[Senate Hearing 108-]
[From the U.S. Government Publishing Office]



 
        DISTRICT OF COLUMBIA APPROPRIATIONS FOR FISCAL YEAR 2004

                              ----------                              


                        WEDNESDAY, JUNE 11, 2003

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:07 a.m., in room SD-192, Dirksen 
Senate Office Building, Hon. Mike DeWine (chairman) presiding.
    Present: Senators DeWine and Landrieu.

                          DISTRICT OF COLUMBIA

STATEMENTS OF:
        HON. ANTHONY A. WILLIAMS, MAYOR
        LINDA W. CROPP, CHAIRMAN, COUNCIL OF THE DISTRICT OF COLUMBIA
        NATWAR M. GANDHI, CHIEF FINANCIAL OFFICER

                OPENING STATEMENT OF SENATOR MIKE DEWINE

    Senator DeWine. Good morning. This hearing will come to 
order. Today we will hear testimony regarding the District of 
Columbia's fiscal year 2004 local budget request. Mayor 
Williams, Council Chairman Cropp, and Chief Financial Officer 
Gandhi will present the city's budget and will discuss the 
District's requests for Federal resources.
    I want to first note that this past Friday, the General 
Accounting Office released the results of its 18-month long 
review of the financial health of the District. This important 
study presents a troubling picture of the long-term structural 
imbalance of the District's economy. This imbalance represents 
a gap between the District's ability to raise revenue at 
reasonable tax rates and its ability to provide services of 
reasonable quality to its residents.
    I recognize that the structural imbalance is driven by 
expenditure requirements and revenue restrictions which are 
beyond the control of the District's leadership. Clearly, the 
city's revenue capacity would be larger without constraints on 
its taxing authority, such as its inability to tax Federal 
property or the income of nonresidents.
    I agree that the city faces a troubling problem in the long 
term. This report is the catalyst for serious discussions here 
on Capitol Hill about how the Federal Government should protect 
the financial health of our Nation's capital. Indeed, many of 
the problems facing the city result from it being the seat of 
the Federal Government. Therefore, to do nothing is not 
acceptable. As chairman of this subcommittee, I will work hard 
to ensure that we start exploring ways to avoid a financial 
catastrophe for the District.
    Now, let me turn to the District's fiscal year 2004 budget. 
Before introducing our distinguished panel, I want to discuss 
some of my priorities for this bill. First, I hope to provide 
resources to improve the city's foster care system so that more 
children have the opportunity to enjoy safe, permanent, and 
loving homes. The hearings we have held this year on the foster 
care problem have highlighted ways that we can help improve the 
situation. I know that the Mayor and Ranking Member Landrieu 
share this desire and I look forward to partnering with them on 
this initiative.
    Also, I would like to continue a Federal investment in the 
city's Combined Sewer Overflow project. This multi-year project 
will revamp a system that was constructed at the end of the 
19th Century and which overflows 50 to 60 times every year, 
dumping raw sewage into the Anacostia River. Given the demands 
the Federal Government places on this system, we clearly have a 
responsibility to contribute to its much-needed renovations. By 
cleaning up the Anacostia River, we will expedite the Mayor's 
proposed Anacostia waterfront development initiative, which I 
wholeheartedly support. This development will ultimately 
provide recreational and commercial opportunities for D.C. 
residents and visitors.
    I also want to ensure that efforts to construct 
biodecontamination and quarantine facilities at Children's 
Hospital and Washington Hospital Center continue to proceed.
    These are a few of my priorities for this bill. Now I look 
forward to hearing what the District's priorities are for 
Federal funding and how the city has used the funds we recently 
provided in the fiscal year 2003 appropriations bill.
    Clearly, there are many worthy activities which will place 
demands on the always-limited resources in the D.C. 
Appropriations Bill. But I look forward to working with these 
city leaders to continue to make life better for all who live, 
work, and visit this capitol city.
    Witnesses will be limited to 5 minutes for their oral 
remarks. Copies of your written statements will be placed in 
the record in their entirety.
    Senator Landrieu, would you like to make an opening 
statement?

                 STATEMENT OF SENATOR MARY L. LANDRIEU

    Senator Landrieu. Thank you, Mr. Chairman. I would like to 
welcome our witnesses, and thank Chairman DeWine for calling 
the annual hearing on the District's local funds budget. I look 
forward to hearing from the city on the status of the 
District's economy, current Federal funding priorities, and a 
summary of the fiscal year 2004 local funds budget.
    At this time, almost every city in the country is 
struggling to maintain a balanced budget, much less deliver 
adequate or even good services to their citizens. I am pleased 
to see that the District has been careful to look ahead and 
address looming budget pressures while maintaining priority 
services. The city is in good fiscal standing, and I trust that 
this environment will continue. However, long-term outstanding 
economic pressures on the city and continued service challenges 
in such areas as public education and child welfare will 
require a new partnership with the District.
    Under the temporary State fiscal relief package included in 
the tax cut passed last month, the District will receive $94 
million over 2 years. Considering current spending pressures of 
approximately $50 million, I would be interested to learn how 
the city is planning to spend these new funds.
    In addition, substantial Federal funding was provided to 
the District in fiscal year 2002 and fiscal year 2003 ($122 
million in direct response to requests made by the Mayor, out 
of a total $512 million in the D.C. appropriations bill for 
Federal responsibilities). The last 2 years have been 
unprecedented in the amount of discretionary Federal dollars 
that have gone to the city, as well as an increase in 
congressional confidence in local leadership, resulting in 
increased autonomy for the District of Columbia. Fiscal year 
2004 has a much more conservative outlook as the committee 
attempts to reconcile a weak economy, few proposed increases 
for Federal discretionary programs and growing needs across the 
Nation, as well as in the District. Chairman DeWine and I share 
a commitment to the restoration of the Anacostia Waterfront, 
assistance for charter schools, and enhanced security this 
year. In this hearing, I hope we can identify the city's main 
priorities and how best to address them with very limited 
funding.
    A more broad challenge was confirmed last week when the 
General Accounting Office released a landmark report finding 
that the city faces an annual deficit of $400 million to $1 
billion between their revenue capacity and cost of providing 
average services. The report, requested by Congresswoman Norton 
and myself, found the underlying reason for the structural 
imbalance in the city's budget is due to the high cost of 
providing services in the District of Columbia.
    The District is uniquely situated and requires a unique 
relationship with the Federal Government; however, right now, I 
am not convinced that more money is the answer. Many options 
for funding have been discussed: a renewed Federal payment, 
changing the tax collection ability of the District, or funding 
directed to specific infrastructure in the District of 
Columbia.
    In this hearing I would like to discuss how to maximize the 
benefit of existing Federal funding, such as Medicaid and 
education. As I stated last week, we need to create a new 
partnership with the District. We must examine the underlying 
issues that create an imbalance and take a multifaceted 
approach to addressing it, before the District goes back to 
years of deficit.
    One major benefit for the District, with no budgetary 
impact, endorsed by President Bush, is to release the local 
budget from annual Congressional approval. The concept of 
budget autonomy for the District's local budget is building 
momentum on the Hill and I hope it will be approved this year. 
These are funds derived from locally generated tax dollars. The 
last word on how the city's budget is expended should be made 
by locally elected leaders, just like any other city. I urge my 
colleagues to examine the benefits of this proposal as 
legislation makes its way through Congress.
    I would like for the Mayor and Council Chairman to comment 
on how current and future general provisions--limitations on 
spending local and Federal funds--will be addressed under 
budget autonomy. I respect the city leaders' diligence in 
implementing and upholding these ``social riders'' through the 
years, against local pressure. I expect this same degree of 
respect for the law will be maintained in the future. There are 
legitimate means for Congress to provide guidance to the city; 
however, it is my hope that at some point in the future 
congressional interest in imposing riders will wane.
    The committee has also held hearings this year on child 
welfare in the District and discovered disturbing gaps in 
service and care. Through Chairman DeWine's leadership I hope 
we can discuss options for addressing this area as well. I 
appreciate your attendance today and look forward to continuing 
our partnership for growth and success of the city. The General 
Accounting Office released a landmark report finding the city 
faces an annual deficit, a structural imbalance, of $400 
million to $1 billion. This amount is the difference between 
the city's revenue capacity and the cost of producing average 
services. The GAO report outlines definitively that there is, 
in fact, a structural imbalance of the management and 
efficiencies of the District. They are still constraints beyond 
what is in your control to solve it, so I want to support the 
chairman's concepts that he outlined this morning, whether we 
have an internal study group or an external group, to come up 
with some specific solutions. There are some ideas that have 
been presented, but I hope that in your testimony this morning 
perhaps you all would have some suggestions, and then we could 
follow the chairman's lead in establishing a more specific 
commission to come up with some solutions that Congress could 
indeed take up.
    I also want to support the chairman's efforts as we work 
together to enhance and strengthen the foster care system. As 
Mr. Mayor, you know, are I think painfully aware that the 
District of Columbia is not the only entity by far in the 
Nation that is struggling with this tremendous challenge. Just 
yesterday there was a front page article in the New York Times 
about the deplorable conditions of the New Jersey child welfare 
system. I have to say that in Louisiana this is a tremendous 
challenge for our State Government to keep the finances and the 
management of a foster care system in a way that temporarily 
removes children from homes so that they can be safe and 
secure, and then re-engage or place them back with those 
families or to move them to a permanent home through adoption 
or through a foster family that looks as much like a real 
family as possible, and that is something that the chairman and 
I are firmly committed to working with you all, and we have had 
several good hearings.
    The only other two things I would mention briefly, I am 
very interested in how we proceed in the future to provide 
every child in this District with an excellent education. There 
are any number of ideas that have come forward, work that is 
underway, progress that has been made, but challenges that 
remain. It is going to be a key focus of mine, Mr. Chairman, as 
we move forward to see what the options are in providing an 
excellent education system for every child, and to have the 
Federal Government live up and stand up and step up to its 
responsibilities in that regard. Again, the District of 
Columbia is not in many instances that different from other 
cities and States struggling to do the same, but I want to stay 
focused on that.
    And finally, parks and recreation does not always receive 
the attention, and perhaps in some people's minds, in the 
scheme of things relative to economic development and education 
and health care it does not always take the priority that I 
think it should deserve, because we have got to give our young 
people something to say yes to, and it really underlines the 
quality of life issue for the District, and while we have more 
green space here than in many cities, and we are fortunate 
because of the Federal Government, we still, I think, lack some 
recreational opportunities for children, for young people, and 
for adults that the suburbs in this area seem to have in 
abundance, and I think that is a real problem when it comes to 
economic development, attracting people back to the city, 
keeping children and families engaged and productive in 
positive expenditures of their time, so I want to continue--I 
am glad the chairman agreed with me, and we invested some 
direct Federal dollars to work with your local dollars in that 
regard, but it is not just throwing more money, it is the 
management and the way that the parks system will provide 
recreational opportunities for children.
    So I thank you, Mr. Chairman, and I am going to give you 
your seat back and go find----
    Senator DeWine. You can stay there if you want to.
    Senator Landrieu. All right. Well, I will stay here then.
    Senator DeWine. Just don't get too----
    Senator Landrieu. I won't get too--well, look, it's so 
comfortable, I mean----
    Senator DeWine. Don't get too comfortable there or too 
accustomed to that.
    I am glad I got the gavel back.
    Senator Landrieu. You got the gavel back, and the chair. 
Thank you.
    Senator DeWine. Let me introduce our panel. Anthony 
Williams was inaugurated as the fourth Mayor of the District of 
Columbia on January 4, 1999. This past January, of course, 
Mayor Williams began serving his second term in office.
    Linda Cropp was sworn in on August 8, 1997 as the first 
woman to chair the Council of the District of Columbia after 
serving on the council for 7 years.
    Dr. Gandhi is the Chief Financial Officer for the District 
of Columbia, and is responsible for the city's finances, 
including his $5.4 billion operating budget and bond 
obligations.
    Mayor, why don't you start off.

