank you, Ms. Jones. Let me address what you 
were talking about. As this process continues to move forward 
with more extensive monitoring and drug testing, we discussed 
last year the additional demand that is placed upon 
incarceration because of parole revocation and we tried to 
account for the increased demand for services.
    You make an excellent point, Ms. Jones. I think your 
request, the nature of it is very well taken. We realize--and 
this is not a question--I know that it gets controversial 
sometimes with the Public Defender Service, but to enable this 
whole process to go forward to make sure that the people on the 
streets are behaving in a way where they should remain on the 
streets and removing that need to be removed, we do need to 
make sure that your office has the necessary resources for the 
role that you have. I can assure you that we are going to look 
at that and work with you and make sure that you do have those 
resources.
    Ms. Jones. Thank you, Mr. Chairman.
    Mr. Istook. I have to say that compared to some of the 
things we have to deal with, your request is pretty simple and 
straightforward and a no-brainer. Your should not have to--we 
don't want you to end up filing motions saying they are 
undercutting you by not letting you do the job that you are 
required to do.

             PUBLIC DEFENDER AND COURT-APPOINTED ATTORNEYS

    I want to ask, considering the mix of cases that are 
handled by your staff and those handled by private attorneys 
that are court appointed, is there any reason to anticipate any 
funding beyond the $545,000 request? Is there anything beyond 
that request?
    Ms. Jones. The funding for the court-appointed attorneys is 
not handled through our office. We help administer the program 
in terms of going through the actual process of assigning 
attorneys but we don't do the funding.
    Mr. Istook. I was generally aware of that. I would 
appreciate your assistance in helping us get a handle on that 
program. I forget what the mix is between those cases handled 
by your office and those cases handled by the court-appointed 
attorneys, but it is something that we have to look at. I 
appreciate that.

              REDUCTION IN NUMBER OF CORRECTIONS EMPLOYEES

    Let me ask you, Mr. Clark, it is always fascinating to 
visit with someone whose big part of their job is doing away 
with their job. I know some people run for public office and if 
you vote for me I will abolish this office for which I am 
running, and they attract a lot of votes. You mentioned the 
personnel impact, which is very real, and we want to work with 
you on that displacement.

              CORRECTIONS--VIEW OF SITUATION YEAR FROM NOW

    I also wanted to ask, as the population for which you have 
charge declines, can you give us some kind of preview a year 
from now when you are looking to close that Lorton facility by 
the end of December next year, what might we be looking at in 
the budget request that we receive a year from now? Can you 
give me a little bit of preview so I can understand the 
implications? I don't mean dollars.
    Mr. Clark. Our request this year is $40 million less than 
last year to reflect the number of prisoners who have moved 
into the Bureau of Prisons. Depending on whether things stay on 
track with the Bureau of Prisons, next year we are looking at 
funding operations of the department for a 3-month period, for 
the first quarter of the year. During that quarter there would 
be a rapid depopulation. Beyond that there will be some 
responsibilities in the closing down of the facilities and some 
environmental issues and that kind of thing after the actual 
closure date.
    I think at the end of the fiscal year, if things stay on 
track, there will be a little over 2,000 prisoners still in the 
Department of Corrections under direct control or in some 
contracts. If that addresses your question--I haven't really 
looked at what the dollar amount would be.
    Mr. Istook. I am not asking you to look at the dollar 
amount. I realize that you don't have a handle on that. I am 
trying to understand the form because I realize that some of 
your costs are pretty much related to per capita costs 
according to the number of inmates. Other things are fixed 
costs, and some of those fixed costs have certain flexibility 
that respond to a level of the inmate population and some 
don't.
    It is that kind of mix. If you might be able to get some 
form of analysis to us that tries to distinguish the fixed 
costs that do not have much flexibility, the fixed costs that 
do have flexibility and then those costs which basically are a 
per capita cost according to the number of inmates that you 
have. I haven't looked at it. If you would get to us what has 
been the change in per capita costs and looking at two 
different ways for last fiscal year, the current fiscal year, 
and any projection. The reason I say two different ways, 
because I know if you just take your overall costs, everything, 
and spread it out per capita, that is one mechanism of 
calculating per capita costs. The other mechanism would be 
calculating per capita costs without looking at the fixed cost 
because that enables us to see the change in the cost of 
feeding people, for example. So that is why I asked for that 
per capita in two different forms.
    Mr. Clark. We can break that down fairly quickly in some 
detail. It is very clear what the per capita cost is on the 
contracts. We are paying so many dollars per day. There is some 
overhead and we can do it fairly quickly.

              3-YEAR COMPARISON OF PER CAPITA INMATE COSTS

    Mr. Istook. That would be useful.
    [The information follows:]
           [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


  CORRECTIONS--COURT ORDERS INCREASE COSTS OF DISTRICT-RUN FACILITIES

    Mr. Clark. Again, it is skewed in the District-run 
facilities because of court orders that frankly order a 
relatively high degree of staffing and spending. As we get out 
from under these court orders, that will ameliorate itself to 
some extent.

             CORRECTIONS--ONE-TIME EMPLOYEE SEVERANCE COST

    One of the things that will be a significant one-time cost 
in that last quarter will be the cost of severance for the 
employees who hang on to practically the end and then----
    Mr. Istook. Have you established a formula for that?
    Mr. Clark. Yes, it is established in the District code.
    Mr. Istook. Basically what is that? 3 months, 6 months, 1 
year?
    Mr. Clark. It depends on the length of time that the 
employees have with the District of Columbia government, so 
many weeks severance per year of employment and then there is 
an enhancement for a period of military service and some other 
factors like that.
    Mr. Istook. Very good. I have some other questions but let 
me wait and let Mr. Mollohan have an opportunity to ask 
questions.
    Mr. Mollohan. Thank you, Mr. Chairman.

                CORRECTIONS--INADEQUACY OF LOCAL FUNDING

    Mr. Clark, I know that we are pleased with the closing of 
several facilities at Lorton. I am concerned about the issues 
you have raised in your prepared remarks regarding expected 
funding shortfalls due to the inadequacy of local funding. 
Could you please outline the trends that you are witnessing 
with regard to local funding and what you expect in the future?
    Mr. Clark. I didn't address this issue in my oral 
statement, but it is a concern of mine in that again the 
Department of Corrections budget in the District of Columbia is 
funded by two revenue streams. One is the Federal budget or 
appropriation that we are talking about here which again is to 
fund the normal state-type operations for the convicted felons. 
In my estimation, that funding level has been adequate over the 
last 2 years and I assume will be with the request that we have 
made.
    On the other side, the proportion of the budget of the 
District of Columbia Department of Corrections that is paid for 
by the local funds is essentially to pay for the cost of the 
pretrial prisoners and the misdemeanor cases, those in a 
typical municipal system.
    There has been some--I am not sure exactly how to 
characterize it--but some uncertainty in the District I think 
as to what their level of responsibility should be, and the way 
that we have tried to analyze this is to look at the extent of 
the operations that will be there after the Federal Bureau of 
Prisons takes all of the felons and what is left, which is the 
jail and the treatment facility that stands next to the jail 
and some community corrections operations to house pretrial 
prisoners.
    In our estimation the current costs of running the jail, 
the correctional treatment facility, the community programs and 
some associated overhead is between $85 million and $90 
million.
    Mr. Mollohan. That is, after the closure of Lorton you are 
projecting real shortfalls if the District of Columbia does not 
come up with more of its share?
    Mr. Clark. Exactly.
    Mr. Mollohan. How much of a shortfall are you projecting?
    Mr. Clark. Based on the current funding level, a difference 
of about $70 million and $85 million to $88 million. So a $15 
million to $18 million range. In fact, the budget transmitted 
by the Mayor recently actually cut the level from $70 million 
to $67 million.
    Mr. Mollohan. Is this a fiscal year 2001 problem?
    Mr. Clark. That is correct. I don't see how they are going 
to be able to run their system at that level. I know that 
everyone would like to have a relatively inexpensive local 
corrections system, but that is not the reality, especially in 
view of the court orders for the staffing levels.
    Mr. Mollohan. Have you discussed this matter with the city?
    Mr. Clark. Yes.
    Mr. Mollohan. With whom?
    Mr. Clark. Primarily with the CFO's office and the 
Department of Corrections and one conversation recently with 
the Mayor's office.
    Mr. Mollohan. You have expressed this concern to all three?
    Mr. Clark. Yes, I have. And I might also say to the City 
Council, to Mr. Brazil, the chairman of the Council's Judiciary 
Committee, who will be holding a hearing on these issues in 
about 2 weeks.
    Mr. Mollohan. What was their response?
    Mr. Clark. They are listening. They would like to run a 
relatively----
    Mr. Mollohan. I am trying to identify where the money is 
going to come from. Are they responsive to your concern?
    Mr. Clark. I think we have had some good conversations in 
the last few weeks. I think some of our analysis maybe is new 
to them.
    Mr. Mollohan. Are they giving you any information about 
what their future plans are to address this problem?
    Mr. Clark. No. We haven't gone that far. The request of the 
Department was in the range of about $85 million, which I think 
was actually looked on sympathetically by the CFO's office; but 
in the larger budget of the administration it was cut by the 
Mayor's office.

               CORRECTIONS--PROBLEMS RETAINING EMPLOYEES

    Mr. Mollohan. As you move toward the complete closure of 
the Lorton complex, are Corrections personnel leaving? 
Nonetheless there still remains a population at Lorton. What is 
the current status and are you having retention problems in 
light of the upcoming closure?
    Mr. Clark. The current status is that we have the two 
facilities, Central with about 2,000 and Maximum with about 600 
prisoners.

         HIGHER SECURITY PRISONERS MOVED TO VIRGINIA FACILITIES

    I might also point out one refinement in terms of more 
difficult prisoners. We have been able to move most of the 
higher security and so-called maximum security prisoners to the 
State of Virginia so that the central facility is essentially 
operating with lower and medium security prisoners.
    Mr. Mollohan. When you say move them to the State of 
Virginia, is the Federal Bureau of Prisons taking them?
    Mr. Clark. They have not been able to take the more 
difficult cases except in small numbers. We have a contract for 
1,350 cases with the State of Virginia Department of 
Corrections at their Sussex facility south of Richmond and 
their Red Onion facility in southwestern Virginia. So they have 
taken most of the more difficult cases.
    There are about 600 at the Lorton maximum security facility 
who are still here. Many of them are difficult cases. Many 
others are there for reasons of protective custody or 
separation. The staffing issue that you asked about, as I 
testified, is a difficult issue because on the one hand in the 
long run we want people to get on with their lives and to find 
employment elsewhere in the District of Columbia government and 
people are doing that. We have been able to fill the holes up 
to this point as we periodically close institutions and 
redeploy the staff that are left.

              CORRECTIONS--OPTIONS TO RETAIN/REHIRE STAFF

    So right now having just closed a facility a few weeks ago, 
we are in pretty good shape but we have to get through another 
year looking at an attrition rate of about 20 a month and this 
is going to be one of the most difficult challenges we face. So 
we have talked to the Federal Bureau of Prisons about possibly 
detailing some staff. We are still working on that with them. 
We are looking at solutions like authority from the City 
Council to rehire retired staff temporarily, some other 
incentives to keep people on longer. There are five or six 
options that we are looking at to try to retain staff during 
the course of the year.
    Again, come next March we are going to close the maximum 
facility with 250 staff or whatever.

                 CORRECTIONS--YOUNGSTOWN, OHIO FACILITY

    Mr. Mollohan. What is the status of your contract with the 
Youngstown, Ohio facility?
    Mr. Clark. Things have stabilized there. You had a great 
interest in this last year when I testified. We removed all of 
the more difficult inmates so that the population has been 
watered down, so to speak, in terms of the unmanageable cases. 
We have cut the count. Again when the difficulties arose in 
1998, there were about 1,700 inmates; now we are running it 
with 1,200.
    Mr. Mollohan. Have they recategorized the security levels 
of inmates they have admitted?
    Mr. Clark. Actually by state law now in Ohio and by our 
appropriation language we cannot put anyone higher than medium 
security.
    Mr. Mollohan. Is that the Federal scale?
    Mr. Clark. The Department of Corrections, we have worked 
with them and they have adopted the Federal classification.
    Mr. Mollohan. What classifications do you have at 
Youngstown?
    Mr. Clark. On the four-part Bureau of Prisons custody 
scale, which is minimum, low, medium and high, they are all 
either low or medium. There are no highs and no minimum.
    Mr. Mollohan. Is that in accordance with BOP's policies and 
practices?
    Mr. Clark. It is. Their policy would generally not even go 
as far as putting medium security prisoners in these 
facilities, but we have no option. We have to put these folks 
somewhere. Things have calmed down. Even with the medium 
security prisoners if they tend to show any signs of disruption 
or lack of adjustment, we remove them back and either bring 
them back to the maximum facility here or put them in the 
Virginia contract.
    Mr. Mollohan. Are you currently having any problems with 
that population?
    Mr. Clark. Not at Youngstown. If we have problems, we just 
take the prisoners out of there.

              COURT SERVICES BUDGET AND COPS GRANT EARMARK

    Mr. Mollohan. Mr. Carver, you are requesting or have set 
forth in your Court Services budget $103 million, correct?
    Mr. Carver. Yes. That includes the request for Court 
Services and Offender Supervision Agency but excludes $17 
million in the COPS earmark.
    Mr. Mollohan. Oh, it does exclude the COPS earmark. Under 
the drug testing and treatment category, you are asking for 
$6.3 million for sanctions, and as I have the breakout here, 
you are suggesting that you are relying on $5 million from the 
COPS grant program?
    Mr. Carver. Right.
    Mr. Mollohan. And then in the treatment $13 million, and 
you are looking for $12 million in the COPS grant program?
    Mr. Carver. That's correct.
    Mr. Mollohan. How do you mean it is not included?
    Mr. Carver. It is not included in the $103 million direct 
appropriation request.
    Mr. Mollohan. Out of the $103 million request for fiscal 
year 2001, you are only asking for $1.3 million for sanctions 
and $1 million for treatment?
    Mr. Carver. It is $1 million for treatment from 
appropriated funds and the remainder to be funded by the 
earmark from the COPS Program.
    Mr. Mollohan. I just want to see you get your money and I 
want to understand how secure you are in your reliance upon the 
COPS grant program. Are you asking the CJS subcommittee to 
earmark it or are you relying on a grant application?
    Mr. Carver. The Administration request includes an earmark.
    Mr. Mollohan. Did you get the earmark request last year?
    Mr. Carver. No, we didn't.
    Mr. Mollohan. How are we going to get you that money? That 
is my question. Because that is a huge part of your sanctions 
and treatment budget.
    Mr. Carver. Yes, it is. It would cripple what we have 
already started building if we do not receive continued 
funding.
    Mr. Mollohan. What are we going to do about that? I want to 
help you. Maybe we will get the chairman of this subcommittee 
to talk with the chairman of the CJS subcommittee.

    PRESIDENT REQUESTED COPS GRANT RATHER THAN DIRECT APPROPRIATION

    Mr. Istook. If the gentleman would yield, how did it come 
to be that the official request from the administration is for 
funds from a different subcommittee rather than saying we want 
this amount for your program from direct appropriations? They 
are saying, well, we want this amount but $17 million comes out 
of this fund which is under another subcommittee's 
jurisdiction. Why do it in that convoluted way?
    Mr. Carver. Mr. Chairman, I will tell you the same question 
came to me and I argued as forcefully as I could during the 
appeal process that having been established in our base or as a 
direct appropriation, this was a very risky proposition to then 
shift it out of the direct authority column with the hopes that 
another subcommittee, which I am sure has its own priorities, 
would enact the President's request for earmarked funding.
    Mr. Mollohan. That is an expression of their confidence in 
your ingenuity.
    Mr. Istook. Who desired it to be this way and what is their 
expressed reason?
    Mr. Mollohan. We want to work together, Mr. Chairman. Thank 
you, Mr. Chairman.
    Mr. Istook. This idea doesn't come out of nowhere. Someone 
wants it this way and they have a reason or a justification for 
it. Who is it and what is the justification?
    Mr. Carver. In our original request, we made a very 
persuasive case that we needed to continue the work that this 
subcommittee jump-started last year by finding funds to build 
our treatment capacity. Initially, there was an even larger 
portion of funding that was proposed as part of the COPS 
earmark. In all honesty, I have not had good experience in 
funding agency operations through earmarks and, for that 
matter, I think it creates a real problem when you are trying 
to build something and have to rely on year-by-year grant 
funding. So I made that case initially and I made it as 
persuasively as I could in the appeal.
    Mr. Istook. Who wants it done that way and why?
    Mr. Carver. The President, and I understand that the 
President has many conflicting priorities to balance. I am here 
to present the President's budget and I am an agency director. 
I feel very strongly as a local agency director that this is 
essential to what we are trying to do, but also I understand 
that there are other national priorities and that tough 
decisions have to be made. I do appreciate the fact that, at 
least on paper, the Administration is supportive.
    Mr. Istook. The cost to the taxpayers would be the same 
either way. If you or I, Mr. Mollohan, were going to go out to 
California to Los Angeles, usually we would go to Los Angeles. 
We would not take a detour through Mexico City or some other 
city. Here if the funding is going to end up in the same place 
why it should take a detour through some other grant program is 
frankly beyond me.
    Mr. Mollohan. Mr. Chairman, serving on that subcommittee, 
we are going to have to look for ways to help. I have a lot of 
questions about these programs but my time is up.
    Mr. Istook. Mr. Aderholt has come in. Do you have any 
questions?
    Mr. Aderholt. Not at this time, Mr. Chairman. I may submit 
my questions later in writing.

   COURT SERVICES--GOAL OF 50 PERCENT REDUCTION IN CRIME OVER 5 YEARS

    Mr. Istook. Mr. Carver, you had your flowchart with a very 
laudable goal, 50 percent reduction in the recidivism rate for 
violent and drug-related crime. An excellent goal. One thing 
that I don't see on this particular chart is a date, 50 percent 
by when? What is the starting date and what is the end date for 
that 50 percent goal?
    Mr. Carver. That is 50 percent over 5 years. In our 
narrative, we talked about 10 percent reduction per year, 
starting this current fiscal year.
    Mr. Istook. As of October 1, 1999?
    Mr. Carver. That is correct.
    Mr. Istook. In doing so I think one thing that is 
important, and let me say how pleased I am to have a measurable 
goal expressed. I think that is very good. I know that it is a 
challenge in many parts of public service but it is nice to 
have one that is clearly stated like this. I want to make sure 
that we have it well measured where the definitions are clear 
and well articulated, and to hold people accountable we want to 
make sure that not only you are satisfied that you reached the 
goal but others are, too.
    Who really is going to define, to make sure that 
definitions are all clearly understood, who is going to define 
and measure this progress? I would not want a couple of years 
down the line for you and your agency to come in and say, 
``well, we have reduced the 20 percent so far'' and to see some 
other set of statistics--from the District of Columbia police 
or the FBI or the Department of Justice, or somebody else, 
whoever it might be--that has a different assessment, maybe 
because they are using different criteria or for whatever 
reason. Who should define and measure this progress? I think it 
is proper that it should be someone in addition to your own 
agency?
    Mr. Carver. That is an excellent question and I should 
explain in that this is a very summary-level chart. There are 
supporting details that really get into it more in detail. We 
originally set the goal as an agency with all the senior 
managers and supervisors. We spent a long time, not only 
figuring out that goal, but also trying to figure out each one 
of those operational strategies. We are now developing 
performance standards for the staff that will carry out the 
larger strategies.
    Very quickly, to answer your question, up until now, we 
have and we will continue to rely on data supplied by the 
Metropolitan Police Department. We have specifically defined it 
in this measure as drug-related and violent crime. We have 
tried to narrow down as carefully as we can a good, solid 
definition of what we are trying to reduce. We have also talked 
about crime reduction among the individuals that we supervise. 
That is our measure and that is the measure that we will be 
reporting on to Congress over the next 5 years.

   50 PERCENT CRIME REDUCTION--NEED TO COORDINATE WITH JUSTICE SYSTEM

    I think what is very helpful to me is that we spend a lot 
of time figuring out what the coherent set of strategies needs 
to be to get to that anticipated outcome. When you go down one 
level in the process, we are now spending a lot of time 
figuring out what is within our control and what is outside of 
our control.
    Just to give you an example, it is going to be very 
important--and this is a point you raised, Mr. Chairman, when 
you opened this hearing--it is going to be very important that 
we work in a coordinated fashion with the rest of the criminal 
justice system. For example, the court is going to be called 
upon to handle many of the violations which our increased 
monitoring will detect. If the court is not in a position to 
handle their increased workload as we begin to report 
violations, that will be a factor which prevents us from 
achieving what we think we can achieve with that support.

    50 PERCENT CRIME REDUCTION--PERFORMANCE STANDARDS AND TIME LINES

    Now, timing is also very important. When you get down one 
level below those operational strategies, what we are trying to 
do is to develop very specific performance standards for staff 
that are time bound. For example, we talked about the critical 
success factor or strategy of doing risk assessments. The whole 
idea of doing risk assessments and assessing needs is that over 
time, with interventions, the risks go down. Well, for the 
risks to go down, and for us to know that what we are doing is 
working, we are going to have to do reassessments at 6-month 
intervals so we can know if this strategy is working.
    We developed a performance standard for teams of community 
supervision officers, and this is just an example, whereby 
every person on a supervision caseload has to be reassessed 
within the previous 6 months. We will set as a performance 
standard, say 85 percent or 90 percent of the caseload. So this 
is at the staff level very specific, which will alert us 
immediately if elements of this strategy are not working.
    I would be pleased to sit down with staff and look at the 
kind of performance management steps that we are building right 
now to ensure that this is not just some paper exercise. For 
too long, our field has been a paper exercise where probation 
checks off forms if a guy comes in. What we are really trying 
to measure is not whether he makes his appointments, but 
whether the interventions have an impact. So we are going to be 
measuring impacts on many different result levels.

        50 PERCENT CRIME REDUCTION--NEED FOR ACCURATE ACCOUNTING

    Mr. Istook. I know that there is a synergy in what you are 
doing and what Ms. Jones is doing and what Mr. Clark is doing. 
I realize just in measuring the progress because it is 50 
percent, as you say, of those to whom you are providing those 
services and there is kind of the cumulative effect. The first 
year someone who was not in your program any more because he 
was back with Mr. Clark's corrections system, the first year he 
is a recidivist and the next year he is not in your program but 
he is in Mr. Clark's corrections program. So to some extent if 
we just look at the figure based upon who is in your program at 
the time, the people who have been filtered out already, they 
have been taken off the streets but their lives have not been 
turned around. That is a very different case from someone who 
doesn't show up as a recidivist because they were in your 
program and basically graduated from it. We want to make sure 
that we distinguish between those two as opposed to just based 
upon that original population.
    So these are just some of the things we need to pay 
attention to because we realize that you have a twofold 
process. You are filtering out the people that have not changed 
and society needs to be protected from, and you also have the 
active treatment program to provide the chance to change for 
people. Both of those are good, worthy and necessary goals.

 COURT SERVICES DRUG TREATMENT PROGRAM TO FREE UP OTHER DRUG TREATMENT 
                                 SLOTS

    I do want to ask, and we have discussed this before, about 
the drug treatment that you have coming on line. Can you give 
us any update and to what extent and when the expansion of the 
drug treatment that is available through your agency will free 
up some of the drug treatment programs that the District of 
Columbia has that could then be available to citizens who are 
not in the criminal justice system. These slots would be 
available for non-criminal justice individuals except that they 
are now being consumed by the people that are in the criminal 
justice system.
    Mr. Carver. Yes, sir. I can give you an update on our 
obligations and the number of people served to date. We got a 
late start with the continuing resolution, as you recall.
    Mr. Istook. Right. I am not sure that it has not fully 
kicked in.
    Mr. Carver. As of last week, we have obligated $3.3 million 
for treatment, and have placed 373 defendants and offenders in 
treatment programs funded through this initiative. We have a 
whole list of treatment providers which, as I indicated, we are 
also providing regular quality control visits.
    The other point is that every one of the individuals going 
into one of these publicly-funded treatment slots goes in with 
this sanctions-based contract. We have taken pains to ensure 
that the criminal justice pressure is there so we get the most 
effective utilization of these scarce treatment dollars.
    To the extent that we can provide immediate slots for 
individuals in need of treatment, that certainly frees up 373 
slots for the District of Columbia. That chart I showed you on 
the various treatment modalities had zero down for detox. In 
the area of detox services, this is a very important capacity 
building issue. We find this especially important in the 
management of individuals under sanctions from the drug court, 
for example. If there is a defendant who is relapsing and just 
can't control that drug use, there is a real immediate need to 
do something and to get that person into a detox program. Jail 
is always a sanction, but it quickly becomes apparent that you 
may need more.
    This actually gets to another example of the kind of 
performance that we are putting in place for staff. When 
someone gets out of a detox program, for example, it is 
important to have outpatient after-care. Therefore we set up a 
standard for staff whereby, and again this is just an example, 
85 percent of people coming out of detox will have been 
enrolled in an outpatient treatment program within 2 days of 
discharge. That is the kind of staff level, time-bound 
measurable performance standards that we are putting in place, 
and we are beginning to measure. We have a long way to go, Mr. 
Chairman, but this is the direction that we are taking.

   MEASURABLE STANDARDS NEED TO BE SOLID, REPORTABLE, AND SUSTAINABLE

    Mr. Istook. I appreciate that and again we want to work 
with you and make sure that they are solid, reportable, 
sustainable standards and that it is done in a way so that the 
other stakeholders, in particular the District of Columbia 
Police Department and perhaps others, are on board with the 
manner of identifying and measuring this progress so that we 
make sure that it is sustainable and has benefits.
    I have got to tell you, for you to say well, we are going 
to try to reduce our workload by 50 percent, that still pales 
next to the 100 percent that Mr. Clark and I were discussing. I 
am a little disappointed that you are not quite as aggressive 
as he is. That is a joke, of course.
    We have other things that we want to ask for the record.

           60 PERCENT OF CRIME COMMITTED BY REPEAT OFFENDERS

    Mr. Aderholt. On your attachment page you mention that 60 
percent of crime is committed by repeat offenders. How does 
that compare today--and you may not have these numbers--but 
going back 10 or 15 years ago? Is that in keeping with say 10 
or 15 years ago? Has that changed in the last few years?
    Mr. Carver. That particular statistic is a national 
statistic provided by the Department of Justice. Frankly, we 
don't have the capability of providing that level of analysis 
with District data, although we are building that capability.
    I am sure this is something we could look up, but my sense 
is that has been fairly constant at least over the last 10 or 
15 years. I am not aware of any significant changes. Prior 
criminal record has always been a strong predictor for future 
criminal behavior and I think that is a consistent finding 
among criminologists.
    Mr. Aderholt. But that 60 percent is a national statistic?
    Mr. Carver. Yes.
    Mr. Aderholt. Thank you, Mr. Chairman.
    Mr. Istook. Thank you, Mr. Aderholt. I don't have any other 
questions that I want to pose at the hearing. I have questions 
for the record, of course. All of you have been very good to 
work with in terms of getting us information.

           QUALITY OF CRIMINAL JUSTICE IMPROVING IN DISTRICT

    Mr. Clark. May I just make one comment, Mr. Chairman? 
Listening to Mr. Carver reminds me of an experience I have 
frequently in the District of Columbia, and that is that it is 
not appreciated but there is a lot of good going on in the 
rebuilding of the District of Columbia government. I am dealing 
mostly in circles where we are dealing with offenders and 
whether it is corrections, pretrial, U.S. Attorney's Office and 
so on, but there is an awful lot good going on and the money 
that is coming from the Congress I think is being very well 
spent.
    I have taken to using the phrase frequently that the 
District of Columbia in many of these activities is going from 
last place to pretty close to first place, at least up in the 
first division on a lot of these things. We have gotten into a 
lot of detail here, but I think it is good to look at the whole 
forest here. I think you can be confident that there is a lot 
of good going on.
    Mr. Istook. I appreciate that reminder. My perspective is 
similar to yours. We know there are plenty of problems that 
remain, but there has been a lot of progress as well. And I 
think the focus belongs on the progress which has been made to 
create the momentum because success in one area tends to give 
people the idea that they can have success in another area and 
to raise expectations, and by doing so raise the measurement 
standards and performance. I think emphasizing what is going 
right or well is very proper and very constructive and I 
appreciate your reminder.

                              ADJOURNMENT

    Thank you. We appreciate your time. This hearing is 
adjourned.

