[Senate Hearing 109-227]
[From the U.S. Government Publishing Office]
DISTRICT OF COLUMBIA APPROPRIATIONS FOR FISCAL YEAR 2006
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WEDNESDAY, JUNE 15, 2005
U.S. Senate,
Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:15 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Sam Brownback (chairman)
presiding.
Present: Senators Brownback, Allard, and Landrieu.
DISTRICT OF COLUMBIA
STATEMENT OF HON. ANTHONY A. WILLIAMS, MAYOR
OPENING STATEMENT OF SENATOR SAM BROWNBACK
Senator Brownback. I call the hearing to order. I thank you
all for joining us this morning. We are scheduled for an early
vote this morning, but what we will do is get the hearing
started, get as far along as we can, and then we will have to
take a recess for the vote and then we will come back.
I want to welcome the Mayor and the members of the City
Council, the Superintendent, the Chief Financial Officer for
the District of Columbia, looking forward to the discussion
that we will have here this morning.
Today we will hear testimony regarding the District of
Columbia's fiscal year 2006 local budget request. D.C. Mayor
Anthony Williams, Council Chairman Linda Cropp, Chief Financial
Officer Natwar Gandhi will present the city's budget and we
will discuss the District's request for Federal resources.
In addition, D.C. School Superintendent Clifford Janey will
discuss the D.C. Public Schools' local budget request and his
plans for using the $13 million in Federal funds that have been
requested of this subcommittee.
I would like to note that in the last Congress the Senate
passed a bill by unanimous consent which would have given the
District autonomy over its local budget, eliminating the need
for the D.C. local budget to be passed on the annual
appropriations bill. By decoupling the local budget from the
Federal appropriations process, we would avoid delaying the
city's local funds whenever the D.C. appropriations bill is not
passed before the end of the fiscal year.
Since the House did not pass a companion measure during the
last Congress, Senator Collins, chairman of the Committee on
Homeland Security and Government Affairs, has reintroduced a
D.C. budget autonomy bill which her committee will soon be
considering.
As we review the local budget, I would like to congratulate
city leaders for making dramatic improvements in the District's
financial conditions. At a time when many local jurisdiction
bonds have been downgraded, the District is enjoying an A
rating from all three credit rating agencies. The city is also
maintaining a cash reserve balance of about $250 million, which
is among the largest in the country. The city is enjoying an
impressive commercial real estate boom and has been creating
jobs at a rate that is twice the national average.
Congratulations on all of these financial scores. Those are
excellent.
There are areas of concern that temper some of these
positive facts and I hope to be able to discuss some of those
with you today. Only one-third of the jobs that the District is
creating are going to city residents. In fact, even as the
District has been creating new jobs unemployment in the
District has been increasing.
The adult illiteracy rate is something that we have
discussed at a hearing previously we had on education, I have
discussed privately with the Mayor and with the chairperson.
The adult illiteracy rate in the District is 37 percent. The
District--this is surely one of the prime reasons for the
persistent unemployment problem.
For years we have been failing generations of school
students in the District and now we are reaping some of these
sad consequences. As I stated in the hearing last month on the
D.C. Public Schools, money I do not believe is the direct
problem. Funding for the District school system has increased
83 percent since fiscal year 1999 even as enrollment has
dropped 5 percent in the same time period. Despite these large
increases, only 32 percent of fourth graders are reading at a
basic level compared to 62 percent nationwide, and only 36
percent of these students are performing at the basic level in
math, compared to 77 percent nationwide.
I know that District officials and others have stated there
are reasons for this as this is an urban area and in other
States you are comparing urban and broader regions. Still,
these numbers are just not acceptable. They are not acceptable
for the children, and if we fail the children we will fail
future generations, we will fail the District overall.
I want to hear from city leaders about how they plan to
rein in school spending and give the superintendent the tools
and support to aggressively improve the schools and at the same
time what we can do to get these grades and scores up. We
simply must do better.
Something I met directly with the Mayor about also is the
need to work to support families in the District. This is a key
to the future and to education. We have to have a strong family
structure so that children at home are being read to and their
math is being practiced. We have got five children in our
family and it is a constant that you are doing all the time.
But if you do not have somebody doing that, you cannot expect
them to go to school and be in a prepared situation.
We need to strengthen those families to be able to have the
children raised in a better environment and be better prepared
to go to school.
Regarding the Federal portion of the D.C. budget, I know
that the District has a number of programs and capital projects
that may merit funding through this subcommittee. Today I would
like to hear more about these project requests from our panel.
Although our resources are always limited, as chairman of the
subcommittee I look forward to partnering with the city leaders
to find ways to make life better for those who live, work, and
visit this great capital city.
As usual, witnesses will be limited to 5 minutes for their
oral remarks. Copies of all written statements will be placed
in the record in their entirety and the hearing record will
remain open for the requisite number of days to make that
presentation.
I would like to turn over to my colleague Senator Landrieu
for opening comments. Senator Landrieu.
STATEMENT OF SENATOR MARY L. LANDRIEU
Senator Landrieu. Thank you, Mr. Chairman, and I look
forward to working with you and the other members of the
subcommittee on this important topic and I want to join with
you. I am going to submit my full statement, Mr. Chairman, to
the record, but because of the time and because I am very
interested and anxious to hear from our panelists today I just
want to commend the city for the really extraordinary
turnaround, Mr. Mayor, that has taken place on the financial
side: the historic surplus, the opportunity that the city has
to take some of that surplus and really make some strategic
investments for the development of the city. The chair of the
Council, thank you, Ms. Cropp, for the work that the Council
has done in that regard. Dr. Gandhi, you have given
extraordinary leadership.