                 STATEMENT OF HON. ANTHONY A. WILLIAMS

    Mr. Williams. First of all, I want to thank you, Mr. 
Chairman, and thank the Ranking Minority Member Landrieu, and 
thank the other members of the committee for this opportunity 
to testify on the District's 2004 budget and financial plan, 
and wherever possible I will try to abbreviate my remarks, 
recognizing that they have been submitted in whole in the 
record.
    This subcommittee has been a partner in our city's 
revitalization over the last few years, and as Mayor, I think I 
represent all of our citizens in saying that we are gratified 
for the support and encouragement offered by the previous chair 
and other Members, and certainly are pleased now to be working 
with you, Mr. Chairman. Your support and encouragement for our 
efforts to make our city shine are deeply appreciated and, in 
particular, your devotion to our children at risk has been both 
a consistent and long feature of your service, and it's a 
welcome signal of Congress' joint bipartisan commitment in this 
important area, recognizing Senator Landrieu's commitment in 
this area as well.
    In fact, this committee's members bring very valuable 
experience in State-level management, and that gives you all a 
unique appreciation for the challenges and constraints under 
which the District must operate. I think we can rest assured of 
a strong and vibrant relationship with you.
    As you know, many cities and States across the Nation are 
facing their worst budgetary challenge of the last 60 years, 
and the District is no exception. Due to the economic downturn, 
we experienced a decline in revenues of almost $370 million in 
the first half of fiscal year 2003. This decline equates to a 
10 percent loss in our local operating budget. Because the 
economy has not yet recovered, these challenges have continued, 
as you know, into the 2004 fiscal year, and we began 
formulation of the budget with a projected gap of $114 million.
    In facing these challenges, we not only continued our 
record of sound fiscal management, we achieved, I think, a 
level of responsible and conservative budgeting found only 
among the most fiscally prudent governments in our country. As 
a result, the fiscal year 2004 budget transmitted today is 
balanced in current and future years. I am not saying it is 
pretty, but it is balanced, and we can talk about that.
    More notably, the District's leaders balanced this budget 
entirely through budget reductions. No tax increases were 
adopted, and not one dollar of the $250 million in cash 
reserves, one of the strongest ratios of cash reserves in the 
country, was used. In many instances, we were able to reduce 
spending by using existing funds more wisely. In many other 
areas, however, significant sacrifices were required. Most 
notable among these is a deferral of key infrastructure 
investments.
    In making these sacrifices, we preserved existing funding 
for existing schools and libraries, but could allocate no new 
funding for the next phase of modernization. As a result, 
current 10-year plans for renovating neglected schools and 
libraries must be scaled back dramatically, leaving major 
challenges in the education of our children. This sacrifice, 
coupled with even greater reductions in roads, bridges, and 
other buildings to me presents one of the greatest challenges 
that we face today, and have not addressed, as you have 
mentioned in your opening remarks, Mr. Chairman, in the 
foreseeable future. In short, we have a significant problem.
    Now, the Federal Government requires that the District 
provide services like a State, but unlike every other State in 
the Nation, we are prohibited by Congress from collecting a 
nonresident income tax. This takes a tremendous percentage of 
our potential tax base offline. As a result, the District must 
fund expenditures far greater than the revenues provided 
through a reasonable level of taxation. As you put it, it is 
very, very difficult to maintain a reasonable level of service 
at a reasonable rate of taxation.
    Faced with this clash between needs and revenue capacity, 
we have maintained a balanced budget through overtaxing of our 
citizens and a deferral of critical investments which continues 
to damage the viability of the District as a place to live and 
operate a business, and I might add by way of operating a 
business, the disproportionate taxation of our businesses is 
actually far larger than the disproportionate rate of taxation 
of our citizens, not to say that that is acceptable, either, 
but for businesses it is particularly stark.
    In specific terms, the amount of the structural imbalance 
is between $400 million and $1.1 billion per year. This 
estimate has been thoroughly analyzed and documented by the 
Rivlin Commission, the Brookings Institution, and McKinsey & 
Company. To independently assess this matter, the Members of 
Congress, including Ranking Member Landrieu of this 
subcommittee, requested that GAO conduct a full-scale analysis. 
I would like to quote as Mayor several key findings that are 
particularly significant to me.
    1. The District faces a substantial structural deficit in 
that the cost of providing an average level of public services 
exceeds the amount of revenue we could devise by average tax 
rates.
    2. The District's per capita total revenue capacity is 
higher than all State fiscal systems, but not to the same 
extent that costs are higher. In addition, our revenue capacity 
would be larger without the constraints on our taxing 
authority, such as the inability to tax Federal property or the 
income of nonresidents.
    3. Addressing management problems, which we are committed 
to doing, would not offset the District's underlying structural 
imbalance, because this imbalance, as the Ranking Member has 
said and you have said, Mr. Chairman, is determined by factors 
beyond our direct control.
    And finally, again as you have mentioned, if this imbalance 
is to be addressed in the next term, it may be necessary to 
change Federal policies to expand the District's tax base or to 
provide additional financial support or some combination 
thereof.
    Through these findings that the independent--I want to 
stress, independent--GAO has confirmed that the District cannot 
compete, or--well, we cannot compete in the long term, and we 
certainly cannot complete our financial recovery under our own 
power. Instead, we must somehow address the Federal policies 
that could force the District back into insolvency, which I 
think would be a tragedy of just overwhelming proportions.
    Congresswoman Eleanor Holmes Norton has introduced the 
Federal Fair Compensation Act, which I believe would go a 
long--well, which I believe would address the situation, and I 
believe that, as Congress moves through this study, it ought to 
look first to the Federal Fair Compensation Act as a way to 
address the problem.
    Now, of course, the city must do its part in terms of 
better management of existing resources. Special education and 
Medicaid present two areas that need concentrated attention. 
The subcommittee I think should be pleased to know that we are 
making some headway, along with city councilman and chair of 
the Education Committee on the Council Kevin Chavous, I am 
chairing a Special Education Task Force that brought together 
all the Government entities that have a role in special 
education.
    After intensive meetings over several months, we were able 
to agree on a cost-reduction plan that the CFO certifies will 
yield $20 million in savings in fiscal year 2004, while at the 
same time improving the educational experience offered to 
children in special ed.
    Last month, I appointed the first Government-wide Medicaid 
czar who will bring similar direction and unity of purpose on 
how we draw down Medicaid funds. In addition to this matter of 
finances, we also face a procedural barrier in the Federal 
appropriations process. I will not go into a long list of 
details, but I would urge this committee's support for budget 
autonomy legislation that is now emerging in the Congress. We 
certainly welcome the partnership with this committee. We 
certainly welcome and certainly endorse wholeheartedly the 
oversight by this committee of Federal funds, but we believe 
that, like every other State and city in the country, we should 
have the autonomy and have the discretion to use our own funds 
as they are developed and derived from local sources.
    There are specific funding requests in the fiscal 2004 
budget before the committee. As I have shared with you, Mr. 
Chairman, and also with the Ranking Member, I am alarmed that 
the President's overall request for the D.C. appropriations 
bill in 2004 is 17 percent below the 2003 level. A cut of this 
magnitude jeopardizes ongoing projects already funded by the 
subcommittee, many of which both of you have mentioned. In 
particular, Congress allocated $50 million for the CSO, 
Combined Sewage Overflow Project, which was matched with local 
funds. This was a very welcome down payment on a billion-
dollar-plus multi-year project for an antiquated, outdated 
system, as you have mentioned.
    Updating this system, which was built originally by the 
Federal Government, pollution of which is--I think a majority 
of which is from the Federal Government, is an integral part of 
our Waterfront Initiative. Therefore, we are seeking that 
additional $50 million. The President's budget includes $15 
million for this purpose and another $10 million for the bike 
trail. I strongly urge this subcommittee to accept the 
President's proposal, but add the additional dollars to match 
last year's commitment.
    In 2003, Congress provided $4 million for a family literacy 
program. Since receiving this payment just 3 months ago, we 
have an ambitious program underway that will soon have at least 
20 literacy leaders dispatched around the city to help 
community-based providers, Government agencies, the faith-based 
community expand the network of adult learners.
    We also have a training symposium this summer to begin to 
train the trainers. With an additional $4 million in fiscal 
year 2004, this subcommittee can sustain this effort. This is 
in a city where 40 percent of our city has a learning challenge 
and is reading at below adequate level.
    Because education for our children is so critical, I 
strongly urge the Congress to add new funding beyond last 
year's level to support our public schools and expand 
opportunities for parents to consider nonpublic education 
settings. We believe that this three-sector approach will allow 
the city to leverage its best assets among the public schools, 
the public charter schools, and the private parochial schools. 
We are strongly committed to expanding the menu of school 
settings for our children both within the public system and 
outside of that system, but all as part of a coordinated 
effort.
    And on a related matter, I want to acknowledge the concerns 
that have been raised by this subcommittee regarding Child and 
Family Services in the District. As a former child in foster 
care, this is important to me, and I know it is important to 
both of you and the members of this committee. Historically, 
this whole Child Welfare System has been extremely troubled and 
although I believe substantial progress has been made, 
including the creation of the family court and the newly 
unified agency, there still remain, undoubtedly, challenges 
that we must continue to address. The CSA Director and I are 
redoubling our efforts to complete the reform process in 
serving our most vulnerable youth, including a more seamless 
approach in how we relate to children at risk.
    The subcommittee's ongoing interest in supporting efforts 
to recruit social workers, promote early intervention in case 
work for children and families, support foster parents, is all 
part of this effort.

                           PREPARED STATEMENT

    I might add, Mr. Chairman, that my appointment of a Senate 
nomination to the council, of a new corporation counsel, one of 
the key factors in my mind in sending the nomination to the 
Council of Robert Spagnoletti was his experience in the U.S. 
Attorney's Office in bringing together and getting on the right 
track domestic abuse in the U.S. Attorney's Office, and he 
evinced a strong interest in doing the same thing as it relates 
to child support and core council support for all these family 
matters, and I believe that he will help us accelerate and 
promote the efforts that I know you want to see, and we are 
committed to.
    In short, we welcome this committee's partnership and 
oversight, and look forward to working with you in the days and 
months ahead in the challenges facing our city.
    [The statement follows:]
               Prepared Statement of Anthony A. Williams
    Thank you Chairman DeWine, Ranking Minority Member Landrieu, 
Senator Hutchison, Senator Brownback, and Senator Durbin for this 
opportunity to testify on the District's fiscal year 2004 budget and 
financial plan. This subcommittee has been a partner in our city's 
renaissance over the last few years. As Mayor, I am grateful for the 
support and encouragement offered by the previous chair and others 
members, and I am pleased to now be working even more closely with 
Senator DeWine. His support and encouragement for our efforts to make 
our city shine are deeply appreciated. In particular, his devotion to 
our children at-risk has been both consistent and strong, and is a 
welcome signal of the Congress' commitment in this area.
    This committee's members bring very valuable experience in State-
level management, and that gives you a unique appreciation for the 
challenges and the constraints under which the District must operate. 
The citizens of our national capital can rest assured that the city's 
relationship with this subcommittee continues to be strong and will 
serve us well as we strive together to address the pressing needs of 
the District.
    Specifically, this session of Congress could be pivotal in the 
evolution of the Federal-District relationship:
  --fiscal challenges posed by the serious structural imbalance are 
        becoming more acute, and there are a number of proposals to 
        help address the issue;
  --the disruption of service delivery caused by problems with the 
        congressional approval process can hopefully come to an end 
        through proposed legislation;
  --the education of our children can be enhanced through new 
        partnerships between the District and Federal Governments; and
  --important infrastructure projects are at critical junctures that 
        require additional Federal support. These include the Combined 
        Sewer Overflow system, the Unified Communications Center, and 
        the Forensics Laboratory.
    With all these advances hopefully in our grasp, it is indeed a time 
of great opportunities and great challenges. As you know, cities and 
States across the Nation are facing the worst budgetary challenge of 
the last 60 years, and the District is no exception. Due to the 
national economic downturn, the District experienced a decline in 
revenues of approximately $370 million in the first half of fiscal year 
2003. This decline equates to a 10 percent loss in our local operating 
budget. Because the economy has not yet recovered, these challenges 
continued into fiscal year 2004, and the District began formulation of 
that budget with a projected gap of $114 million.
    In facing these challenges, however, the District not only 
continued its record of sound fiscal management, we achieved a level of 
responsible and conservative budgeting found only among the most 
financially prudent governments. As a result, the fiscal year 2004 
budget transmitted today is balanced in the current and future years. 
More notably, the District's leaders balanced this budget entirely 
through budget reductions. No tax increases were adopted, and not one 
dollar of the $250 million in cash reserves was used.
    Just as significant is the fact that this budget protects core 
services. In times of tight resources, some would set their goals aside 
in order to weather the storm, but I believe the opposite must be done: 
in these difficult times we must focus on our goals more than ever so 
that we may protect them and continue making forward progress.
    The proposed fiscal year 2004 budget reflects this approach by 
focusing resources in the areas of highest priorities for our 
residents. These are (1) education programs, including early childhood 
education, school choice, and adult literacy; (2) public safety, which 
includes providing greater police presence in neighborhoods and a 
vastly improved 911 emergency communications system; and (3) 
opportunity for all, which includes the housing, job-readiness, and 
health care needed for all residents to become productive and healthy 
members of the community and economy.
    In order to protect these priorities, however, some reductions had 
to be made in other areas of the budget.
             sacrifices made to preserve budgetary balance
    In many instances the District was able to reduce spending by using 
existing funds more wisely. In many other areas, however, significant 
sacrifices were required. Most notable among these is the deferral of 
key infrastructure investments. In fiscal year 2003 the District 
eliminated funding for $250 million in approved capital construction, 
including transportation investments, recreation facilities, and 
important technology investments. An additional $87 million of funding 
for such projects was eliminated in fiscal year 2004.
    In making these sacrifices the District preserved existing funding 
for schools and libraries, but could allocate no new funding for the 
next phase of modernization. As a result, current 10-year plans for 
renovating neglected schools and libraries must be scaled back 
dramatically, leaving a major challenge for the education of our 
children. This sacrifice, coupled with even greater reductions in 
roads, bridges, and buildings, present one of the greatest challenges 
that the District faces today and, if not addressed, into the 
foreseeable future.
    Is this challenge purely the result of our national economic woes? 
In fact, it is not. Even during times of economic growth, the 
District's can not support the level of investment required to 
compensate for the many decades of neglect from which our 
infrastructure has suffered. This is true not because of any factor 
under the District's control, however, but because of the uniquely 
unfair constraints placed on the District's tax base by the Federal 
Government.