              COURT SERVICES--ANTI-DEFICIENCY ACT MATERIAL

    [CLERK'S NOTE.--The following material relates to a 
reportable Anti-Deficiency Act violation by the Court Services 
and Offender Supervision Agency for the District of Columbia:]

     
    
    [CLERK'S NOTE.--The following material relates to 
violations of the Anti-Deficiency Act by the District of 
Columbia Courts (for additional information, see part 1 of FY 
2000 DC Appropriations hearings, pages 415-715.]
               DC COURTS--ANTI-DEFICIENCY ACT VIOLATIONS

    [CLERK'S NOTE.--The following material relates to 
violations of the Anti-Deficiency Act by the District of 
Columbia Courts (for additional information, see part 1 of FY 
2000 DC Appropriations hearings, pages 415-715):]

        COMMITTEE'S CONTINUING CONCERNS WITH DC COURT VIOLATIONS

    [Except from page 32 of House Report 106-786 (July 25, 
2000) accompanying the FY 2001 DC Appropriations Bill (H.R. 
4942):]

                ANTI-DEFICIENCY ACT VIOLATIONS BY COURTS

    The Joint Committee on Judicial Administration in the 
District of Columbia by letter dated January 4, 2000, to the 
Speaker has responded to the General Accounting Office's 
conclusions set forth in its report, D.C. Courts Planning and 
Budgeting Difficulties During Fiscal Year 1998 (GAO/AIMD/OGC 
99-226 September 1999) that DC COURTS VIOLATED THE 
ANTIDEFICIENCY ACT in overobligating its fiscal year 1998 
appropriation and that DC Courts lacked the authority to retain 
and spend interest. The position of the Joint Committee is that 
they operated in conformity with the Antideficiency Act in 
overobligating their fiscal year 1998 appropriation and 
possessed the authority to retain and spend interest. Neither 
position is tenable.
    The DC Courts cites 31 U.S.C. Sec. 1515(b)(1) (A) and (B) 
as its authority to overobligate the 1998 appropriation. The 
reliance on such authority is misplaced. This same assertion by 
DC Courts was considered and rejected by the GAO in its report 
(GAO/AIMD/OGC 99-226, pp. 10-14, 20-24. The GAO report makes it 
clear that the overobligation was attributable to DC Courts 
failure to properly manage its discretionary spending during 
fiscal year 1998. For example, the DC Courts failed to 
immediately initiate steps to reduce spending levels to stay 
within the amounts appropriated and, instead, increased 
spending by granting a discretionary pay raise. The primary 
step DC Courts relied upon was obtaining additional funding. 
When the additional funding did not materialize DC Courts 
relied upon its failure to take steps to live within their 
appropriation early in the year to justify not taking more 
draconian measures later in the year on the grounds that the 
continuations of government services were essential for the 
safety to human life and property.
    Finally, the DC Courts lacked authority to retain and spend 
the interest earned on Federal funds appropriated and paid to 
DC Courts. DC Courts should have deposited the interest 
earnings into the U.S. Treasury. Section 450 of the District of 
Columbia Home Rule Act, D.C. Code Ann. Sec. 47-130 (1981, 1997 
Replacement Vol., 1999 Supp.). Further, even if it could have 
retained the interest, it could not spend it. The District of 
Columbia Appropriations Act for fiscal year 1998 appropriated 
$108 million, not $108 million plus interest. It is a 
fundamental principal of appropriations law, as Chief Justice 
Rehnquist of the Supreme Court has made clear, that the 
expenditure of public funds is proper only when authorized by 
Congress, not that public funds may be expended unless 
prohibited by Congress. United States v. MacCollom, 426 U.S. 
317, 321 (1976). In this case, DC Courts can point to no law in 
effect during 1998 that authorized it to spend interest earned 
on the Federal funds provided to operate the DC Courts.
              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

                  COMMITTEE'S CONCERNS WITH DC COURTS

 [Excerpt from pages 27 and 28 of House Report 106-249 (July 22, 1999) 
     accompanying the FY 2000 DC Appropriations Bill (H.R. 2587):]

Federal Payment to the District of Columbia Courts

           *       *       *       *       *       *       *


    Funding for Attorney Programs.--Funding of $33,336,000 
requested by the Courts for attorneys under the Criminal 
Justice Act program, the Counsel for Child Abuse and Neglect 
program, and the Guardianship program is provided under a 
separate appropriation heading. In past years this amount was 
included within the appropriation for the Courts.
    The Committee is greatly disappointed in the Courts' 
actions with respect to the payment of attorneys for indigents 
and the Courts' misuse of language included in annual 
appropriations acts to allow the courts to pay obligations 
incurred in previous fiscal years. A provision provided in good 
faith by Congress to ensure that attorneys would be paid 
promptly out of current year funds when they submitted vouchers 
late or in a year subsequent to the year in which the 
obligations were incurred was not intended to allow the Courts 
to defer legitimate attorney payments and use the funds for 
other purposes. The Courts have used this provision of law 
contrary to the express intent of Congress and contrary to the 
Courts' justification of the need for the language in 1976. The 
Courts have, in effect, used this provision of law to create a 
``slush fund'' and avoid making difficult management decisions 
that other governmental entities must make when funds are 
insufficient. The Courts' spending plan for FY 1998 updated 
September 15, 1998 showed a 75 percent reduction in attorney 
payments for July 1998 with no payments scheduled for August 
and September 1998 even through the amount budgeted of $25.8 
million was more than adequate to pay the $5.4 million in 
pending payments. Instead, it appears that the Courts were 
using the funds budgeted for attorneys for indigents for other 
purposes. Likewise, the Courts' spending plan for FY 1999 
``revised through 3/31/99'' shows asterisks instead of amounts 
in monthly columns from June to September. The asterisk 
footnote explained that ``Funding requirements will be provided 
either through reprogrammings or the use of refunds and 
reimbursements . . .'' even though the conference agreement on 
the FY 1999 DC Appropriations Act (H. Rept. 105-825, page 1106) 
states ``Accordingly, to avoid a similar situation this year, 
the courts are directed to use the FY 1999 allocation of 
$32,936,000 for court appointed attorneys for that purpose and 
for that purpose only.''. When confronted with the situation 
the Courts submitted a revised spending plan that reflected the 
conference report directive. It is difficult to understand why 
the Courts misinterpreted the directive, especially after the 
problems created by their similar actions in FY 1998 which 
resulted in the Committee requesting the General Accounting 
Office to review the Courts' financial and other operations.
    The Courts must take action immediately to improve and 
upgrade their financial operations and their accountability to 
taxpayers funds. Taxpayers expect no less. While the Committee 
recognizes the need for financial flexibility by the Courts, 
the definition of flexibility does not include ``shell games'' 
or misleading information or ignorance of congressional 
directives.
          [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

                                             Friday, June 30, 2000.

        MANAGEMENT REFORM IN THE DISTRICT OF COLUMBIA GOVERNMENT

                               WITNESSES

HON. ANTHONY A. WILLIAMS, MAYOR, DISTRICT OF COLUMBIA
HON. LINDA W. CROPP, CHAIRMAN, COUNCIL OF THE DISTRICT OF COLUMBIA
GLORIA L. JARMON, DIRECTOR, HEALTH, EDUCATION ACCOUNTING AND FINANCIAL 
    MANAGEMENT ISSUES, GENERAL ACCOUNTING OFFICE
NORMA SAMUEL, SENIOR AUDIT MANAGER, ACCOUNTING AND INFORMATION 
    MANAGEMENT DIVISION, GENERAL ACCOUNTING OFFICE
    [See ``Appendix'' on pages 823-971 for additional 
``management reform'' material.]
    [CLERK'S NOTE.--This hearing date, Friday, June 30, 2000, 
was selected to accommodate the schedule of Alice M. Rivlin, 
Chairman of the DC control board. Neither she nor any of the 
other control board members appeared to present testimony. See 
page 732, this volumn.]

                   Opening Remarks of Chairman Istook

    Mr. Istook. The meeting will come to order. We're meeting 
this morning as the District of Columbia Appropriations 
Subcommittee to receive testimony from the Mayor of the 
District of Columbia, the Chairman of the Council of the 
District of Columbia, and from the General Accounting Office. 
The topic of course is management reform efforts concerning the 
District of Columbia. We have had a concerted effort by folks 
in the District, and by Members of Congress, to assist the 
District of Columbia to get a hold of some of the difficulties 
and challenges that it has in making its government more 
effective, more efficient, more responsive to the needs of the 
persons who live here, those who work here, and those who visit 
here.
    This creates some special challenges. I believe everybody 
knows that there has been a history of some difficulties and it 
would certainly not be fair to try to say that persons who are 
currently in office in the District are fully responsible if 
everything is not running perfectly, because we know that 
problems accumulate and they take a period of time to solve.
    The Congress has been intimately involved in this effort. 
For example, during fiscal years 1998 and 1999, hundreds of 
millions of dollars were allocated for various management 
reform projects through the Congress and the control board to 
assist the District. There have been estimates of management 
savings that have been plugged into the budget numbers for the 
last couple of years for the District of Columbia. Certainly 
this subcommittee is hopeful that management reform also 
accomplish their objectives, so that taxpayers will have the 
benefit that they're receiving the solid government for which 
they pay, and they are not paying for government which wastes 
any of their money.
    There are a number of challenges, and I think this hearing 
will focus on those. What I really hope we do is to try to put 
some focus on what does it take to get these longstanding 
difficulties resolved.

                             No Audit Trail

    A couple of examples, the GAO has presented testimony 
before and reports that over $100 million in capital funds 
budgeted for management reforms were redirected to other 
projects by the District with the GAO unable really to follow 
an auditing trail and find exactly how it was spent.

                   Only 69 Of 281 Projects Completed

    At the end of FY 1998, out of 281 projects that had been 
undertaken, 69 were completed, 213 reported as status unknown. 
It's very difficult to get a handle on these.

                      Road Contracts Take 4 Years

    Let's talk about road construction. Federal funds are made 
available to the District to rebuild and repair roads. Everyone 
who drives in the District knows of the challenges because of 
the condition of the roads, and yet to find money that's 
available to fix the roads and not utilize that money in part, 
because what takes about 7 months in most jurisdictions in the 
country from the time that money is allocated to the time that 
a project is underway, a 7-month timetable in other places 
stretches out to about 1,500 days, or 4 years basically, in the 
District of Columbia. And everyone who drives on the roads 
suffers from that. We want to help to shorten that time frame, 
to be responsive to the needs of the citizens of the District.

                   Personnel; Rightsizing; Competency

    There's a great challenge I know with personnel. I know 
that the Mayor has plans that are underway. They consume time, 
we understand that. It's not just a matter of making sure that 
you can rightsize the government so that you don't have more 
people than you need, but that the people you have are 
functioning effectively. I realize that in most major 
departments, or at least in a large number of the major 
departments, those that are senior level political appointee 
managers and so forth were actually appointed by a prior 
administration. It's a challenge, I know, for Mayor Williams to 
get a hold of these different things.

                          13,000 Pay Variances

    In the workforce in the District of Columbia, there are 
over 13,000 pay variances. If you're trying to track who was 
doing what and how are they being compensated for it, there is 
not an adequate management information system to track these. 
Part of the difficulty is the complexity of the very structure. 
When there's over 13,000 variations in pay rates with all sorts 
of variables and multipliers that can apply to different 
employees at different times, and yet for the whole United 
States Government, which covers the whole country and the whole 
world, there are only 9,000 different variations. The District 
of Columbia is 50 percent more complicated in its personnel pay 
policies than even the Federal government is.

                   Vehicle Purchases--Millions wasted

    We have had information, of course, regarding the fleet 
management and the purchase of motor vehicles. The District, of 
course, is eligible to purchase those through the General 
Services Administration. We've done an analysis--and I 
appreciate the efforts of the GAO and my own staff in doing 
this--that shows that several million dollars could have been 
saved if vehicles were purchased through GSA rather than 
through the process that has been used in the District.

           Election to change School Board selection process

    I could go on about different examples, but let me express 
what I hope we will see developing and continue to evolve. I 
realize it was a political hot potato, a very hotly contested 
issue, but take the election this week regarding the school 
board. I realize that the purpose is accountability, to make 
sure that persons that are in positions of the District 
government are accountable to the citizens, and I applaud that 
effort. Whether you agree or disagree with the particular plan, 
I applaud the effort to improve accountability among persons in 
the District.

                Activists Attracted To Nation's Capital

    It's been my observation that, in an effort to make sure 
that everybody has a chance to chime in with their opinions, 
that process itself can become so cumbersome that it makes it 
difficult to get anything done at all if you spend so much time 
talking before anything is done. That's a very strange 
challenge in Washington, because the Nation's Capital attracts 
people who are political activists; of course it does, it's the 
Nation's Capital.
    So when people basically have the impression that we want 
to make sure nothing happens unless we have had a say in it and 
that nothing happens unless we approve of it, suddenly, you're 
not able to do things just by a simple majority anymore. If you 
don't have a 95 percent consensus, you may not be able to get 
anything done, and nobody's going to be able to achieve that 
level of consensus.

                   Simplification And Boldness Needed

    I was visiting with Council Chairwoman Cropp just before 
the meeting, and as I told her the word that keeps coming to my 
mind, when I look through the various problems in managing 
government and government agencies and services in the 
District, the word that keeps coming to my mind is 
``simplify.'' When you have elaborate structures trying to make 
sure you consult with everyone, you may find that that 
structure itself limits your ability to do anything. Sometimes 
when everyone has a voice, it ends up that no one has a voice, 
and I would certainly hope that we see some boldness on the 
part of District officials, because I don't think that anything 
else is going to succeed.

                 Reform Efforts Delayed And Dragged Out

    There have been so many years of efforts to reform 
management, to reform processes, and yet they can be dragged 
down and delayed.

          4-Year Road Contract Process--concern over comments

    I notice, Mr. Mayor, regarding the difficulty with how long 
it takes to get a road project done, there was a quote in the 
local press yesterday. One of the District officials in charge 
of road work said, ``well, we're going to shorten that process, 
and we'll have a shortened process in place in about a year.'' 
I think that's an illustration of the problem. If people think 
that, well, it's going to take a year to get a handle on how to 
shorten a process from 1,500 days to 7 months, maybe that, in 
itself, is an illustration that people are thinking in the 
wrong time frames rather than saying we need to make sure we've 
got a process in place within 30 days or 60 days, that at least 
makes a significant shortening, while we keep at it, shortening 
it further. And I know, Mr. Mayor, that many people say to you, 
you're pushing too hard, people cannot be retrained. The 
attitude cannot be changed, the lines of authority and 
organization cannot be straightened out and you have a lot of 
resistance, and some people say you're pushing too hard.

                   District Needs To ``Push Harder''

    But frankly, I would have to say I would encourage you to 
push harder still, because I think the challenge is there. I 
think the citizens in the District certainly merit a more 
responsive government than they have right now, and I applaud 
the efforts of the Mayor and the Council to get a handle on the 
situation.
    Enough soap box lecturing from me. We're going to be 
hearing from our witnesses, but before we do, Mr. Moran, I will 
be happy to recognize you for any comments.

                  Opening Remarks Of Congressman Moran

    Mr. Moran. Thank you, Mr. Chairman. And I think that this 
hearing is appropriate. I do think, though, that it's important 
to underscore that of the roughly $330 million that has been 
identified as management reforms in fiscal year '97 and '98, 
$296 million is local government money. Only 10 percent of it 
is Federal money. But that Federal money, nevertheless, is 
intended to produce direct results, and we have certainly been 
accountable for that, and to some extent accountable for the 
entire budget that we approve, as you know. I don't think we 
should necessarily have that roll into perpetuity.

            Concern That Management Reform Funds Not Tracked

    It is troubling what we're going to hear from the General 
Accounting Office that the money was spent but not tracked, and 
so there's very little information as to what management 
reforms were even attempted, never mind implemented.
    I think that there was probably overly ambitious thinking 
and rhetoric and plans at the time. But I do feel that this 
Mayor is a visionary, and does intend to carry out all of these 
management reforms. I think we're going to have to give him a 
great deal of latitude to be able to do that. I hope that this 
hearing does not--is not perceived as beating up on the current 
administration or the Mayor, and I trust that it will not. I 
think we are in this together and we have a common objective.
    Many parts of the District government are an unwieldy 
bureaucracy, and that's what we're going to find, and we are 
going to find a lot of people more focused on the process of 
government than the product or the delivery of services.

                      Need To Focus On ``Basics''

    But it's also understandable that management improvements 
are not achievable, unless you first do the basics. For 
example, with regard to waste management, if more than half the 
trash trucks lack the parts to operate or half the workforce of 
a particular division calls in sick more than twice a week, 
well, you can have all the fancy management improvements in the 
world, but you're not going to get the job done. So I think 
we're going to have to maybe get down to the basics in some of 
these programs and again, make sure that when we agree to 
management improvements, that we have some tracking system in 
place so that we can ensure that the money is spent well. I 
think when we do that, we will be helping the Mayor rather 
than, being critical of the Mayor's management.
    So let us get on with the hearing. Let us hear from GAO, 
and then I think we'll be interested to hear the city's 
response to their findings. Thank you, Mr. Chairman.
    Mr. Istook. Thank you very much, Mr. Moran. If we might ask 
the Mayor and Ms. Cropp to go ahead and come forward.

                         Sequence For Testimony

    Customarily, as a matter of protocol, certainly in respect 
for their positions, we would ask the Mayor and Council 
Chairman to testify first. However, if you will forgive the 
breach of protocol. Since we recognize that a lot of your 
testimony, Mr. Mayor, as we talked about a few minutes ago, 
would be responsive to GAO in some ways, I think the 
appropriate thing would be to hear GAO's testimony first and 
then we can delve into details together.
    I think it will be a better approach to take.

                            Witnesses Sworn

    The standard procedure, of course, is to swear in all 
witnesses, so if I could ask our three witnesses, to stand and 
I'll administer the oath to each of you collectively.
    If you would raise your right hand.
    [Witnesses sworn].
    Mr. Istook. Thank you. Please be seated. Our witnesses this 
morning, in the order in which we'll be hearing testimony, are 
the General Accounting Office represented by Gloria Jarmon 
who's director of Accounting and Financial Management Issues, 
and Norma Samuel who is accompanying her from GAO. And of 
course we have the Mayor of Washington, D.C., the Honorable 
Anthony Williams, and the Chairman of the Council of the 
District of Columbia, Ms. Linda Cropp.

              Absence of Alice Rivlin, Control Board Chair

    [CLERK'S NOTE.--See ``Clerk's note'' on page 727, this 
volumn.]

    I should note that we requested that Ms. Rivlin, or one of 
the other members of the control board, be here this morning 
for testimony.
    Unfortunately they advised us at the last minute they would 
not be here. I am not quite sure why, but the point remains 
they are not here and I think that's going to present a couple 
of challenges, because I know that the control board has 
certain authority that the Mayor and the Council have not 
enjoyed in recent years, and the control board certainly bears 
accountability for their exercise of that authority, which 
includes a lot of the financial disbursements here.

                            Focus of Hearing

    I would echo Mr. Moran's comment. I don't think any effort 
should be made to say that all of the accumulated problems or 
things that have happened over the years should be blamed upon 
the people who currently occupy offices and who were not in 
those positions or similar positions at the time the problems 
occurred. I would not want testimony and questions about, well, 
what are you doing about this, to be seen as a wrong 
reflection.
    We realize that different people have been in different 
positions over the years, and the main issue is how do we 
correct things to make sure that the reform efforts are 
successful.
    So if we may, Ms. Jarmon, we'll be happy to hear your 
testimony first.

                Prepared Statement of Gloria Jarmon, GAO

    Ms. Jarmon. Mr. Chairman, members of the subcommittee, I am 
pleased to be here today to discuss the District's management 
reform initiatives regarding fiscal years 1997 and 1998, and I 
will summarize my statement and ask that the full statement be 
made part of the record.
    [The prepared statement referred to follows:]
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

                Opening statement of Gloria Jarmon, GAO

    Ms. Jarmon. Because of your concern that little information 
was available on the results achieved from the District's 
management reform initiatives, you asked us to provide 
information on their status and related estimated savings. 
Before summarizing the result of our review, I will provide 
some background information.
    Management reform was seen as a way to transform the 
District's operations to provide quality services to its 
citizens, businesses and visitors. The 1997 Revitalization Act, 
Public Law 105-33 directed the Financial Authority and the 
District of Columbia government to develop and implement 
management reform plans for nine major agencies and four 
citywide functions during fiscal years 1998 and 1999. Funding 
for management reform was to be provided, for the most part, by 
existing budget authority within agencies, and by the fiscal 
year 1998 surplus that resulted from the Federal government's 
assumptions of the costs of certain functions previously 
financed through District revenue.
    The law gave the Authority, the power to allocate surplus 
funds to management reform projects. The Authority reported in 
1998 that projects were selected using management reform 
criteria of customer satisfaction, empowering employees, long-
term service delivery improvements, and greater internal 
capacity.

                11 Consultants Hired Costing $7 million

    In September 1997, the Authority hired 11 consultants to 
develop management reform plans for these agencies and 
functions at a cost of almost $7 million. The District's 
management reform team, consisting of the Chairman of the 
Authority, the former Mayor, the Chairman of the City Council, 
and the heads of each agency, approved the projects for 
implementation.

                     Chief Management Officer Hired

    The Authority then hired a Chief Management Officer who was 
delegated responsibility for these projects. The CMO 
implemented a system to manage these projects that included 
development of operational plans, identification of the 
official directly responsible for each project and periodic 
monitoring of each project. Agencies were required to report 
monthly on expenditures and results of the projects.

                CMO Functions Returned to Mayor Williams

    The Authority reported in its fiscal year 1998 annual 
performance report that 69 projects had been completed. In 
January 1999, the Authority returned responsibility for the 
nine city agencies and four citywide functions to the newly 
elected Mayor.

                   Realignment of Projects in fy 1999

    In fiscal year 1999, in consultation with the Authority, 
the new administration, under Mayor Williams, identified what 
it considered to be the best projects out of the remaining 200. 
The District then selected 20 of those projects to be continued 
in fiscal year 1999. The District also initiated seven new 
projects for a total of 27 projects that were funded in fiscal 
year 1999.

   $330 Million spent; $200 Million Savings Projected; $1.5 Million 
                                realized

    From fiscal years 1998 through 2000, the District budgeted 
over $300 million, $33 million of which was Federally 
appropriated, to fund the over 250 management reform 
initiatives. Included in the District's budget for this period 
were projected savings of about $200 million, including $17 
million in management reform productivity savings. However, as 
of June 1st, 2000, the District has only reported savings of 
about $1.5 million related to these initiatives and has not 
consistently tracked the status of these projects.

          Neither Control board Nor City kept Adequate Records

    Neither the Authority nor the District could provide 
adequate details to us on the goals achieved for all of the 
projects that have been reported as completed or in various 
stages of completion. Consequently, the District cannot say for 
certain how funds designated for management reform have been 
spent or whether the key goals of these initiatives were 
realized.
    Mr. Chairman, this concludes my statement. We'll be happy 
to answer any questions from you or Mr. Moran.
    Mr. Istook. Thank you, Ms. Jarmon. I think before 
questions, of course, we would like to hear from Mayor Williams 
and Ms. Cropp.
    Mr. Mayor.

                  Opening Statement of Mayor Williams

    Mayor Williams. Mr. Chairman, Congressman Moran, other 
members of the Committee, I want to thank you for the 
opportunity to testify before you today on management reform in 
the District of Columbia.
    The original management reform agenda was an ambitious 
attempt to revise the way the District did business. Its 
objectives were the right ones, but there were flaws in the 
agenda's execution. Furthermore, when I became Mayor, I 
recognized that the remaining management reform initiatives 
alone were not sufficient to make this government work for the 
residents of the District of Columbia. So upon assuming office, 
I initiated a comprehensive approach to performance management 
that focused on defining goals, getting results and holding 
people accountable for achieving those results.
    We incorporated selected management reform initiatives into 
agencies' strategic plans, and more importantly, agencies' 
strategic plans address many of the goals of the management 
reform agenda, if not all of the specific initiatives.

                          Cost Savings Not Met

    Finally, our management reform agenda promised substantial 
cost savings that have yet to be met. My administration is 
committed to achieving significant and lasting productivity 
savings this year, in fiscal year 2001, and beyond.
    The management reform agenda predates my administration. It 
was established by the Financial Responsibility and Management 
Assistance Authority and the Chief Management Officer in fiscal 
year 1998. The Office of Budget and Planning tracked management 
reform expenditures closely in fiscal years 1998 and 1999 and 
has shared those records with the GAO over the last several 
months.

                   CFO Report Identified shortcomings

    The Office of the Chief Financial Officer issued a report 
assessing fiscal year 1998 management reform results that were 
shared with Committee staff in July 1999 and with GAO in 
February 2000. The key shortcomings of the management reform 
agenda that report identified included unclear definitions of 
management reform and unclear criteria for project selection, 
division of accountability for programmatic and financial 
results, delay in implementation after initial plans were 
submitted to Congress, emphasis on expenditures within a set 
time frame, overachieving project outcomes and results, even if 
it meant completing projects later than expected, and 
performance measures that were unclear and unmeasurable.

                   Management Challenges of New Mayor

    So when I took office, the management challenges my 
administration inherited were daunting, but I could basically 
put them into four categories. I think when you take over a 
troubled organization, you have really four things you've got 
to look at. You've got to look at your system, you've got to 
look at your strategy, you've got to have a belief system. 
Everybody ought to be working on a common agenda. You've got to 
certainly look at enablers and systems to support everyone and 
resources to support everyone to achieve those objectives. But 
you also have to look at people and culture.

                 Mayor's Approach to Management Reforms

    Now I would argue just as a quick snapshot summary of where 
I sit right here a year and a half into my administration, what 
I've tried to do is bring literally thousands of citizens in 
the District together, is craft a vision and a strategy and 
goals for our city, ambitious targets for each agency, 
accountability contracts for each deputy mayor, agency head and 
everybody else. They have got to meet these targets by the end 
of this year, and trying to meet these targets by the end of 
this year will necessarily drive the necessary changes in 
approach, the necessary changes in people, the necessary 
changes in culture.
    We have not seen yet on the people and the culture front 
for example the heavy lifting.

                     Labor Management Negotiations

    I'll give you an example. The labor contracts in the 
District--we haven't really initiated labor management 
negotiations. You know in Philadelphia and other cities, a key 
part of their financial recovery were in-depth intensive labor 
negotiations where they get at all different kinds of issues, 
including the many, many, many different collective bargaining 
agreements.
    It was a conscious decision, whether rightly or wrongly, I 
think it was a good one, to go ahead and give our employees a 
bonus and delay until after that bonus, the actual labor 
management negotiations. I had wanted to do it all at once, 
which means we would have already gone through that labor 
management collective bargaining process. As it turns out, 
we're entering that process now as I speak. We've completely 
rebuilt our labor management team. We have got the support of 
Mary Leary, who is the head of our management team. She's got 
extensive labor management background, Milou Carolan, our 
director of personnel, worked in Philadelphia for Ed Rendel, 
one of America's great mayors in this century, I would argue. 
We are enjoying the support of a private sector firm, Covington 
and Burling, and Tony Herman, who is our pro bono lead labor 
negotiator counsel.
    So I believe that we are as geared up as this city has ever 
been to have some good solid labor negotiation that goes to 
many of the issues that we're talking about here.

                     Management Supervisory Service

    One other issue, we're going to have in another couple of 
months an opportunity to rebuild the culture of this government 
in a way that literally no other jurisdiction has, and I give a 
lot of credit to this to the Council in general and to Kathy 
Patterson in particular. We're going to have something called a 
management supervisory service, 800, 900 of our managers in 
exchange for better pay are going to be working on an at-will 
basis. The ability of this measure to really, in an integrated, 
holistic, if you will, deep-seated way, to begin changing 
habits and practices in the government, I don't think we can 
even calculate right now. That's what I'm looking at, and I'm 
looking at inheriting these challenges that were daunting, a 
workforce rarely held accountable, and a consistent manager and 
an organizational structure that's resistant to change, 
infrastructure devastated by years of deferred maintenance.

                         Road and Bridge Repair

    We talk about our roads and our bridges. Yes, we spend too 
long calculating how to process contracts, and I can, in answer 
to your question, get at the reasons why I think this exists 
and what we're trying to do about it. The lack of adequate 
technology, which I think we tend to exaggerate at times and 
make a technology excuse for everything.

                   Fresh Top to Bottom Agency Reviews

    But faced with these conditions, we ordered agency 
directors to stop for a moment and to take a fresh look at the 
condition of their agencies from top to bottom. How did the 
people, processes and systems that had been in place support 
our commitment to providing better services for the District 
residents? This included assessing which of their senior 
managers could contribute to retooling their agencies and which 
could not, identifying agency practices and processes that made 
sense versus those that were out of date, determining which 
information systems were state-of-the-art adequate to support 
the agency's mission or at risk of not making Y2K.

                        Short Term Action Agenda

    Throughout my campaign and my first days in office, I 
recognized the District lacked a unifying vision and I talked 
about this. At the same time, I knew that residents had little 
patience for a long planning cycle. We needed immediate 
results. So we initiated the Short-Term Action Agenda, a set of 
immediate measures to demonstrate rapid, visible improvements 
in basic services within 1 year or less.

           Agency Strategic Plans/Accountability of Directors

    As agency directors implemented the Short Term Action 
Agenda, I also instructed them to develop long-term strategic 
plans. The unfinished management reform initiatives were among 
the many options directors were to consider, but not all of the 
projects were going to continue in fiscal year 1999. In 
establishing strategic plans, directors were to make tough 
assessments of their organizations' strengths and competencies, 
question what businesses their agencies were in and what 
businesses they should get out of and identify strategies for 
innovation. Most importantly, agencies' strategic plans were to 
include concrete deliverable specific deadlines, and meaningful 
measures of progress and success, and I've set up performance 
contracts based on these strategic plans with my agency 
directors so that they know exactly what they're responsible 
for delivering. I'm going to evaluate their progress twice a 
year and their job security depends on their effectiveness in 
achieving these goals.

                            Citizens Summit

    However, in formulating my strategic priorities, I needed 
to be certain that we were establishing and achieving goals 
that mattered to the residents. So I decided to do something a 
little untraditional and empowered citizens to set priorities 
for our government. So we held a citizens summit in November, 
and as you know, more than 3,000 residents answered the call 
and came to the Convention Center to set priorities for the 
city. We compiled those comments and used these priorities to 
put together the 2001 budget. We also used them to develop a 
citywide strategic plan with a set of very specific measurable 
goals for every agency of our government. Using the citywide 
plan as a template throughout 2000 and 2001, residents will be 
engaged in neighborhood action planning processes that provide 
communities an opportunity to establish their own individual 
neighborhood priorities that feed into these larger goals.

            90 Percent Success With Short Term Action Agenda

    The Short Term Action Agenda was critical to regaining the 
faith of residents. Initiatives including, and I could go into 
them, but they included everything from reducing backlog for 
inspections and permits, establishing one spot for calling in 
for services from the District, with a testing process to see 
that citizen calls are actually resolved. We achieved a 
gratifying 90 percent success on the short-term initiatives, 
but the short-term initiatives I completely agree and believe 
were only a downpayment. They build trust and confidence and 
they gave us a little momentum, but they were only the first 
step in the process.

                         Longstanding Problems

    We're also achieving success in tackling longstanding 
problems. While we didn't pursue many of the original 
management reform initiatives, we have addressed and continue 
to address the broad themes of customer service, business 
process improvement, financial management and workforce 
investment. We have successes we can point to in all these 
areas and delays we can cite as well, but I'll describe a few 
results for you.

                          CITYWIDE CALL CENTER

    I talked about the citywide call center. While management 
reform initiatives address customer services agency by agency, 
a common refrain among residents was that there was no one 
place to call for help from the District government. So we 
committed to establish one number for agencies and launched a 
citywide call center in April 1999. Residents now have an easy 
to remember number, 727-1000, and we track performance data on 
frequently requested services and how long it takes to resolve 
them. Lessons learned from the operation of the call center 
have helped us establish uniform standards for phone service 
quality district-wide, and during fiscal year 2000, we're 
tracking the quality of call center operators and of operators 
at key District agencies.

                        Motor Vehicle Department

    Establishing a better Department of Motor Vehicles. As we 
all know, the stories on the Department of Motor Vehicles, and 
I will just give you a snapshot. The long and short of it is we 
have made management changes now at the Department of Motor 
Vehicles as a first step, again, awaiting the management 
supervisory service, awaiting our labor negotiations, we will 
be able to go much farther, but we've made an impact. No one 
who goes down to the vehicle inspection station right now on H 
Street, since we've made changes there over the last couple of 
months in response to huge increasing volume--this is the good 
news, we have 70 percent more people going through DMV this 
year over last year, and I believe it's because people are 
moving back to the city.
    The bad news is you're right, people waited days, I don't 
know how long, weeks sometimes waiting to get a vehicle 
inspection. No one over the last month or so has waited over 20 
minutes to get an inspection at H Street. No one has waited who 
has gone to get their license renewed, their registration 
renewed, has waited over twenty minutes in the new express line 
we put up. We're opening up new satellite centers in the 
neighborhoods. We have one coming in Georgetown. We have one 
over at RFK stadium. We're discussing one over at the Hechinger 
Mall. We're building a new DMV up on Georgia Avenue again to 
provide customer service. It puts the customer, the citizen 
first, and our needs second.
    Personnel management, I talked to the committee about 
management supervisory service.

               Performance Management training completed

    Performance management, more than 2000 management, 
supervisory and excepted service personnel and agencies under 
my authority, independent entities and receiverships, completed 
training in the performance management program from March to 
May 2000. Personnel and agencies under the Mayor are completing 
these performance plans this summer and will complete fiscal 
year 2001 performance plans by October 2000. This is a way to 
link directly, directors and performance agreements, 
supervisors, and evaluation system, employees in terms of 
expectations for gain sharing and productivity, link all of 
this to the performance objectives of the District government.

                       Rightsizing City Workforce

    Rightsizing the District government. The Office of 
Personnel is also spearheading the District's rightsizing 
efforts in partnership with the four deputy mayors and the 
Office of Budget and Planning. The initiative is described in 
more detail in the productivity savings that I have submitted 
to the committee.

                     Recurring Productivity Savings

    One of the unrealized promises of management reform was 
achieving real and lasting productivity savings. And my 
administration is committed to making the District government 
more efficient. We're committed to achieving $7 million in 
productivity savings in fiscal year 2000. We've already saved 
approximately $1 million as a result of an audit of unused 
telephone lines. We project additional savings from recouping 
Medicaid reimbursements that D.C. public school special ed 
division has historically failed to pursue, and through better 
management of disability claims throughout District government 
agencies.
    Further savings will come from cell phone, account 
management, energy savings and one-time revenue from vehicles 
identified for disposition in our new district-wide fleet 
roundup that we kicked in a week or so ago. It's an effort to 
bring better asset management to the District, reduce the 
number of cars, better use the cars and buy cars at a lower 
price. You know, it's not rocket science and we should have 
been doing it for a long time.
    I would never say we shouldn't, but my staff can tell you 
in every one of their contracts, just as there's an element for 
customer service, there is an element for risk management. I 
consider a big part of risk management managing our resources 
well.

                  $37 Million In Productivity Savings

    I've submitted to the Committee a number of different 
measures that we have underway this year to achieve some $37 
million--$47 million in a rightsizing initiative, and they go 
to agency staffing structures, creating accurate organization 
charts and position lists that can be used for planning over 
this summer into the next fiscal year, better managing 
vacancies to see that we are reviewing how we're filling these 
vacancies with a mind of bringing this government down to its 
right size.
    Retirement incentives, employees under the personnel 
authority of the Mayor who are eligible for regular or early 
retirement on or before September 8th, 2000, may be eligible 
for a lump sum payment of 50 percent of an employee's salary up 
to a maximum of $25,000. We have a fact sheet that summarizes 
the key components of this proposal, but the long and short of 
it is, this is our major use of the $18 million that we 
received in a grant from this Committee to rightsize the 
government, and as I've said to Committee members and the 
Chairman individually, as I say here publicly, we want to take 
maximum example and exploit the high retirement rate in our 
system to--in a deliberate methodical but nonetheless 
productive way--bring our government to its right size. We want 
to do this not only to save our citizens money, but so that 
when the next recession arrives, which it inevitably will at 
some point or another, we won't have to have the Draconian, 
massive service disruptions and employee dislocations that bad 
planning would otherwise cause.

                  $10 Million In Productivity Savings

    Finally, the remaining $10 million in productivity savings 
will consist of initiatives launched this year that will yield 
continuing savings in fiscal year 2001, including disability 
claims management, Medicaid reimbursements, reduced fleet 
acquisition and management costs, reduced energy and utility 
payments, telephone lines and service options, management and 
cell phone account management.

                    Conclusion of Mayor's Statement

    So in conclusion, Mr. Chairman and Congressman Moran, I 
have not come here to tell you that we have met all of our 
challenges in the District. I would never sit here and say 
that. I would never say that we're a finely-tuned machine, that 
everything's fine. I'm not even going to tell you that we have 
met half of them, but I am telling you that we are tackling 
problems that have been more than 20 years in the making, and 
for all the initial success that I can point to with pride, 
there are 10 more problems to address. However, through 
continued diligence, I am confident that we're going to reach 
our goals, because I think first and foremost, more than 
anything else, we've created a sense of urgency in this 
government that one way or another, hell or high water, will 
result in their accomplishment.
    I want to thank you, and at the end of all the testimony 
look forward to your questions.

                  Prepared Statement of Mayor Williams

    [The prepared statement of Mayor Williams follows:]
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


    Mr. Istook. Thank you very much, Mayor Williams.
    Ms. Cropp.

           Opening Statement of Linda Cropp, Council Chairman

    Ms. Cropp. Thank you. Good morning, Chairman Istook and 
Congressman Moran. I am pleased to be here with you and with 
Mayor Williams to testify on the status of the District 
government's management reform efforts. My testimony will be 
brief. I do not believe that I have an awful lot of light on 
this particular issue to shed on this subject.
    We will be reviewing the General Accounting Office report 
on the District government's management reform projects. I just 
saw it today. Although the Council did assist in the initial 
identification and the development of these projects, we have 
been provided scarce information about the status of the 
project expenditures despite inquiries about them from the 
Council.

                    Control Board Approved Contracts

    As you know, the management reform was an effort initiated 
by the Financial Authority, and I must say it was supported by 
the Council and by the Mayor that we do these management 
reforms. It was understood by all that we needed to do them 
under the Chief Management Officer of the District of Columbia. 
The Financial Authority, not the Council, approved the 
contracts associated with the management reform projects and 
oversaw their implementation.

             Council's Concern Over Control Board's Largess

    From the start, the Council has consistently voiced concern 
that tens of millions of dollars in consulting contracts were 
being awarded in the name of management reforms contracts, 
resulted mostly in reports that described longstanding familiar 
problems in the District government, and these reports also 
recommended solutions, which in many instances, had previously 
been recommended, either by the Council or other bodies in 
previous reports.
    We have not seen a comprehensive assessment of whether and 
where dollars were actually expended on the implementation of 
the solutions that were recommended by the consultant's 
reports. The information, however, has been requested by 
several committees of the Council, and we do look forward to 
receiving that information.
    My sense is that some of the management reform dollars 
dedicated to actually solving the problems as opposed to simply 
writing reports about problems have been spent on raising the 
salaries of managers in the District government agencies, as 
part of an effort to retain and attract a higher quality 
management team, and quite frankly, that is greatly needed. The 
District needed to do that in order to put our workforce in 
parity with other jurisdictions with whom we are in constant 
competition. For so long, our workforce had been underpaid and 
in fact, during our retrenchment funds, they went through a 
period where actually their salaries were decreased because of 
furloughs, so this did need to be done.
    I realize, however, that from your perspective that this 
may be problematic in the sense that it may cause a one-time 
expense. However, let me assure you that the District has at 
least shouldered the ongoing cost of these pay scale salary 
scales with local funds to outyears, and that has been part of 
our budget, so we realize it does need to be included in 
outyears.

               Council Efforts at Enacting Major Reforms

    The Council has played an active role over the past few 
years in enacting major reforms, which have been recommended by 
the Mayor and other various experts to many statutes that 
govern District operations. Following oversight and other 
public hearings by Council committees, legislative reforms have 
been adopted virtually across the board, including major 
changes. And these major changes I am talking about now were 
really initiated through the legislative branch of the 
government, and then they were embraced and supported and 
suggestions were given to change these areas dealing in 
procurement law, our personnel law, and our business regulatory 
environment.
    The legislative branch realized several years ago that 
those were some of the major areas of needed reform in the 
District government, and we were pleased to be able to initiate 
those changes and to have the executive branch and the 
financial authority play a major role in trying to bring about 
some good conclusions to it and most recently, to our school 
governance and criminal justice sentencing system, just to name 
a few.
    Implementation of many of these statutory reforms has begun 
by the executive and other agencies, but much more 
implementation surely needs to be done in these and other areas 
of reform.

                     Performance Measures Required

    As you know, Mr. Chairman, Mr. Moran, the Council has also 
taken an active role in requiring performance measures for 
District agencies and public-funded activities. In 1995, the 
Council enacted the Government Manager's Accountability Act, 
which requires the establishment of performance measures and an 
accountability plan for every agency and activity in the 
government that uses public funds. The Council has used 
performance measures as a tool in its review of the fiscal year 
2000 budget and in fact, over the past 2 years, prior to going 
into our regular budget hearings, we have held hearings, each 
committee has held hearings on performance measures alone.
    We want to ensure that government resources are linked to 
specific performance goals and measurement goals and 
measurements that cannot only be tracked by the District 
government, but by District residents as well.
    As you examine the fiscal year 2001 budget, I think you 
will find that it addresses our programmatic priorities, clean, 
safe neighborhoods, tax reform, quality health care, economic 
development and job growth and an effective education system in 
a way that ensures government accountability and results.

         Monitoring of Government Manager's Accountability Act

    The Council will be working closely with the D.C. Auditor 
in monitoring the implementation of the Government Manager's 
Accountability Act, including assessing the reliability of the 
performance data, the accuracy of performance measures and the 
level of success in achieving these performance measures.
    What the legislative branch will be doing with the auditor 
is, throughout different years, picking specific agencies that 
we will now start to measure the performance measures that have 
been identified by the agencies to see whether or not the 
report is accurate, and we will start that this year. We think 
that it will be an effort for the executive branch and the 
legislative branch to work together to ensure that what 
agencies have said they are accomplishing, that we can truly 
track that they really did what they said they were going to 
do.

            1,000 FTE Positions To Be Eliminated In FY 2001

    While the full accounting of the District's management 
reform efforts may be unclear, one major impact of those 
efforts is expected to be realized very soon. The fiscal year 
2001 budget is predicated upon the realization of management 
reform productivity savings in the amount of $37 million. The 
proposed savings is to be achieved through the elimination of 
1,000 FTE positions in the District government. This will be 
done by offering a retirement incentive program, which the 
Council authorized, and identifying vacant positions that do 
not need to be filled. The District government, through its 
Office of Personnel, has begun the process of implementing 
these savings.

                      Two Studies of City Council

    Finally, the Council has not exempted itself from 
management reform. The Council commissioned a study by the 
National Conference of State Legislatures and worked 
cooperatively with the Appleseed Foundation in their study of 
the Council operations. Even though we think we're perfect as a 
legislative branch, we realize that there's always room for 
growth.
    Mr. Istook. We have the same problem.
    Ms. Cropp. I understand the Council has already implemented 
many of the recommendations from these two studies, and you 
have probably seen some of the outgrowth from the 
recommendations in that the Council has had special committee 
investigations on different issues that may come up from time 
to time within the District government where we look at these 
issues. We have looked at the police department, the Mental 
Retardation and Developmental Disabilities Administration, and 
we're looking at special education in the school system where a 
focus outside of the regular committee structure will be given 
to specific problem areas.

               Conclusion of Council Chairman's Statement

    In conclusion, taxpayers and the public deserve to know 
what the positive concrete results have been for management 
reform efforts with specific performance measurements 
associated with improved quality of service, reduced costs, 
efficiency and effectiveness. The Council will continue to work 
cooperatively with the Mayor and others to ensure 
implementation of these management reform initiatives that 
improve the delivery of essential and basic services to our 
residents, businesses and visitors.
    I thank you again for this opportunity to testify before 
you.

          Prepared Statement of Linda Cropp, Council Chairman

    [The prepared statement referred to follows:]
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Mr. Istook. Thank you very much, Ms. Cropp.
    Getting into a discussion on management reform in the 
District is kind of like being at a smorgasbord, you're never 
quite sure where you want to jump in and start.
    Ms. Cropp. Just so long as we're not the buffet.
    Mr. Istook. That's right. I think Mr. Moran was accurate, 
and I want to be accurate in not blaming people in current 
positions for what was done by their predecessors.

     Current Mayor and Council Chairman not new to D.C. Government

    Now having said that, neither of you are totally new to the 
District government in the last couple of years, whether it's 
service on the Council or with the control board, or the CFO. 
You know, there is some continuity there too, and I think, as 
you mentioned, Ms. Cropp, a lot of the recommendations that you 
hear sound like they're being recycled.

               Vehicle Purchases Cost $7 Million Too Much

    You know you've heard it before and that makes it hard for 
people to recognize when something is actually being done 
rather than just having further discussion on it. And the 
difficulty--you know for example, Mr. Mayor, you mentioned that 
part of the savings that you project from productivity, as 
opposed to RIFing and so forth, but the productivity savings 
that you're projecting for this year, you tag at $7 million. 
That figure catches my attention because on the purchase of 
motor vehicles that's been publicized recently, a fairly small 
number of vehicles, the savings that we understand could have 
been achieved by going through GSA was $7 million. So, you 
know, if you save it in one area, but then lose it in another, 
you haven't gained. If the Washington Redskins get 9 yards on 
first down but on second and third down they lose 12, they 
haven't made any progress. I realize that's one of the 
difficulties that you have when the problems are so widespread 
and so systematic.
    But let me just take that as an example, because that one 
item has the ability to wipe out all of your projected 
productivity savings for an entire year. Can you give us some 
information on why vehicles were purchased in the way that they 
were rather than going through a more economical purchasing 
method such as offered by GSA, whether it be purchase or lease?
    Mayor Williams. I can't speak with complete authority, let 
alone comprehension, of vehicles that were purchased before I 
was Mayor. I know as CFO, we shared with the agencies a number 
of studies on lease-versus-purchase options, and in one or two 
of the budgets, an analysis of bulk purchasing of vehicles. I 
know that was followed by the police department and fire 
department with significant savings.
    I would again urge on the Committee, in response to the 
mandate for every agency director, to pursue savings in risk 
management and to pursue better asset management. We have begun 
a process of doing a systematic inventory of all of our 
vehicles, downsizing our fleet, more economical fleet, 
economizing in how we use our fleet with motor pools, and 
looking at the most economical way to bring this fleet in line 
whether it's through lease or through purchasing through GSA. 
So this is something that we've already taken the first step to 
do, and we'll bring to its completion.
    Mr. Istook. I might mention the chart that I have that 
shows the different vehicles involved and the purchase dates. 
Although a large number of them did predate your inaugural as 
Mayor, there's also a number of them that followed that date, 
too. It's a mixture, and I would not want to pretend otherwise, 
but I think that's an example of the challenge of getting a 
hold of something.

               Mayor Has Not Changed Top Agency Managers

    In making a difference in the administration, you've talked 
about the people that you bring in, and yet you have the 
continued difficulty in trying to move and motivate a 
recalcitrant bureaucracy.
    We have a chart of, I believe the term you use is the 
excepted service positions. You can call them at-will 
employees, you can call them political appointees, but that can 
be misleading because that presumes that everybody's hired on a 
political basis, which I know is not the case. But the point is 
if you look at the people in senior positions in different 
divisions of the District government in your administration, 
and you know whether they are holdovers or are new hires, for 
example, in the Department of Consumer and Regulatory Affairs, 
two-thirds of the persons in those positions are holdovers 
predating your administration, and they are still in the same 
positions; the Department of Motor Vehicles, 100 percent; the 
Office of Personnel, 57 percent; Office of Contracting and 
Procurement, one of the big challenges, two-thirds; Department 
of Public Works, 61 percent.
    Those are just examples of, in many cases, the persons in 
key positions are the ones that occupied key positions before 
you became Mayor. Now neither you nor I would suggest that just 
because the Mayor changes, you have to change all those 
persons. But I wanted to ask you if a lot of the difficulty is 
because persons in key positions are not responsive, you have 
the ability to change those persons at the top level. Can you 
comment on whether there needs to be more change in the upper 
level of the different agencies within the District in order to 
accomplish the turnaround that you want?
    Mayor Williams. I've had a number of meetings with my 
cabinet urging them to be more assertive in making change over 
at the top, but in any event, they understand that. Again, 
every agency director has a scorecard of goals they have got to 
achieve. Now to achieve, like, for example, there's a lot of 
controversy reported in the newspaper about a person that I 
think is going to prove to be a very good director of Parks and 
Recreation, Bob Newman. Okay.
    About these baseball fields and about how the lawn isn't 
mowed, and a lot of controversy as to did he mow the lawn or 
not? He knows he's on record now publicly stating that he's 
going to have X number of ball fields renovated by December. He 
can't say I don't have enough money, he can't say that 
procurement bit me. It means he's got to have the ball fields 
renovated. So there's got to be in his shop a sense of urgency 
to get this job done and everyone knows that. To give you an 
example, everybody understands now we have gone 6 months 
through the year and now there's going to be an evaluation. If 
it looks like an agency is having trouble, yes, we are going to 
help them with resources. Yes, we are going to help them with 
procurement or personnel or whatever the case may be, but we're 
also going to ask them if you're having trouble, why haven't 
you made changes at the top, because it's clear you're having 
trouble, and this is probably a contributing reason.
    So the long and short of it is I'm using this performance 
management process as a way to fairly evaluate on an objective, 
as objective as possible, basis top managers and make changes 
as they're needed. I believe that the 6-month review that I 
have underway right now will show that, in many cases, this is 
needed.
    Ms. Cropp. Can I just add that the new personnel reform law 
that the Council passed will also enable the Mayor to do more 
of what he was saying, along with the management supervisory 
service. So those changes, I think, will be very helpful in 
doing an evaluation of personnel, and also making sure that the 
personnel are suited to the needs of the government.

            Attitudes and Qualifications of Senior Personnel

    Mr. Istook. Let me pose a question, since you're commenting 
in this area. Is the Council satisfied that the holdover 
persons in senior positions within the divisions of the 
District government are capable of doing the turnaround, 
capable not just in the intellectual sense, but in the sense of 
attitudes and willingness to make that significant degree of 
turnaround?
    Ms. Cropp. In some instances, the individuals are there. I 
think there has been great concern that there have been some 
individuals who may have been misplaced, that there may have 
been a need for additional training in their position, and 
within a certain period of time if they did not have the full 
knowledge of that position, then they need to be moved to their 
appropriate place. For example, when we looked at procurement, 
we found that there were an awful lot of individuals in 
procurement who may not have even been trained in procurement, 
and it has absolutely nothing to do with one's level of 
intelligence.
    Quite frankly, if you put me in procurement today, I would 
probably mess up tomorrow. I'm not trained in procurement. But 
if you give me the opportunity to understand what it is all 
about, I could probably rise to the occasion. It is my belief 
that we have had that in the District government for far too 
long, that we have a lot of individuals who may have the 
intelligence level and may even have the desire and the will to 
do the work, but they may have been misplaced over the years 
unfortunately. That necessitates in some instances an audit of 
positions and also of the people and their ability and their 
training.
    I do think that we need to also give them an opportunity to 
meet whatever the requirements are within a short period of 
time and then if in fact they don't rise to that occasion, then 
they need to be moved.

             Mayor in Office 18 months with many Holdovers

    Mr. Istook. I would say, and of course, Mr. Mayor, I know 
you recognize this as your administration, when you have 
persons in key positions that are there when you assume office, 
they are still not your people in that sense. However, a year 
and a half into an administration if there are persons that you 
have the ability to change because they are at will, you're 
trying to expand the number of people that are at will so that 
you have control, but a year and a half into an administration 
and persons who are at will that you have the ability to remove 
if they are not performing are no longer someone else's people, 
they are your people after a year and a half there.
    I did want to ask----
    Mayor Williams. Could I--if I could just respond.
    Mr. Istook. Please.
    Mr. Williams. Well, again I think it's important because 
I've been criticized for this in the past as CFO. It is to give 
everybody a valid basis for evaluation, which I believe I have. 
No question there is a fair basis for evaluation.
    Too, I would urge on the Committee a couple of things. 
There's no question if you haven't accomplished your goals you 
have no one to blame but yourself. That's me, okay? Having said 
that, I want to make sure everybody understands that some of 
these numbers may include folks who are not excepted service 
and/or have retreat rights, are career people. Our strategy in 
those instances has been to rely, where changes are needed, to 
rely on the upcoming management supervisory service as well as 
this retirement buyout program because we're anticipating that 
many of these folks will be retiring and we will be able to 
accomplish the intended result even though they are not 
classified as excepted services.
    So my goal is to be as ambitious and as aggressive as 
possible in this because I think you're right, at the end of 
the day if the goals haven't been accomplished, I don't want to 
stand here and say I couldn't accomplish them simply because I 
didn't have a system or more money.
    Mr. Istook. Let me pose a question to Ms. Jarmon if I may.

      Management Reforms--Tracking Problem Occurred With New Mayor

    I know of course in your report talking about reforms that 
are put on the table and then they're not tracked, they're not 
followed. The Mayor has mentioned that of the 200 remaining 
reform projects, let's take this group and this is the focus--
of those started in the prior administration, certain ones he 
is trying to carry through and pursue. Ms. Jarmon, from your 
work so far, what is your ability to correlate how much of 
these problems were in a prior administration compared to the 
current administration in tracking the flow of the money that 
was provided for management reforms and whether those reforms 
were tracked and measured and actually pursued?
    Ms. Jarmon. We didn't actually look at it from that 
perspective. We were looking to see which projects were 
tracked, like in fiscal year 1998, and we had the listing then 
of about 280 projects. Like I mentioned, during that time they 
were getting monthly reports on the status of those projects. 
Then in fiscal year 1999, when the new administration reviewed 
the projects that were considered not complete, which at that 
time there were about 200 projects remaining, there was some 
analysis to determine which projects were the best ones to 
consider. Then there were 20 identified that were the best ones 
to continue in fiscal year 1999, that were going to be tracked 
in 1999. It was at that point where there was difficulty in 
determining what happened to the remaining 180, whether some of 
those were tracked somewhere outside of management reform. Some 
of them were capital projects and were tracked separately, but 
there wasn't a good crosswalk at that time as to what happened 
to those other projects that were not considered the best 
projects to carry forward for fiscal year 1999. At that point 
there was a lack of audit trail. We had difficulty following 
and getting support for those projects.

                             NO AUDIT TRAIL

    Mr. Istook. Does an audit trail exist now to track what is 
happening now?
    Ms. Jarmon. We received this week, this Wednesday, a 
summary of the status of the projects for fiscal year 1999. So 
we haven't had a chance to analyze that information. So it's 
difficult to say at this time what support there was behind the 
information we just received for the 1999 projects.
    Mr. Istook. I need to allow Mr. Moran to take some similar 
time and pose questions, then I'll come back and continue 
further. Mr. Moran.

      $330 Million in Management Reforms; $1.5 Million in Savings

    Mr. Moran. Thank you, Mr. Chairman. I will go to Ms. Jarmon 
first to make sure I understand all this. In fiscal years 1998 
and 1999, about $330 million was identified, was agreed to by 
this subcommittee and this Congress because it was designated 
for management reform. That money was then parceled out to the 
agencies. You're telling us that once it was parceled out, 
about half of the money was actually used and about half went 
unobligated, right? That's correct so far?
    Ms. Jarmon. That's correct.
    Mr. Moran. Of the projects--there were 280 projects that 
this $330 million was--it's roughly an average of a million 
dollars a project. Some of them were almost exactly a million 
dollars a project. Of those projects virtually none was ever 
completed, nor did they show results. Is that fair or am I 
being too--general.
    Ms. Jarmon. Of those projects, we received a listing of 69 
projects that were completed.
    Mr. Moran. Of the 280?
    Ms. Jarmon. Right.
    Mr. Moran. You received 69 that were completed?
    Ms. Jarmon. Right.
    Mr. Moran. Did you find any real savings? Was this pretty 
successful stuff? Is there any anecdote that you can tell us 
where this was a really whiz bang thing that was accomplished? 
What did they have to show for it? If you were the public 
relations person instead of the auditor, what would you find 
that you could spin that this was money well spent? Is there 
anything that comes to mind?
    Ms. Jarmon. As one example in the fiscal year 1999 budget, 
there were expected savings of $10 million related to these 
projects. When we asked for support for that, we received a 
schedule showing that $1.5 million was saved.
    Mr. Moran. That's in total from those three agencies?
    Ms. Jarmon. For those three agencies. But we were asking 
for support for savings from all of these projects.
    Mr. Moran. Of the total $330 million and 280 projects, when 
it came right down to it, there was $1.5 million of savings 
from the $330 million?
    Ms. Jarmon. That the District could show us in support, 
right. Part of that was a lack of tracking, part of it was 
projects that were just begun.
    Mr. Moran. It was nice to see Mr. Lilly, incidentally, who 
is the Staff Director of the full committee. He has been 
working 20-hour days. I don't know how he is still standing. I 
hope you get a good break, Mr. Lilly.

              POOR EFFORT AT MANAGEMENT REFORM BY DISTRICT

    They showed $1.5 million of savings, $330 million invested 
to achieve savings, 280 projects, and of those 280 projects, 69 
you say were completed. But even the completion didn't 
necessarily produce savings. So what I'm getting at is in your 
estimation, this was a pretty sad effort at management reform 
at this time, wasn't it? Pretty ineffective stuff?
    Ms. Jarmon. There should have been better tracking of the 
costs.
    Mr. Moran. But even if it was tracked, we didn't have much 
to show for it?
    Ms. Jarmon. And better plans related to the expected cost 
savings, so that more could have been shown rather than the 
$1.5 million.

                    MANAGEMENT REFORM--UNSUCCESSFULL

    Mr. Moran. It makes you wonder if we're not better off 
instead of identifying money as management reform, providing 
the money to the Mayor with oversight from the Council and 
maybe starting at the end. This is how much we want to see 
saved or this is what we want to accomplish, because putting 
the money into these amorphous management initiatives just did 
not work. This was an unsuccessful effort in fiscal years 1998 
and 1999. So we've got to figure out a better way of 
accomplishing what we had wanted.
    Let me ask the Mayor. In hindsight, do you think that this 
money was well spent and how could we better have invested the 
$330 million generally, Mr. Mayor?

                         CONTROL BOARD FAILURE

    Mayor Williams. Well, first, as I say in my testimony, my 
major--first of all, they're not here, I'm not sure why I'm 
sitting here as their spokesperson because I'm not. You know 
what my feelings are about the control board. I think they've 
been of enormous service to our city, they were operating under 
extremely difficult conditions, this place was a complete 
wreck, they were trying to fill a void, there were some 
mistakes made, yes, but I make mistakes.
    Having said all that by way of a long winded preamble, I 
think that the issues with how this was done were, one, there 
were unclear definitions of what we mean for management reform. 
This is necessarily not the Financial Authority's fault but you 
necessarily had a committee structure trying to run a 
government and drive the change and that's going to invite 
problems. Most importantly I think that this was not really 
part of a comprehensive plan. There wasn't a comprehensive 
strategic plan for the District, of which the reform agenda was 
feeding these objectives. There was this discrete number of 
projects distributed to all the different agencies.
    Mr. Moran. 280 projects.
    Mayor Williams. 280 projects.
    Mr. Moran. Half the money didn't even get spent. What's 69 
over 280? Less than a third were ever even completed.
    Mayor Williams. But having said that, I do believe that in 
governments all over the country, I know speaking from the 
Federal government as a former CFO in the Federal government, 
cost accounting has not been great in any government. It is 
something we're all trying to build. And so the tracking, the 
cost tracking for these savings was lacking, no question about 
it.

               IMPROVEMENTS AT MOTOR VEHICLES DEPARTMENT

    But if I look at some of the projects, while specific cost 
savings were not tracked and may not have been provided, I 
looked at, for example, DMV and some of the things that were 
done in DMV in terms of an evaluation of the problems down 
there, putting new systems down there, the systems that are 
going in the DMV combined with some of the personnel changes 
that happened and the procedures changes that happened. They 
were clearly going to result in some benefit to the city.
    Mr. Moran. I think this is a discrete management initiative 
for which you have achieved reform and savings but more 
importantly than that, you've achieved some credibility and 
better customer service. That's what you wanted. I don't know 
about the Congress, but I think most D.C. residents would 
rather pay some more money if they could just get some timely 
and efficient and friendly service from D.C. employees. 
Apparently this is happening with DMV. That's a great project.

            GAO AUDITS--OBJECTIVE IS TO FOSTER IMPROVEMENTS

    What I'm getting to, because there's no sense crying over 
spilled milk, we try to use GAO audits to figure out how we can 
improve the situation for the future.

           20 MANAGEMENT REFORM PROJECTS IDENTIFIED BY MAYOR

    You have 20 discrete management reform projects that were 
funded in FY 2000?
    Mayor Williams. 1999.
    Mr. Moran. Much of it was spent, though, in FY 2000.
    Mayor Williams. In 1999, we tracked where we had achieved 
savings and in a lot of cases where we hadn't achieved savings. 
While the bad news is in a number of instances savings weren't 
achieved, the good news is that we identified something that 
wasn't working, when it didn't work, and were up front about 
it.

          SAVINGS NOT ACHIEVED--LACK OF CONTROL OVER AGENCIES

    An example would be--I want to also emphasize, again I'm 
not pointing fingers, but in 1999 the savings that I was 
supposed to achieve, 45 percent of them were really not within 
my control directly. So, for example, schools, not within my 
control, which is why we've gone through this long process now 
to try to reform the school governance structure because I'm 
sitting here testifying on what management reform did or didn't 
happen in the schools and I'm not really--I don't really have 
the authority. That's what we've been trying to do is get the 
elected officials more vested in this.
    Mr. Moran. Schools was a big one. You have authority in 
public safety. You had some management reform initiatives in 
public safety. I'm trying to figure out if we have been able to 
track the subsequent management reform initiatives better if 
we're going to be able to show some savings and discrete 
results or is it going to be pretty much----

       $18 MILLION IN SEVERANCE PAYMENTS TO REDUCE D.C. WORKFORCE

    Mayor Williams. I would say the answer to that is yes. To 
give you an example, of the $18 million for severance payments 
to reduce our workforce, we've gone through a very deliberate 
process about being very precise with the Committee about the 
criteria for the use of that money. I had one conception of how 
the money could be used, the Committee had another. Obviously 
the Committee won. So we're now moving with that approach to 
how we use that $18 million, and we will bring in the requested 
savings on the basis of the use of that money. That's how it 
ought to be done wherever these funds are provided.
    Mr. Moran. So you're confident that things have turned 
around, that you've got tracking systems, you're going to show 
savings? The 2 to 1 ratio that the chairman----
    Mayor Williams. I think there has to be diligence from the 
committee of oversight, whether it is here in most instances 
and our Council.