   FEDERAL CONSTRAINTS ON REVENUE COLLECTION RESULTING IN STRUCTURAL 
                               IMBALANCE

    The Federal Government requires that the District provide services 
like a State, but unlike every other State in the Nation, the District 
is prohibited by the Congress from collecting a non-resident income 
tax. As a result, the District must fund expenditures far greater than 
the revenues provided through a reasonable level of taxation. Faced 
with this clash between expenditure needs and revenue capacity, the 
District has maintained a balanced budget through several strategies 
that have provided solvency in the short term, but cannot be 
maintained. These strategies are:
  --Producing service improvements within existing constraints.--The 
        District has aggressively improved service delivery through 
        more focused use of existing resources. Having capitalized on 
        the major opportunities for such efficiencies, however, the 
        District cannot expect to solve its structural imbalance 
        through this strategy.
  --Taxing local residents and businesses at high levels.--With a 
        severely limited tax base, the District has had no choice but 
        to rely on local residents and businesses to provide revenues 
        for government services, resulting in many tax rates that far 
        exceed those of surrounding jurisdictions. This translates into 
        additional hurdles to attracting and retaining residents and 
        businesses that could help stabilize our fragile economic base.
  --Deferring spending on critical infrastructure and services.--At 
        present, the District is deferring each year hundreds of 
        millions of dollars in critical investments. These include 
        funding for school buildings, transportation systems, water and 
        sewer projects, economic development, and social services.
    Although these strategies have temporarily addressed the imbalance 
between expenditures and revenues, they cannot be employed much longer. 
The overtaxing of our citizens and deferral of critical investments 
continue to damage the viability of the District as a place to live and 
operate a business. As a result, the financial and operational recovery 
underway will falter and the District will lose the important ground 
that it and its Federal partners have worked to gain.
    In specific terms, the amount of the structural imbalance is 
between $400 million and $1.1 billion per year. This estimate has been 
thoroughly analyzed and documented by the Rivlin Commission, the 
Brookings Institute, and McKinsey and Co. To independently assess this 
matter, the members of Congress, including Senator Landrieu of this 
committee, requested that the U.S. General Accounting Office (GAO) 
conduct a full-scale analysis, which was released just last week.
    I would like to quote several key findings from this report:
    1. ``The District faces a substantial structural deficit in that 
the cost of providing an average level of public services exceeds the 
amount of revenue it could raise by applying average tax rates.''
    2. ``The District's per capital total revenue capacity is higher 
than all state fiscal systems, but not to the same extent that its 
costs are higher. In addition, its revenue capacity would be larger 
without constraints on its taxing authority, such as its inability to 
tax federal property or the income of nonresidents.''
    3. ``Addressing management problems would not offset the District's 
underlying structural imbalance because this imbalance is determined by 
factors beyond the District's direct control.''
    4. ``If this imbalance is to be addressed, in the near term, it may 
be necessary to change federal policies to expand the District's tax 
base or to provide additional financial support.''
    Through these findings, the independent GAO has confirmed that the 
District can not complete its financial recovery alone. Instead, we 
must somehow address the Federal policies that could force the District 
into insolvency. Congresswoman Eleanor Holmes Norton will shortly 
introduce the ``Federal Fair Compensation Act'' which would go a long 
way to addressing the situation. Congress ought to move this 
legislation or an alternative quickly.
    Of course, the city must do its part in terms of better management 
of existing resources. Special Education and Medicaid represent two 
areas that need concentrated attention. The subcommittee should be 
pleased to know that we are making some headway. Along with the City 
Council, I am chairing a special education task force that brought 
together all the government entities who have a role in special 
education. After intensive meetings over several months, we were able 
to agree on a cost reduction plan that the Chief Financial Officer 
(CFO) certifies will yield $20 million savings in fiscal year 2004, 
while at the same time improving the educational experience offered to 
children in special education. Last month I appointed the first 
government-wide ``Medicaid Czar'' who will bring similar direction and 
unity of purpose to how we draw down Medicaid dollars.
    In addition to this matter of finances, the District also faces a 
procedural barrier in the Federal appropriations process.
   disruptions resulting from federal review of the district's budget
    Unlike any other State or local jurisdiction in the Nation, the 
District must have its locally-raised revenues appropriated to it 
through an act of Congress. Aside from the obvious issues related to 
government by consent of the governed, this process creates major 
disruptions in the delivery and improvement of basic government 
services. Specifically, there are several key reasons why the President 
and Congress should change the current process:
  --The current system denies the District the capacity to adapt 
        quickly to changing needs for front line services. The Federal 
        Government requires the District to formulate its budget a year 
        in advance in order to accommodate the Federal review process.
  --Congressional delays disrupt critical new improvements.--Virtually 
        every year, Congress fails to approve the District's budget by 
        the beginning of the fiscal year, most recently more than 3 
        months later.
  --Mid-year budget reallocations require an act of Congress, and 
        disrupt service delivery.--As discussed, local governments need 
        the flexibility to respond to rapid changes in their needs.
  --The city must ``use or lose'' funding at the end of each year.--
        Congressional approval for spending expires at the end of the 
        year, which punishes program managers who save funds by not 
        allowing the city to carry them over for one-time uses.
    Last January, the President's statement in favor of budget autonomy 
for the District was transmitted to the Congress, and is greatly 
appreciated by the District. At present, the House and Senate oversight 
committees on the District of Columbia are developing legislation that 
would begin reforming the Federal approval process for the District's 
budget. Of course, the process for Federal funds for the city and 
relevant oversight would be unchanged. As Congress pursues passage of 
this legislation, the District looks to you for leadership in affecting 
this change that will relieve the impediments to the District's 
continued financial and operational recovery.

                   CRITICAL FEDERAL FINANCIAL SUPPORT

    There are several specific funding requests in the fiscal year 2004 
budget before this committee. I am alarmed that the President's overall 
fiscal year 2004 request for the DC appropriations bill is 17 percent 
below the fiscal year 2003 level. A cut of this magnitude jeopardizes 
ongoing projects already funded by this subcommittee. In particular, 
last year Congress allocated $50 million for the Combined Sewer 
Overflow (CSO) project, which was matched with local funds. This was a 
very welcomed down payment on a billion-dollar-plus multi-year project. 
Updating our antiquated sewer system, which was built originally by the 
Federal Government, is an integral part of our Anacostia Waterfront 
Initiative. Therefore we are seeking an additional $50 million in 
fiscal year 2004. The President's budget includes $15 million for this 
purpose and another $10 million for the Anacostia Bike Trail. I 
strongly urge the subcommittee to accept the President's proposal, and 
add $35 million to the sewer project to match last year's commitment.
    The President has also included $15 million for the Public Safety 
Event Fund, which reimburses the city for various security costs of 
demonstrations and other events related to our status as the Nation's 
capital. This fund helps shift the unfair burden of covering these 
costs from District taxpayers and allows the District to better balance 
our duties to protect residential neighborhoods and the Nation's 
capital. I strongly urge the subcommittee to provide these important 
resources.
    In addition, thanks to the generosity of this subcommittee, the 
Tuition Assistance Grant Program has provided thousands of District 
residents with tremendously expanded options for post-secondary 
education. Indeed, many of these people might not have otherwise 
attended college. In fiscal year 2003, the program will use all its 
allotted funding and will require an additional $17 million in fiscal 
year 2004.
    In fiscal year 2003 Congress provided $4 million for a family 
literacy program. Since receiving this payment just 3 months ago, we 
have an ambitious program underway that will soon have at least 20 
Literacy Leaders dispatched around the city to help community-based 
providers, government agencies, and the faith-based community expand 
the network of adult learners. We will also have a training symposium 
this summer to ``train the trainers''. My goal is to reverse the city's 
destiny in this area by transforming ourselves from a city with a 
shockingly high rate of adult literacy challenges to a city where the 
right to read is sacred. Adults will have a harder time fulfilling 
opportunities for health care, employment, and stable family life as 
long as they lack basic reading skills. It is time that the stigma 
associated with adult learning challenges be eradicated and all of 
Washington make this a priority. With an additional $4 million in 

fiscal year 2004 the subcommittee can sustain our efforts.

                  SUPPORTING CHILDREN IN THE DISTRICT

    Because quality education for our children is a critical priority 
for the city, I strongly urge the Congress to add new funding beyond 
last year's levels to support our public schools and expand 
opportunities for parents to consider nonpublic educational settings. 
This 3-sector approach will allow the city to leverage its best assets 
among public schools, public charter schools, and private/parochial 
schools.
    The District of Columbia Public School system is making headway in 
reform, including the very promising Transformation initiative for 15 
low-performing schools. It also has a liberal out-of-boundary program 
that affords parents opportunities to consider public schools across 
the city. Our robust charter school system is a national model for 
public school choice whose expansion is limited largely by a lack of 
adequate facilities. In addition, dozens of private and parochial 
schools are assets for our children. Consequently, I want to reiterate 
my support for school choice--both within the public system and between 
public and private schools. I urge the Congress to be both bold in 
supporting school choice in DC through a 3-sector approach.
    On a related matter, I want to acknowledge the concerns that have 
been raised by this subcommittee regarding child and family services in 
the District. Historically, the whole child welfare service system has 
been extremely troubled, and although major progress has been made, 
including creation of the Family Court and a newly unified Child and 
Family Services Agency, there still remain challenges that we must 
continue to address. Our capable CFSA director and I are redoubling our 
efforts to complete the reform process in serving our most vulnerable 
youth, including a more seamless approach in how government agencies 
relate to children at risk. The subcommittee's ongoing interest in 
supporting efforts to recruit social workers, promote early 
intervention in case work for children and families, and support foster 
parents who take on this difficult work is very encouraging.
    And finally, before I conclude this testimony there are several 
specific points that must be made clear for the record. First, I ask 
that the District's appropriation be passed without the undemocratic 
``riders'' that are sometimes included. These non-budgetary provisions 
subvert the will of District citizens and their only elected 
representatives. If the elected leadership of the city has decided to 
use local funds for various purposes, we ask only for you to grant us 
the same prerogatives and liberties that cities in your own districts 
enjoy.
    In addition, I would also like to note for the committee that the 
city continues to be vigilant in its emergency preparedness 
responsibilities and is expeditiously drawing down on Federal funds 
provided for this purpose. We are making great progress working with 
surrounding jurisdictions and Federal agencies in developing effective 
regional responses. Similarly, working with local hospitals, our 
capacities in the areas of preventing and responding to bioterrorism 
are greatly expanded. Through partnership with the Federal Government, 
the District is rapidly becoming one of the best prepared jurisdictions 
in the Nation.
    And finally, no discussion of District-Federal partnership is 
complete without a discussion of voting representation in Congress. The 
District is the capital of the world's greatest democracy, and it is 
the ultimate hypocrisy that its citizens suffer from the exact 
disenfranchisement this Nation was founded to end. Like all of us in 
this hearing room, I was filled with great pride and gratitude watching 
the young men and women of our armed forces help bring democracy closer 
to the people of Iraq. At the same time, however, I was struck with the 
irony that those among them who hail from our great city do not enjoy 
full democracy here.
    Again, Senator DeWine and members of the subcommittee, I thank you 
for your support of the District and I thank you for this opportunity 
to testify before you today. After the testimony of Chairman Cropp and 
Dr. Gandhi, I will gladly answer any questions you may have.