                  BUDGET SURPLUS AND MANAGEMENT REFORM

    Mr. Moran. Let me ask you and the D.C. Council, you have 
been able to tout the surplus that was achieved, was that in FY 
2000? How much was the surplus?
    Mayor Williams. Every year. In 1997, 1998, for all the 
years now.
    Mr. Moran. Let's try, in 1998 and 1999, do you recall how 
much the surplus was?
    Mayor Williams. In 1998 it was $445 million.
    Mr. Moran. $445 million. And 1999?
    Mayor Williams. $86 million.
    Mr. Moran. Is it possible that a good portion of that 
surplus was attributable to these management reforms where the 
money was put in, was not necessarily used for management 
reform, fell to the bottom line and resulted in a surplus that 
you could take credit for? Is it possible that the money simply 
wasn't spent but enabled you to show a surplus and to have some 
fiscal solvency?
    Mayor Williams. I think in some cases the money wasn't 
spent. In some cases the money was spent, in part of the 
general fund, in overall agency operations and as those 
operations were brought down it fell to the bottom line.
    Mr. Moran. So while it probably didn't produce management 
savings, it at least wasn't necessarily all spent and the 
unspent amount contributed to a stronger financial status for 
the District.
    Ms. Cropp. Could I add to that?
    Mr. Moran. Yes, we would like to hear from you.
    Ms. Cropp. I don't think so. There could be a part of it. I 
would not suspect, however, that it was a herculean share. If 
you just look at the figures of $445 million, that's way over 
the $330 million allocated for management reform. But 
additionally, I think you will probably find some of the 
management reform dollars in the capital budget. The capital 
budget would not fall to the bottom line in the surplus, I 
would think, no.
    Mayor Williams. That's a good point.
    Mr. Moran. That is a good point.
    Mr. Chairman?
    Mr. Istook. Thank you, Mr. Moran.

   MAYOR WILLIAMS AND COUNCIL CHAIRMAN CROPP PARTIALLY TO BLAME FOR 
                                PROBLEMS

    Let me focus on what may be one of the most troubling parts 
of this. Mr. Moran and I both have talked about how we don't 
want to take the sins of the prior administration and blame the 
current administration for those. But as we also referred to 
before, it's not as though there is no continuity. Ms. Cropp, I 
think you've been on the Council 9 years, chairing it for 3 
years.
    Ms. Cropp. It only seems like 90.
    Mr. Istook. I understand. Mr. Mayor, you were CFO during 
the time this $330 million was allocated for management 
reforms, I think since 1995 until, I'm not quite sure what your 
separation date was from that position. But you were both in 
key positions during the time that these reforms were supposed 
to be under way, as Ms. Jarmon has testified to. As persons 
that were in key positions at that time, obviously you bear 
some of the responsibility for making sure that they happened 
as they were intended to happen.
    Ms. Cropp. I would like to take a little exception on that 
for the Council.
    Mr. Istook. That's why I used the term some of the 
responsibility. I'm not talking about whether it's a herculean 
share or some other degree, but each of you I think would agree 
that you must bear some share of that responsibility. We won't 
worry about trying to assess percentages.

     COMMITTEE'S CONCERNS OVER MANAGEMENT SAVINGS IN FY 2001 BUDGET

    But with that in mind and knowing that the stability of 
this year's budget, the balancing of this year's budget in part 
depends upon productivity and management reform savings, and if 
you don't achieve that surplus, you're not going to get out 
from under the restrictions of the control board and the 
statutory requirements.
    Mayor Williams. The key thing there is that in this year's 
budget, the Council and Mayor agree that if the savings aren't 
achieved, there is no compensating expenditure. By necessity 
there will not--in other words, all expenditures are tied to an 
offset. The savings that I've said we're going to achieve with 
$37 million, for example, in personnel savings, first of all, 
that's a discounted, conservative number. Secondly, if this 
number isn't certified as achieved by the CFO, there can't be 
any expenditure in that amount out of freed-up moneys from the 
former $150 million reserve. So we've been very, very 
conservative to prevent what we're talking about right here.

                     DISTRICT'S CREDIBILITY DAMAGED

    Mr. Istook. This relates to what I was going to say. If we 
want to make sure those materialize, we have the responsibility 
of approving or disapproving items in your budget. It raises 
the question of should we be doing something to make sure that 
certain expenditures indeed don't happen, if certain savings 
don't happen. We've tried, as you know, last year to respect 
your budget, but we want to make sure that those savings 
happen.
    One thing that I think is a very important factor, and I've 
looked at the timetable that you have regarding the RIFs and 
the changing of the status through the management supervisory 
service to at-will employment and so forth. But looking at that 
timetable and comparing it with the timetable of the 
appropriations process and when we might expect to finish our 
work, not just on the House version but on the conference 
version of this bill, I think it's going to be very important--
I know it is to me, and I suspect it will be to many other 
House Members and Senators involved in this--it is going to be 
very important to see what happens with this RIFing process, 
with the union negotiations that are under way as we are 
simultaneously working on your budget, because that's going to 
be one measure to us of the dependability of the savings that 
are built into your budget from the reform efforts.
    If we see contrary indications, whether it be because the 
negotiations with the unions seem to be building in more 
complexity and more problems rather than simplifying and 
improving things or there is some difficulties that somehow 
materialize in the downsizing that you've discussed on the 
1,000 positions, I cannot see how that would not directly 
impact what we are doing as we're working on your budget for 
the coming year and the appropriations for it.
    I think it's just incumbent upon me to point that out. I 
really think it's kind of obvious but these things are going to 
be going on simultaneously and they are going to be 
interrelated.
    Ms. Cropp?

                 COUNCIL ACTIONS ON MANAGEMENT SAVINGS

    Ms. Cropp. Mr. Chairman, let me say obviously as being a 
part of the Council, the Council being a part of the District 
government they are responsible. One of the reasons that I have 
said that the District's legislative branch was not as much 
involved with the management reform, we did take part in the 
initial identification of problem areas, but it was outside of 
our ability after that to have any impact on specifics. We 
wanted it, we wanted to be involved. I think one thing that 
will be different now is that you do see involvement of the 
legislative branch, in the $37 million for example, that you 
will see in this budget. If you look at this budget, one thing 
that you will see is that the Council had concerns just as 
you--as you articulated with regard to the $37 million. We 
realize it's part of the budget and we wanted it to be 
balanced. And because of the concerns that were there, we 
worked with the Mayor and we came up with a process that we 
think will help safeguard the concern that you've raised and, 
that is, if the $37 million is not realized, then certain other 
things will not happen. There are other parts of the budget 
that may be expanded programs or new programs.
    Mr. Istook. Those would be?
    Ms. Cropp. They will only be kicked in based on the success 
of the $37 million.
    Mr. Istook. I'm trying to recall which elements those are.
    Ms. Cropp. I can't recall the specifics of them but they 
have been delineated. So if the Mayor successfully completes 
$20 million in the management savings, then $20 million in new 
and expanded programs will be implemented and to the extent 
that the other $17 million was not accomplished, then something 
will not happen that's in the budget. That was a concern that 
the Council had and it's also a safeguard that we had. It was 
the mechanism that the Council and the Mayor agreed to in order 
to ensure that we end up with a balanced budget.
    So don't worry about the time lines, there are safeguards, 
there are triggers as to whether or not it's successful. As the 
Mayor told the Council, I want to be successful, I want my 
plans to be implemented.
    Mr. Istook. And, believe me, I want you both and all the 
District to be successful. It is trying to help make sure that 
that happens that causes us to have hearings such as this, not 
to berate but through an honest and frank discussion of the 
accountability to make sure that these things happen. Because 
frankly I realize that one thing that's important to your 
ability to push accountability into all the levels of 
government is for people to see that you are being held 
accountable yourself, because I think that filters all through 
the system.

                       CFO CERTIFICATION REQUIRED

    Ms. Cropp. What we have done--let me just add. What we have 
done in the legislation is that we have asked that the CFO 
certify that certain things have occurred and as the CFO 
certifies that certain things have occurred, then the programs 
will kick in.
    Mr. Istook. Did you have anything you wanted to say on 
that, Mr. Mayor?
    Mayor Williams. No.
    Mr. Istook. Let me go back a moment to GAO.
    Mr. Moran. Mr. Chairman?
    Mr. Istook. Yes, Mr. Moran.
    Mr. Moran. On this subject, would you yield?
    Mr. Istook. Go right ahead. Certainly.

  FOLLOW-UP HEARING TO DETERMINE WHETHER $37 MILLION SAVINGS ACHIEVED

    Mr. Moran. With regard to this $37 million, we have a 
letter addressed to you from the D.C. Personnel Department that 
I know was shared with the Mayor and City Council. It says 
that, ``As you can see in the attached timeline, the vacancy 
management working group intends to have a preliminary 
allocation of the $37 million savings and reduction in 1,000 
FTEs by mid-August, with the final allocation complete by 
September.''

    [CLERK'S NOTE.--See pages 774-789 for letter referred to.]

    Mr. Chairman, do you think it would be worthwhile, and I 
would like to know from the witnesses, to have a follow-up 
hearing in the Fall to determine whether that was achieved?
    Mr. Istook. I agree with you, Mr. Moran, that we definitely 
want to have a follow-up. Whether the best form would be in a 
hearing or through an informal process that would involve us 
both, I don't know, but I totally agree with you that we need 
to make sure of that. I'm looking at the timeline, also. A lot 
of the activity is happening in June, July, and August, where 
we should have some measure of what has been achieved. The 
timeline shows September 1, for the final PS and FTE reductions 
being allocated and so forth; September 22, as the final day 
for retirements to be effective for essential employees and so 
forth.
    I don't know whether a hearing would be the best mechanism, 
but I absolutely agree with you that we have got to be doing 
this as a part of our responsibility.

   COUNCIL ``TRIGGERS'' REQUIRE SAVINGS BEFORE NEW SPENDING PROCEEDS

    Ms. Cropp. Mr. Chairman, you had asked earlier about 
specifics. Actually in section 4702 of the Budget Support Act 
is where it is stipulated what the triggers are with regard to 
the $37 million. You had asked about what some of the things 
were. They were Department of Parks and Recreation, $1.2 
million, for example. Commission of Humanities, Arts and 
Humanities, $400,000. Office on Aging, $3.2 million; Employment 
Service, $2.5 million; University of District of Columbia, $1.5 
million; Public Works, $1 million; Motor Vehicles, $4.2 
million. These items that have been delineated specifically are 
based on the $37 million becoming real. They were on a priority 
basis.
    We have looked at that issue, we have been very clear about 
the issue, and if in fact it is not real, then these items that 
are listed in I think section 4702 will not then kick in.
    Mr. Istook. Thank you very much.

              CITY HAS MADE SAME PROMISEs YEAR AFTER YEAR

    Let me turn back to Ms. Jarmon, because obviously GAO does 
a lot of digging and inquiring and we lean on you. You are 
extremely helpful to us as we are going through this process 
and through discussion, and some people have pointed out to me 
copies of testimony from prior years that we have had, and I 
think you could go back several years and find a lot of 
exchanges very similar to this one. We don't want to have 
another exchange a year from now about why the things that we 
thought were going on did not actually happen. We want to make 
sure that this cycle, this loop that happens with talking about 
doing things, providing money for doing things and yet they 
don't happen, things don't become more efficient, they don't 
shrink down to size, they are not simplified, we want to make 
sure that we break that cycle.
    Ms. Jarmon, I recognize that your report was not focused on 
the current things but you've been here listening attentively, 
I know. Is there any key difference that you are able to tell 
us about between the mechanisms for monitoring and holding 
people accountable for what is going on now in the management 
reforms compared to what was supposedly going on in management 
reforms the last 2 or 3 years but was not happening? Has the 
accountability changed? Are you able--and if you're not able to 
give us guidance right now, I want to bring you into the 
process and have you help give us some guidance as to whether 
we are looking at the same old thing or if we are looking at 
measurable, definable mechanisms of tracking and accountability 
for the reforms that we're trying to accomplish. Can you tell 
us if there is a difference or not?

       KEY DIFFERENCE IN FY 2001 BUDGET--SPENDING TIED TO SAVINGS

    Ms. Jarmon. What seems to be the key difference is a lot of 
what the Mayor and Ms. Cropp have talked about relating to the 
$37 million. We didn't see when we were looking at the cost 
savings that were in the budget for fiscal years 1998 through 
2000, which I testified was about $200 million during that 
time, what they are talking about now as far as having the 
spending tied to the savings being realized. That's an 
important, key difference that we didn't see during the period 
we were looking at.
    Mr. Istook. That's the one that stands out to you as the 
most significant?
    Ms. Jarmon. Yes.
    Mr. Istook. I understand and appreciate that and certainly 
will want to work with you, as I said, on this process.
    Mr. Moran, do you have questions?

                           CITY'S PRIORITIES

    Mr. Moran. My principal question, Mr. Chairman, is first to 
the Mayor and then to the Council, but primarily to the Mayor. 
What can we do in this markup to be most helpful to you in 
accomplishing your management objectives in the short run and 
in the long run? Give us a little sense of your priority. The 
problem is that once we get back from this July Fourth break, 
we're going to hear from you on your FY 2001 budget, then we're 
going to mark up the very next day. This was not my suggestion, 
but since I wasn't asked, it seems a little quick.
    Mr. Istook. We don't always get our choice, as you know.
    Mr. Moran. I understand. Given that, how do you think we 
can be most helpful to you in this budget process?
    Mayor Williams. In terms of actual dollars or in terms of 
management changes? We could always talk about more dollars.

                MANAGEMENT REFORM MONEY NOT USED WISELY

    Mr. Moran. The dollars, the point we were making on this 
audit is the dollars didn't necessarily--some of it seemed a 
bit superfluous. It wasn't used for management reforms. Most of 
it got lost. Some of it fell--may have fallen to the bottom and 
contributed to the surplus. But there was very little tracking.
    Now, this new money under your new administration is 
apparently going to be trackable and is going to achieve a 
roughly 2 for 1 savings and that's terrific. But it has got to 
be more than that. You have still got a very unwieldly 
bureaucracy. You have got some agencies that are very difficult 
to modernize, to upgrade, to make more customer friendly.
    Since this is focused on management reform generally, not 
to be critical but to be constructive, what is it that we could 
do this year through the budget process that would help you 
accomplish your objectives, which I think are mutual objectives 
with ours?

              MAYOR'S PRIORITY--INVESTING IN PRODUCTIVITY

    Mayor Williams. To be most helpful and to focus not just on 
general dollars, for example, I know we are happy to have 
received the dollars for infrastructure that's going into and 
is tracked and we spent a lot of time to make sure it is 
precisely tracked. It was $50 million for infrastructure in the 
current budget. If you look at the condition of our roads and 
streets, while I will depart from our Acting Director of 
Transportation in saying we can wait until next year to have a 
new process in place for Federal dollars, I think what he meant 
to say is we're going to begin now with steps now ending up 
with everything fixed in a year. That's different from saying 
we're going to wait a year until we start fixing, to say we're 
going to start fixing now and it will be finished in its 
totality in a year.
    Having said all that, I would say that the biggest help I 
think this Committee could be would be to continue to make 
investments, because we have a very high rate of retirement, 
continue to make investments and allow us to the maximum extent 
possible seize this opportunity to continue right sizing the 
government in this whole area of productivity and management 
change.
    Mr. Moran. If you can show 2 for 1 savings from the $18 
million last year, and you think that you can continue in that 
vein and repeat it again, we are going to be short of cash, but 
obviously if you can produce those kinds of savings through 
attrition, through managing retirements, that's in our interest 
and that's what you're suggesting that can continue to be done.
    Mayor Williams. I think that that--in this line of really 
investing in productivity, tracking it, showing real results, 
yes.
    Mr. Istook. If I might take a moment, Ms. Cropp made me 
aware that she has a funeral that she has to attend. I did not 
want you to feel that out of protocol or anything you need to 
remain here during the last few minutes. I understand your need 
there. Please feel free to do whatever you need to do to take 
care of that.
    Mr. Moran. If I might, Mr. Chairman, ask Ms. Cropp if she 
has one last comment to leave with us in the same vein as the 
question of the Mayor?

  COUNCIL CHAIRMAN'S PRIORITY--TAXING NON-RESIDENT EMPLOYEES OF D.C. 
                               GOVERNMENT

    Ms. Cropp. Thank you, Mr. Moran. I do. And you may not want 
to hear it but I'm going to leave it if I may and expand just a 
little bit. Let me say I concur with the remarks of the Mayor. 
I'm going to ask that as we look at changing the District 
government and as we look at not only today but we are really 
trying to look at the future for the District, because, believe 
me, I don't want to suffer the pain that the citizens suffered 
and the government suffered over this past decade. We hope that 
it is lessons learned from history. As I look at the future and 
the out years for the District and as we plan for the budget 
today, we really need to look at that future. We look at our 
expenditure growth because of necessity. It may be 2 percent. 
If you look at our revenue growth, it may be 1.5, 1.7 percent, 
which means that there is possibly a problem looming in the 
future, and we need to prepare to address that concern.
    I ask that you really look in the future at the bill that 
our Congresswoman, Eleanor Holmes Norton, is introducing with 
regard to taxing income at its source, particularly for those 
who work for the District of Columbia government. Two-thirds of 
the people who work for the District of Columbia don't live 
here. Two-thirds. For every dollar earned in the District of 
Columbia, we only keep 34 cents. That is a telling figure 
there. For every dollar earned in the State of Maryland, they 
keep $1.15. Something is wrong with that.
    Now, I understand the concerns that Virginia and Maryland 
would have with us not having income taxed at its source. 
That's why the bill that Delegate Norton is introducing is 
something that would not harm Maryland and Virginia, while at 
the same time could be extremely beneficial to the Capital of 
the United States. It does mean that the Federal government in 
its role would probably pick up the difference somewhere. I 
would suspect that the difference is a rounding off number in 
the budget of the Federal government. But it could mean an 
awful lot to the District of Columbia.
    We have a lot to do. That's what this hearing is about 
today. We have an awful lot to do in the District. The Mayor, 
the Council, we are committed to doing our part. Sometimes it 
is hard. We have taken on some very tough issues recently. We 
have the wounds on our back for those issues. But we're willing 
to do that. But as we look at out years for the District of 
Columbia, I think we have to also get out of the box in the 
District and think of things differently. I would ask that the 
Committee could play a real good role in this particular issue. 
In this case, Mr. Moran, it would not hurt the citizens in the 
Commonwealth of Virginia, because we understand the concerns 
that your citizens may have. So we're asking that you join us 
in partnership as we look at approaches to make sure that the 
District of Columbia where a dollar of income earned here we 
only keep 34 cents, 34 cents out of a dollar. It is not like 
that anywhere else in this country. I would hope that this 
committee can help us in trying to resolve this issue.

              CHAIRMAN ISTOOK'S REMARKS ON TAX RECIPROCITY

    Mr. Istook. If I might, Ms. Cropp, I would tell you as a 
matter of principle, as a matter of comity and of fairness, I 
don't think that one jurisdiction should say that we will tax 
the income of people who live here and the income of people who 
work here but don't live here unless they are willing to grant 
the same privilege to the other jurisdiction involved. I think 
that's a two-edged sword. I'm frankly not sure what Virginia's 
or Maryland's tax laws are regarding if they have somebody that 
lives in Virginia, for example, but works in the District or 
vice versa, but I do think that there is a basic principle of 
fairness and that no jurisdiction should expect to have it one 
way but then say that the companion jurisdiction cannot. I 
think that goes to the heart of what you're describing.

       CONGRESSMAN MORAN'S REMARKS ON TAXING INCOME AT ITS SOURCE

    Mr. Moran. If I may, Mr. Chairman, beyond that issue, the 
State income tax in the District is twice what it is compared 
to Virginia. But I think it needs to be understood, too, though 
that the folks who are working in the District of Columbia and 
living in the suburbs are raising their children in the 
suburbs, they are using primarily the municipal services that 
those suburban jurisdictions provide. They come in here during 
the day, they work, they generally spend money, sometimes a 
substantial amount of money on lunch and other amenities, and 
then they go back and their kids--the education and public 
safety are the principal municipal costs, and those, of course, 
are borne by the suburban jurisdictions. There is not a lot of 
cost that is incurred to accommodate the people who come in 
here to work and many of them, of course, work for the Federal 
government. Roads obviously are an expense but a significant 
amount of the road costs are borne by the Federal government.
    Having said that, though, I am not inalterably opposed to 
Mrs. Norton's latest proposal. I think we can work with it. I 
think that the best approach is a regional one that is focused 
on services that must be provided on a regional basis but are 
integral to the District of Columbia. For example, if we had a 
regional transportation authority that could issue bonds, not 
necessarily tax but maybe in the long run you could tax as 
well, that could pay for public transit. D.C.'s survival is 
dependent on many things, but one of the principal things is to 
take a radial transportation system that is basically 
originated within the District of Columbia. That has to be 
financed. There are ways that we can do that on a regional 
basis that would probably end up with a substantial subsidy to 
the District of Columbia.
    A commuter tax is a very difficult thing to sell. It may be 
an easier sell with the kind of management reforms we're 
talking about, where people are confident that the money would 
go directly to the D.C. Government, would be spent in an 
efficient and effective way. That has not necessarily been the 
case in the past. And so it has been a nonstarter as an issue. 
Money going to a regional authority which might have more 
credibility in terms of its efficiency and effectiveness would 
probably be an easier sell, but at this point there is not 
going to be a commuter tax in the near term.
    The path that we are on, trying to work with the District 
government and trying to find creative ways of helping you to 
not only reform but to enhance your services is in all of our 
interests. I do think as we go into more regionally oriented 
efforts that D.C. will become the principal beneficiary. As we 
strengthen the core of the District of Columbia, we also help 
the suburbs, but we understand the suburbs have more capacity 
to help the core than they are exerting right now.
    I know that Congressman Tom Davis feels that way as well 
and I certainly do, representing the suburbs. But as Chairman 
Istook said, too, if you look at the transportation patterns, 
for example, the Southeast Expressway in the evening, that is 
more congested with people traveling from jobs in the northern 
Virginia suburbs back to their homes in D.C., than it is in the 
morning in that direction. In other words, the reverse flow 
appears to be getting more congested than the traditional flow 
of people coming from the suburbs. So we are providing a 
substantial amount of employment and that is helping the 
District. I do think with this economic boom that we are all 
benefitting from, D.C. is at least as much a beneficiary. I 
think the future is a very positive one.

             MAYOR'S REMARKS ON TAXING INCOME AT ITS SOURCE

    Mayor Williams. If I could just echo what Linda said, 
though, I strongly support Eleanor's proposal because I think 
it really does address this issue of the budget and operations 
for Maryland and Virginia. I would as Mayor use any proceeds in 
a way that addresses regional issues. If I were Mayor and we 
had these proceeds, I would use them for transportation, I 
would use them for tax cuts that even the playing field and 
have a regional benefit.
    Mr. Moran. You would during your term but when you set a 
tax structure in motion, there is no way to put those kinds of 
restrictions on the use of the money.
    Mayor Williams. That's an issue, but I think it is in all 
of our--I agree that we ought to be striving for regional 
solutions and there are--while you could argue over what 
benefits are or aren't provided, there clearly are some things 
here that all citizens, whether they live in the District or 
not, enjoy and I would use those proceeds on those kinds of 
things. Maybe it is police, fire, roads, and I would say 
economic competitiveness in terms of tax structure.
    Ms. Cropp. And I was talking primarily initially of just 
the District government workers, not those who work for the 
Federal government but just folks who work for the District of 
Columbia government who do not live in the District.
    Mr. Moran. I think it is potentially a viable proposal. It 
is one that we should and can continue to talk about.

 MAYOR WILLIAMS--NEED FOR MORE FEDERAL PROCUREMENT FOR CITY BUSINESSES

    Mayor Williams. A short term thing while we're on this 
point, we've talked a lot about the number of Federal agencies 
that are outside the District, but it is really Federal 
procurement where there has been a huge loss. And anything that 
can be done to use Federal procurement and target that for 
investment in the District and zones in the District would have 
enormous benefit potentially. You see what I'm saying?
    Mr. Moran. I do. Most of the Federal procurement in the 
Washington region is not tangible stuff, it's information 
technology, it's services and so on.
    Mayor Williams. But I'm saying it's going to businesses 
that are located somewhere. And to the extent we can get more 
Federal procurement for businesses in the District, 
specifically in areas we're trying to rebuild and rejuvenate, 
it can have enormous benefit.

            DISTRICT'S TAX STRUCTURE ``ALMOST CONFISCATORY''

    Mr. Moran. And as you put in those technology incentives 
and so on, you will probably get more of those firms moving to 
the District. But your tax structure is still almost 
confiscatory in some of those areas.
    Mayor Williams. We're working on that.
    Mr. Moran. I know you are. I'm glad you are.
    Ms. Cropp. Mr. Chairman, Mr. Moran, thank you very much.
    Mr. Istook. Thank you, Ms. Cropp.

                    INFORMATION TECHNOLOGY VENTURES

    Mr. Mayor, I wanted to mention, I had lunch with your 
Deputy Mayor for Economic Development Eric Price the other day. 
That is part of what we were talking about, the attractiveness 
of the District to information technology ventures and so forth 
and how that can be improved. I am certainly very interested in 
working with him and you and everyone else in the District 
because I think there is a lot of promise here and I want to 
help make it happen.

                BUDGETED SAVINGS NOT REALIZED IN FY 2000

    Mr. Mayor, there is something I wanted to ask you about 
here but I think we could ask about it at the budget hearing on 
July 12. Part of this year's budget, of course, anticipated 
procurement and management savings of $21.5 million consisting 
of $14.5 million in general supply schedule savings, and $7 
million in management reform savings. I wanted to have some 
discussion about that as it relates to the current year's 
budget, which of course is different than the RIFs and 
management supervisory service. But I think that's something 
that we could get into a bit as part of our next hearing rather 
than prolong this hearing past the appointed time. I don't know 
to what extent we might want GAO to just kind of look at that 
briefly in the 2 weeks we have between now and then but if we 
could explore that a little more.
    Mayor Williams. I would urge the chairman, I've been up 
front about my savings and whether we're achieving them or not. 
I've been up front saying forget the OSCP express and the 
supply schedule, it's not working, we need to try something 
different.
    Mr. Istook. You're talking about the very things that I was 
just describing.
    Mayor Williams. Absolutely.
    Mr. Istook. But as to the why and so forth, I think it is a 
part of that.

                   COMMITTEE REQUESTS FOR INFORMATION

    I also want to say, Mr. Mayor, as you know, through my 
office we have had a lot of information requests, some of them 
I know have been tedious and very detailed because we honestly 
want to help and partner with you in achieving these reforms in 
personnel and savings and so forth. I just wanted to express my 
appreciation publicly for your responsiveness to the 
Committee's requests. I know they have not been simple 
requests. It has taken a lot of attention from yourself and 
your staff. I want to express the Committee's appreciation for 
that. It has been a model of cooperation. I thank you for it.
    Mayor Williams. Thank you.

                         CONCLUSION OF HEARING

    Mr. Istook. We will be having the hearing on the FY 2001 
budget after we come back from the district work period. I want 
to express my appreciation to the Mayor, Ms. Cropp, Ms. Jarmon, 
Ms. Samuel for taking the time to be here, which I know is only 
the tip of the iceberg for all the work that you have done. We 
appreciate it. We stand adjourned.

       INSPECTOR GENERAL--AUDIT OF FY 2000 PERFORMANCE CONTRACTS

    [Clerk's note.--The following letter concerning 
``management reform projects'' was received from the D.C. 
Inspector General:]
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 


                                          Wednesday, July 12, 2000.

                      BUDGET FOR FISCAL YEAR 2001

                               WITNESSES

HON. ANTHONY A. WILLIAMS, MAYOR, DISTRICT OF COLUMBIA
HON. LINDA W. CROPP, CHAIRMAN, COUNCIL OF THE DISTRICT OF COLUMBIA
NATWAR M. GANDHI, CHIEF FINANCIAL OFFICER, DISTRICT OF COLUMBIA
ALICE M. RIVLIN, CHAIRMAN, DISTRICT OF COLUMBIA FINANCIAL 
    RESPONSIBILITY AND MANAGEMENT ASSISTANCE AUTHORITY

                   Chairman Istook's Opening Remarks

    Mr. Istook. The Committee will come to order.
    We are meeting this morning to receive testimony concerning 
the fiscal year 2001 budget for the District of Columbia. We 
are very pleased to have with us--and I should note that for a 
couple of them, it is for the second time in a couple of weeks, 
and we appreciate your making yourself available--first, of 
course, the Mayor of the Nation's Capital, Anthony Williams; 
Linda Cropp, the Chairman of the Council of the District of 
Columbia; Alice Rivlin, who chairs the D.C. Financial 
Responsibility and Management Assistance Authority--nobody 
calls it that, of course; we just call it the control board--
and Natwar Gandhi, who is the District's independent Chief 
Financial Officer.
    The testimony, of course, is very important to the 
Committee. Although we have received the written submissions, 
before we proceed to mark up our annual appropriations bill, it 
is extremely important to have the considered testimony from 
the city's leaders. We again thank you for gathering here this 
morning; we realize scheduling is difficult.
    Of course, our desire is to work together with the city, 
trying to make it the best possible place for those who live 
here, visit here, work here, to have a safe environment, 
facilities that are functioning properly, a solid education 
system for future generations, and certainly a safe community.

              CITY'S HISTORICAL TRENDS--CAUSE FOR CONCERN

    We all know the challenges that have been before Washington 
in recent years. I have to express, as I think everyone is 
aware, that there is a real issue over whether some historical 
trends are reasserting themselves in D.C. relating to the 
finances, relating to the extent of mismanagement problems. And 
I notice in some of the financial information that has been 
submitted by the District that the potential certainly exists--
and I am not trying to be a Cassandra and make a self-
fulfilling prophecy, but the potential certainly exists that 
the District, within 3 years' time, could slip back into 
deficits.
    Potential and actuality, of course, are two different 
things. But it is very important when we look at the budgeting 
of the District to recognize that one-time sources of revenue 
are not constant sources of revenue and should therefore be 
applied for different purposes than continuing streams of 
money.
    We recognize the District has historical concerns about 
limitations upon its ability to arrange its own financial 
affairs, which includes on the taxing side as well as on the 
expenditure side, and I think we will probably get into some of 
that in testimony this morning.

                         D.C. GENERAL HOSPITAL

    There is a grave concern regarding D.C. General Hospital 
and the corporation that is involved in running it--the annual 
deficits, and the disclosure of a previously undisclosed, 
publicly at least, addendum to an employment contract that has 
several questionable items.

              BIGOTRY OF CITY COUNCIL--CONTRACEPTIVE ISSUE

                (see page 1068 for copy of news article)

    And I have to share, because there is so much buzz here in 
the Capitol about it, I think that the D.C. Council in the eyes 
of the Congress of the Nation damaged itself immensely 
yesterday when it permitted a legitimate issue to become a 
forum for bashing religion and one faith in particular. The 
failure of others to speak up or at least disassociate 
themselves from the bigotry that was expressed in the Council 
meeting yesterday is a great disappointment, and there is 
immense talk about that on Capitol Hill.
    Having seen wrongful accusations here in Congress earlier 
of supposed bias against a faith, and then to have it blatantly 
declared by members of the other party yesterday was really a 
chapter that is going to linger in the memory of a lot of 
people in this body for a great amount of time.

 CONSTITUTION PLACED DISTRICT EXPLICITLY UNDER CONGRESSIONAL OVERSIGHT

    I think part of what it does is illustrate the special 
challenge that the District of Columbia faces, which is why, 
under the Constitution, it was created separately with a 
distinct difference between its governance and that of the 
States, namely, that the Nation's Capital, by its nature, 
attracts political activists, special interests that want to 
try to change the course of the Nation by changing the course 
of the Nation's Capital. And the Founding Fathers, not wanting 
that to happen, wanted to make sure that there would be a 
system to resist the special interests that would be attracted 
to the Nation's Capital.

    SPECIAL INTEREST PRESSURES--CHALLENGE TO LOCAL POLITICAL LEADERS

    I know that it is a great challenge that you as political 
leaders in Washington, D.C., face, which is resisting the great 
pressure that is brought to bear by the special interests and 
having to achieve election in spite of those pressures.
    And that is at the heart, I think, of so many of the 
problems that D.C. has: processes that run slowly, budgeting 
decisions that are driven by those, the challenge of getting a 
grasp over a community where everyone wants to stop anything 
from happening unless their particular interest is satisfied, 
more so than any other community in the country.

 SPECIAL INTERESTS AND ACTIVITISTS--BOLD LEADERSHIP REQUIRED TO COUNTER

    And we in Congress are certainly looking for bold 
leadership by those involved in the governance of the District 
of Columbia, standing up as necessary to special interests and 
political activists to try to make this a safe, functioning 
community for the welfare and future and prosperity of the 
people who live here, and certainly also the people who work 
here and the people who visit here.
    Great concern has been renewed by what happened at the D.C. 
Council yesterday, and I would be very remiss, I believe, if I 
did not point that out.

         D.C. GENERAL HOSPITAL--ANTI-DEFICIENCY ACT VIOLATIONS

    There is great concern about finances. I am going to go 
back a moment to D.C. General Hospital. There is clear law on 
the books regarding not making expenditures that have not been 
appropriated; and if that law is being circumvented, persons 
involved in circumventing that need to be held accountable. And 
those who are in charge of boards in D.C., regardless of how 
bad mismanagement may be by persons in key positions, if the 
persons that are on supervisory boards that are supposed to be 
making sure that things are run properly do not do their job, 
then do not blame just the individual that is heading an agency 
or department, look at the responsibility of those who are in 
positions of oversight and whether they performed their 
authority.

            CITY LEADERS NEED TO USE TALENTS TO IMPROVE CITY

    These are some of the issues I anticipate that we will be 
getting into as the hearing progresses. But let me say I 
believe that the persons that are sitting on the panel in front 
of us have the ability, have the personal desire, have the 
capability, the talents and the political capital if they will 
use it, to buck some of these historical trends and to make the 
turnaround that everyone in this country is cheering for 
Washington, D.C. to make.
    I have no doubt of your abilities. I think that what we 
want to do is to help you to find the ways to have the 
necessary political leverage and structure to be able to make 
that turnaround that we are all looking for.
    I yield now to Mr. Moran, the ranking member.

                 CONGRESSMAN MORAN'S OPENING STATEMENT

    Mr. Moran. Thank you, Mr. Chairman.
    I want to thank the Mayor and the Control Board Chair and 
the City Council Chair for spending their time, and our Chief 
Financial Officer for spending the time here this morning and 
sharing their perceptions of the budget. I suspect that I am 
going to agree with those perceptions and I certainly--even if 
I did not, I would be inclined to defer to their judgment, 
since they are the ones who will be held accountable for the 
D.C. budget.
    I want to begin by saying that I very much regret that 
through events which I understand are outside of the chairman's 
direct control, we are holding today's hearing just one day 
before this subcommittee considers the bill--in other words, 
will mark up this bill. That does not give us any time to 
reflect on the remarks of today's witnesses, and it is really a 
rush to judgment; I don't think it serves this institution very 
well nor the District.

                          PRIORITIES OF BUDGET

    But I commend the Mayor and the City Council and the 
control board for their efforts to craft a consensus budget 
that builds on the strengths of the District's financial 
recovery and makes strategic investments in, as they say, 
``children and youth,'' ``safe neighborhoods,'' ``strong 
communities,'' and ``making government work.'' those are our 
priorities as well. They are mutual objectives. And I do think 
that this budget lays the groundwork for fundamental reform and 
reshaping of the District's public services.

            CITY'S FAILURE TO PROVIDE BASIC SERVICES--IMPACT

    No one has suffered more than District residents for the 
failure of its agencies to perform basic services. And the 
suburbs are not suffering; people move to the suburbs because 
of the fact that public services have not consistently been 
customer friendly within the District.
    I am glad that is changing, and I am glad that people are 
going to feel better about turning to the D.C. government for 
help, whatever that help might be. So committing the resources 
to restore these basic services and thereby raise the public's 
expectation that they will improve should create the momentum 
and accountability that the District needs to ensure that our 
shared objectives are fulfilled.
    I can't think of many more important investments essential 
for the District's long-term financial health than those you 
have outlined in your budget, and I know it is not an easy 
process and not everyone is going to be happy with its outcome; 
but it is a budget that is balanced and it was completed on 
time. And I wish we could meet our objectives in as timely a 
fashion. I am afraid we are going to wind up again at the end 
of the fiscal year trying to come up with an omnibus bill 
because some of the appropriations bills we are going to enact 
will be vetoed.

                             FEDERAL FUNDS

    I hope this is not going to be one of those bills that gets 
vetoed. But it is already clear that, with the 302(b) 
allocation that caps the amount that we can appropriate to no 
more than $414 million, we will not be able to honor the 
Federal funds request of $445 million and adequately fund the 
District's courts, the Department of Corrections, build a new 
Metro station, help clean up Poplar Point or provide in-State 
college tuition benefits to D.C. students, all of which are 
congressional priorities--or at least there has been support 
evidenced for these projects. We are short $31 million from 
what would be a responsible budget; and at this point I don't 
know where we take that money, because I think this is a good 
budget, this $445 million.
    I don't think that $414 million is adequate, so it is 
probably going to be a painful process, particularly if we are 
forced to accept many of the social riders that were part of 
last year's bill and at the same time be unable to fund the 
Federal contribution to the District. We are going to have to 
wait to see what tomorrow's bill contains and what we get out 
of the final conference agreement with the Senate, but I am not 
particularly optimistic.
    I am looking forward to your testimony.

                          CONTRACEPTIVE ISSUE

    I should say, with regard to the issue that the chairman 
has raised, I know that there is a lot of consternation over 
this issue, but I certainly support the inclusion of 
prescription drugs--of contraceptives in prescription drug 
benefit packages. That basic objective is an appropriate one as 
far as I am concerned, and I think it is very unfortunate that 
it has become so politicized. It needed to be done.
    A lot of these institutions go beyond religious 
institutions. They receive a lot of Federal money, particularly 
Georgetown. And they are supposed to be providing a public 
service to all of the public. But I won't get into that any 
deeper than I already have at this point. I know we have a vote 
on, but we are anxious to hear your testimony, and some of our 
colleagues may want to make statements as well.
    Thank you, Mr. Chairman.
    Mr. Istook. Thank you, Mr. Moran. Let me ask--I asked Mr. 
Cunningham to try to go to the floor and back, trying to keep 
this hearing continuous. However, I don't think it really would 
be fair to the Mayor and the other witnesses if we ask them to 
testify to part of us. So are there any other members that want 
to make any sort of opening statement?
    Mr. Tiahrt?

                  CONGRESSMAN TIAHRT'S OPENING REMARKS

    Mr. Tiahrt. I would just like to add my comments to what 
the chairman said about this occurrence in the D.C. Council. We 
have honored the ability for people to practice their faith in 
this Nation. And it saddens me that we have taken action and 
words were said that goes contradictory to some faiths.
    Contraceptives can be provided as an option, and it can be 
done so that people could select contraceptive coverage as part 
of their prescription coverage; it shouldn't be mandatory. And 
it seems a paradox to me that the people who are proponents of 
choice deny that when it comes to contraceptive coverage on 
insurance. So I am very disappointed in what the D.C. Council 
has done, and I think we should weigh what options we have in 
order to correct that situation in order to make it an option 
for people, rather than a mandatory requirement.
    Thank you, Mr. Chairman.
    Mr. Istook. Thank you, Mr. Tiahrt. Of course, my comments 
were addressed not necessarily to the merits of the underlying 
political issue, but the manner in which it was done and the 
scene that it certainly created.
    There being no other comments, we will rush as quickly as 
we can to vote and get right back. But we realize we are 
infringing on some very busy and important schedules, so we 
will stand in recess and resume very quickly.
    [Recess.]
    Mr. Istook. Thank you for being patient with us. Mr. Mayor, 
we would be very pleased to hear from you as the first witness.

                            WITNESSES SWORN

    The standard procedure of the subcommittee is to swear all 
witnesses, if I could have each of you stand.
    [Witnesses sworn.]
    Mr. Istook. Thank you.
    Mr. Mayor, we are pleased to hear from you.

                  OPENING STATEMENT OF MAYOR WILLIAMS

    Mayor Williams. Mr. Chairman, Congressman Moran, members of 
the subcommittee, thank you for the opportunity to testify 
before you today.
    It's an honor and a privilege to share with you our fiscal 
year 2001 budget. And I also want to recognize, if she is still 
here, our Congresswoman, Eleanor Holmes Norton, for the 
leadership that she provides here in the Congress.
    Mr. Istook. Thank you, Mr. Mayor.

                         THREE FINANCIAL GOALS

    Mayor Williams. This budget, in my belief, builds on the 
strong financial recovery achieved in recent years in our city. 
The District is going to begin fiscal year 2001 having met the 
three financial goals set out by Congress when it established 
the Control Act:
    First, we have balanced four consecutive budgets, those for 
fiscal years 1997 through fiscal 2000;
    Second, we will have gained full access to credit markets; 
and
    Third, we will have established financial reserves totaling 
over $400 million.

                      BLUEPRINTS FOR CITY'S FUTURE

    These budgets are more than just spending plans, they are 
blueprints for our future; and it is not only manifested in the 
programs that are funded, but the long-term restructuring of 
how our government operates. Although the District has 
stabilized its finances, my administration is also involved in 
a multipronged approach to make lasting improvements that will 
put the District's government on a permanent road toward self-
determination and self-government.

                     RIGHT-SIZING CITY'S WORKFORCE

    In an effort to weather any future economic storms, we are 
currently engaged in an effort to right-size the District's 
workforce and achieve significant cost savings. Using a variety 
of tools, including the Management Supervisory Service, agency 
directors are engaged in completely rebuilding our agencies' 
operations so that we can achieve and sustain the level of 
service our citizens expect and deserve, and even more 
importantly and fundamentally, make sure that over the long 
term, expenditures and revenues are, as we say in the business, 
``structurally balanced.''

                  TARGETS TO ENHANCE SERVICE DELIVERY

    Yet, this budget also has specific targets to enhance 
service delivery for residents and businesses. Although we 
still have much work to do in managing difficult areas, such as 
procurement, street repairs and beautification, and repairing 
the social service safety net, we are making tremendous strides 
every day, and we continue to demonstrate a strong track record 
of steady, constant improvements.

                            EDUCATION BUDGET

    Now, first, this budget is an education budget. I believe 
that if we want to continue to attract residents back to our 
city and accelerate that trend and ensure a future for our 
children, then we can settle for nothing less than the best 
education system of any big city in America. We have a long way 
to go, but again I believe that we have turned the corner and 
are beginning to make progress.

                $52 MILLION INCREASE FOR PUBLIC SCHOOLS

    This budget achieves full funding for the public schools, 
an increase of $52 million for next year. This is the first 
time in over 20 years that a Mayor has proposed a budget with 
the needed level of funding for our schools. I have balanced 
the approach of full funding with accountability, which is the 
only way of ensuring that funding reaches the classrooms and 
the schools and the neighborhoods where it belongs.

     CHARTER SCHOOLS--OPTION FOR PUBLIC SCHOOL STUDENTS AND PARENTS

    This budget also expands options for public school students 
and parents. To accommodate increased enrollment in charter 
schools, we committed $77 million next year to continue the 
reform effort. Currently, charter school enrollments are 
increasing year to year, but budgets are based on last year's 
enrollment. This means that there's a 1-year lag between 
increased enrollment and an increased budget. Next year, I look 
forward to working with Members of Congress, our City Council, 
the control board, and the community to correct this situation, 
to ensure fair competition.

                COLLEGE TUITION ASSISTANCE GRANT PROGRAM

    Now, education does not stop in high school, which is why I 
want to thank the Congress for passing the District of Columbia 
College Access Act, and through it, appropriating money for the 
D.C. Tuition Assistance Grant Program. This program will give 
many D.C. students the opportunity to attend college for the 
first time. The good news I have for you today is that our 
constituents are taking advantage of this opportunity. As of 
July 7th, we have received over 2,300 applications for this 
program. This has exceeded our initial goal of 2,000 
applications, and applications continue to pour in. What these 
numbers mean is that we are well on our way to spending the 
funds allocated for this program.
    We are confident that a large proportion of our graduating 
high school seniors, as well as students attending eligible 
institutions, will receive the tuition grant. Unfortunately, a 
large group of students who otherwise would be eligible for the 
program have been left out. These are District residents that 
will be seniors in college this fall. A cutoff date of January 
1, 1998, written into the legislation, results in most seniors 
being ineligible for the program.

          CHANGE IN CUTOFF DATE FOR COLLEGE TUITION ASSISTANCE

    I am requesting that Congress reconsider this cutoff. By 
moving it back to January 1, 1997, a whole class of students 
will become eligible. This will give us the ability to have a 
full cohort of students in the program in its first year. And I 
am confident that we have the capacity to administer a full 
program, including our college seniors, this year.

                  FOSTER CARE AND ADOPTION INITIATIVES

    This budget also continues our collective efforts to build 
families in our city. There is continued funding for foster 
care and adoption initiatives which, in my opinion, should all 
be directed toward funding and supporting those families that 
both adopt and engage in providing foster care.

            CHILDREN TRUST--SERVICES BEFORE AND AFTER SCHOOL

    We also need to continue our commitment to provide quality 
services before school, after school, on the weekends, and in 
the summers--in other words, at all times out of school. As 
part of the Children Investment Trust, I include $10 million in 
additional funding to provide programs during these out-of-
school hours when our children are most likely to fall into 
trouble.
    Studies show again and again that after-school programs, 
particularly where, in our case, you are involving a 
partnership between government and the private sector, 
government and the foundation community, government and our 
faith community, you can reduce juvenile crime and raise 
academic performance.

                 REDUCING CRIME--PUBLIC SAFETY AGENCIES

    Now, we have made some progress in the past year in 
reducing crime in our neighborhoods, but I am the first to tell 
you there is more to do. We need a budget that supports our men 
and women in uniform and empowers constituents to reduce crime 
with our public safety agencies in their neighborhoods. So, for 
starters, the MPD has already met its fiscal year 2000 target 
of 3,600 sworn officers, and for the first time, this includes 
over 100 lateral transfers from Federal and neighboring law 
enforcement agencies. In addition, I am going to continue to 
challenge the police, the prosecutors, the courts to manage our 
resources efficiently and get more out of our officers on the 
beat where we need them.

                          GUN BUY-BACK PROGRAM

    Second, as part of MPD's budget, we will continue our gun 
buy-back program, which collected almost 3,000 guns last year.

                         OPEN-AIR DRUG MARKETS

    And third, we will continue our Capital Communities 
initiative to work with neighborhood residents to shut down 
open-air drug markets. We have already seen the benefits of 
community policing in those neighborhoods, and I want to take 
this strategy citywide.

                          ABANDONED PROPERTIES

    Fourth, we are mounting a coordinated effort to root out 
the conditions that breed crime in our communities, such as 
returning more abandoned properties to productive use.

                        FIRE FIGHTING INCREASES

    Now, in addition to crime fighting, we are also insisting 
that we support our dedicated fire fighters, who risk their 
lives to protect our homes and neighborhoods; and so this 
budget includes $7.5 million to buy new pumper trucks, ladder 
trucks, and rescue vehicles. You can never take all the risk 
out of being a fire fighter, but you can and should reinvest in 
their safety, and that is why this budget commits $4.3 million 
to add a fifth fire fighter to our fire trucks and a battalion 
aide, so that no fire team will go into action with one arm 
tied behind its back.

      ECONOMIC DEVELOPMENT; HOUSING; NEIGHBORHOOD CLEANUP EFFORTS

    The next priority in this budget is economic development in 
our neighborhoods, and in this budget we have committed $21 
million over 3 years to demolish more than 1,000 units of 
vacant and abandoned housing throughout the city to make way 
for new homes. This budget also contains funds to hire 24 new 
housing inspectors to preserve our housing stock, as well as an 
additional $2 million to support neighborhood cleanup efforts.
    Following through on a commitment I made last year, this 
budget contains more than $7 million to acquire sites to 
relocate District agencies to our neighborhoods.

                      GEORGIA AVENUE REDEVELOPMENT

    To that end, I recently announced a $100 million 
redevelopment plan for Georgia Avenue, the District's original 
``Main Street,'' which will include the relocation of the 
Department of Motor Vehicles to the Petworth neighborhood. This 
is a first step in my commitment to move the agencies into 
neighborhoods to better serve the citizens and to act as a 
catalyst so that we can leverage public funds and partnerships 
with the private sector to drive our continued renaissance of 
our neighborhoods. In fact, businesses both on Georgia Avenue 
and all around town are investing funds predicated on these 
government initiatives. Much of the urgency of the investment 
along Georgia and New York Avenues is to support local 
businesses and stabilize community.

                 POPLAR POINT AND NEW YORK AVENUE METRO

    To continue my goal of revitalization of the city, this 
budget contains funds for Poplar Point in Anacostia National 
Park and to construct the New York Avenue Metro station, which 
is a model of public-private participation, the private sector 
putting up $25 million, the public sector, $75 million.

                          HEALTH CARE SERVICES

    This budget includes $10 million to build and expand 
community-based doctors' offices conveniently accessible to 
every home in the District. To that goal, this budget will 
provide $1.4 million for four new senior wellness centers, 
expanded home care services, and job opportunities for seniors.
    The budget makes important strides in the areas of lead 
poisoning, HIV tracking, clean water initiatives, and full 
funding for the Commission on Mental Health.

                       PBC/D.C. GENERAL HOSPITAL

    And finally incorporated in this budget, as it is fashioned 
as a result of the findings of the Health Care Commission, I 
want to take a moment to talk about the Public Benefit 
Corporation, because I believe that I personally--and my 
administration--both in my role as CFO and now as Mayor, am on 
the record that the health care system in this city has to be 
less costly, has to serve more people, and has to be in tune 
with modern health care economics.

                       EXPANDING HEALTH INSURANCE

    And I think that in my first budget--although it wasn't 
properly executed, we were on the record saying that for the 
health care dollars we are spending, maximum emphasis should be 
placed on expanding insurance in a cost-effective way and 
making sure that every hospital in our system, particularly our 
social-safety-net hospitals, earn their stripes and perform 
their functions in a cost-effective manner. And an example of 
where we took that approach last year was with our Greater 
Southeast Hospital.

                       GREATER SOUTHEAST HOSPITAL

    Greater Southeast Hospital was, in fact, part of our social 
safety net in the city, our health care safety network. It was 
part of the hospital network, but it was running out of money; 
it wasn't doing its job. We are on the record, as city 
leadership, saying that every hospital had to operate within 
financial limits--every tub had to sit on its own bottom; that 
Greater Southeast had to come up with a workout plan that 
allowed it to succeed under its own power, and there weren't 
going to be continued subsidies to support a losing 
proposition.

                         HEALTH CARE COMMISSION

    With the Public Benefits Corporation, we, as a result of 
last year's budget, impaneled something we called the Health 
Care Commission for the District. We looked at a number of 
different issues. It was the clear consensus of everyone on the 
Health Care Commission that a workout team be brought to the 
Public Benefit Corporation to put it on the same kind of 
footing, to put it on the same track that led to the successful 
resolution of the issues with Greater Southeast.
    That, in fact, is what has been done with a workout group 
now at the hospital, with a new board of directors in place 
having been nominated by this Mayor with the support of this 
Council; and I am confident that in a series of steps, we can 
see that the Public Benefit Corporation and D.C. General 
Hospital is, in a cost-effective way, playing its proper role 
in the social safety network without the deficiencies that we 
have seen, without the deficits that we have seen, in a 
responsible, cost-effective way.

                BUDGET SURPLUS FOR FOURTH STRAIGHT YEAR

    Finally, I want to say to the Committee that as it has been 
stated, the District will, for the fourth straight year, enjoy 
a budget surplus. And despite this good news and proof that we 
can govern the city well, there is still the specter of riders 
to the annual D.C. Appropriations bill.

                     RIDERS ON APPROPRIATIONS BILL

    Year after year, riders have invited controversy to the 
District's budget. Most of this budget, as Congressman Moran 
has said, is District taxpayer money; and we should be allowed 
to make the decisions for ourselves like every other 
municipality and local jurisdiction in the United States. This 
year, I hope the Congress will follow the President's lead and 
choose to allow the District to maintain this course toward 
something I campaigned on and something which we all believe--
one government, good government, and self-government:
    One government, in that on the basis of these balanced 
budgets and on the basis of our progress--we can thank the 
Control Board for their work, but let them go on about their 
own activities;

                         Good Government Goals

    Good government, in that we are pursuing the goals of 
reforming this government, right-sizing this government, 
providing a government that works and is a platform for 
investment, healthy neighborhoods, and strong families that we 
all want; and
    Finally--and very, very importantly in my mind--self-
government, in that it is the Capital of the United States and 
is a symbol of democracy for people all over the world.
    We recognize that democracy is not always perfect and that 
the marketplace of ideas can be chaotic, to say the least. I 
know I get up in the morning as the Mayor and there are some 
features of democracy that I do not particularly like; I wonder 
who created the separation of powers in the legislature, but 
this is something that we deal with, you know. And I respect 
Council Chairwoman Cropp, but this is something that we deal 
with.
    The fact of the matter is that there are episodes and there 
are times in our democracy as a city, as there are in our 
democracy as a country, where there are things that happen that 
we do not like; but they are precious to us and they are 
fundamental to us, and everything that I do is struggling for 
that day when we have one government, good government, self-
government and real, strong, full representation in our city.
    I look forward--and I have strong respect for this 
Committee, for the Chairman and Members of the Committee. I 
want to thank Congressman Tiahrt particularly for being with us 
at our prayer breakfast--I know it turned into a ``prayer 
brunch''--but for being with us that day; it was an important 
day.
    And we look forward to working with you and answering all 
of your questions.

                  Prepared Statement of Mayor Williams

    [The prepared statement of Mayor Williams follows:]
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Mr. Istook. Thank you, Mr. Mayor, and we will appreciate 
some chance to interact with you.
    Next, Chairman Cropp.

              Opening Statement of Council Chairman Cropp

    Ms. Cropp. Thank you very much, Chairman Istook, Mr. Moran, 
members of the House Appropriations Committee and to our own 
Delegate Eleanor Holmes Norton. I am pleased to be here this 
morning to testify on behalf of the District of Columbia's 
fiscal 2001 budget.

                 CONTRACEPTIVE ISSUE/CONSCIENCE CLAUSE

    I would be remiss, however, Mr. Chairman, if I did not 
address an issue that you had raised this morning. To the 
extent that there is a misperception regarding the debate that 
went on in the Council yesterday, let me correct it.
    It is my true and strong belief that it is a disservice to 
the Council of the District of Columbia to label the Council as 
antireligion or bashing of any one particular religion. The 
Council debated a very controversial issue yesterday, one that 
took up probably 3 hours of debate--a lot of talk between 
Council members and outside members for a long time, extensive 
lobbying and debate over the weekend.
    As we debated the issue yesterday, probably 2 or 3 hours' 
worth of debate there, it was an issue that dealt with health 
issues and insurance issues. There was probably a 1-minute or 
2-minute discussion by one member of the Council that may have 
dealt with a particular religion.
    I am certain in this august body that, at times, there may 
be one member who may go off a little different from where the 
majority is, but it is not the majority of the Council who took 
that position. And, in fact, it was the Council who said 
constantly that this is an insurance issue that we are dealing 
with, and this is a health issue.
    So I think that as we look at this issue--this Council 
works extremely hard; it does not take anything lightly--we 
suffered over this. It was a contentious issue within us as we 
wrestled with it and wrestled with whether or not we would put 
that clause in there. But I am extremely proud that the Council 
grappled with the issue.
    We have different opinions on it, even now, today as to 
where we want to come out. But the Council took its vote. The 
one thing that we were consistent on and the one thing that we 
all realized that we needed to move forward on was that this 
was a health issue that was extremely important to the citizens 
of the District of Columbia. This was a health issue for the 
women of the District of Columbia, particularly poor women who 
had no other alternative in many instances to deal with their 
particular needs.
    This was an issue for women; it was a discrimination issue, 
and many issues--in trying to deal with where males were 
allowed to have certain insurance rights and females were not 
allowed to have certain insurance rights.
    This was a health issue when we looked at HIV/AIDS and 
other things increasing dramatically in this city. This was a 
health issue for the District of Columbia when we looked at the 
number of people who were contracting venereal diseases, and 
the cost to the city and the deaths that have occurred, to 
this, when one member deviated from that. And let me say that 
many Council members expressed concern about that deviation and 
said, we are not talking about any particular religion.
    There are members of the Council who belong to the 
particular religion that was mentioned. I am one. I am a 
Catholic. But members on the Council said, we need to keep this 
straight that this is a health issue and an insurance issue.
    There may be debate and there may be different opinions 
with regard to the conscience clause in there, but under no 
circumstances did the Council of the District of Columbia bash 
any religion; and in fact, I think the Council's position is 
one of respect to not only the Catholic faith, but every other 
religion that may come before us or may be involved in this 
city.
    So I did need to put that on the record to make sure that 
there was a clear understanding that even though the media 
sometimes may like to sensationalize one point that may be the 
sexy part of something, an 8-hour meeting, 2 hours prior to 
that meeting--2 minutes of dialogue, and that is what gets the 
headline--some very good work that was done strengthening 
marijuana laws so that we could cut down the marijuana traffic 
in the city; sentencing reform that we took up yesterday at the 
Council; ten other insurance pieces that will hopefully attract 
insurance companies to Washington, D.C. There was an awful lot 
of hard work that went on by the members of the Council of the 
District of Columbia, who have worked extremely hard to try to 
set this city on a course.
    So I would like to straighten up any misperception that may 
have been out from a 1- or 2-minute statement that may have 
been made by one member of the Council.

           CONTRACEPTIVE ISSUE--REVIEW OF MEETING TRANSCRIPT

    Mr. Istook. I appreciate very much your comments. I think 
that you will find many people who will be looking through 
transcriptions or recordings of the meeting because of the 
concerns. But I certainly am sensitive to your comments of how 
a body can be tarred with the statements of one or two persons 
within it.
    As you correctly note, that happens in the Congress, as 
well as happening in the Council in the District and every 
other public body. Having gone through efforts several months 
ago to try to paint my own party as supposedly--of course, it 
was nonsense, but supposedly having a bias against your faith--
I realize the great sensitivity, of course, that people have 
out there. And I think that you would probably share that 
sensitivity as well.
    And we won't take that from your statement time, because I 
realize the importance of that issue. If you would like to 
proceed with your prepared statement that is fine.

               COUNCIL STRIVING TO END ``CONTROL PERIOD''

    Ms. Cropp. I would. Thank you very much Mr. Chairman.
    Let me fast forward to next year. Imagine another oversight 
hearing, expect we will be celebrating the day for the 
following reasons:
    We would have balanced our budget for 4 straight years.
    We will again present to Congress another fiscally sound 
budget.
    The Financial Authority would disappear, although we have 
enjoyed working with them and the hard work that they have 
done.
    And that would be a proud occasion for the District of 
Columbia government, because that is what we have been striving 
for to accomplish over the past 3 years, to become solvent 
financially and to end the control period.

                             FY 2001 BUDGET

    In this context, we are pleased and proud to present a good 
product for fiscal year 2001, a spending package that is 
fiscally disciplined, prudent and balanced. It includes more 
money for schools, police, health care, neighborhoods, and a 
modest tax credit for some 54,000 low-income families.

                          PRIORITIES IN BUDGET

    In this budget, the Council has set forward several goals 
for our city, i.e. service improvements, fiscal discipline, and 
strategic financial investments. This budget not only takes us 
closer to removing the Financial Authority, it continues to 
invest in the District and in its future specifically and 
strategically in the following priorities:
    Clean and safe neighborhoods;
    Tax reforms for working families;
    Quality health care;
    Economic and job growth;
    Effective education system with expanded funding; and
    Improved customer service.

                          THREE YEARS FROM NOW

    And, Mr. Chairman, you mentioned in your opening statement 
concern with regard to the District 3 years from now. The 
Council shares that concern with you as we look at possible 
revenue that will be coming in and expenditures. And we do not 
want to go back to where we were. We do not want to have to 
bring the Financial Authority out of its slumber. We want to 
stay solvent, and one of the things that you will see as part 
of this budget is an investment plan that we strongly support 
that will help us to stay away from that very type of 
situation.
    During the past several weeks, the Council has worked 
diligently to reach agreement with the Mayor on various 
issues--funding critical needs, addressing freed-up 
appropriated funds from the reserve carryover, augmenting our 
revenue, expending or investing tobacco funds, to producing a 
solid financial plan that will meet the needs of our city. In 
this process, we aligned the priorities of the Mayor and the 
Council and produced a budget that will move the city in the 
right direction and make it a better place to live, to work, 
and to visit.

                   MAYOR'S BUDGET CHANGED BY COUNCIL

    When the Mayor submitted the budget to us on March 13th, he 
had proposed a local budget of $3.1 billion, in addition to 
using the reserve and tobacco funds amounting to $171 million. 
While we support the Mayor and concur with him that the 
District needs a budget that invests in critical services, 
educates our youth, funds health programs adequately, and cares 
for our elderly, our approach to this challenge was decidedly 
more cautious and even bordered on excessive fiscal restraint, 
if you can imagine that being said by the Council. Better yet, 
we assisted him in tackling those problems, particularly areas 
such as schools, blighted neighborhoods, enhanced health 
services for the elderly, improved services for the 
underprivileged children and mentally retarded within the core 
budget.