    Senator DeWine. Mr. Mayor, thank you very much.
    Ms. Cropp.

                    STATEMENT OF HON. LINDA W. CROPP

    Ms. Cropp. Good morning, Chairman DeWine and Ranking 
Minority Member Landrieu. It is a pleasure to be before you 
today to testify on behalf of the District of Columbia. Let me 
thank you, Mr. Chairman and Senator Landrieu, for your comments 
with regard to the GAO report, and there is a nexus between the 
structural imbalance and our ability to serve the needs of our 
young people, comments that you also made.
    The fiscal year 2004 budget, another in a series of 
fiscally sound and responsible budgets, marks another important 
stride in our city's home rule. It fully illustrates that the 
Mayor and the council can work together and put together a good 
spending plan that continues to make the District a better 
place to live, to work, to raise a family, and to visit. It 
also is a reflection of our resolve to stand as one good 
government that will remain fiscally prudent and, most 
importantly, responsible.
    Fiscal discipline. This has always been and will be a top 
priority on our legislative agenda. We not only demand it of 
the executive branch, we practice it. The various forms of 
fiscal discipline, from rainy day funds to financial 
safeguards, insurance and investment policies, economic 
triggers to pay-as-you-go funds that we have demanded of and 
imposed on ourselves in the past several years have yielded 
significant returns for the District of Columbia.
    Case in point, the council insisted that the Government 
limit the growth of our spending in fiscal year 2004 while 
ensuring that all basic municipal needs were met. Instead of 
increasing taxes to address declining revenues for fiscal year 
2004, the council, with the mayor, limited the rate of growth 
in our spending to under 5 percent. Again, this was done 
without any detriment to the District of Columbia residents who 
receive services and benefits from important programs.
    The $323 million-plus revenue shortfall in fiscal year 2003 
budget on the very first day of our new fiscal year, October 1, 
2002, was dealt with very quickly by the Mayor and the council. 
On April 1, 6 months into the fiscal year, the council took 
emergency action, as recommended by the mayor, on another $134 
million that was a hole in this year's budget. Our counterparts 
in Maryland and Virginia and all across the country, of course, 
face similar challenges because of the economy in our Nation, 
although we think that the District has acted more quickly, 
effectively, and responsibly to take the actions necessary to 
bring our budget in balance.
    Finally, it is important to note that, due to the city's 
fiscal discipline and our hard work, we have a positive image 
fostered by the partnership of locally elected leadership in 
our business community. We have finally been recognized and 
rewarded on Wall Street, where the District Government bond 
rating has been upgraded from stable to positive. Moreover, the 
city's bond rating is expected to be further upgraded while 
other jurisdictions' ratings are being downgraded during this 
economic period.
    As the council continues its work during the fiscal year 
2003 and 2004 legislative session, we will remain vigilant 
about maintaining fiscal discipline that we have imposed on the 
executive branch and ourselves, and we will also focus on other 
important goals set forth in our legislative agenda. These 
goals include the revitalization of our neighborhoods, 
investment in our youth, protection of our vulnerable 
residents, oversight of executive performance and service 
delivery, promotion of continued economic stability and growth, 
and expansion of home rule and democracy, our priorities, put 
together with a fiscally sound and responsible spending plan, 
is good for the District.
    The operating budget funds basic city services and 
programs. The capital budget, as a result of stringent 
oversight, was realigned. Funds were redirected and targeted 
for projects with higher priorities and critical needs such as 
schools for children, improving blighted properties in our 
neighborhoods, and enhancing existing facilities, better 
public-council interaction.
    I have provided copies of the committee reports from all of 
our council's committees for the record, and I believe that it 
will be good reading and will also provide you good information 
with regard to the status of many things in the District of 
Columbia.
    Senator DeWine. Those will be made a part of the record. 
Thank you very much.
    Ms. Cropp. Thank you. An integral part of the council's 
budget process is public input. As such, many hearings on the 
fiscal 2004 budget were held. This gives the council and the 
Mayor an opportunity to hear from our citizens. The process 
gave citizens and our workforce the opportunity to comment and 
critique programmatic and funding needs and agency performance 
and their impact. The feedback is invaluable, because it 
contributed and culminated in decisions and recommendations of 
each committee in the mark-up process.
    At the end of this public process--translated into 54 
public hearings or about 289 hours--we incorporated the 
findings from that public hearing process, from our residents 
and our employees, into the budget. On May 6, the council 
approved the $6.6 billion spending plan that provides adequate 
funding for basic city services, in keeping with the seven 
goals of our legislative agenda. All of this was done, 
including full funding of our police department, without a tax 
increase. In fact, we are continuing with the portions of the 
tax reduction associated with the Tax Parity Act as passed by 
the council in 1999, which were already in place. The council 
action will bring our taxes more in line with our neighbors' 
over a 5-year period. We believe this has contributed to the 
economic renaissance that our city is experiencing.
    Historically, the relationship between the District and the 
Federal Government has been a unique political and financial 
arrangement. Between 1879 and 1920, the Federal Government 
provided assistance by paying half of all of the District's 
expenditures. Subsequently, given the various Federal 
prohibitions on taxing nonresidents' incomes, Federal 
properties, Federal purchase of goods and services, the 
District would receive a direct payment. This payment was 
stopped in 1997, when the Federal Government expropriated the 
cost of the contributions for the police, firefighters, 
teachers, and retirement plans, and various court services.
    It is worth recalling that in 1997 the Revitalization Act 
was passed. One recommendation was that since the District no 
longer receives the Federal payment, that the District should 
not have its local budget portion come before Congress, just 
like other States. I join with the Mayor in asking that you 
support budget autonomy for the District of Columbia. Although 
the District may be solely responsible for its local spending, 
it's not responsible for the structural imbalance that exists 
in its spending needs and its revenue generation capacity.
    The District, not unlike any other major urban city in this 
country, has a population that is older, sicker, and poorer. 
The big difference, and it is a major and important difference 
with the District and other large urban cities, is, we help 
support Baltimore and Richmond, because most of our income 
leaves the city and goes out to help support our suburban 
economies, totally a reversal from where it is in the rest of 
the country, where in most instances, the suburban 
jurisdictions help to offset the high cost of what is going on 
in the district. That is a huge structural imbalance unlike 
anything else. The GAO report is very clear, the imbalance 
ranges between $470 million and $1.1 billion a year. The cost 
of providing public services is just much higher in the 
District than in other areas.
    Mr. Chairman, you had asked if we had some suggestions. The 
Mayor certainly outlined the Federal Fair Compensation Act that 
our Congresswoman has introduced that we would hope that we 
could start discussions around that. I would like to also call 
your attention to the fact that in 1997, Congress recognized 
that the District paid an inordinate amount of Medicaid funds. 
We were the only city in the country, in this entire United 
States, that paid 50 percent of the cost of Medicaid. You 
recognized that that was an imbalance, and we changed the 
payment to 70 percent Federal and 30 percent District of 
Columbia. That is another area where you can look.
    The Federal Government pays a higher proportion of Medicaid 
than many other jurisdictions. It seems only fair and just, and 
a way to deal with the structural imbalance, that we at least 
get the same rate as other States may get for just the city, 
when no other city has to pay a Medicaid cost.
    Another area is our whole Metro payment. That certainly is 
a benefit to us, as we serve, as the capital city, our suburban 
jurisdictions. While we have Metro and we have our suburban 
areas that sit on the Metro board, their States pay the cost of 
Metro, so Montgomery County and Fairfax, Arlington, Prince 
George's, they do not even have to pay part of their Medicaid 
cost, while the District of Columbia once again, in a highly 
structurally imbalanced way, must bear the brunt of our Metro 
cost, so that is another area where we could look.
    Finally, as you consider our appropriations request, we ask 
that you support and pass the budget in time for the start of a 
new fiscal year and before adjournment of the 108th Congress. 
It really is telling that while our budget period started in 
October we did not have an approved budget until January. In 
some instances, we needed to reduce the cost of our Government 
to deal with our economy. It is important to remember that at 
the end of the budget process, both the Mayor and the council 
found themselves in sync and approved a budget that invests in 
service delivery and basic programs. We urge you to pass the 
budget as is without any riders.
    This much-anticipated 2004 budget is important, because it 
shows again that the Mayor and the council coexist and 
underscores our commitment to make Washington, D.C. one of the 
best-governed cities in the world. The council will continue to 
oversee our operations and expenditures, sometimes to the 
chagrin of the Mayor, but I think both of us agree that it is 
for the good of the city as a whole.

                           PREPARED STATEMENT

    We will be responsive to our constituents who call the 
District their home. We will work with the Mayor, with you and 
Congress and our surrounding Governments to achieve mutually 
shared goals. Together with the Mayor, we will produce good, 
responsible budgets that invest dollars for the District and 
leave a legacy for our future generations. Granted, we do not 
always agree, but we are always at the table to assert 
ourselves as an institution and work for the betterment and the 
future of our citizens.
    Thank you very much for this opportunity.
    [The statement follows:]

                  Prepared Statement of Linda W. Cropp

    Good morning, Chairman DeWine and Ranking Minority Member Landrieu, 
and members of the Senate Appropriations Subcommittee on the District 
of Columbia. I am pleased to be here with my colleagues to testify on 
the District's budget for fiscal year 2004.

                              INTRODUCTION

    The fiscal year 2004 budget--another in a series of fiscally sound 
and responsible budgets--marks another important stride in our city's 
history of home rule. This is the second budget that the locally 
elected leaders have crafted entirely within the Home Rule process. It 
fully illustrates that the Council and the Mayor can work together and 
put together a good spending plan that continues to make the District a 
better place in which to live, to work, to raise a family, and to 
visit. It is also a reflection of our resolve to stand as one good 
government that will remain fiscally prudent and most importantly 
responsible.
    This past February, the Mayor and Council received the annual 
Comprehensive Annual Financial Report, which certified that the 
District's fiscal year 2002 budget that ended on September 30, 2002 was 
our sixth consecutive balanced or surplus budget.
    Fiscal Discipline.--This has always been and will always be a TOP 
PRIORITY on our legislative agenda. We not only demand it of the 
executive branch, we practice it. The various forms of fiscal 
discipline--from rainy day savings, financial safeguards, insurance and 
investment policies, economic triggers to PAY-AS-YOU-GO funds--that we 
have demanded of, and imposed on ourselves in the past several years, 
have yielded significant returns to the District of Columbia.
    Case in point . . . The Council insisted that the government limit 
the growth of spending in fiscal year 2004, while ensuring that all 
basic municipal needs were met. Instead of increasing taxes to address 
declining revenues for fiscal year 2004, the Council resolved to limit 
the rate of spending to under 5 percent. Again, this was done without 
detriment to the District residents who receive services and benefits 
from important programs.
    This reflects a continuation of the same fiscal discipline 
strategies that the Council applied to the budget shortfalls that have 
occurred during fiscal year 2003. The Council took the lead and made 
tough decisions with the Mayor in closing a $323-million-dollar-plus 
revenue shortfall in this year's fiscal year 2003 budget on the very 
first day of the fiscal year--October 1, 2002. On April 1st, 6 months 
into the fiscal year, the Council took emergency action to close 
another $134 million hole in this year's budget. Our counterparts in 
Maryland and Virginia and all across the country of course face similar 
challenges, although we think that the District has acted more quickly, 
effectively and responsibly to take the actions necessary to keep our 
budget in balance.
    Finally, it is important to note that due to the city's fiscal 
discipline, our Congressional counterparts, as well as the hard work 
and positive image fostered by the partnerships of the locally elected 
leadership and our business community, we have finally been recognized 
and rewarded on Wall Street, where the DC government's bond rating has 
been upgraded from ``stable'' to ``positive.'' Moreover, the city's 
bond rating is expected to be further upgraded, while other 
jurisdictions ratings are being downgraded at this time.

                           COUNCIL PERIOD XV

    As the Council continues its work during the fiscal year 2003 and 
fiscal year 2004 legislative sessions, we will remain vigilant about 
maintaining the fiscal discipline that we have imposed on the Executive 
Branch, and ourselves. Also, we will focus on other important goals set 
forth in our legislative agenda. These include:
  --Revitalization of our Neighborhoods;
  --Investment in our Youth;
  --Protection of our Vulnerable Residents;
  --Oversight of Executive Performance and Service Delivery;
  --Promotion of Continued Economic Stability and Growth; and
  --Expansion of Home Rule and Democracy.