                NO TOBACCO DOLLARS OR RESERVE FUNDS USED

    And let me repeat, because that is very important, that 
this was done within the core budget and without using the 
tobacco dollars or the reserve funding.
    The Council did hard work, scrubbed numbers, and made some 
very tough decisions and fixed many problems. We cut excessive 
growth in several administrative areas. We scrutinized the 
numbers, found savings within the school transportation budget, 
and then fully funded the schools. This is in accordance with a 
suggestion by the Special Master for the special education 
programs when he testified that more savings could be made in 
the transportation budget.
    We gave an estimated $20 million to address the District's 
foster care system by leveraging Federal Medicaid dollars for 
which the District is eligible. Additionally, $13 million was 
given to the Corrections Department and $3 million to the 
mental health services just to list a few. Had we not done 
this, these areas would have been underfunded.
    Because we felt that these priorities were so important, 
our solution was to fund them within the core budget. We simply 
could not trust these funding priorities to a one-time windfall 
source of revenue beyond our control. We wanted to ensure that 
citizen needs were met through direct and reliable funding. We 
wanted to eliminate the happenstance of underfunding in areas 
that might later require budget cuts to fund these programs.
    We resisted the tendency just to add to the top of the 
existing budget. We found ways to selectively enhance revenue. 
We did all of these things because, as an oversight body, we 
have a duty not to waste the taxpayers' dollars. And prior to 
taking on these responsibilities of fixing the budget, the 
Council and its 10 standing committees devoted many hours of 
discussion with our citizens and spent much time in reviewing 
these agencies' performances at the budget and oversight 
hearings.
    At the end of this review process, we had conducted a total 
of 55 public hearings and, where appropriate, incorporated the 
input from our citizens and workforce in putting this budget 
together. And we would like to submit for the record a copy of 
our budget hearings, and there is an awful lot of good 
information that you can get there.

     RESERVE--$75 MILLION IN FREED-UP FUNDS FROM RESERVE CARRYOVER

    At this point, I would like to focus on the precautionary 
steps that we have taken regarding the freed-up appropriated 
funds from the reserve carryover. Besides enabling the District 
to spend its reserve like any other government, the rollover of 
the unspent portion of this fund has greatly boosted our 
efforts as we continue to rebuild and revitalize the city.
    I have, at the beginning of my testimony, highlighted the 
Council's philosophy in our oversight of this budget--service 
improvement, fiscal discipline, and strategic financial 
investments. Not only did we hold fast to these watchwords as 
we reviewed the budget, there are additional insurance policies 
built into this list of reserve expenditures.
    In agreeing with the Mayor, the spending of these funds 
will occur sequentially and be guided by several safeguards. I 
will elaborate on how fiscally cautious these safeguards are, 
and, Mr. Chairman, this is with regard to some of the concern 
that you had raised a couple of weeks ago at the earlier 
hearing.

              RESERVE--TIERS OF SPENDING FREED-UP RESERVE

    The three tiers of spending are:
    Trigger 1 includes $32 million for foster care receiver 
LaShawn, Commission on Mental Health, DCPS, and the Mayor. The 
unspent portion of the fiscal 2000 reserve when carried over 
will free up local funds currently budgeted in the fiscal year 
2001 reserve. Only with certification by the CFO can these 
funds be spent.
    Trigger 2 has $37 million targeted for programs for our 
children, the elderly, the Latino population, and public 
safety, just to name a few.
    Trigger 3 contains $6 million to be allocated to the 
following: the Police Department, Citizen Complaint Review 
Board, Human Resource Training, and Settlement and Judgments.
    To safeguard and further ensure the spending Triggers 2 and 
3, these are the ``insurance policies'':
    The Mayor will achieve the $37 million in management reform 
savings by downsizing the government as proposed in this 
budget;
    The Mayor will achieve the $10 million in operational 
improvement savings by various methods--outsourcing, managed 
competition;
    The CFO will certify the carryover of the 2001 reserve; and
    The CFO will certify that collection of additional revenues 
for 2001 will be achieved.
    And those are the areas specifically that you had expressed 
great concern.
    If, and only if, these conditions are met can the CFO 
certify the availability of funds. Any balance will be used as 
pay-go capital funds instead of borrowing and if the CFO 
certifies that the balance is not required to replace funds 
expended in the 2000 reserve.
    These ``insurance policies'' are imperative because to the 
extent which the Mayor cannot achieve the savings, the $37 
million will be used to replace the savings and not on the 
programs. And that will keep us from spending money that we do 
not actually have. Previously, this city has fallen into 
serious financial trouble by spending one-time infusions of 
money on ongoing programs and services. The Mayor and the 
Council share that concern, and that is why we agreed to put 
these safeguards in here.

                        ROAD TO FISCAL SOLVENCY

    Since 1997, thanks in part to the revitalization plan that 
transferred in fiscal year 1998 various costly State-like 
functions from the District to the Federal government and 
increased the Federal Medicaid share from 50 percent to 70 
percent, the city has been on the road to fiscal solvency, and 
we want to keep it that way.
    This journey is not an overnight miracle by any means. We 
paid off our accumulated deficits, we crafted five straight 
balanced budgets, and we will do no less in the coming years. 
It may be painful, but our commitment is to do no less. We have 
obtained clean audits of the city's checkbook since 1997. We 
continue to receive favorable investment bond ratings. We made 
legislated reductions in programs and personnel throughout the 
government. We imposed tight controls on spending.

    [CLERK'S NOTE.--Regarding the District's improved financial 
situation, the following should be helpful and informative to 
the reader.
    First, Congress had to cut the budgets that were sent to 
Congress by the mayor, council and control boards. Those cuts 
since FY 1995 total over $1.4 billion cumulatively, with the 
budget base being reduced by over $315 million. If those budget 
reductions had not been made, there would not have been a 
surplus of $185 million for FY 1997; instead, the District 
would have ended up with a $130 million deficit. And the 
surplus for FY 1998 would not have been $445 million; it would 
have been $130 million; and the surpluses for FY 1999 ($86 
million) and FY 2000 ($241 million) would have been DEFICITS of 
$229 million and $74 million, respectively, simply because 
District officials, including the control board, had not 
reduced the District's operating budget base.
    Second, the Revitalization Act (title XI of Public Law 105-
33) shifted $900 million in so-called ``State'' functions to 
the Federal government along with $5 plus billion in unfunded 
pension liabilities. Congress also eliminated the Federal 
payment of $660 million. The arithmetic shows that the city was 
broke and woke up the day after the President signed the 
Revitalization Act with over $200 million cash in the bank (see 
page 870 of part 2, FY 1998 House DC Appropriations hearings, 
for excerpt of District's ``Amended FY 1998 Budget and 
Financial Plan'' which shows $235.9 million in net savings to 
District government from Revitalization Act). And instead of a 
$445 million surplus for fiscal year 1998, there would have 
been a $70 million deficit ($445 less $315 less $200); and the 
surpluses for FY 1999 ($86 million) and FY 2000 ($241 million) 
would have been DEFICITS of $429 million and $274 million, 
respectively.
    Third, in the fiscal year 1999 appropriations bill Congress 
added over $150 million in Federal funds for the District.
    Fourth, the national economy and stock market boom have 
generated an infusion of tax revenues into the city's treasury.
    Basically, the District's newfound prosperity does not 
appear to be due to extreme sacrifices made by the District, 
including the control board, or management improvements in the 
District government's operations. Some would say the budgets as 
submitted by District officials, including the control board, 
reflect a `business as usual' attitude. The city has had only 3 
years of surplus and positive fund balances--that does not 
necessarily signal that the District should resort to its prior 
spending habits and less than stellar management practices.]

                   UNIVERSAL PREKINDERGARTEN PROGRAM

    We did not neglect our citizens, especially our young 
people. Schools for the first time have received full funding, 
which includes $2 million for universal prekindergarten.

                          POLICE CADET PROGRAM

    A cadet program for high school students will be 
implemented in the Police Department.

                          ECONOMIC DEVELOPMENT

    Where economic development is concerned, we have invested 
$62 million in capital funds in public works and nuisance 
property abatement programs, and that goes to the heart of 
quality-of-life issues that are very important for our city to 
keep our citizens here in the District and to be able to 
attract others. There is $25 million dollars to expand the New 
York Avenue Metro station project and $1 million for the Metro 
bus barn repairs.

                 $11 MILLION TO MAINTAIN NEIGHBORHOODS

    A comprehensive and cohesive plan for the community is 
under way, and $11 million have been allocated to various 
agencies to help maintain stable, diverse, attractive 
neighborhoods throughout the District. While the downtown is 
flourishing, the District will not survive if, in fact, we do 
not also do something for our neighborhoods, our community, the 
heart of our city where our people meet, live. And the Mayor 
has talked a little bit about that, and you will see that as 
part of this budget.
    This includes $2 million to redevelop the 14th Street/
Columbia Heights area, the Georgia Avenue corridor, and the 
other issues that the Mayor articulated earlier. These 
initiatives are a continuous effort on our part to improve the 
quality of life for our residents and make this city a better 
place to live.

                    CONTRACTING AND PROCUREMENT LAWS

    At this juncture, Mr. Chairman, we would also like to urge 
the Federal agencies, especially when they act on behalf of the 
District, to comply with the District contracting and 
procurement laws which ensure that local, small and 
disadvantaged individuals and business enterprises receive full 
consideration in the contracting and procurement process. 
Because in order to keep the city solvent and to come forward, 
we must also be able to support the businesses within the 
community and keep those dollars in our city. This request is 
in line with the Sense of the Council Resolution that was 
introduced at our legislative session yesterday, and I would 
present that to you for the record.
    As you approve the entire Federal budget, we ask that you 
support the intent of this resolution because this compliance 
would definitely provide an impetus to our local business 
environment as we work to retain and attract more businesses to 
the city.
    [Clerk's Note.--The material referred to has been retained 
in the Committee files.]

            D.C. GENERAL HOSPITAL/PUBLIC BENEFIT CORPORATION

    If I could just briefly also touch upon the Public Benefit 
Corporation, where you have expressed concerns, let me say, we 
share your concerns. The Financial Authority, the Mayor, and 
the Council have been working together more so over the past 
several months to try to address the health care concerns in 
the District of Columbia. I think we have a track record of 
trying to meet the needs, if you look at Greater Southeast 
Hospital and what happened with Greater Southeast Hospital, 
another hospital in our city that was in trouble. We embraced 
that, and it was a joint effort by the Financial Authority, the 
Mayor and the Council to try to resolve that issue. We have 
once again embraced our minds, our collective minds and 
ability, around the Public Benefit Corporation; it is troubled 
right now.
    Another thing that was in the paper this morning--I hope 
you saw that one--$1.2 million in cuts that have already 
started with D.C. General Hospital. That is just a start; it 
will continue. We will continue to see some other growth. We 
have Cambio consultants who have worked with Greater Southeast 
Hospital and they also worked with Georgetown Hospital in 
helping to bring that into order. They are working with us with 
the Public Benefit Corporation, so we do expect that we will be 
able to bring the spending level and some other concerns with 
Public Benefit Corporation in line.
    I would suggest, however, it is a hospital for a time that 
needs to stay open. It takes care of 75 percent of the trauma 
care in this city. We cannot just close it down without having 
an extreme detrimental impact on many of the citizens in this 
city. So we do look forward to working with you as we bring 
their spending in line, address some of the other problems that 
we do share with you, but at the same time enable us to provide 
health care to a very needy population.

                       BUDGET REQUEST FOR FY 2001

    And, finally, as you consider our appropriations request, 
we ask that you support and leave intact the budget which has 
been mutually put together by the Council and the Mayor and the 
Financial Authority. Even though the Financial Authority is 
still in place, and we thank them for their service and 
commitment, we, the elected representatives, felt that this 
budget should be resolved by us. And I am happy, under the 
leadership of Alice Rivlin, that the Financial Authority 
enabled and supported the Mayor and the Council as we worked 
out the problems that were presented to us in this budget.
    We intend to be vigilant in our oversight role as we 
continue to strengthen the financial health of this city. It is 
the Council's responsibility, even more so after the control 
period, to work with the Mayor to produce the responsible, good 
budgets and invest our dollars for the District and leave a 
legacy for future generations.
    The Mayor and the Council will continue to have public 
differences, debates, and compromises; that is the nature of 
government. More importantly, we, the Mayor and the Council, 
shall do what is necessary to have a strong financial structure 
and to improve service delivery for this city.
    Thank you.

              PREPARED STATEMENT OF COUNCIL CHAIRMAN CROPP

    [The prepared statement of Council Chairman Cropp follows:]
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

            Chairman Istook--City's Problems Exceed Progress

    Mr. Istook. Thank you, Chairwoman Cropp.
    I think in several things that you and the Mayor have 
pointed out, I would not want the continuing existence of 
significant problems to mask the progress that I do see is 
being made. Nor would I want the progress that is being made to 
mask the existence of continuing problems. I think it requires 
a lot of attentiveness and, frankly, a lot of pressure to make 
the types of changes that are necessary so that the progress 
exceeds the problems.
    I would note--I appreciate the action regarding the PBC and 
D.C. General Hospital, but the level of savings they said 
yesterday they would achieve, they only need to do that 120 
more times.
    Ms. Cropp. We will keep working. We will keep working.
    Mr. Istook. I think that perspective is very important.
    I should note for our witnesses, a series of House Floor 
votes is coming up and will probably consume approximately one-
half hour to conduct. Yet I know the interaction with members 
of the Committee is going to be very important on this. All I 
can ask for is your indulgence.
    Dr. Rivlin, we probably do have time before we have to take 
that break to receive your testimony. I am never sure which is 
best to call you, Dr. Rivlin or Chairman Rivlin, or Vice 
Chairman, whichever title.
    Ms. Rivlin. I respond to Alice. Thank you, Mr. Chairman.

              OPENING STATEMENT OF CONTROL BOARD CHAIRMAN

    As my co-witnesses have noted, the 2001 budget is a 
milestone for the Financial Authority. It is likely the last 
year that we will have to approve the D.C. budget. If, as we 
expect, fiscal year 2000 ends in the black--and we won't know 
that until February 1st of 2001--we will be able to phase the 
activities of the Authority out during fiscal 2001, and the 
control period will end on the 30th of September, 2001.

                   FY 2002 BUDGET--CONTROL BOARD ROLE

    Our role in next year's budget process will be a very 
different one. We will still be there, but we will review the 
2002 budget, not approve it, and that is a very significant 
difference.
    For this reason, we consciously played a lower profile role 
this year, as Chairman Cropp has pointed out. This budget is a 
result of direct negotiation between the Council and the Mayor. 
We were largely in an advisory capacity.
    For the next approximately 14 months that the control board 
expects to be in existence, we will continue to work very hard 
and to support the Mayor and the Council to improve the 
management and the fiscal health of the District of Columbia, 
so that we can minimize the chance that the President will ever 
have to reactivate the Authority.

         MUCH REMAINS TO BE DONE--CITY MISMANAGED FOR LONG TIME

    There has, as we have noted, been much progress in the 
District of Columbia. But much remains to be done. This was a 
deeply broken government that had been mismanaged for a long 
time. That is a situation that does not get corrected quickly, 
even with very great effort.

                  SIX PRIORITY AREAS OF CONTROL BOARD

    I would like to mention six priority areas that we will be 
working with the Mayor and the Council on over the next 14 
months.

                    BUDGET STAFFS NEED STRENGTHENED

    The first is to strengthen--to help them strengthen the 
budget staffs, both the Mayor's budget staff and the Council's. 
We will work with the Chief Financial Officer to do that.
    This year, the Authority staff worked hard behind the 
scenes to produce some of the analysis that enabled the Mayor 
and the Council to negotiate successfully the 2001 budget. But 
the Authority staff won't be there forever. The Mayor and the 
Council need more capability to analyze budget options and to 
negotiate with each other based on firm numbers.
    I think the Council needs a kind of mini-CBO to strengthen 
its ability to produce fiscal impact statements and to produce 
good budget analysis. It needs also to strengthen its legal 
staff and its ability to draft legislation.

           PROBLEMS--FINANCIAL MANAGEMENT/INFORMATION SYSTEMS

    Second, we will be working with the Mayor and the Council 
and the CFO to strengthen the financial management and 
information systems of the District. The lateness of the 1999 
audit and the management letter that went with it revealed many 
problems in managing financial information in the District, 
especially the cash management. Dr. Gandhi is very aware of 
this, and we are working closely with him to improve that 
financial management.

    [CLERK'S NOTE.--The following is from page 5 of House Report 106-
786, July 25, 2000 accompanying the District of Columbia Appropriations 
Act, 2001:

                           GENERAL STATEMENT

                         Control Board Failure


               INDEPENDENT AUDIT REPORT THREE MONTHS LATE


    The Committee is greatly disappointed in the failure of the 
District of Columbia Financial Responsibility and Management Assistance 
Authority to ensure the timely completion of the District's 
Comprehensive Annual Financial Report (CAFR). This is not a new report; 
it has been prepared on time each year for over 20 years. The CAFR is 
an important document that provides District officials, citizens, the 
financial community, and others with important information on the 
financial health and integrity of the city. It is used by the financial 
community to determine the city's bond rating, which then determines 
interest rates on the city's bonds. For more than 20 years the CAFR has 
never been more than a few days late, let alone 3 months late. In fact, 
in most years it was completed early. This complacency and inaction by 
the Authority as well as the District's Inspector General are 
unacceptable. The Committee requests a detailed plan from the 
Authority, the Inspector General, and the independent auditor by 
October 15, 2000, for the District's FY 2000 audit.]

                        PUBLIC SCHOOLS PROBLEMS

    Third--and the Mayor and the Council Chair have both 
emphasized this--we want to work very hard with them to improve 
the schools. We have a new Superintendent with strong 
qualifications and a high energy level. I think we were very 
lucky to get Mr. Paul Vance to take over when Superintendent 
Ackerman left, and it is our hope that he will maintain the 
momentum and continue the reforms that she started. He needs to 
work hard on the management of the District of Columbia public 
schools, on procurement, on payroll, on building maintenance, 
and all of those nitty-gritty things, while improving academic 
performance and accountability for results.
    Serious problems remain in the District of Columbia public 
schools. I would highlight three:
    Special education, including transportation, is something 
that the Superintendent will need to focus on;
    Reducing the truancy rate, which is high in the District, 
is a priority for all of us; and
    Establishing a good working relationship between the D.C. 
traditional public schools and the public charter schools is 
extremely important.

            PUBLIC BENEFIT CORPORATION/D.C. GENERAL HOSPITAL

    Fourth, there is, of course, the Public Benefit 
Corporation. The last audit and subsequent events revealed the 
seriousness of the problems that many of us had suspected for 
some time, and the situation is evolving rapidly. The new PBC 
Board has taken hold. There is an on-going process of 
transition to new management. There is a new financial team in 
place, and Dr. Gandhi has worked with them. There is a 
consultant group, the Cambio Group, working with the Board and 
other members of the collaborative, which consists of the 
Council and the Mayor and the Health Department, to make a plan 
for the future of the Public Benefit Corporation, emphasizing 
primary care in clinics.

                   COMMUNITY-BASED UNIVERSITY OF D.C.

    Fifth, there is the University of the District of Columbia. 
The audit for 1999 also revealed serious financial management 
problems at the University along with other problems. It is 
very important that the District have a strong, well-managed 
public institution of higher education, even though we are 
grateful for the Congress' efforts on the college assistance 
program which will enable many of our students to attend 
college outside the District.
    Here too there is a new Board in place. We will be working 
with the UDC Board and with the Chief Financial Officer to 
improve financial management at UDC, and to help them better 
define a role for that institution.

                          ECONOMIC DEVELOPMENT

    Finally, economic development, which others have talked 
about. Economic development is the key to the future financial 
health of the District of Columbia. We are working to keep the 
new convention center on track to timely completion and to 
support the planning and execution of the economic development 
plans that will give the District a higher tax base going 
forward to support improved services and a thriving residential 
and business community.
    Thank you, Mr. Chairman.

               PREPARED STATEMENT OF CONTROL BOARD CHAIR

    [The prepared statement of Alice Rivlin, the control board 
chair, follows:]
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

                      RECESS FOR HOUSE FLOOR VOTES

    Mr. Istook. Thank you very much Chairman Rivlin.
    We do have three or four votes that will take a period of 
time, so I am anticipating that we will be in recess 
approximately one-half hour. I am going to come back as quickly 
as I possibly can and certainly I urge all the other members to 
do the same. We are in recess.
    [Recess.]
    Mr. Istook. We reconvene. And I am happy to tell people, we 
should not be interrupted again. I wish we had not been before.
    Dr. Gandhi we are pleased to hear from you.

                OPENING REMARKS OF NATWAR M. GANDHI, CFO

    Dr. Gandhi. Thank you, sir. Good morning, Mr. Chairman, Mr. 
Moran, Ms. Norton and members of the Committee. I am Natwar 
Gandhi, the Chief Financial Officer of the District of 
Columbia. Thank you for the opportunity to appear before you 
today to present our fiscal year 2001 proposed budget and 
financial plan.
    I look forward to working with the subcommittee, along with 
Mayor Williams, the Council, and the Financial Authority. I 
will briefly discuss the following areas today:

                  GOALS OF THE CHIEF FINANCIAL OFFICER

    The key goals of the Office of the Chief Financial Officer;
    Revenue projections and economic outlook;
    Debt management;
    Fiscal challenges; and
    The consolidated annual financial report, the so-called 
CAFR or annual audit.
    As the Chief Financial Officer, there are three overarching 
goals that must be reached before I can be successful as the 
CFO. These are, one, receiving a clean opinion, on schedule, 
from the District's independent auditor for fiscal year 2000 
and all subsequent years; two, obtaining a balanced budget; and 
three, providing effective, efficient financial systems and 
business methodologies to support the decision processes of our 
policymakers.
    These are eminently achievable goals. We have the 
motivation and skilled professionals to obtain these goals. We 
will concentrate on key operations in accounting, budgeting, 
treasury, and tax and revenue to make sure that we succeed.

              REVENUE PROJECTIONS--INCREASE OF $49 MILLION

    Now, let me turn to revenue projections and other matters. 
Revenue collection in fiscal year 2001 will continue to benefit 
from strength in the District's economy. Overall, we expect 
general fund revenue to be about $3.3 billion, an increase of 
about $49 million over the fiscal year 2000.
    Two strong areas in the District's economy will be personal 
income taxes and the general sales tax. These two areas account 
for the bulk of the $49 million increase over prior-year 
revenue after factoring in the tax rate reductions due to the 
Tax Parity Act.
    For fiscal year 2001, we expect to see continued growth in 
employment in the District and the personal income of our 
residents.
    However, this optimism is tempered by the District's 
sensitivity to adverse national trends. Higher fuel prices or a 
higher prime rate, for instance, could dampen travel to the 
Nation's Capital, reducing tax collection as a result.

                 DEBT MANAGEMENT--PER CAPITA DEBT HIGH

    Another area that is of paramount importance to the 
District's long-term financial success is effective debt 
management. Although our outstanding debt levels are comparable 
to other jurisdictions, the debt per capita ratio is rather 
high. We are developing debt reduction efforts, and the long-
term strategy in place will allow the District to fund its 
capital needs through issuance of debt and still maintain long-
term financial viability.

                    FY 2001 BUDGET REQUIRES SCRUTINY

    Although the fiscal year 2001 proposed budget is balanced, 
it will require fiscal discipline, prudence, and effective 
budget execution to meet our budget objectives. For example, we 
will monitor the progress of savings targets totaling $47 
million. The plan to achieve these savings is already in place. 
In fact, one of the primary initiatives to achieve these 
savings is an Early-Out/Easy-Out Retirement Incentive Program. 
Employees eligible and willing to retire under this program can 
elect to retire beginning this week. By starting this 
initiative prior to the beginning of the fiscal year, it will 
be possible to know in advance whether other measures will be 
necessary to achieve the savings targets.

         COMPREHENSIVE ANNUAL FINANCIAL REPORT (ANNUAL, AUDIT)

    And lastly the CAFR. The fiscal year 2000 CAFR action plan 
has been developed and it is currently being implemented. This 
plan specifically addresses the interim closing process, the 
cash reconciliation process, and the year-end closing process.

    [CLERK'S NOTE.--See page 1024 for ``clerk's note'' 
concerning the FY 1999 Comprehensive Annual Financial Report 
being three months late.]

    That concludes my oral testimony, Mr. Chairman. I would be 
glad to answer any questions you may have, sir.
    Mr. Istook. Dr. Gandhi, thank you very much.

                PREPARED STATEMENT OF NATWAR GANDHI, CFO

    [The prepared statement of Natwar M. Gandhi, CFO, follows:]
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Mr. Istook. Thank you very much, Dr. Gandhi. Let me mention 
to all the members of the subcommittee that, considering time 
factors, I am going to try to enforce the 5-minute rule 
closely, including upon myself. I think we owe that courtesy to 
everyone.

            D.C. GENERAL HOSPITAL/PUBLIC BENEFIT CORPORATION

    Let me begin with expressing some concerns regarding the 
Public Benefit Corporation and D.C. General Hospital. Over the 
last 5 years, I believe the figure is in the neighborhood of 
$200 million that has been called a loan from the city, and 
with control board involvement, to D.C. General Hospital, and 
then many of those loans have been forgiven.

        $200 MILLION IN ``LOANS'' TO HOSPITAL--NO LOAN DOCUMENTS

    Yesterday, we made an inquiry from my office saying we want 
to see the loan documents, the notes, any due diligence that 
was done on them. What was it that made this a proper 
investment? Because I recognize that the city with its funds 
and the control board with its funds have a responsibility to 
be prudent in what is being done. If that is being called a 
loan, it ought to be a prudent investment. Now, perhaps there 
was a misunderstanding of what we were after, because the 
answer that came back to us was ``there are no such 
documents.''
    Now, it is hard for me to fathom $200 million in loans in 
recent years from the District and the control board to D.C. 
General Hospital and PBC. There's not even any sort of 
promissory note. There is no due diligence. There's no inquiry 
as to whether there is a reasonable expectation that it would 
be repaid or what the interest rate would be. I certainly hope 
that we were misinformed in the answer we got back.
    But, Dr. Rivlin, I understand you know, certainly with your 
position in the Federal Reserve System, if you are looking at 
any institution or any country that has a policy of making 
loans in this fashion, I am sure you would call that absolutely 
unacceptable. And it appears to be nothing more than a 
subterfuge to try to escape the law, the law of the 
Antideficiency Act, against spending funds that have not been 
approved for spending against appropriations; and, personally, 
I think persons that are involved in such a thing must be held 
accountable for that.
    But I would like to begin with you, Dr. Rivlin. Can you 
tell us on these loans that have been booked between the city 
and the control board and D.C. General Hospital and PBC, would 
you tell us what sort of documentation and negotiation there 
was in entering into these loans and what the terms were 
regarding repayment?

         ``LOANS'' CARRIED AS RECEIVABLES AND THEN WRITTEN OFF

    Ms. Rivlin. Mr. Chairman, I am not an accountant, but these 
were not loans as such. The hospital was carrying receivables 
which were approved by the accountants that were in the end, 
not good receivables.
    Mr. Istook. You say they are carrying receivables. If it's 
not a loan, what is it? It cannot be an expenditure because it 
is not authorized by law. It is not appropriated to be an 
expenditure. I don't want to play word games here. What do you 
call it then? What have you been calling it?
    Ms. Rivlin. We've been calling it a receivable.
    Mr. Istook. Would you have been calling it also loans?
    Ms. Rivlin. No, not technically.
    Mr. Istook. You say it is a receivable. It is a receivable 
because you gave somebody money?
    Ms. Rivlin. No, because they owed money to the District 
which they hadn't paid. And they were also carrying receivables 
on their books, Medicaid claims that have not been paid. This 
is a normal interaction between related units of a government. 
But, as I said, I am not an accountant.
    Mr. Istook. I have got to ask, was there a contract? You 
say it is a receivable. If I'm a businessman and I have a 
receivable, it is because I have some sort of contractual 
relationship with somebody that they may owe me money or they 
have assigned things to me. Were there assignments with those 
so-called receivables? Were there documents? Were there 
agreements? What was there? What sort of records were created? 
What sort of due diligence was done when you have a history of 
years of receivables not being paid and you have no reasonable 
expectation--did you reasonably expect that this was a 
receivable that would be paid back?
    Ms. Rivlin. There was a lot of discussion about that 
question, and some of us were dubious about the collectability 
of these receivables. But the accountants did not question that 
categorization.
    Mr. Istook. So what documentation is there, you know, where 
somebody assigned an asset or assigned a receivable or an 
account or had a contractual agreement? Was there any?
    Ms. Rivlin. I don't think there were contractual 
agreements. I don't know the details of the accounting between 
the PBC and the city. We could ask Dr. Gandhi to respond to 
that. But this accounting relationship between related entities 
is not an unusual situation, rather it has been one in which 
the hospital, as I think everybody knew, was not being terribly 
well managed. And----.
    Mr. Istook. But, Dr. Rivlin, to say that spending a couple 
of hundreds of millions of dollars beyond what is being 
appropriated is not unusual is begging credulity. I mean, to 
me, I find that incredible.
    Ms. Rivlin. This was accumulated over quite a long time, 
and it is a serious problem. It is a serious problem now being 
addressed. But in the accounting situation which you pose for 
any corporation, there's a moment in time at which you must 
recognize that a receivable is not collectable and take a 
charge for it.
    Mr. Istook. And usually it does not make--you know, when 
you find that, after 1 or 2 years of experience, you don't 
continue to advance tens of millions of dollars at a time for a 
period of more years. I am very concerned about the 
accountability.
    Let me ask the Mayor and the Chairman of the Council if 
they have any comment on what has been the due diligence and 
the documentation to justify this expenditure of taxpayers' 
money despite the absence of an appropriation for it.
    Mayor Williams. I think it would be helpful, Mr. Chairman, 
maybe for Natwar to characterize as of today what the 
relationship is.
    Mr. Istook. I want to hear an answer from you, and I want 
to hear an answer from the Council. I want to hear an answer 
from the persons in the position--not Dr. Gandhi, who has been 
in his position for--how long is it, Dr. Gandhi?
    Dr. Gandhi. Two months.
    Mayor Williams. I wasn't asking Dr. Gandhi to explain what 
happened 20 years ago, just to characterize what the 
relationship is so we all use similar terminology. That's all.

                   MAYOR WILLIAMS--NO LOAN DOCUMENTS

    Mr. Istook. But the first question I want to know, is there 
any sort of documentation, loan agreements, any rates assessed, 
contracts, assignments of receivables, anything at all?
    Mayor Williams. No, I think the simple answer to that 
question is, to the best of my knowledge when I was CFO, now as 
Mayor, that there aren't any of these documents in place. I 
don't want to characterize a deficit situation for a hospital, 
and a hospital in mortal financial danger, to be a usual 
situation. I don't believe that that's what the Chairman is 
saying it is. But, you know, in many, many situations around 
the country, there are struggling public safety or safety net 
institutions like our hospital that are struggling day-to-day. 
The authorities in government make a judgment based on 
receivables as to what is collectable, what isn't, and there's 
the hope to keep this institution going on whatever basis. And 
they make that judgment.
    But there aren't loan documents and the like.