                    THE COUNCIL/MAYOR BUDGET PROCESS

    In December of last year, the Council passed the fiscal year 2004 
Budget Submission Requirements Resolution of 2002. It established March 
17 as the date by which the Mayor shall submit to the Council the 
proposed budget. The Mayor transmitted his budget on March 17 and the 
Council acted on it within the 50 days as required by the Home Rule 
Charter. During this 50-day period, the Council worked diligently with 
the Mayor in aligning both sets of priorities and, put together a 
fiscally sound and responsible spending plan. The operating budget 
funds basic city services and programs. The capital budget, as a result 
of stringent oversight by the Council, was realigned. For example, 
funds were redirected and targeted for projects with higher priority 
and critical needs, such as schools for the children, improving 
blighted properties in the neighborhoods, and enhancing existing 
facilities for better public/Council interaction.
    I have provided copies of the Council's committee reports and the 
fiscal year 2004 Budget and I would ask that they be made part of the 
record.
    When the Mayor submitted the budget to us on March 17, he had 
proposed a local budget of $3.8 billion, an increase of $195.5 million 
or 5.4 percent above the revised fiscal year 2003 budget, as amended by 
the fiscal year 2003 Amendment Act of 2002 and later approved by the 
Congress.

               THE COUNCIL/PUBLIC CITIZEN BUDGET PROCESS

    An integral part of the Council budget process is public input and, 
as such, many hearings on the fiscal year 2004 budget were held. The 
process gave the citizens and our workforce an opportunity to comment 
and critique programmatic and funding needs and agency performances 
that impact them. This feedback is invaluable because it contributed 
and culminated in the decisions and recommendations of each committee 
in the mark-up of the budgets. Following a review of the committee 
marks, the Committee of the Whole made additional recommendations in 
order to bring the budget into balance. At the end of this public 
process--which translated into 54 public hearings or about 289.15 
hours--we incorporated findings from our residents and employees into 
the budget.

               HIGHLIGHTS OF THE FISCAL YEAR 2004 BUDGET

    On May 6, the Council approved the $6.6 billion spending plan that 
provides adequate funding for basic city services and programs. In 
keeping up with the seven goals on our legislative agenda, schools 
continue to receive full funding. To protect our vulnerable residents, 
the Council found $4 million to fund the Interim Disability Assistance 
program for disabled adults. In the area of public safety, the Council 
provided the funding needed to increase the number of active policemen 
in the Metropolitan Police Department (MPD) to 3,800 by the end of 
fiscal year 2004. The Council accomplished this by separating the 
dollars needed to fund this initiative from the rest of the MPD budget 
by placing the dollars into Pay Go funding. To invest for future 
generations, capital and operating dollars were added for our young 
children to improve their studying environments and broaden their 
academic and vocational skills. We continued the District's effort to 
collect Medicaid reimbursement for local expenditures that are eligible 
for such Federal reimbursement.
    All of this was done without any general tax increase. In fact, we 
are continuing with the portions of tax reductions associated with the 
Tax Parity Act passed by the Council in 1999, which are already in 
place. This Council action will bring our taxes more in-line with our 
neighbors over a 5-year period. We believe this has contributed to the 
economic renaissance that our city is experiencing.

                          FEDERAL CONTRIBUTION

    Historically, the relationship between the District and the Federal 
Government has been a unique political and financial arrangement. 
Between 1879 and 1920, the Federal Government would provide assistance 
by paying half of all District expenditures. Subsequently, given the 
various Federal prohibitions on taxing nonresident incomes, Federal 
properties, Federal purchase of goods and services, the District would 
receive a direct payment. This payment was stopped in 1997 when the 
Federal Government expropriated the cost of the contributions for the 
police, firefighters, and teachers retirement plans and various Court 
services.
    It is worth recalling that when the 1997 Revitalization Act was 
passed, one recommendation was that since the District no longer 
receives any Federal payments, Congress would not need to review or 
approve its budget. At a minimum, Congress should no longer approve the 
local portion of the District's budget. Just like the other 50 States, 
the District would be solely responsible for approving its own local 
spending.
    Although the District government may be solely responsible for its 
local spending, it is not responsible for ``the structural imbalance'' 
that exists between its spending needs and its revenue generation 
capacity. Just recently, the General Accounting Office (GAO) released a 
report regarding this imbalance. Some of the significant conclusions of 
this report include:
  --The imbalance ranges between $470 million and $1.1 billion per 
        year;
  --The cost of providing public services is much higher in the 
        District than it is in the average State due to a relatively 
        large poverty population, poor health indicators, high crime, 
        and the high cost of living;
  --Although the District has a very high revenue capacity, we are 
        already taxing toward the upper limit of our revenue capacity, 
        thereby creating a punitive tax structure.
    In order to solve the problem of structural imbalance, the General 
Accounting Office suggests that the Congress consider one of the 
following: (1) Relax current taxing restrictions on the District; or 
(2) Compensate the District for its special status as a capital city.

                               CONCLUSION

    Finally, as you consider our appropriations request, we ask that 
you support and pass the budget in time for the start of the new fiscal 
year and before the adjournment of the 108th Congress. It is important 
to remember that at the end of the budget process, both the Council and 
the Mayor found themselves in sync and approved a budget that invests 
in service delivery and basic programs. Furthermore, we urge you to 
pass the budget as is, without any extraneous riders. This much 
anticipated fiscal year 2004 budget is important because it shows that 
the Mayor and the Council can co-exist together and underscores our 
commitment to make Washington, DC one of the best governed cities in 
the world.
    Nonetheless, the Council will continue to oversee executive 
operations and expenditures. We will be responsive to our constituents 
who call the District their home. We will work with the Mayor, 
Congress, and the surrounding governments to achieve mutually shared 
goals. Together with the Mayor, we will produce good responsible 
budgets that invest dollars for the District and leave a legacy for 
future generations. Granted we do not always agree from time to time, 
but we will be at the table to assert ourselves as an institution and 
work for the betterment and future of our citizens.

    Senator DeWine. Thank you very much. Doctor.

                     STATEMENT OF DR. NATWAR GANDHI

    Dr. Gandhi. Good morning, Mr. Chairman, Senator Landrieu, 
Congresswoman Norton. As the Chief Financial Officer, my 
primary responsibility is to ensure the overall financial 
viability of the District at all times. In the past year, we 
have enjoyed some notable successes, including the sixth 
consecutive balanced budget. Overall, the city ended fiscal 
year 2002 with a general fund surplus of $27.4 million, and a 
positive general fund balance of $865 million. In fiscal 1996, 
there was a negative fund balance of $518 million, so we have 
witnessed a turnaround of over $1.3 billion since then. This in 
itself is clear evidence the District is qualified for Home 
Rule and ready for budget autonomy.
    I believe we are in a good position to continue this 
progress. We instituted several changes in financial systems 
that will give us a much better picture of our financial 
posture as we go through the year.
    During fiscal year 2003, we began to implement standardized 
spending plans and to report actual performance against those 
plans, using a new online financial management tool for 
controlling agency budgets. At the end of fiscal year 2001, we 
had $100 million in cash reserves. This amount grew to about 
$248.7 million by the end of fiscal year 2002, and will 
increase to nearly $254 million by the end of fiscal year 2003, 
to remain at 7 percent of total local expenditures. These 
reserves were fully funded 5 years before the designated 
deadline.
    Along with the fund balance noted earlier, these steps 
solidified the District's bond rating and led Moody's to 
upgrade their outlook on the District's $3 billion in general 
obligation bonds from ``stable'' to ``positive''. This is 
particularly significant at a time when rating agencies are 
downgrading or looking negatively at numerous States and 
localities. We hope our positive outlook will lead to a ratings 
upgrade later this year, as Chairman Cropp expected, which will 
contribute to even lower borrowing costs in the future.
    For the fiscal year 2003 financial outlook, through the 
leadership and cooperation of our elected officials, the 
District made the necessary tough decisions to assure a 
balanced budget for fiscal year 2003. As of early June, the 
remaining spending pressure for fiscal year 2003 is estimated 
at about $50 million, primarily driven by the high utilization 
cost for the health care safety net. These amounts will be 
addressed. I am confident that we will end the year with a 
balanced budget.
    For the fiscal year 2004 budget request, in local funds, 
which comprise about two-thirds of the total budget, the 2004 
budget request is about $3.8 billion, an increase of about $230 
million over the approved 2003 level. The total number of 
positions funded with the local fund is about $26,245, a 
decrease of 150 positions, or less than 1 percent.
    As you will see, the budget projects positive net operating 
margins through fiscal year 2007. This projection shows a 
positive financial picture, and is based on revenue forecasts 
that use realistic economic and demographic assumptions 
generally accepted by the forecasting community and the Federal 
Government. However, a close examination of the data suggests 
that the District is operating on a slim financial margin 
indeed. Fortunately, we expect local revenues to begin to grow 
in fiscal year 2004, after the decline and stagnation of the 
past 2 fiscal years, but the growth that can be expected is 
nothing like the 7 percent annual change between fiscal year 
1999 and fiscal year 2001.
    The District now faces a more slowly rising revenue curve, 
as financial and real estate markets return to more normal 
patterns, generating revenues that are expected to grow at 
around 4\1/2\ percent per year. We believe that it will be 
challenging for this revenue to sustain our current level of 
services, and there is no room for consideration of additional 
program initiatives, significant infrastructure investment, or 
tax cuts. For these reasons, the city and its elected 
leadership will face difficult program and financial decisions 
in the years to come.
    One of the reasons for the difficulty is the structural 
imbalance in the District's budget that needs to be addressed. 
Chairman Cropp and the Mayor already have talked about the 
structural imbalance issue, so I will not dwell on that any 
further. I appreciate your leadership and Senator Landrieu's 
leadership in our appropriations, and it is my hope that the 
current GAO report would help Congress and the District move 
beyond the questions of whether there is a structural imbalance 
to questions of how the Federal Government and District 
Government can work together to address this problem. This 
problem must be addressed with urgency to ensure the long-term 
financial viability of the Nation's capital city.

                           PREPARED STATEMENT

    Mr. Chairman, this concludes my prepared remarks. I request 
that this testimony be made part of the record. I will be 
pleased to answer any questions you may have. Thank you.
    [The statement follows:]

                 Prepared Statement of Natwar M. Gandhi

    Good morning, Mr. Chairman, Senator Landrieu, and members of the 
subcommittee. I am Natwar M. Gandhi, Chief Financial Officer for the 
District of Columbia, and I am here today to testify on the District's 
fiscal year 2004 budget request to the Congress. My remarks will 
briefly touch on the fiscal year 2003 financial outlook, the fiscal 
year 2004 request, and the structural imbalance that threatens the 
District's long-term financial viability.

                                OVERVIEW

    As the Chief Financial Officer, my responsibility is to ensure the 
overall financial viability of the District of Columbia in the short-, 
mid-, and long-term. In the past year, we have enjoyed some notable 
successes, including the sixth consecutive ``unqualified'' (or clean) 
opinion from the city's independent auditors, with the fiscal year 2002 
Comprehensive Annual Financial Report (CAFR) completed ahead of time 
and with a balanced budget. Overall, the city ended fiscal year 2002 
with a general fund surplus of $27.4 million, and a positive general 
fund balance of $865.3 million. In fiscal year 1996, there was a 
negative fund balance of $518 million, so we have witnessed a 
turnaround of over $1.3 billion since then. Even allowing for the 
restatements necessary to conform our financial reporting to the new 
requirements of Governmental Accounting Standards Board (GASB) 
Statement Number 34, this result is clear evidence that the District is 
qualified for Home Rule.
    I believe we are in a good position to continue this progress. We 
instituted several changes in financial systems that will give us a 
much better picture of our financial posture as we go through the year. 
We successfully implemented GASB 34 on time with minimal outside 
assistance. During fiscal year 2003, we began to implement standardized 
spending plans and to report actual performance against those plans 
using CFO$ource, a new online financial management tool for controlling 
agency budgets. At the end of fiscal year 2001, we had $100.9 million 
in cash reserves; this amount grew to $248.7 million by the end of 
fiscal year 2002, and will increase to nearly $254 million by the end 
of fiscal year 2003 to remain at 7 percent of total local expenditures. 
These reserves were fully funded 5 years before the legislative 
deadline. Along with the fund balance noted earlier, these steps 
solidified the District's bond ratings and led Moody's to upgrade their 
outlook on the District's $3 billion in general obligation bonds from 
``stable'' to ``positive''. This is particularly significant at a time 
when rating agencies are downgrading or looking negatively at numerous 
States and localities. We hope our positive outlook will lead to a 
ratings upgrade later this year, which would contribute to even lower 
borrowing costs in the future.
    We have made progress on other fronts as well. This year, for the 
second time, the District of Columbia's ``Comprehensive Financial 
Management Policy'' appears as an appendix of the budget submission. 
This policy, required annually by the fiscal year 2001 District of 
Columbia Appropriations Act, Public Law 106-522, is actually a 
compilation of policies in key areas and a financial management tool 
that codifies current policies and procedures. It is updated annually.
    Effective with the fiscal year 2003 budget development process, we 
began the transition to performance-based budgeting. With the active 
support of the Office of the City Administrator, seven large operating 
agencies, including the OCFO, submitted performance-based budgets based 
on agency strategic business plans aligned with the mayor's citywide 
strategic plan. For the fiscal year 2004 budget process, we worked with 
another 27 agencies (the remainder of the Mayor's cabinet) to convert 
them to performance-based budgeting.
    A long-term replacement strategy for the District's payroll systems 
and their integration with other administrative systems has been 
developed as part of the Administrative Services Modernization Program 
(ASMP), spearheaded by the Office of the Chief Technology Officer. Over 
the next 2 to 3 years, all of the District's administrative systems--
personnel, payroll, procurement, property management, and budget--will 
be upgraded and integrated with the System of Accounting and Reporting 
(SOAR). For the first time, this will give the District a top quality, 
integrated information system with which to manage District operations. 
Now that we have 3 years of operating experience with SOAR, we are 
utilizing more of its capabilities. We already have an Integrated Tax 
System, rated as among the best in the country by the Federation of Tax 
Administrators, and the District is the first city to offer free online 
tax filing and the only city to provide account balances via the Web.

                   FISCAL YEAR 2003 FINANCIAL OUTLOOK

    Through the leadership and cooperation of our elected officials, 
the District made the necessary tough decisions to assure a balanced 
budget for fiscal year 2003.
    As of early June, remaining spending pressures for fiscal year 2003 
are estimated at $50 million, primarily driven by higher utilization 
costs for the Health Care Safety Net. This amount will be addressed. I 
am confident we will end the year with a balanced budget.
    I want to thank you, Mr. Chairman, and you, Senator Landrieu, and 
the subcommittee members and staff for your leadership and support on 
the District's portion of the fiscal year 2003 budget supplemental that 
was enacted in April of this year.

                    FISCAL YEAR 2004 BUDGET REQUEST

    The Council of the District of Columbia voted to approve the 
consensus fiscal year 2004 budget request on May 6. Copies of the 
budget documents have been distributed, and CD-ROMs will be made 
available shortly. I would like to briefly summarize some of the key 
points in the request.
    In total, the District's gross fund operating request for fiscal 
year 2004 is $5.69 billion, which represents an increase of about $119 
million, or 2.1 percent, over approved fiscal year 2003 levels. The 
total number of positions in fiscal year 2004 from all funding sources 
is 33,867, which represents an increase of 233 positions, or less than 
1 percent.
    In local funds, which comprise about two-thirds of the total 
budget, the fiscal year 2004 budget request is about $3.83 billion, an 
increase of about $230 million, or 6.4 percent, over approved fiscal 
year 2003 levels. The total number of positions funded with local funds 
is 26,245, a decrease of 150 positions, or less than 1 percent.
    Over the 4-year period from fiscal year 1998 to fiscal year 2002, 
the District's local fund expenditures increased by 6.1 percent 
annually, or a total of $741 million over this period, from $2.768 
billion in fiscal year 1998 to $3.509 billion in fiscal year 2002. Of 
this $741 million increase, $621 million (nearly 84 percent) came in 
two areas: $316 million in the D.C. Public Schools and the Public 
Charter Schools, and $305 million in the Departments of Human Services, 
Mental Health, and Health, and the Child and Family Services Agency 
(all of which were part of the Department of Human Services in 1997). 
At these six agencies, expenditures increased at a rate of 11.1 percent 
annually over the past 4 years. Expenditures in all other District 
agencies combined increased by $120 million, or 1.8 percent annually, 
over the same period.
    As you will see, the budget projects positive net operating margins 
through fiscal year 2007. This projection shows a positive financial 
picture and is based on revenue forecasts that use realistic economic 
and demographic assumptions generally accepted by the forecasting 
community and the Federal Government.
    However, a close examination of the data suggests that the District 
is operating on a slim financial margin. Fortunately, we expect local 
revenues to begin to grow in fiscal year 2004, after the decline and 
stagnation of the past 2 fiscal years. But the growth that can be 
expected is nothing like the 7.4 percent annual change between fiscal 
year 1999 and fiscal year 2001. The District now faces a more slowly 
rising revenue curve, as financial and real estate markets return to 
more normal patterns, generating revenues that are expected to grow 
around 4.5 percent per year. We believe that it will be challenging for 
this revenue to sustain our current level of service, and there is no 
room for consideration of additional program initiatives, significant 
infrastructure investments, or tax cuts. For these reasons, the city 
and its elected leadership will face difficult program and financial 
decisions in the years to come. One of the reasons for the difficulty 
is a structural imbalance in the District's budget that needs to be 
addressed.

             STRUCTURAL IMBALANCE IN THE DISTRICT'S BUDGET

    Over the past several years, the District has submitted balanced 
and responsible budgets during periods of increasing as well as 
stagnating and declining revenues. Our restrained budgeting in the good 
years helped us work through some of the hard times in fiscal year 2002 
and fiscal year 2003. For fiscal year 2004, the District is submitting 
a balanced budget in a particularly challenging economic environment, a 
testament to the ability of the District's elected leaders to manage 
through difficult times. However, despite this balanced budget, and 
despite the surpluses the District has generated over the past 6 years, 
the District has a serious long-term financial problem--a structural 
imbalance that transcends short-term challenges and cyclical revenue 
fluctuations. This structural imbalance is a long-term gap between the 
District's ability to raise revenue at reasonable tax rates and the 
District's ability to provide services of reasonable quality to its 
residents. It is driven by expenditure requirements and revenue 
restrictions that are beyond the control of District leadership.
    Several outside assessments of the District's financial condition 
have affirmed the presence of this imbalance. In March 2002, a McKinsey 
& Company report funded by the Federal City Council stated, among other 
things, that Federal constraints impose an annual opportunity cost of 
at least $500 to $600 million. In October 2002, Alice Rivlin and Carol 
O'Cleireacain of the Brookings Institution assessed the District's 
relationship with the Federal Government and concluded that a strong 
rationale exists for additional Federal financial assistance to the 
District. And just last week, the General Accounting Office (GAO) 
released its final report, thoroughly assessing the District's 
financial structure and corroborating the existence of a structural 
deficit in the District's finances.
    Economic changes have lead other jurisdictions to begin identifying 
structural issues as well, and the District shares in the breadth and 
depth of problems facing most States and localities. In addition, 
however, the District's structural imbalance is more extreme, driven by 
the unique set of services provided by the District and the unique set 
of restrictions that limit the District's revenue raising capacity. I 
have testified to these requirements and restrictions on several 
occasions. In the District, we provide city services, State services, 
county services and even the services of a school district; we provide 
public safety and public works services to the Federal Government 
itself. We do all this with an artificially constrained tax base. We 
cannot tax the income of people working in the District and living 
elsewhere, a restriction faced by no State. We cannot tax 42 percent of 
the property value within the city because it is owned by the Federal 
Government. We cannot count on high-density property to make up for our 
limited taxable property because of the height restrictions on District 
buildings.
    The cumulative effect of these requirements and restrictions is 
that the District faces a long-term structural imbalance, whereby it is 
unlikely that we can provide a standard quality and range of services 
to our citizens, even with tax burdens that exceed those elsewhere. 
This imbalance manifests itself in many ways:
  --The District's per capita expenditure requirements are very high. 
        We face high per capita expenditure requirements because we 
        provide public services in a market with high labor costs; we 
        provide services to a large commuter population; and we have 
        many residents with high service needs. On top of these cost 
        drivers, the District provides about $500 million in services 
        of a State-like nature, and we provide millions of dollars of 
        services as host to the Nation's capital. Although the District 
        certainly has the potential to improve the efficiency of 
        operations, the District's higher costs are determined by 
        factors beyond our control and cannot be offset entirely by 
        improved service delivery.
  --The District compensates for its very high expenditure requirements 
        with taxes that are very high. The District's tax effort is 
        among the highest, if not the highest, in the Nation. The need 
        for high taxes is driven further by restrictions on the 
        District's ability to tax income earned in the District and a 
        significant portion of the property within the District.
  --The structural imbalance is not just a reality facing the 
        District's operating budget. The imbalance contributes to a 
        significant capital budget and infrastructure problem as well. 
        The District faces an accumulated infrastructure backlog of 
        $2.5 billion, which has not been funded in recent capital 
        improvement plans. The District continues to defer capital 
        investment to avert the operating costs associated with debt 
        service. The problem is acute because additional borrowing 
        could raise outstanding debt to levels that adversely affect 
        the District's credit rating.
    When it comes to addressing the structural imbalance, we have few 
options. Increasing the tax burden on District businesses and residents 
even further could have an adverse impact on total receipts, because it 
could influence potential and current residents or businesses to locate 
in adjacent, lower-tax States. Given the structural imbalance, the 
District must choose between tax levels that are even higher than the 
national average, service levels that are lower than the national 
average, or combinations of both.
    An alternative solution is Federal compensation for the District's 
unique relationship with the Federal Government. Not only does the 
District provide unreimbursed services to the Federal Government and 
fund itself with a federally restricted tax base, but the Federal 
Government has a strong interest in a fiscally secure District of 
Columbia. Ultimately, the long-term solution to the structural 
imbalance is a matter to be addressed by District and congressional 
policy-makers. A dialogue must continue that revisits the Federal/local 
partnership and arrives at a long-term solution for equitable support 
of District services.
    It is my hope that the GAO report helps Congress and the District 
move beyond questions of whether there is a structural imbalance to 
questions of how the Federal Government and District government can 
work together to address this problem. And this problem must be 
addressed with urgency to ensure the long-term financial viability of 
the Nation's capital city.

                               CONCLUSION

    Mr. Chairman, this concludes my prepared remarks. I request that 
this testimony be made part of the record. I will be pleased to answer 
any questions you or the other members may have.

    Senator DeWine. Good, thank you very much.
    Senator Landrieu.
    Senator Landrieu. Thank you, Mr. Chairman. I really 
appreciate the overview provided by each one of you, and 
particularly the points of your focus.