         MAYOR WILLIAMS' APPROACH TO HOSPITAL--INSURE UNINSURED

    I can tell you personally what my approach to the PBC has 
been since I have been elected Mayor. My initial approach was 
to essentially take the money we were using for the PBC and put 
it into social insurance to broaden insurance for some 80,000 
uninsured. The fact of the matter is that this proposal did not 
get through the political system. That is how government works.

              MAYOR'S HEALTHCARE COMMISSION--CAMBIO GROUP

    We went back to the drawing board. With the support and 
participation of the Council, we impaneled a Health Care 
Commission. It looked at a number of different issues; and the 
bottom line was that the Health Care Commission, control board, 
Council, Mayor all agreed we wanted to bring in a workout team, 
the Cambio Group. We had good experience with them with Greater 
Southeast Hospital, a similar situation where a hospital was 
struggling under deficit conditions, and we had to make some 
tough choices, so we elected to bring them in.
    When it became clear that the PBC Board was wholly 
incapable of properly working in concert with all of us and 
certainly managing this workout team, I worked with the Council 
and everybody here to put in place a new team at the hospital, 
a new board. They have begun to make progress. It's $1 million 
out of all of the money that you were talking about. Clearly, 
by itself, it is not going to solve the problem. But I do 
believe that the Board, with the action it took, set a tone 
that they are looking for answers; they are looking for 
solutions; and they are looking, very, very importantly, for 
this workout team to put this hospital, sooner rather than 
later, at its right size, in its right configuration so we 
aren't throwing good money after bad and, at the same time, we 
are meeting the needs of our neediest citizens.
    And I do believe that there is some package of services 
that this hospital has to deliver, and I base that on the work 
of this Health Care Commission. These are health care experts. 
I don't consider myself a health care expert. I base it on 
their work.

              CHAIRMAN ISTOOK--CITY IGNORED LAW FOR YEARS

    Mr. Istook. Mr. Mayor, my time is exhausted on this. But I 
hear people trying to say we had to do it and ignore the law in 
the process. This is not the first time we have come up with 
workout plans. I mean, people should have been addressing this 
years ago and, if the budgets were unrealistic, budgeting 
differently, rather than saying, well, we will just ignore the 
legal limits on spending and find a way around it.
    Mr. Moran is not here. Mr. Cunningham.

                CONGRESSMAN CUNNINGHAM'S OPENING REMARKS

    Mr. Cunningham. Thank you, Mr. Chairman. Since you tricked 
me and asked me to go for the first vote during the opening 
statements, I hope you will be lenient on that light and reset 
it after at least 2 and a half minutes. Thank you.
    Mr. Mayor, Mr. Chairman, and the Ranking Minority Member 
Jim Moran.
    Mr. Istook. We will come back to him.
    Mr. Cunningham. I would like to say we are very close 
friends, and we work together very much. But, like the two 
Irishmen we are, we disagree from time to time on things. But I 
am glad that Jim is on this Committee and that we work together 
with the chairman.
    I volunteered, as I told you the very first time that I 
came on, for this committee. My colleagues thought I was nuts 
for volunteering for the D.C. appropriations subcommittee with 
all the problems that it had way back when. We looked at 30 
years of neglect and where the D.C.--the Democrats let things 
run just as--and the corruption and all the different things 
that had happened, and we decided that we are going to do 
something about D.C., and I think you are seeing some positive 
change from that.
    Personally, I decided to support, in my opinion, a 
business-oriented mayor that was positive instead of Marion 
Barry and for the obvious reasons that I thought someone would 
revitalize and bring some direction to the city. I think, as 
the chairman said, a lot of that progress has happened. I am 
going to focus on the items where I don't think some of the 
progress has happened because I am very upset about some of 
them.

                           EDUCATION FUNDING

    I focused on education, not only when my own party limited 
the funding for public schools. I went and lobbied then Speaker 
Newt Gingrich to fully fund public schools as well as the 
charter schools because I felt you had moved in a positive 
direction; and like with my children when they do good, I don't 
penalize them, I reward them. I think that has been very 
important.

                  ATTORNEY FEES FOR SPECIAL EDUCATION

    Special education I have been very upset about. And I am 
going to ask a question and then you can respond after I go 
through this whole thing, but we put a cap on lawyers' fees for 
special education. Allen Burstyn was a Clinton appointee, now 
the Superintendent of San Diego city schools. I support him 100 
percent. He is doing a great job. His number one problem in San 
Diego County is trial lawyers suing and forming these cottage 
organizations and drawing away from the school district the 
money that is going to lawyers instead of our school systems.
    We put a cap of $60 an hour. The Council in your budget 
does not do that. The first year, in 1998, you had $14 million 
in legal fees. We put the cap in 1999. It was $2.36 million. 
With those savings, we increased the budget by 10 placement 
specialists for special education, four speech pathologists, 
four psychologists, a social worker charged with monitoring all 
the placements by DCPS, employed 13 psychologists, 17 speech 
pathologists, 17 social workers, staffed and equipped 12 new 
special education inclusion programs.
    And now according to the budget you want to go back to the 
$600 per hour business, and not have a cap on trial lawyers. 
That would allow them, instead of the cap we had of about 
$225,000 a year, which I think is adequate for a trial lawyer, 
to giving them over $625,000 a year. That takes money away from 
the school system. I disagree with that, and in a minute I am 
going to ask you to explain that.

                     ANACOSTIA RIVER--HEALTH HAZARD

    My second the Anacostia River. I think it is a health 
hazard, and I think it is an area where you have moved forward 
from Bladensburg on down working with the State of Maryland.

                  TOWN HALL MEETINGS--FOCUS ON HEALTH

    I also said that I wanted to work--since I am a prostate 
cancer, survivor--on having some town hall meetings with both 
juvenile diabetes and, prostate cancer, especially since 
African Americans in D.C. have the highest prostate cancer rate 
in the United States. And those haven't happened yet. We have 
tried to fund them. We haven't found the sites, and we would 
still like to work with you on doing that on a nonpartisan 
basis.

                          WATERFRONT PROBLEMS

    The waterfront is a cesspool down there. The city has 
neglected it for years, costing members of the waterfront--you 
can look at the article in this weekend's paper about the 
waterfront and how the city has neglected it. You have pylons 
leeching creosote into the water. They are decaying. They are 
terrible down there.
    And the delays--and we have talked about this, Mr. Mayor. 
You came to my office the other day with what--I am 
disappointed the City Council put off until the 19th of 
September. Last year at this time in this hearing you told me 
that we were going to resolve this particular problem on the 
waterfront, and I said there's been delay after delay after 
delay, and it has been a do-nothing City Council on this 
particular issue, one thing after another.

                       ``IDIOT'' CITY INSPECTORS

    And I want to tell you, it doesn't go unnoticed--the delay 
and the gridlock. Once the contract was signed, the very next 
week the hotel people that want to put in a hotel went down 
and--with the Washington Marina--with the lease in hand, 
demanded what the Washington Marina was going to do or they, 
through the City Council and their buddies, were going to shut 
down the Washington Marina. Now that bothered the hell out of 
me, especially that they would have that contract--that lease 
and then feel that they have the power to go down the 
Washington Marina and demand certain things.
    The city's inspectors came down to the Capital Yacht Club, 
and they inspected. They found nothing. They came back 3 weeks 
later and said, ``we are going to charge you $27,000 a day 
because that pipe goes into the Anacostia River.'' We are not 
on the Anacostia River. That's the lunacy of these idiots that 
go down there. And then when we pointed out it was a city pipe, 
they said, ``we're only going to charge you $11,000 a day.'' 
And then we pointed out that the city owned it, and then they 
said ``we are going to charge you $2,500 total.'' But guess 
what? If the city--if the Yacht Club admits to that, they 
violate the lease, and the city can revoke that lease and take 
the property the same week.
    You have 25 agents who went down to Tommy Long's, a ship 
repair guy, and raided--they went into the boats of the people 
that reside there. They inspected. They found nothing.
    You know what was on the document for the writ to be able 
to go in there? They suspected him of canning horse meat. Well, 
they found no horses, of course, down there.
    This whole thing of trying to take the waterfront away from 
the people that run it--you have got a minority-owned yacht 
club down there that was established back in the 1800s for 
minorities, and they are just trying to survive down there, and 
then to have the city's onslaught on this. I want to tell you, 
there are indications that someone is in collusion with the 
hotel group trying to take this away from the residents, not 
only from the Washington Marina but the yacht club and Tommy 
Long's.
    Mr. Mayor, you have one of the strongest proponents of 
trying to help you and be your wingman, but I am upset beyond 
control about this, and you are just about to lose a strong 
supporter. I want to see this thing resolved. No more Mr. Nice 
Guy. I am going to try to fence everything the city wants until 
this is done. I am going to take back the $3 million in Federal 
money that we gave to the waterfront if I can. I am going to 
sue, within the limits of a Member of Congress, and help these 
people that have gone through nearly a half a million dollars 
in legal fees because the city has not reacted. And then the 
City Council, again, on the 19th of September is not even going 
to take up this plan, when all of these folks have got 
suppliers, they have got people and banks that say, ``hey, you 
told us this was going to be resolved 2 years ago.'' And I had 
promise after promise and delay after delay; and this last 
delay, it's the camel that broke the straw. I can't tell you 
how upset I am.
    My staff has spent an enormous amount of time--and I don't 
gain a penny from this. This is not my marina. But I vowed to 
make the Washington Marina--to leave something. I don't want a 
Top Gun type squadron. I want to take over the worst squadron 
in the Navy. That was D.C., where I could make the most 
positive change on the Anacostia River, on a long-term sewage 
plan, on the education issue and the health care issue and a 
waterfront that I can leave like San Francisco or San Diego 
where you had 1-month leases and nobody is going to invest in 
that because the Council and members were getting money under 
the table to agree with those leases.
    Well, I want to change that, and I want to help you do it, 
but I can't do it with the damned delays that are going on and 
on and on, and I want to see it changed, Mr. Mayor.
    Mr. Istook. Is there a question?

              WATERFRONT--COUNCIL CHAIRMAN CROPP'S REMARKS

    Ms. Cropp. Mr. Chairman? Mr. Chairman, I don't know what 
this is with regard to the City Council today, but, Mr. 
Chairman, members of the subcommittee and Mr. Cunningham, as a 
member of the legislative body that represents the citizens of 
the District of Columbia, part of our job, as you all have so 
rightfully suggested to us in the past, is our due diligence. I 
support your effort to be supportive of the District and 
applaud it, and I thank you for--so very much for the 
friendship that you have given to the District of Columbia.
    The waterfront is something that, let me say, I support 
with you, that I hope that we can improve not only in Southwest 
but along the Anacostia River. We are doing an awful lot of 
things now that I hope will bring that about. And, yes, you are 
exactly right. An awful lot has happened in the city over the 
past decade, two decades, that probably was not good and we 
know was not good for the city.
    The City Council has supported an Office of Planning that 
had been decimated, totally decimated over the past decade. The 
Office of Planning, one of the first things that they are doing 
now, and it is part of this budget, is to look at areas in our 
community not just downtown but our neighborhood, including the 
waterfront as a measure to improve it. And the waterfront you 
will see--I hope with this new Office of Planning and what has 
happened in there, you will see changes with it.

               60-YEAR WATERFRONT LEASES--COUNCIL REVIEW

    Now, the Council, like any other legislative body, has to 
do due diligence in our work and in our oversight. We have been 
chastised for not doing it. And this Council, this Council is 
committed to doing that.
    I have heard, a ``do-nothing Council.'' However, the 
Council received the lease for the property that you are 
talking about late Monday night. We had a meeting at 8:30 p.m. 
It is a 60-year lease--60 years--without having any opportunity 
to look at it prior to coming before the Council, without 
giving the citizens an opportunity to look at it. We did not 
think as a legislative body that it would be good for us to 
vote on a 60-year lease that we had received 6 hours before our 
meeting.
    So what we had committed to do, because of its importance 
and because we want it to be important and because we know of 
its importance to you, what we committed was that we would meet 
the requirement that was put in the appropriations budget. We 
are going to hold a public hearing on it because it is 60 
years. You want the people in Southwest with whom you have been 
speaking about the problems that you have articulated well, we 
want that part of the record so we can make sure it won't 
happen any more.
    Mr. Cunningham. Let me interject, first of all, this lease 
process started 2 years ago. It went through seven leases in 
which we went back and forth--the owners went back and forth 
with the city and agreed, disagreed, agreed, disagreed starting 
2 years ago. The final lease was ready last year at this time--
a plan, a proposed lease. The Mayor promised me and said, soon 
as we get this we are going to sign this. We're going to get 
this thing done and move forward with it.
    What you may have gotten Monday has been done and completed 
and gone back and forth with the city. And every time that the 
group met and met all the demands, the city came back with, 
``oh, by the way, we want this.'' And every time the hotel was 
involved with this stuff--and that bothers me. Which you may 
not be responsible for, in getting it last Monday, has been 
ongoing, and I think 2 years is long enough for due diligence. 
It may not be the city's fault, but the whole process and the 
bureaucracy is failing in this, and I want to tell you I am 
gravely disappointed in the process. I have been trying to work 
with the process because I believed in the Mayor.
    Mr. Istook. The gentleman's time has expired.
    Mr. Moran.
    Mr. Moran. Thank you, Mr. Chairman. Thanks for having this 
hearing. This is the first time I have had a hearing in this 
room.
    Mr. Istook. Do you like it?
    Mr. Moran. Well, I don't, particularly, no.
    Mr. Istook. We can move it.

                       WILSON BRIDGE IN VIRGINIA

    Mr. Moran. Not right now when everyone is sitting here. But 
I think that picture over there on the wall is actually my 
Woodrow Wilson Bridge, which is a miserable, constant reminder.
    Mr. Istook. It looks pretty narrow.
    Mr. Moran. It is one of the worst examples of inadequate 
Federal construction in the history of public works projects, 
and at some point we are going to be able to share our needs 
with all of the Congress on the Wilson Bridge, but it is kind 
of the first time I have seen it memorialized in a picture. But 
I trust there is no significance to that, and no one else would 
have noticed it, and it is certainly not a memorable bridge.
    But, otherwise, it is nice to have the convenience of this 
room; and, as I say, I do wish that we had a little more time 
before we mark up to consider this request. We are on a very 
fast track, I think perhaps too fast a track, and I hope that 
doesn't mean that we get derailed.
    Mr. Istook. And as the gentleman knows, even after we have 
the initial mark and the House passage, and as we go through 
conference--and I know the officials in the District are aware 
of this--things are adjusted as we go through and find what 
develops.
    Mr. Moran. I understand. I think that the waterfront has 
probably been discussed sufficiently by my friend from 
California, so I won't belabor the waterfront any more. That's 
really Duke's issue. I don't get into that so much, but--other 
than to smell the fish when we cross the 14th Street Bridge on 
a hot evening.
    But there are some areas that I really want to develop 
here, a number of them. Let me start with Mrs. Rivlin. I will 
work my way down.

        D.C. GENERAL HOSPITAL--GOLDEN PARACHUTE FOR JOHN FAIRMAN

    With regard to Mrs. Rivlin, the Public Benefit Corporation, 
John Fairman, he's probably a very nice guy, and a lot of 
people spoke up for him. I don't know him at all, so I can feel 
free to mention the fact that there seems to have been some 
gross mismanagement. I guess it is historic, almost 
traditional, with the institutions that come under the Public 
Benefit Corporation. But I was a little surprised at the fact 
that he would get a million dollar golden parachute as part of 
his severance package. In the scheme of things that doesn't 
mean a lot, given the enormous deficit that we are running, but 
I think it's symbolic to many people. Is there anything that 
can be done and do you plan to do anything about that, Ms. 
Rivlin?
    Ms. Rivlin. Yes, Mr. Moran. Mr. Fairman's original contract 
was in 1997. That was submitted to the Authority. We were 
concerned about the severance at that time, and it was reduced 
at our request. Then, much more recently, in 1999, the PBC 
board approved an amendment to this original contract with a 
much more generous provision in it. That was not submitted to 
us, and I don't think it was submitted to anyone.
    Mr. Moran. Don't they have to submit it to you?
    Ms. Rivlin. They do, and this modification is not valid. It 
is void. There are negotiations going on at the moment between 
lawyers for the PBC board and Mr. Fairman. If those don't reach 
what we regard as a satisfactory conclusion, the Authority is 
prepared to consider exercising its powers under the 1996 
Appropriations Act to terminate Mr. Fairman's employment, and 
this would result in denying to him any further compensation.
    Mr. Moran. Thank you, Mrs. Rivlin.

               DEFICITS PROJECTED FOR FY 2003 AND FY 2004

    Mr. Mayor, I see in your budget you are projecting a 
deficit of $14 million for fiscal year 2003 and almost $44 
million for fiscal year 2004. What should we do to try to stem 
those deficit projections?
    Mayor Williams. What I am trying to address with that 
deficit projection in 2003 is, every year, to the maximum 
extent that we can, use the retirement rate as it exists, 
people who would normally retire, and try to minimize wherever 
possible back-filling their positions, use every year generous 
early retirement incentives, and move to e-government as a way 
to further economize our agencies to bring expenditures in the 
long term down to make sure that the lines of spending and 
receipts don't cross. That's the primary policy that we are 
taking as an administration, working with the CFO. He can tell 
you what the underlying revenue estimate behind that is because 
I believe it is a conservative estimate.
    Ms. Cropp. Mr. Moran, could I add to that?
    Mr. Moran. Yes, I would be happy to hear from you. This is 
probably the most important element of this appropriation 
hearing. We don't want to be on a path to future deficits.
    Ms. Cropp. We agree.
    In addition to what the Mayor has said, if you continue 
down and look at lines 35 and 36 from our financial plan, in 
that you will see where there are additional dollars that have 
come there. The net benefit from the integrated tax system, for 
example, is $35 million that is there; and, actually, we end up 
with a positive balance. So the expectation is that in the 
final analysis that we will be in balance. So when you see that 
deficit there, that does not take into consideration additional 
revenue that we expect. But it is listed in our financial plan. 
That will bring us down to a balance, in fact, a positive 
position in the final analysis.
    Mayor Williams. That's what I mean by conservative. That 
doesn't include any additional revenue. It is very, very 
conservative. And what I am saying as Mayor and what the 
Council has said throughout this budget process, and I agree 
with them, we ought to manage conservatively and bring the 
government down to that size.
    Mr. Moran. Okay. Did you want to speak, Mr. Chief Financial 
Officer?
    Dr. Gandhi. Mr. Moran, you do have a larger issue here, 
however, as you look ahead in the year 2002, 2003 and 2004, 
that our revenue growth, as you look ahead, is not as fast or 
as much as our expenditure growth. So there is a problem here.
    Mr. Moran. That's a problem.
    Dr. Gandhi. A problem of structural balance. And the heart 
of the matter here is that our tax base is rather limited. And 
until that issue is addressed, my concern here is that, in the 
future, we will have the problem.
    Mr. Cunningham. What would it be if you clean up the 
waterfront?
    Mr. Moran. Duke just won't quit on this, but it is 
important to be tenacious.

                              RENT CONTROL

    There have been, of course, a number of things that have 
been identified that you could do. They began with Mrs. 
Rivlin's first report, and I know some of them have been--let 
me just mention one that I noticed, an article in the paper of 
record, The Washington Post, this morning on rent control.
    There was one more study. This was--I think it was Nathan 
Associates. It seemed to show conclusively that there will be 
very little harm caused tenants but, as has been repeatedly 
said, substantial benefits to D.C.'s tax base and to upgrading 
these living facilities and to the communities in which these 
rundown apartment buildings stand because the landlords don't 
have the revenue stream to be able to upgrade them.
    And when I was more of a liberal than I am today, I used to 
think rent control was a wonderful answer to low-income 
tenants's living conditions, but it doesn't work that well in 
practice. And I personally think it is a problem, and I would 
like to hear a response from the members, if that's okay, Mr. 
Chairman. I know we are limited, but if it's okay.
    Mr. Istook. Sure. Let's get the response to this, and then 
let the other members take their time.
    Mr. Moran. And then we will come back, because I do have 
some questions about special ed, et cetera, that I would also 
like to raise.
    But let's get into rent control. Shall we go first with 
Mrs. Rivlin and just go down the line, Alice?
    Ms. Rivlin. I think rent control is a serious issue, and 
the Authority was disappointed and has said so, that the 
Council extended the rent control for 5 years in the Budget 
Support Act. We don't think it belongs there and are requesting 
that they not do so.
    Mr. Moran. Mr. Mayor?
    Mayor Williams. A simple answer is that, during my 
campaign, I pledged to support rent control; and I believe I 
have got to live up to my commitment. I mean, that's a simple 
answer; and I believe in living up to commitments.
    Ms. Cropp. As Mrs. Rivlin said, the Council does support 
rent control, and it is part of the budget, and it was extended 
for 5 years. The Council also said that we were waiting for a 
study that was coming out; and, in fact, the study has come 
out, I think, this week, the study came out.
    And what the Council has also said was that we were 
committed to going over the study and looking at the study and, 
if necessary, revisiting the issue.
    While we talk about rent control, however, it needs to go 
on the record that the rents do increase and there is an 
opportunity for some of the problems within the buildings to 
occur. If a landlord, for example, needs to make some type of 
improvements and renovations in an apartment building, they can 
make it; and then the rent can be adjusted based on the 
improvements and renovations that the landlord can make. So 
when we talk about rent control it doesn't knock out the 
ability for them to make some type of adjustments and other 
things that are necessary.
    But we will look at that study. We are committed to looking 
at that study.
    Mr. Moran. I am glad you are looking at it. It is 
appropriate to include those comments in your response, that 
there are caveats.
    But the reason I raised the question was in the context of 
capital investment, and you are not going to maximize the 
capital investment you need coming into this city, particularly 
for multifamily housing, when you have rent control. Period. 
You don't get major investment in decent, sanitary, safe and 
even affordable multifamily housing when there is rent control 
in a community, and that has been proven time and again 
throughout this country.
    But so much for the lectures. You have heard them many a 
time, I am sure; and I understand the politics of the 
situation. Thank you, Mr. Chairman.
    Mr. Istook. Thank you, Mr. Moran. I very much appreciate 
your bringing that topic up, and perhaps we can discuss it 
more.

                    SPECIAL EDUCATION--ATTORNEY FEES

    For the record, Mr. Cunningham asked me to make sure that 
he does want the city officials to provide an answer for the 
record regarding the issue of why it does not want to continue 
a limitation on the legal fees in the special education 
litigation. If we can do that for the record, because I want to 
make sure other members----
    Mr. Moran. I was going to raise that, too, Mr. Chairman.
    Ms. Cropp. If I could just say, Mr. Chairman, that we 
passed something yesterday that copied the language that was in 
the appropriations bill; and we are looking for the MOU to come 
together to work it out.
    Mr. Istook. Certainly. Thank you.

    [CLERK'S NOTE.--See page 1070 for letter from Mayor 
Williams and pages 180-193, this volume, for additional 
material concerning special education attorney fees.]

    Mr. Istook. Mr. Tiahrt.

                  CONGRESSMAN TIAHRT'S OPENING REMARKS

    Mr. Tiahrt. Thank you, Mr. Chairman. I am glad the 
witnesses are all here. I appreciate your coming here today and 
dedicating your time.
    I want to say, Mayor, that I enjoyed the prayer breakfast, 
and I will have a better idea how to schedule in the future, 
but I found it uplifting and joyful, and I left with a light 
heart, so please invite me back again.
    I have been on this subcommittee for 4 years, and under a 
previous Mayor, the first thing that happened to me is one of 
my constituents who was visiting was killed in the District of 
Columbia, and I had the horrible job of trying to get the body 
released to go back to Kansas for burial. And back in Kansas it 
was viewed as the murder capital rather than the Nation's 
Capital.
    I have to tell you that it has significantly changed in the 
last 4 years, and I want to congratulate you. It feels like it 
is a safer place to live and work and play. It's cleaner, and 
it is a more enjoyable place to be. So I think we are making 
progress. And I just want to publicly commend you on the 
progress that you are making.
    The good news is the budget; I think that we have made 
progress in the budget. The bond rating, as certainly was 
pointed out, is much better.

                PROCUREMENT PROBLEMS--TOO MANY VEHICLES

    But there are some problems, in particular some in 
procurement, and I would like some answers about that; the SUVs 
that we seem to have an excess of.

                    SCHOOLS--MONEY NOT ONLY SOLUTION

    The schools, I want to make a statement that when it comes 
to schools, money is not the only solution. It has to go beyond 
money. I know you have made progress monetarily in funding 
schools, and I think that is a good start, but it also has to 
be in focusing on scholastic academics and accountability, and 
I hope that the city will continue along those lines.

                              RENT CONTROL

    I want to add my comments to Mr. Moran's about rent 
control. I think he is absolutely correct. If we want to 
attract new capital into the District, we are going to have to 
allow people to feel like they can get a return on their 
investment, otherwise it simply won't occur.

             HOUSING INCENTIVES FOR FIRST-TIME HOME BUYERS

    At one time there were some housing incentives that were in 
place for first-time home buyers. Is that program continuing? I 
think it is, isn't it?
    Ms. Cropp. It is, and it has done remarkably well in 
getting a lot of individuals, particularly new young couples, 
to buy. I think it has really helped.
    Mr. Tiahrt. I think it is a great idea. I want to encourage 
that.

                              MUSIC MUSEUM

    One other thing before I ask my two questions that I would 
like to comment on. I met with Nancy Sinatra recently, and she 
is dedicated to her father's history of music, and she said 
there was a plan to build a national museum of American music 
or historical music.
    Mr. Moran. A music museum.
    Mr. Tiahrt. A music museum where the new convention center 
is going to be. And I think it is a wonderful idea, and if I 
can help do that, I would like to do that.
    Mayor Williams. Thank you. We appreciate that help. We have 
brought together civic leadership, business leadership of the 
city and a convention city task force to look at the best use 
for what is the last and best remaining site in the city. There 
is the possibility, and it is a great possibility, of having a 
national music museum there. Certainly with that legacy as well 
as the materials at the Smithsonian, it could be a tremendous 
museum.
    But there is strong interest by other parties in the city, 
in the business community, that we be open and nonpartisan, if 
you will, about this. So we want to do this in as expeditious 
way as possible. And I think the first meeting of this task 
force is going to be in another week or so.
    Mr. Tiahrt. Well, I think music is a wonderful part of our 
history.
    Mayor Williams. Sure is. My mother can tell you that.
    Mr. Tiahrt. For those of us who had to pound out the piano 
in our early years, we have grown to appreciate it, I guess.
    As I look at the panel, I see some good financial minds, 
and Dr. Rivlin's six recommendations, it seemed like most of 
them were giving the tools to the City Council or to the 
Mayor's office to provide good data so that you can make good 
financial decisions, and I hope you will carry out those 
recommendations. So one of my questions will be have they been 
taken into consideration, and will they be implemented?

                PROCUREMENT PROBLEMS--NEED TEAM APPROACH

    And the other one is about procurement. I know that in the 
past, procurement has been somewhat of a problem. We have 
talked about it. There were some improvements in procedures 
that were started last year. Are there more to come?
    So I would like to know about what implementation of Dr. 
Rivlin's recommendations are going to be undertaken, and also 
what is going on with the procurement procedures.
    Mayor Williams. Just speaking for the executive branch on 
Dr. Rivlin's recommendations, I will start with number 2 just 
to be quirky. I am very, very proud that Nat Gandhi has 
succeeded me now as CFO because I worked with Nat when I was 
the CFO. I know his work very, very well, and I believe that 
there is no one better situated to see us through to a 
conclusion on not only the main financial system and the 
tributary systems, if you will, which are causing us 
difficulty--for example, personnel and procurement but also to 
work with us in our administration. I think the system is the 
ultimate solution to the procurement problems, the personnel 
problems and the others, to invest in real training and place 
responsibility in program management.
    One of the things I tried to do as I left the CFO job was 
to try to begin a plan to start vesting more responsibility 
with the program managers for all of these different issues, 
because that's ultimately where it should rest. I will give you 
an example. The GAO does a report that we haven't made a lot of 
progress over the last couple of years, even though a couple of 
years ago we signed a memorandum of understanding with all the 
parties that we were going to speed up Federal highway dollar 
transactions. Still, it is taking too long. And the Committee 
rightfully criticized the statement of our acting director who 
said that we were going to have it fixed by sometime next year, 
even though he meant we were going to start immediately and it 
will be perfect next year. But notwithstanding there needs to 
be a sense of urgency.
    The long and short of it is that in my mind we have the 
procurement difficulties because we do not have a team approach 
in the government. I believe that Nat is situated to do this, 
and we are putting the capacity in our own office to do this--a 
team approach. A team approach is important, because if there 
is a major project that needs to be done, maybe it is the 
project on the waterfront or another project, a major project 
that needs to get done, there has to be somebody with the 
authority and the responsibility and the ownership of that 
project to push that project, with all the people at the table 
necessary to make that project succeed.
    So all the supply line agencies have to be part of the team 
to get that project on the critical path. And right now that 
isn't happening. We don't have that team approach. So you've 
got the Normandy landing, the supply lines had to be there, or 
those folks would have been stranded. We launch major projects, 
and at times the supply line's not there, and you end up with 
delay after delay after delay. And until we get that team 
approach--and I take ultimate responsibility for this because 
this is an overall executive branch issue--we are going to 
continue to see those kinds of issues, and I think therein lies 
the real issue behind the procurement difficulties you see over 
and over and over again.
    Yes, there are operations problems; yes, there are 
technical problems; yes, there are problems with training of 
procurement personnel. But, ultimately, it is a problem that 
the program people deliver junk to procurement. The procurement 
operation isn't really the best in the world anyway, and so the 
process just comes to a grinding halt. We have to build that 
team approach, and that is what we are in the process of doing, 
and I would be happy to share with you some of the major 
changes we are going to be doing to do that.
    Mr. Tiahrt. I would like to meet with you sometime on that.

                 RENT CONTROL--NEW CONSTRUCTION EXEMPT

    Ms. Cropp. Mr. Tiahrt, you brought up rent control also. I 
just want to give some information on rent control. New 
construction has always been exempt from the rent control 
issue, so that has not been part of it. And it also allows for 
a 12 percent rate of return for it, and greater rates of return 
if, in fact, there is the capital improvement piece. And I am 
happy to say that we are seeing the construction of an awful 
lot of new condos and other buildings in the city, and I am 
pleased, and I am hoping it's because of a lot of the good 
things that you all are saying has happened over recent years.
    But we still are committed to looking at it. But I just 
wanted to share with you all some of the other things because 
it is an issue--sometimes folks think that because it's rent 
control that it means everything is controlled. A lot--I won't 
say most--a lot of the units in D.C. are not under it. New 
construction, that is not even part of it. So we encourage 
folks to come in.
    Mr. Istook. Mr. Tiahrt's time has expired.
    Dr. Gandhi, do you have a comment?