                               EDUCATION

    Mr. Mayor, maybe I should start with an issue that has been 
in the news a great deal, an issue that probably needs some 
clarifying, and we are going to spend some time working on this 
issue here, and that is the issue of education and choices and 
opportunities that we have to improve the educational 
opportunities for children not just here in the District. As 
you know, it has been a major focus of Congress with the 
passage of ``Leave No Child Behind'' as well as other efforts 
of funding and reforming special education.
    It has been a real focus of Congress to try to figure a new 
way to work in partnership with local Governments and State 
Governments to enhance the quality of education for all 
children, and it is a contentious debate at times, because 
there are a variety of different approaches. There seems to be 
some consensus emerging at least on the subject of providing 
more options than what exist now, but as you know, there is not 
tremendous support, and I agree with that, for abandoning the 
public school system, even though I know that people would 
contend that this is not what some people are attempting to do. 
Some evidence would suggest that some people have maybe 
completely given up on the public school system and want to go 
elsewhere. I am not one of those.
    So given this debate, could you just express to us, as 
clearly as you can, about what your views are. You have talked 
about a three-sector approach when this subject comes up, could 
you just clarify that issue for us? I realize that the school 
budget is not part of the District's Federal budget--though the 
school board is not here, I would like your views, Mr. Mayor. 
Many Mayors are now stepping up to try to help their cities 
navigate this issue of school choice, and your voice is one 
that we listen to a great deal, could you clarify what some of 
your thoughts are about that issue, and then I will come back 
to some others that you outlined.
    Mr. Williams. Well, I think, Senator Landrieu, that 
education is really critical to the future of the city. It is 
critical to have any kind of workforce and talent pool that our 
businesses need. It is critical in terms of having in the 
future the civic leadership that any city needs, let alone our 
Nation's capital, and if you look at a lot of literature about 
cities right now, people will tell you that more and more 
employers are looking to come to cities for the sense of energy 
and creativity, energy that a city is about.
    Well, clearly you are not going to have that energy and 
creativity if a good part of your city is really not fully part 
of the mainstream educationally, in terms of literacy and 
otherwise, so education is vitally important, and what we have 
tried to do is certainly in the first instance put a major 
emphasis on education over, if you look at the budgets over the 
last 4 or 5 years that I have introduced to the council, you 
know, major increases have really gone to either human services 
or they have gone to education. Everything else has pretty much 
been flat--education, some 42 percent increase in education.
    As we face this looming structural, well, present and 
looming structural imbalance in the capital budget, we have had 
to basically cut out of the capital budget $250 million in 
order to preserve capital dollars for school programs, so 
schools have been, are, and will continue to be, the public 
schools, a major part of our emphasis, because they are clearly 
the major part of the lifting and the delivery system for our 
children, and in that regard, the program that I have 
supported, calling for additional dollars for a choice program, 
or additional dollars above and beyond the dollars that we are 
investing in our schools.
    To the extent that children leave our regular public 
schools under this program, we would hold our regular public 
schools harmless, so in any event, regular public schools would 
have additional dollars to devote to better class sizes, other 
kinds of initiatives.
    Above and beyond that, we are proposing as part of this 
three-sector strategy provision of dollars, I would like to see 
in the order of magnitude of $50 million ongoing funding to 
relieve the funds of State costs that they can then invest, 
State costs borne by our District, no other State, or not other 
city, certainly, that can go into teachers, learning, and other 
kinds of enrichment.
    The second part of this program, in addition to these 
ongoing dollars for the public schools, would involve $50 
million matched by the private sector for school modernization 
for our charter schools. Right now, the demand far outstrips 
the supply for our charter schools. One of the big issues, as 
you know, is facilities in our charter schools. This will go a 
long way toward helping our charter schools meet and satisfy 
that gap.
    And then finally, certainly there is a choice component 
here for the third sector. We believe that it ought to be 
devoted to children who are right now trapped in our low-
performing schools, our lowest-income children, their ability 
to go to schools in the District, schools that would agree to 
accept nondiscriminatory policies, and certainly--and I am 
pleased that the Cardinal has already evinced support for this, 
certainly one leader in the private parochial area--that there 
be a common accountability mechanism, so that--you know, one of 
the things I am seeing right now as we enter into this debate 
is there is so much fury, inflammatory rhetoric about what can 
or will happen if we do this, but not a lot of it is based on 
real, empirical data.
    What we are talking about here is a pilot. We are talking 
about experimenting, and we are talking about doing a study 
under the Department of Education, Federal Department of 
Education, so that 4 or 5 years from now, we can look and say, 
okay, the outcomes were better, or maybe the outcomes are the 
same, or maybe they are no different, in which case we ought to 
try something new. And that is what I am proposing, and that is 
what I strongly support.
    I think we have tried one model for a long, long time. We 
are not abandoning that model, but if we can help 2,000 or 
3,000 children as part of a multisector approach, I think we 
ought to do it.

                             SCHOOL CHOICE

    Senator Landrieu. Well, just to conclude, and then I have 
got a couple of questions on different subjects. Regarding 
school choice, perhaps an approach would be a limited pilot, as 
you have described, but that would include not just the 
District, but several other cities, but quite limited, and the 
parameters quite secure. One of the reasons that I hesitate to 
even be more supportive at this point is because of the 
experience we just went through with ``Leave No Child Behind'', 
where funding was promised, but it was not forthcoming, and so 
I guess that there are many Members of Congress on both the 
Democratic and I would say some on the Republican side, that 
are wondering how we even move forward from here. There were 
commitments of funding levels made to schools across the 
country, and in my position the chairman may disagree, but 
those levels were not--whoever's fault it was, we could argue--
but those levels were not maintained, and so entering into any 
kind of arrangement without some security of the funding that 
follows whatever arrangements is something I think we should be 
very careful about, and again, having an approach that might 
include other regions of the country as well, if we were going 
to pursue it.
    But finally, I do want to, Mr. Mayor, commend you for being 
at least open. I think in this debate we have to be open to new 
approaches, but your efforts and the council's efforts 
particularly on expanding charter school options and choices in 
the District is very commendable. There are not many cities, 
Mr. Chairman--and I think now almost 17 percent of the students 
have a choice for charter schools. There are many cities that 
have much more limited choices, so the District has made a lot 
of progress in their charter school movement, and now having 
quality charter schools and accountability.
    But when you move into other areas beyond that, this issue 
of what children will be tested, what tests they will agree to, 
the private sector, as you know, holds very dearly their 
freedom to either not have tests, have whatever kinds of tests 
they want--of course, they do not have public funds involved, 
so they have that freedom, but adopting a new system would 
require private and independent schools to maybe adopt certain 
criteria that they might not feel is appropriate.
    So we are not going to resolve it today, but I just want to 
commend you for being open, but I guess caution that we proceed 
very slowly because of some of the things that I outlined.
    Go ahead.
    Ms. Cropp. If I may just for a moment add to that, the 
council shares in your concern with regard to funding for 
unfunded mandates. With ``No Child Left Behind'', the District 
is looking right now for millions of dollars to try to pay for 
that. We have the issue of our transformation schools that we 
are still dealing with.
    I would just like to put on the record for discussion not 
only in the District, but I think nationally, the real issue 
and concern with education is with the hard-core child who is 
having problems. The District has probably the largest charter 
school population of any city, any State in the country almost, 
or we are probably up there in the highest rank. Normally, 
those who go to charter schools, it is a certain culture, or a 
certain belief from the parents starting out with the children, 
but we still are not really tapping into that hard-core, 
uneducated child, and no matter what of the pilots that we are 
talking about now, until we touch into this hard-core group of 
those who are undereducated, I do not think we are going to 
achieve what we want to achieve.
    And the District of Columbia has really done exceptionally 
well, I think, over the past several years, but the area, if I 
had to select an area where I think we have the greatest need 
in growth it is with education and with our young people, and I 
would hope, as everyone, the District, nationally, other 
jurisdictions, as we look at it, we do not just look at those 
individuals who are going to make it. You know, with the 
charter schools, the parents obviously have a care for 
education. With school of choice, the parents obviously are 
trying to seek a higher level of education for their children, 
but it is that hard core that is in the public schools around 
this country, that if we do not address them, we are not going 
to resolve the problem at all.
    Senator Landrieu. Well, I thank the councilwoman, and I am 
not going to take any more time, but only to say that many of 
those hard-core children, as you are describing them, and 
perhaps that is a good term, are special needs children, and 
the Federal Government said they would pick up 40 percent of 
the tab of special needs, and the Federal Government is only 
picking up 8 percent for jurisdictions all over the country, so 
that would have to be addressed as one of the founding building 
blocks of this new proposal, that discrepancy in funding, 
before we would proceed.
    Mr. Chairman.

                              BOND RATING

    Senator DeWine. Dr. Gandhi, what is the outlook on Wall 
Street for the city's bond rating, and do you think that the 
recent GAO report will affect the bond rating?
    Dr. Gandhi. Sir, let's say my hope is that next time we go 
to Wall Street--which will be another month or two--that we 
would see an upgrade. That is my hope.
    Senator DeWine. An upgrade?
    Dr. Gandhi. Upgrade, sir, but let me say there are two 
fundamental issues here. The people on Wall Street are looking 
at, first, how well the city is managing its fiscal affairs, 
and I think the elected leaders have proved that, in the 2003 
and 2004 budgets, they have done heavy lifting and have done 
monumental work in terms of making sure that our budget is 
balanced. It is balanced without raising any taxes. They were 
able to provide realistic remedies to solving problems without 
using any tricks--no one-time revenues, no accounting mechanism 
that others have used. We have not done that.
    The second issue here is that they do look at our 
structural problem. There is no way of going around that. That 
does affect us, and they look at our long-term economic 
viability. Unless the Congress resolves this fundamental issue, 
we do have some problem, but as far as the city's fiscal 
credibility, I think we have proved on Wall Street that we can 
manage the city, and manage in a very fiscally prudent and 
financially responsible manner.
    The last thing I would say, sir, is that we now have 
roughly 25 percent of our fund balance, and until the year 
2007, every year we will have more than half, up to 60 percent 
of our fund balance, in cash. No other State, except perhaps 
Mississippi, that has a requirement of putting 7 percent of 
fund expenditure in general fund cash reserve. We have that.
    Further, and I will end with this, the replenishment 
requirement that we have is rather--how shall I put this?--very 
strict; so basically, that fund is untouchable, and that gives 
a lot of assurance to the people on Wall Street that that money 
is always there, and there in cash, so I am very hopeful.
    Mr. Williams. If I could add, Mr. Chairman----
    Senator DeWine. Good. Mr. Mayor, go ahead.
    Mr. Williams. Because of my experience as CFO, I think that 
it actually helps, because when we go up and talk to them, one 
of their major issues is this issue of the imbalance, and the 
Federal relationship, and to the extent that a recognized 
authority like GAO has pointed this out, and that there are 
statements from you as Chairman and the Ranking Member on this, 
and certainly our Congresswoman, I think that that actually--I 
think Wall Street sees that as supportive, as opposed to 
counterproductive.
    Another thing, as I just said, I am proud of the fact that 
from the time of our fiscal insolvency until now--and you are 
talking about a swing probably of, what, around $1 billion?
    Dr. Gandhi. $1.3 billion, yes, sir.
    Mr. Williams. Right, in liability, to now a fund balance, 
we never financed our debt. So we basically worked that debt 
down year by year, managing--you know, like the family managing 
the MasterCard, we just managed it down the very, very old-
fashioned, hard way. And I think that is to our credit, over 
these last 7, 8 years.
    Dr. Gandhi. And Mr. Chairman I would add, just to 
supplement the Mayor's point, that when the tobacco money came 
to us, we securitized that, and that substantially lowered our 
debt by $1/2 billion.
    Senator DeWine. You did what, Doctor?
    Dr. Gandhi. Securitized our tobacco debt, and consequently 
we do not have to now rely upon lower tobacco consumption and 
lower tobacco input into the fund. We are basically free of 
that obligation, so I think it was a very wise fiscal move on 
the part of the elected leadership, and it established our 
credibility on Wall Street even further.

                COMBINED SEWER OVERFLOW PROJECT UPGRADES

    Senator DeWine. Mr. Mayor, in fiscal year 2003, our 
subcommittee provided $50 million to begin these urgently 
needed upgrades to the city's Combined Sewer Overflow Project. 
Do you want to give us an update on the status of the project?
    And also, with Federal cost-sharing, how will you be able 
to reduce the time for the project completion, and also maybe 
tell us a little bit about, if the funding level goes down? In 
other words, if the numbers we are able to give you will go 
down to, say, $10-15 million, what does that mean to you?
    Mr. Williams. Right. Well, Mr. Chair, first of all the 
project, as you know, has three phases. There is the Anacostia 
phase, the Potomac phase, and the Rock Creek phase. All of 
them, particularly the Anacostia and Rock Creek, are 
particularly polluted.
    The most urgent and complicated of these is the Anacostia 
River phase, which as you have mentioned is $1 billion. The 
contribution of $50 million so far has been matched by a $90 
million contribution from WASA, which will go to completing 
early work. There remains, however, a need of $800 million for 
this Anacostia phase. There are several projects that are 
already underway, pumping capacity, targeted separation, an 
initiative to maximize storage in the existing system. Were we 
to receive reliable funding--in other words, if we were to know 
we were going to receive reliable funding over a period of 
years, we would then be able to finance the project properly 
and start the project in all of its phases and get it done over 
a reasonable period of time.
    Senator DeWine. Reliable means what?
    Mr. Williams. Pardon me?
    Senator Landrieu. Dedicated.
    Mr. Williams. Dedicated, reliable, recurring funding.
    Senator DeWine. At what level, though? It means at a 
certain level, I assume.
    Mr. Williams. Well, I do not want to--I could get you the 
exact number, but I would believe that if we were able to 
receive the level of funding we have already received on a 
reliable basis, recurring basis, we could then take that to the 
markets and package the project and get it done in a timely 
fashion.
    Senator DeWine. Sure.
    Mr. Williams. Were we not to receive this, I do not see a 
way that we can rely on our taxpayers and our businesses to 
shoulder the total cost of doing this project, and I think the 
results are just tragic, because it would grossly undermine the 
overall effort to revitalize the river, revitalize the city's 
waterfront here in our Nation's capital, what is it, ten blocks 
from the U.S. Capitol.
    And I might mention that the sewage system is antiquated. 
It was built in the last century. The major issue is, as you 
know, storm separation. This is the old, quote-unquote old 
city, south of Florida, here in Washington, D.C. The Federal 
Government probably has got about a 60 percent share of that 
old city, so it really is--it is not just a Federal issue 
because we are the Nation's capital. It is a Federal issue 
because our largest employer or major corporate partner here 
has got to do its share.

                            METRO COMMITMENT

    Senator DeWine. Let me move to another area. You are 
requesting Federal support to help the District meet its 
commitment to Metro. Do you want to explain why you feel this 
Federal commitment is so important?
    Mr. Williams. Well, Metro is certainly important to our 
city's economic livelihood, because our city has probably the 
second-largest in the country, I believe it is, ingress-egress 
of commuters of any city in the country. We have--like many 
cities in the country, we are in the top tier in terms of 
transportation congestion. This has been exacerbated by Federal 
actions, however well-intentioned, whether they are up here at 
the Capitol, but certainly down with the executive agencies, 
and most prominently, the White House. We have got Pennsylvania 
Avenue closed.
    I do applaud the effort to begin work on studying a tunnel, 
but we are way behind in getting the circulator moving, which 
will help free up traffic, so here you are trying to revitalize 
the city. We have seen $27 billion of investment in the city, 
and yet we have got this transportation congestion, 
coagulation, which is really hampering that effort to bring in 
additional business. The tractor man was a great example of how 
one little hiccup in the system can ricochet all over the 
region.
    Another example, if the Pentagon decides they are going to 
change how they register employees as they come in, or change 
how they do business--I remember this happened shortly after 9/
11. We had traffic backed up for miles all over the place, so 
we really need Metro.
    Now, Metro, the District's share of Metro is 
disproportionately higher than the surrounding jurisdictions, 
even though we do not have the tax base to support it, so our 
share is disproportionately higher, and we are paying that 
share, as Chairman Cropp has mentioned, unlike our partners in 
Montgomery County, Fairfax County, and the like.
    Dr. Gandhi. If I may supplement the Mayor----
    Ms. Cropp. If I may add to that?
    Senator DeWine. Sure.
    Ms. Cropp. What the mayor just articulated, with the share 
that we are paying, our capital dollars are being spent, and we 
are almost at a very high level. The infrastructure of the city 
as a whole needs to be repaired. The Mayor, the council, we 
have aggressively been trying to do that, fix our streets and 
do other things. With limited capital dollars, and with such a 
large share having to go to Metro, at some point the city is 
going to have to make a decision.
    Remember, we are talking about our taxpayers' dollars, and 
our taxpayers are saying, we want our parks and recreation that 
you are talking about, and the fact that we cannot even keep 
our parks, our recreation facilities, but we are going to help 
to pay and offset a disproportionate share of Metro for people 
outside of the District of Columbia, once again, a structural 
imbalance where the people who are paying for it are not even 
getting their dollars' worth.
    Mr. Williams. That is an excellent point. In 2005, I 
believe, the Metro share climbs up to $200 million, so you are 
already cutting the capital budget tremendously in order to 
meet the kind of per capita debt ratio that is going to satisfy 
Wall Street, and you have to cut it tremendously in order to 
just maintain ground with the schools, yet we have got to face 
this $200 million of Metro that is going to further crowd out, 
as the chairman is saying, needed investments.
    Senator DeWine. Doctor.
    Dr. Gandhi. If I may just supplement by some numbers here 
the Council Chairman and the Mayor's point--if you really look 
at this formula, which is really antiquated, we are now paying 
around 39 percent of the subsidies, while we hold only about 6 
percent of the real property valuation in the region, and only 
about 20 percent of the workforce is the riders who are on 
Metro. Any working day, the majority of the people riding Metro 
are basically regional people, and any working hour, especially 
in rush hours, the majority of the riders are Federal workers.
    Senator DeWine. Senator Landrieu.
    Senator Landrieu. Let me ask--and I really appreciate the 
discussion on Metro, because I think there might be some 
opportunities there for us to pursue some of the suggestions 
that all of you have made, Dr. Gandhi, some of us debated 
within this recent tax relief an opportunity, although it never 
came to fruition, to allow our cities to save through 
refinancing, because there are some Federal restrictions right 
now on refinancing. We did not opt to do that, which I think we 
should have, because we could have, at no cost to the taxpayer, 
saved our city some money.
    Would that be applicable to you in terms of, if we allowed 
some refinancing options, and I am not talking about 
reamortizing the debt, stretching it out, I am just talking 
about a refinancing to take advantage of potentially lower 
rates. Have you looked at that to see----
    Dr. Gandhi. I appreciate your concern, Senator Landrieu, 
and I think currently we are exploring every available 
opportunity to refinance our debt. We want to be absolutely 
sure that as we refinance, that roughly 15 percent of the total 
current outstanding debt should be the limit by which we have 
new issue of additional general obligation. We also want to 
make sure that our debt services do not rise above the limits 
that we have imposed upon ourselves in terms of the overall 
revenues.
    But our fundamental problem, as the Mayor and Mrs. Cropp 
have pointed out, is that our per capita debt now is among the 
highest in the country, and we are neck and neck with New York.
    Senator Landrieu. And what is that? What is your per capita 
debt?
    Dr. Gandhi. That is around, roughly in 2004 it is likely to 
be around $5,000 per capita. That is a lot of per capita debt, 
because we are carrying the debt of the municipality, county, 
and the State.
    Senator Landrieu. Correct. It is a combined debt that you 
are carrying.
    Dr. Gandhi. Senator, the chairman had asked me a question 
about the viability of having an upgrade in the bond rating, 
but this is one of the things they look at, what is your per 
capita debt. In per capita debt, we are very high.
    Senator Landrieu. Well, explore--and if you have any 
Federal restrictions that are not allowing you to refinance to 
take advantage of lower rates, let us know, because it may be 
something that our committee could help you with, because some 
of us had that idea to allow all the cities to do it in the tax 
package. It did not make it in the final package.
    And finally--I know we have a vote--Mr. Mayor, we are 
committed, as the chairman, under his leadership, to help on 
this Anacostia piece. I think it is very important, to find out 
what the surrounding areas are contributing, because as I think 
about it, even if we would redo the sewer system here in the 
District, there are lots of other States or counties that drain 
into this basin. I should be more clear as to what Maryland and 
some of the other jurisdictions are doing in terms of their 
nonpoint pollution source and revitalization of their 
infrastructure, or is their infrastructure already where it 
needs to be?
    Mr. Williams. Well, certainly I would say that--and I 
applaud Senator Sarbanes, the former Governor, the current 
Governor, county executives, Prince George's and Montgomery 
County have all pledged their support to the Anacostia 
Waterfront Initiative, and indeed some steps have been taken 
certainly on a cosmetic level, although that is important, too, 
just the trash traps on some on the tributaries up in Maryland, 
so we at least do not have just huge amounts of floating debris 
on the top of the river, but above and beyond that, a firm 
commitment on real dollars to the water clean-up is still 
forthcoming.
    But I think that, you know, were there to be the kind of 
commitment by this Congress, I think--and certainly there is a 
commitment here at the local level--we are able to leverage 
that and get that commitment up there as well.
    Senator Landrieu. So to do this project, you would need 
Maryland, primarily, participating. Any other State?
    Mr. Williams. Well, you are talking about three rivers 
again. You are talking about Potomac, Anacostia, and Rock 
Creek.
    Senator Landrieu. So you would need Virginia, Maryland----
    Mr. Williams. The two most polluted, Rock Creek and 
Anacostia River, you are talking primarily Maryland. When you 
get into the Potomac, obviously you are talking about 
ultimately up into West Virginia and Virginia, in the 
watershed.
    Senator Landrieu. Okay. Thank you.

               PREPARED STATEMENT OF SENATOR PAUL STRAUSS

    Senator DeWine. Senator Strauss has prepared a statement 
for the record, which will be included.
    [The statement follows:]

               Prepared Statement of Senator Paul Strauss

    Chairman DeWine, Senator Laundrieu and distinguished members of the 
Senate Subcommittee. I am Paul Strauss, the Shadow United States 
Senator elected by the voters of the District of Columbia.
    I appreciate the opportunity to provide this statement on behalf of 
my constituents in the District of Columbia. Today I would like to 
address the District's fiscal year 2004 local budget request to 
Congress. I would like to state for the record that the locally raised 
portion District of Columbia budget should not have to go through this 
process. The fact that there is a congressional hearing devoted to our 
budget is fundamentally wrong. These hearings have been held in the 
D.C. Council and the District should not have to submit this purely 
local portion of the budget to Congress at all.
    It is essential to the District of Columbia that Congress pass this 
budget in time for the new fiscal year 2003. You must avoid getting the 
local District of Columbia budget held up in Continuing Resolutions. 
The consequences are severe enough when the Federal Budgets get held up 
in Continuing Resolutions but the consequences are far worse when 
applied to the budget of the District of Columbia. When the District of 
Columbia's budget is held up, needed spending adjustments increases are 
not allowed to be implemented and the cost of debt services increases. 
Our local govermental services suffer greatly every new day that our 
budget is held up.
    An easy solution to the dilemma of our budget being held up every 
year is budget autonomy. The budget autonomy bill in the House of 
Representatives allows the District Budget to be separated from the 
Federal Appropriations Process. That is a good step in the right 
direction but it does not go far enough. Our local budget should have 
nothing to do with Congress. Since fiscal year 1996, the District of 
Columbia has continuously provided Congress with a balanced budget. The 
District of Columbia has demonstrated itself as a competent, governing 
body, which should allow the District right to reject all policy 
interference and social riders attempting to regulate the government 
within the District. It should be the privilege and priority of the 
government of the District of Columbia, not Congress, to make the 
District's economic decisions. Although it is a present constitutional 
prerogative of Congress to exercise oversight of the District and its 
budgetary needs, it is not always appropriate.
    The District of Columbia has submitted a budget that calls for 
serious investments in education and public services. Mayor Williams, 
Chair Cropp, and Chief Financial Officer Gandhi have explained the 
specifics in great detail and I support their efforts in the budgetary 
requests of the District of Columbia.
    I do not mean to suggest that there is no role for Congress in the 
D.C. Budget process. This committee should focus on resolving the 
structural imbalance faced by the District of Columbia. The structural 
imbalance faced by the District of Columbia is one of the major 
problems concerning the budget. The gap between the District's ability 
to raise revenue at reasonable tax rates and the District's ability to 
provide services of reasonable quality to its residents jeopardizes the 
District's ability to retain residents. Instead of being penalized for 
residing in the District, they should receive the same constitutional 
rights as all American citizens.
    The government of the District of Columbia needs to be fairly 
compensated by Congress for the services it provides to Federal 
agencies. This compensation would provide a solution to the structural 
imbalance within the District's budget. The District's government 
represents the citizens of the most unique city in the Nation. The 
District has repeatedly provided Congress with a budget that has proved 
to be both sensible and attainable. The outlook for the current fiscal 
year 2003 budget is being projected as balanced with a surplus. The 
government of the District has proven itself to be the best determiner 
of the expenditures within the District itself. This reoccurring record 
of balanced and responsible budget management during times of economic 
hardships and declining revenues is yet another fact that proves the 
District's elected officials can govern the District. Not allowing the 
District to have complete control over its spending only increases the 
structural imbalance in the District which continues to discourage its 
citizens.
    The elected officials of the District work hard to ensure the 
District is able to attain the locally raised revenue needed to fund 
various local interests such as public service and education. The city 
should be able to utilize its tax dollars in a more flexible manner. 
Allowing the District's government flexibility with its tax dollars 
would give them an opportunity to provide the community grater benefit 
from that revenue. Flexible use of locally raised revenue within the 
District of Columbia would provide the proper funding would ensure the 
community's public service departments remain secure and stable 
entities within the city. My constituents have the right to receive 
needed revenue to meet their children's educational needs. I urge you 
to approve the proposed budget, as it will be necessary in aiding the 
improvement of our District's schools. The District submitted a timely 
budget so Congress has appropriate time to approve it. I again ask that 
Congress pass this budget before the beginning of the fiscal year. It 
is unfair the District and its constituents suffer Congressional delays 
that often disrupt critical improvements such as these within the local 
government.
    I would like to thank you, Chairperson DeWine for the opportunity 
to present this statement. This budget was carefully drafted in order 
to benefit the citizens of the District of Columbia. I support this 
prompt passage without amendment. In closing, let me that two members 
of my legislative staff, Matt Helfant and Tricia Torok, for their 
assistance in preparing my testimony this morning.

                          SUBCOMMITTEE RECESS

    Senator DeWine. Well, we thank you very much.
    Mr. Williams. Thank you, Mr. Chairman.
    Senator DeWine. I think it has been a very helpful hearing.
    Mr. Williams. Thank you.
    Senator DeWine. Thank you.
    [Whereupon, at 11:23 a.m., Wednesday, June 11, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
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