                    BUDGET FORMULATION AND EXECUTION

    Mr. Gandhi. I wanted to respond to Mr. Tiahrt's suggestions 
about Dr. Rivlin's suggestions, the one about improving our 
budget formulation and execution capacity. We have strengthened 
our budget shop and also are improving our analytical research 
capacity. We are putting together right now in the office of 
the CFO a research and analysis wing under Julia Friedman, our 
chief economist, and we are going to strengthen that so that we 
will have the analytical capacity that Dr. Rivlin is talking 
about.
    Mr. Istook. Thank you, Dr. Gandhi.
    Mr. Aderholt.
    Mr. Aderholt. Thank you, Mr. Chairman. Thank you all for 
being here today.

                              RENT CONTROL

    Not knowing a lot about the rent control situation, I would 
like a little bit of background. Currently there is a rent 
control policy in place in the city?
    Ms. Cropp. That is correct.
    Mr. Aderholt. And how long has the policy as it exists now 
been in place for the city?
    Ms. Cropp. '88 or '78--'78.
    Mr. Aderholt. All right. Okay. So it has been quite a 
while.
    Ms. Cropp. It has been quite a while.
    Mr. Aderholt. And certainly, Mr. Mayor, I can respect--you 
said you campaigned----
    Mayor Williams. I wouldn't say I campaigned on it, but I 
made a commitment.
    Mr. Aderholt. Certainly, and I understand that. And 
certainly when you make a commitment and when you are running 
for office, you are expected to live up to that commitment and 
unless something changes, so I can understand your position on 
that. I may have some more follow-up questions for the record 
on that, but nothing on that particular subject right now.

                              MUSIC MUSEUM

    Let me just ask one question following up Mr. Tiahrt. I 
also got the briefing on the music museum and also found it 
very interesting. What is--I know you said you were about to 
get ready for some initial meetings on that. What is the time 
line as far as looking to when--if things go well and as you 
anticipate--when something like this could be completed?
    Mayor Williams. Well, we'd like to move as quickly as 
possible in all of these different projects because this 
economy, notwithstanding what it continues to do, isn't going 
to last forever, so we want to tap into it while we can. And 
time is of the essence. I can't get an exact time line for this 
task force, but we never intended a task force to last 2, 3, 4 
years. We are talking a matter of months so that we can go 
forward with all the necessary materials, get the investors in 
there and get the project started at the time the convention--
our goal is to have this work under way and investors in place, 
things started at the time the convention center moves to its 
new site.

                CONVENTION CENTER MOVE AND MUSIC MUSEUM

    Mr. Aderholt. When is the anticipated date of the 
convention center move?
    Mayor Williams. I can get you the exact date in a matter of 
minutes. 2003.
    Ms. Cropp. Mr. Aderholt, let me make sure that there is an 
understanding that what this is dealing with is in conjunction 
with, as the Mayor said, the new convention center opening. And 
nothing else will happen before that because it is the site of 
the old convention center. And one other thing that also has to 
happen is--that was another contentious battle in the city, if 
you all remember the convention center issue, and a part of the 
question was expansion, whether or not the new convention 
center would be able to expand. And the way this could happen 
is if we could use the old site for expansion, and the way that 
would be paid for is by what happens on the new site on top of 
ground. In other words, we would deal with the air rights, and 
that is where this museum, the music museum, is coming in. What 
we do with the air rights for the old convention center site is 
how we could pay for the expansion underground for the existing 
convention center site.
    So all of that comes into play, and none of it will happen 
until obviously we move into the new convention center.
    Mayor Williams. But that's the reason why you want to have 
all the best minds on this task force and make sure it is done 
right and everything is in its place, ready to go, construction 
ready to begin, when the move occurs.
    Mr. Aderholt. Okay. That's all I have, Mr. Chairman.
    Mr. Istook. Thank you, Mr. Aderholt.

                        NEWSEUM MOVING INTO D.C.

    Let me--while you are talking about this, let me do some 
quick follow-up just to share some things about this, because 
certainly I understand you know--and this is the good side, of 
course, of being the Nation's Capital--that people want to have 
a national museum of American music here. They want to move the 
Newseum here that I know you are all delighted about.
    Mayor Williams. $100 million, a tremendous milestone.
    Ms. Cropp. And they are paying taxes, the sales taxes. If 
the old museums would pay them, too, that would help us, too.
    Mr. Istook. We can tell you are in office, Ms. Cropp.

                     FUND RAISING FOR MUSIC MUSEUM

    But just to share with you some thoughts on the music 
museum, because I know there is a desire to have a very large 
fund-raising campaign, private fund-raising campaign in 
conjunction with that, and to use a Federal appropriation as 
the seed money for that. We are hearing from different people 
involved in the music industry, which has so many different 
facets right now. They are basically saying, ``oh, we want it 
to happen,'' but they are not saying, ``and we are willing to 
write big checks.'' I don't doubt that there are significant 
people that are, but that's a gap in the feedback that we need 
because we want to make sure that anything in which we invest 
is something that is going to indeed spark that level of 
contribution to make something a reality.
    So there may be some revision in how we treat that in the 
initial mark and what may ultimately be the result when we get 
fully through the process. You were going to say something on 
that.
    Mayor Williams. We want to do everything we can to keep 
that dream, keep that hope, keep that prospect alive--and we 
hear this very much from different members of the business 
community. While we are acting as quickly as possible.

                            WATERFRONT DELAY

    And I want to say parenthetically, if the fault lies with 
me for this whole snafu with the waterfront, I want to take 
responsibility. I don't want to point fingers at the Council. 
Clearly, if they got the thing the other night, it's got to be 
something that we've done in the process of these negotiations.
    Mr. Istook. The District had it whether the Council had or 
not.
    Mayor Williams. No, it doesn't sound like it's the council; 
it sounds like it's me. So I take responsibility for that, and 
we want to pursue that.

                     FAIRNESS IN HANDLING PROPOSALS

    But I think one of the principles is not just diligence and 
getting these things done expeditiously, but another principle 
clearly that I am hearing in this whole episode is fairness and 
that all the parties have to be treated fairly. And that's what 
we are trying to do with the convention center, to make sure 
that we are treating all the different proposals fairly; while 
decisively, fairly.
    Mr. Istook. I think that is a very correct principle.
    Ms. Cropp. I am sorry to add. Thank you, Mr. Mayor, and let 
me say that I will take the blame with the District. But what I 
don't want to happen is for the Council to be blamed in 
isolation for something. But if it is a District problem, the 
council is a part of it, but don't just single out the Council.

                     DISTRICT NEEDS TO ``SIMPLIFY''

    Mr. Istook. I understand. I think one of the great needs, 
and we mentioned some of this in the last hearing, is I use the 
word ``simplify,'' but it has a lot of different aspects. You 
can imagine the complexity not only of persons that are trying 
to get business licenses or zoning permits in the District, but 
right now, of course, with the Control Board structure 
situation and with what has been temporary and permanent school 
boards, and now with a new composition coming, the boundaries 
between those, the Mayor, the Council, lines of accountability 
as well as of authority need to be simplified so that there can 
be decisions made.
    I've certainly urged each of you to exercise bold 
leadership, realizing that you will never please everybody, 
especially in an area that by its nature attracts every 
political activist, every special interest group in the country 
that doesn't want anything to happen unless they have approved 
it, and you have had to deal with that. And it's very 
challenging, I know, for you. I do not envy you.
    But, you know, simplified lines of authority, simplified 
lines of accountability, simplified decision-making powers, 
simplified ability to oversee. We talked last year about the 
registry of leases--so that you knew what was really going out. 
We may have a similar situation regarding contractual 
agreements such as Ms. Rivlin mentioned on the PBC contract 
that was not submitted, the addendum that was not submitted. 
That aids accountability as well as your information if there 
is centralized registration for someone to go and look at what 
are the contracts.
    But simplified personnel practices, performances, cleaning 
out those--I mean, I see a great need. And I recognize what you 
mentioned, Mr. Mayor, about having to go a step at a time to 
get logistics and supply lines in place. You used the Normandy 
example.

                       TAX POLICY AND RECIPROCITY

    I did have one other question that I wanted to pose, and 
this goes to the heart of the matter that I know is extremely 
important to you as District officials, and it relates to the 
tax policy. You know, if across the boundary, across the border 
someone has the ability to tax a resident there on an income 
they earn in the District, but the District does not have the 
corresponding right or does not have the ability to tax someone 
on the income they earn in the District regardless of where 
they live--because I know about reciprocity. I know what the 
Oklahoma income tax laws are if you have income that you earned 
in a different jurisdiction yet you are a resident of Oklahoma 
and how that is prorated.
    How definitive a study is there, or does there need to be 
one, trying to define to what extent are tax revenues of the 
District basically being exported elsewhere. Through the 
discrepancy on one side of the river you can have one policy 
toward how you tax residents and nonresidents but on the other 
side you cannot? Do you have a handle on that? Has there been a 
sufficient study done recently? Is there time to do so?
    Mayor Williams. Over the years there have been a number of 
studies that have been done, and you can start with Dr. Rivlin 
who did one, I think, a precedent-setting one about our 
situation. And Julia Friedman when I was CFO did a lot of work 
on this subject.
    I know that there is a case under way right now that is 
challenging this practice under the principle of principles and 
immunities in the Constitution. And I first thought it did not 
make much of it, but I have actually read this brief, and for 
what it's worth, and this can't buy you anything because I am 
not a practicing lawyer, but I think it has merit.

                     USE OF RECIPROCAL TAX REVENUES

    If I were Mayor when this thing happens, and I hope it 
happens while I'm Mayor, I would use the proceeds from those 
for things that have a regional benefit. And things that have a 
regional benefit are infrastructure, transportation, economic 
development, tax reduction that brings us down to parity with 
the surrounding area. I would not use the proceeds from this 
for adding to ongoing government expenditures. That's what I 
would do with it.
    Mr. Istook. I understand, because I do think there is a 
basic fairness issue.
    Dr. Rivlin?

                TAXING OF INCOME EARNED BY NONRESIDENTS

    Ms. Rivlin. There have been plenty of studies, but the 
basic facts are very simple. Two-thirds of the income roughly 
earned in the District is earned by nonresidents. That's a very 
narrow tax base.
    Mr. Istook. But it's not simply an issue of whether it is 
earned by nonresidents. It is whether the resident State of 
those persons is able to tax their income in the District, yet 
the District is not able to tax their income in the District.
    Ms. Rivlin. That is right. But every State in the Union has 
a right to tax the income earned in their jurisdiction, but we 
don't. That's the simple situation.
    Mr. Istook. If they were not taxing the income earned in 
the District, it would be a very different situation, rather 
than a ``heads-I-win, tails-you-lose'' situation.

                      WORKFORCE OF D.C. GOVERNMENT

    Ms. Cropp. Mr. Chairman, Dr. Gandhi probably will be able 
to really give you some more specifics, but let me just suggest 
one huge problem that makes it at the very base level. When you 
look at the workforce of the District of Columbia, not the 
Federal government, not the private sector, but those 
individuals who work for the District of Columbia alone, two-
thirds, just about, live outside of the District of Columbia.
    So for those people who just work for the District 
government, they don't even live in the District of Columbia. 
Not only that, but we are denied the ability to even require 
people who work for the District of Columbia government to live 
in the city.
    Mr. Istook. Well, I just wonder if the parity potentially 
might lie in saying if the District cannot tax the income of 
persons working in the District, then neither should another 
jurisdiction be able to tax the income of persons working in 
the District. They could tax the income they earn elsewhere, 
but, you know, at least you have equilibrium. People may not 
like the result, but the principle of fairness is there.
    Ms. Cropp. It goes to what I said last time--and I had just 
met with Dr. Gandhi the day before. I said, of the dollar 
earned in the District of Columbia, only 34 cents remained in 
the District of Columbia. For each dollar earned in Maryland, 
$1.15 will stay in Maryland. That's inequity.
    Mr. Istook. Understood.
    Ms. Cropp. Dr. Gandhi may have----

     SHIFT IN DISTRICT'S POPULATION BETWEEN WORKING AND NON-WORKING

    Dr. Gandhi. I think they have spoken quite eloquently, but 
there are two things I would like to point out. One is that, in 
the early '70s, we had about 230,000 more people living in the 
city than working. Today, we have 80,000 more people working in 
the city than living. The consequence of this is, as Mrs. Cropp 
pointed out, for every $100 that is earned in the city only $34 
can be taxed, as opposed to Maryland where $115 would be taxed.
    The last thing I would point out is that the sectors of the 
District's economy that are expanding, such as law firms, 
accounting firms, consulting services and other professional 
services, contribute fewer tax dollars per job than the jobs 
that we are losing. So, as I mentioned earlier, until this 
fundamental problem of our limited tax base, the narrow tax 
base as Dr. Rivlin pointed out, is addressed, I think we are 
going to face some structural problems.
    Now the economy is very good, and we do very well on that 
front. But the question is, what happens when the economy goes 
south?
    Mr. Istook. Yes, and I think it's very different if you 
postulate that not as an issue of enabling people's taxes to be 
increased or, for that matter, not forgiving Federal taxes of 
people that everyone else in the country is paying, but where 
you are saying if the District cannot tax the income earned in 
the District, why should another District level or State level 
or community level entity be able to do so?

               TAXES--DISTRICT SUBJECT TO DOUBLE JEOPARDY

    Dr. Gandhi. Mr. Chairman, I want to address the question of 
consistency that you mentioned. Suppose a lawyer were to file 
an income tax return for the work that he did throughout the 
country? Maybe he would be filing 15 income tax returns, and he 
would have to pay taxes in each one of those jurisdictions.
    Mr. Istook. He would still be paying all the other taxes, 
proper sales, et cetera.
    Dr. Gandhi. And then they would claim a tax refund for 
those taxes against our taxes. So it is a double whammy for us.
    Mr. Istook. I understand.
    Mr. Moran.
    Mr. Moran. Thank you for that segue, Mr. Chairman.
    I was going to ask about special ed, but I guess we are 
going to have to discuss this issue. Because there seems to be 
some enlightening information here, so I am going to have to 
ask some naive questions because maybe I totally misunderstand 
the situation.

                           D.C. INCOME TAXES

    The roughly 9.5 percent of D.C. income taxes that is 
assessed, that is not assessed on people who live in the 
District but work in the suburbs?
    Dr. Gandhi. It is assessed on people who live in the city.

            PERSONS WHO WORK IN DISTRICT BUT LIVE IN SUBURBS

    Mr. Moran. And do you have any idea how many of them live 
in the suburbs?
    Dr. Gandhi. Well, as I pointed out, we have more people who 
work in the city than live in the city. In the evening, when 
they go home----
    Mr. Moran. That's not the question. I know they go back 
home, and their home is not in the city----
    Dr. Gandhi. Right.
    Mr. Moran [continuing]. But do you have any idea how many 
people live in the city but work in the suburbs?
    Dr. Gandhi. I don't have those numbers with me.

   SOUTHEAST EXPRESSWAY--NORTHERN VIRGINIA EMPLOYEES WHO LIVE IN D.C.

    Mr. Moran. If you look at the Southeast Expressway you will 
find the traffic is worse in the evenings, people coming from 
the Northern Virginia suburbs back home in the District than it 
is people leaving the District and going home in the Northern 
Virginia suburbs. So I suspect that we are probably talking 
about tens of thousands of jobs. But you are suggesting that 
that 9.5 percent that you assess would go to Northern 
Virginia's coffers as reciprocity?

     INCONSISTENCY OF APPLYING PRINCIPLE OF TAXING INCOME AT SOURCE

    Dr. Gandhi. No, all I am suggesting is that the principle 
of taxing income at the source should be consistently applied. 
And the fact remains that for every $100 that is earned in the 
city, we can tax only $34, as opposed to Maryland and Virginia 
who will be able to tax more than $100 that is earned in their 
jurisdictions.

                        SALES TAXES PAID TO CITY

    Mr. Moran. How much do you--roughly how much do you take in 
in sales taxes?
    Dr. Gandhi. We take a substantial amount in sales taxes, 
yes.
    Mr. Moran. A substantial amount. And since two-thirds of 
the people in the city during the day are not city residents--
now do they not pay sales taxes in the restaurants they go to?
    Dr. Gandhi. Yes, they do, but that would be the case for 
any District resident who would go to restaurants in Virginia. 
They would pay a sales tax there as well.

            SPENDING RECIPROCAL TAXES FOR REGIONAL PURPOSES

    Mr. Moran. I don't want to belabor this any more than 
necessary. I think the Mayor's proposal is a very constructive 
one, to have money spent on regional purposes such as a 
regional transportation authority. That's a great idea. And 
since Metro expenditures are absolutely essential to the 
District, economically, socially and certainly from an 
infrastructure standpoint, while the suburbs benefit it is 
probably more beneficial to the District than it is to the 
suburbs because the hub of that transportation center is in the 
District. And the suburbs have contributed significantly, 
haven't they, to the Metro system?
    Dr. Gandhi. Oh, yes, sir.
    Mr. Moran. So that would be the kind of thing that money 
might be committed to. So I would suggest that if there is to 
be some change in the way in which the taxation occurs now, 
that it would have to be reciprocal.

             REQUEST FOR EARNINGS AND TAX ANALYSIS FROM CFO

    And I think we would certainly want to see your analysis of 
how much money is being earned in the suburbs by District 
residents, because that is where the strongest job growth is 
occurring.
    Dr. Gandhi. By all means.
    Mr. Moran. Good. We would like to see that and even some 
estimates of the amount of sales tax revenue that is taken in 
from these nonresidents. And then I think probably we could 
figure out how much Federal assistance is provided as a 
proportion of the District's revenue and do some comparisons 
there, too.

    [CLERK'S NOTE.--See page 1077 for letter from CFO showing 
the amount of sales taxes paid by non-residents and the amount 
of income taxes paid on income earned in the suburbs by 
District residents.]

                        STATE-LIKE EXPENDITURES

    Dr. Gandhi. And may I point out there, sir, that roughly 
about $700 to $800 million of the city's money is being spent 
on what I would call State-like expenditures. For example, my 
own agency, Tax and Revenue, which is basically a State 
function elsewhere, or on an----

    [CLERK'S NOTE.--Dr. Gandhi fails to mention that even 
though $700 to $800 million is being spent on State-like 
expenditures, the District government collects ``State-like'' 
taxes of approximately $2.5 BILLION from sources such as income 
taxes of $1.3 billion, sales taxes of $651 million, and net 
lottery receipts of $69 million.]

    Mr. Moran. Well, you weren't in this position when we 
passed the legislation that basically starts to treat or is now 
treating the District like we do other States. The Federal 
government assumed substantial functions and responsibilities 
for funding areas that are State in nature.
    Dr. Gandhi. And that was a major step. No question about 
it.
    Mr. Moran. So progress is being made, you would agree?
    Dr. Gandhi. Absolutely.
    Mr. Moran. Substantial progress.

    [CLERK'S NOTE.--The Revitalization Act (title XI of Public 
Law 105-33) shifted $900 million in so-called ``State'' 
functions to the Federal government along with $5 plus billion 
in unfunded pension liabilities. Congress also eliminated the 
Federal payment of $660 million. The arithmetic shows that the 
city was broke and woke up the day after the President signed 
the Revitalization Act with over $200 million cash in the bank. 
And instead of a $445 million surplus for fiscal year 1998, 
there would have been a $70 million DEFICIT ($445 less $315 
less $200) if the Revitalization Act had not been approved. See 
``CLERK'S NOTE'' on page 1015, this volume.]

          SPECIAL EDUCATION--COST TO SEND STUDENTS OUT OF CITY

    Mr. Moran. Special education is the area I did want to talk 
about. So can you just somewhat concisely--in deference to the 
Chairman's time constraints, I would like to know how much 
progress we are making on the assessment and case backlogs. We 
have a lot of students going to special ed schools outside of 
the District at enormous expense.
    Now, apparently what I was told, and I am not sure how 
valid this is, that a whole lot of families, particularly up in 
Northwest, knowing that you couldn't process the review of the 
need, were getting their children into some pretty expensive 
schools just by virtue of the fact that they did not get their 
application processed within the time period, and so by default 
it was assumed to be proper and the child went to these other 
schools. There's a real issue, obviously, as to whether it 
wouldn't be more cost beneficial to improve the facilities 
within the District for special needs students.

                  ATTORNEY FEES FOR SPECIAL EDUCATION

    And I would like to know your views in terms of capping of 
legal fees and the time period for review. I understand that 
you are implementing the language that was in the 
appropriations bill last year, but you may want to elaborate on 
that a little bit.
    Thank you, that will be my last question, Mr. Chairman.
    You want to go first, Mr. Mayor.
    Mayor Williams. I mean, just briefly, because the Control 
Board, as you know, has responsibility for the schools. It is 
my belief that Dr. Ackerman--not a doctor, Arlene Ackerman made 
some progress.
    Mr. Moran. I thought she was a doctor.
    Mayor Williams. Everybody calls her doctor, but she is not.
    Mr. Moran. She never corrected me.
    Ms. Rivlin. She has an unfinished dissertation that she is 
very eager to finish.
    Ms. Cropp. She has honorary degrees.
    Mayor Williams. Yes, a number of them.
    She had reduced the assessment backlog, and she reduced the 
case backlog and had gotten that down but, in doing so, 
actually brought costs up, because it increased the number of 
students in the system. She was beginning to look at the fact 
that, yes, $40 million was being spent on transportation, 
beginning to absorb that; Laidlaw Transportation pulled out and 
she was beginning to work on that.
    If I could just say before I turn the microphone over, this 
whole notion of the reform movement and the counsel and 
attorneys fees, I supported counsel and attorneys fees last 
year. There was a tremendous opposition to that from a lot of 
different interests in our city. I want to believe that the 
best way to get at the issue is actually not capping attorneys 
fees, which were scheduled to expire a lot in any event because 
they were seen as a temporary measure. The best way to get at 
this was reforming the underlying system.

    [CLERK'S NOTE.--See page 1070 for letter from Mayor 
Williams concerning attorney fees for special education.]

               REFORMS NEEDED BUT DIFFICULT TO ACCOMPLISH

    And in terms of reform in general, whether it was taking 
subsidy for the hospital and putting it into social insurance, 
taking proceeds from a sale, even though we didn't have title, 
to support UDC and actually focusing and expanding its program. 
You know, managed competition, any number of different things, 
I believe that I have been speaking for change in the city.
    But I think the fact of the matter is what I found over a 
year and a half is that we have got to keep the fire alive and 
keep the focus on change alive. But we often have to work 
through sometimes cumbersome, sometimes complicated political 
processes; and I have learned that that is just a fact of life.

                    REFORMS--APPOINTED SCHOOL BOARD

    I'll give you an example. You talked about education and 
trying to speak for reform and change in education. You know, 
there was no political benefit for me to come out for an 
appointed school board. This is clear to me after we have seen 
the results of the referendum for just a partial change in the 
schools, so I believe in pushing major change.
    Mr. Moran. But you won, and it was the right thing to do.
    Mayor Williams. I will just say to this Committee 
generally, and then I will shut up, that I know that change 
sometimes seems fleeting, I know it sometimes seems protracted 
and too painstaking, but we are committed to change, underlying 
change and reform in this government one way or the other. I 
really do believe that, and I just wanted to state that.

                     SPECIAL EDUCATION NEEDS REFORM

    Mr. Moran. There is no question in my mind that is the 
case. I do think that special ed, the area of special education 
is one that particularly needs more reform.
    Ms. Rivlin. I think we all think that. And the Authority 
met recently with the associate superintendent in charge of 
special education, and there has been very considerable 
progress, and the backlog is now down from several many hundred 
to 33 cases, which is quite impressive.
    Mr. Moran. That is not bad.
    Ms. Rivlin. It does mean, as the Mayor noted, that some of 
these cases are--many of them were resolved in favor of the 
children being in special ed, and that increases the cost. The 
as yet mostly unresolved problem, the one you point to, that in 
many cases the District doesn't have the facilities for 
particular kinds of special ed problems and these young people 
are placed in private facilities many of them out of the 
District. That's expensive. And the problem that the school 
system is now working very hard on is creating alternatives 
within the District for those children so that they can be 
served adequately but less expensively.
    Mr. Istook. The gentleman's time has expired. Thank you, 
Mr. Moran.
    Mr. Cunningham.
    Mr. Cunningham. Thank you.
    On special education, my point was that if you allow each 
lawyer to make $625,000 a year without that cap, you are going 
to have a whole covey of them in here. That's what happened in 
San Diego and in California, and it's taken a lot of money away 
from the special education programs and from the children. And 
that's what I am trying to prevent.

                              MUSIC MUSEUM

    The music museum, if you include country music in there, 
country-western, I have some very close friends, Charlie Pride, 
Dwight Yoakam.
    Mr. Istook. There are some people in Oklahoma who like both 
kinds of music, country and western.
    Mr. Cunningham. Johnny Cash is a very close friend. June 
Carter I am sure would help. We could get fund-raisers and 
people--I can pretty much commit for those people because they 
have done it for me in California in music museums, and they 
are very generous and beneficial with their time to do things 
like that, and I would like to work with you, too.

              ANACOSTIA RIVER--TOXIC WASTE CLEANUP NEEDED

    The Anacostia River, I won't bring up the waterfront 
anymore. You know I am upset, but the Anacostia River----
    Mayor Williams. Could I just ask a question about the 
waterfront?
    Mr. Cunningham. Can I finish that, and I will allow that.
    Mayor Williams. I'm sorry.
    Mr. Cunningham. Mr. Mayor, we have worked to get the Navy 
Yard to clean up its toxic waste there in the barrels, and you 
have increased the fines on dumping, which I think will help. 
Because you look at the plastic and the cans and everything up 
there in the Anacostia River, near Bladensburg, in the mud 
flats, trying to drain out and dredge out with all those toxic 
wastes.
    The point is, though, that long term I would like to know 
in the budget all of that is going to be for naught because, as 
we all know, every time it rains, you get raw fecal material 
out of a sewage system that wasn't designed for the population 
in D.C. Is there a long term plan for fixing that system? 
Because all of that--the Anacostia River is in that basin, and 
every time it rains the sewage goes right in there, and all the 
things that we are trying to do is just going to keep that 
polluted.
    And over a long period of time it is something I would like 
to work on. I will be gone, I am sure, by then. But I would 
like to at least help with that as well as the school systems 
and the other programs.
    Mayor Williams. I was going to say the Mayor--I have an 
Environmental Council of not only environmental advocates but 
businesspeople and nonprofit organizations in the city, and our 
major focus has been the Anacostia River, and one of the major 
milestones over the last couple of months is unsolicited. We 
have got an offer of help from former Congressman Beryl Anthony 
to work with us in developing a plan and working with folks 
like yourself up here to develop a package to get at this 
underlying problem with the Anacostia River. And so I would 
love to sit down with both of you and work on this.

              ANACOSTIA RIVER--SEWAGE OVERFLOWS INTO RIVER

    Mr. Cunningham. I can take a bucket of water out there, but 
it is going to fill back real quick, and it will fill back up. 
Everything that we are trying to do is for naught if we don't 
solve the D.C. sewage system that just flows into the Anacostia 
River there every time it rains.
    Mayor Williams. Absolutely.
    Mr. Cunningham. And that's why I think the D.C. City 
Council and everything else, it would be good to have a long-
range plan for that so that the EPA and all the other things, 
that it can come about.

                 WATERFRONT--DELAY IN APPROVING LEASES

    And now if the gentleman wanted to ask his question on the 
waterfront, I will be happy to respond. You said you had a 
question.
    Mayor Williams. I don't want to keep bringing this up, but 
I first heard there had been a delay about a week ago. I 
thought that the matter was under control. So now that I know 
that it is a problem and I know I promised this a year ago, we 
won't allow it to continue to drift.
    Mr. Cunningham. I have worked with, quote, your 
representatives for the entire year.
    Mayor Williams. Right. I thought it was worked out.
    Mr. Cunningham. The delays on the lease that the City 
Council got was from the city. We worked, over periods of time, 
on seven different leases on that thing. And then for some 
reason--and then my real upset was when the hotel came back 
after the final lease was done and then demanded things from 
the Washington Marina or they were going to see to it that the 
lease was canceled. This is the hotel group. Not the City 
Council. Not the city.
    And if it was me in there, that would bother me and I would 
look into who they think they are that they have the power to 
demand things that they shouldn't have. And it just shows me a 
little bit of collusion in this. Especially with some of the 
other things that are going on, Mr. Mayor.
    And my staff has worked on this. And I really want to leave 
a legacy when I leave here, and that's the reason I joined this 
Committee, and it's frustrating when I am trying as hard as I 
can to do that and I run into roadblocks.

                ANACOSTIA RIVER--STUDY OF SEWER PROBLEM

    Ms. Cropp. Mr. Cunningham, on your sewer problem, we have 
funded with a million dollars to study the total maximum daily 
load to address and look into the very issue that you are 
talking about so that we can plan it.
    And you probably would also be very happy to know, the 
Mayor and I participated not too long ago with the Anacostia 
Watershed Society and the Navy and with the Park Service and 
with the city with replanting some of the natural plants that 
were in the Eastern Branch part to help clean up the Anacostia 
River a few months ago. So there is an awful lot that is going 
on.
    Mr. Cunningham. Go with me in my little jet boat, and you 
will see that we have a long way to go.
    Ms. Cropp. But we have started.
    Mr. Istook. But make sure that your insurance is paid up 
first. And maybe when it is all done, you can put together a 
concert with your friends there. Maybe you could record an 
album with Johnny Cash, ``Duke Sings with Johnny Cash.''
    Mr. Cunningham. I was on the last Grand Ole Opry.
    Mr. Istook. See, I'm getting ahead of myself. I will buy 
that recording. Thank you, Duke.

                         CONCLUSION OF HEARING

    Mr. Mayor, Ms. Cropp, Ms. Rivlin and Dr. Gandhi, we 
appreciate your sitting through what has been a longer hearing 
than we intended. We apologize for the delays. We just don't 
know how to avoid them.
    And certainly any other thoughts that you have that you 
want to pass along, both before we do the markup tomorrow, 
which we wish were not as rushed a process, or as we continue 
through the process, we would be most happy to keep working 
with you.
    I do want to--you know, we have talked about some things 
that I believe are still serious problems. But I would never 
want to overlook the serious progress that I think is also 
occurring, and I look forward to continuing to work with you on 
those.
    Thank you.
    The Committee is adjourned subject to the call of the 
Chair.
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