So because the financial situation of the city has improved
quite dramatically with the help of this subcommittee and with
Congress, but in large measure due to some of the management
decisions that have been made at the city level, we are hoping
now that some really good strategic investments can be made as
this city looks forward. One of those investments of course
could be the school system, which, as the chairman has pointed
out, while progress has been made, while we are pleased, Dr.
Janey, that you are here and you are providing some excellent
ideas for that improvement, that this is a real opportunity for
the city and the Council to step up and even partner in a
stronger way with the school system.
Great cities cannot be built without great school systems,
and this school system, just like many school systems in
America, are struggling. Not uniquely, not singularly, but many
cities have this same struggle. The difference is that I see,
which is a positive difference, is that this city has a
surplus. This city has a reserve fund. This city has made
significant progress. There are cities, even if they wanted to
help their school system, could not do it because their budget
situation is so dire.
Now, I understand that there are other needs. Housing is a
need, streets and transportation, crime and investments in
keeping crime rates down and supporting the police department.
I am not unaware of that. We struggle to help our cities in our
own States with that.
But truly there is an opportunity here, and I look forward,
Mr. Chairman, to continuing to work to identify excellence in
our public school system here, to identify failure and
eliminate it, identify success and reward it, provide more
choice and opportunity for parents, and focus on real results,
not process.
The final thing I will say about it is solving this problem
with the schools is not just about money. It is about
management. When you have on the front page of the newspaper
today--and I know this is about the city budget, but the city
should be about schools and I know this Mayor is. When you have
the front page of the newspaper today stating that schools had
to be let out because it is 100 degrees in classrooms, we have
to ask ourselves, what more could we do. That is what I hope we
can get to later today.
[The statement follows:]
Prepared Statement of Senator Mary L. Landrieu
Welcome Mayor Williams, Chairman Cropp, CFO Dr. Gandhi, and
Superintendent Janey. We are so pleased that you could be here this
morning to inform us about your fiscal year 2006 DC Local budget. Thank
you, Mr. Chairman, for calling this hearing today. I know it will be
helpful to us as we prepare to mark up the fiscal year 2006 D.C.
Appropriations bill. As you know, the D.C. Appropriations Subcommittee
is unique in that it has the responsibility to approve, without change
the local funds budget as proposed by the Mayor and passed by the
Council. This year's local budget totals $7.35 billion, of which $4.95
billion is derived from locally-generated taxes and has been fully
debated in the Council of the District of Columbia. I hope that we can
continue our focus on the Federal funding provided through this bill to
the District government. In the past we have used these funds to both
enhance particular local programs or projects and fulfill our sole
responsibility to provide oversight to the District's criminal justice
functions, the Courts and Court Services and Offender Supervision
Agency.
Over the last four years, this Committee has tried to be a partner,
not a dictator. As such, we have tried to refrain from altering the
local funds budget as passed by the locally-elected leadership of the
District--you are best equipped to determine the priorities of city
agencies. This is not to say that we cannot be active partners in
reform, or provide funding for discreet projects to catalyze
improvement, or help to make recommendations in policy in line with
Federal law. We have tried to play this role in the areas of education,
nudging the leadership to funding excellence, replicate success and
eliminate failure.
Great cities, Mr. Chairman, need great schools. I am a city person,
having grown up in New Orleans, a city much like D.C. In education is
particular, both cities are faced with the ongoing challenge of
providing a quality education to all children. The purpose of the
public education system in America mirrors much of the mission of the
United States as it was formed--to provide an open opportunity for
citizens to create, build, and contribute to our great nation. Our
primary mission in providing access to a quality was to encourage the
development of a creative workforce which would, and has, driven the
innovation America is known for.
But the public education system that served us for so long is
becoming increasingly outdated and faces many challenges. To survive, I
must change and adjust. To remain competitive in competitive times, it
must be more consumer focused and less bureaucratic, more dynamic. D.C.
itself has suffered a decline in enrollment of 2,000 students every
year for the last 10 years. People have grown tired of a slow moving
bureaucracy who cannot meet the needs of its students or the workforce
demands of our society and they have gone elsewhere I believe that can
change and I am encouraged by Dr. Janey's commitment to develop
targeted areas of improvement.
One such area we have worked closely on is the $40 million annual
investment in school improvement. In 2004, the Congress initiated a
five year demonstration program to invest $13 million annually in three
sectors of education: scholarships to private school, expansion of
public charter schools, and strengthening of public schools. I have
worked hard not only to invest in leading edge innovation in public
charter schools, but also to challenge the oversight of charter schools
to be more strenuous. From Dr. Janey's first weeks we have worked to
target the funding to public schools to increasing student achievement
and teacher readiness. I look forward to hearing about implementation
of these funds and plans for fiscal year 2006.
Education is just once piece of the unprecedented increase in
Federal dollars that have gone to the city ($157 million in fiscal year
2003-2005). The last several years have marked an increase in
Congressional confidence in local leadership, resulting in increased
autonomy for D.C., and increased investment in strategic projects. A
more broad challenge was confirmed by the General Accounting Office
(GAO) in a landmark study of the District's ``Structural Imbalance'',
finding 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 D.C. Congresswoman Norton and myself, found
the underlying reason for the structural imbalance in the city's budget
is the high cost of providing services in D.C. The study also
identified management inefficiencies, particularly in schools and
Medicaid billing that with attention could realize savings.
Finally, the GAO estimated that the imbalance has caused the
District to defer maintenance or invest in critical infrastructure to
the tune of $2.5 billion over the years. In the past the Committee has
included a marker on the Federal share of building and maintaining
infrastructure in the city, particularly in the area of transportation
and the Anacostia River. I hope to build on this investment this year
by partnering with the city on major infrastructure investments.
At the same time as working on the structural imbalance, we must
focus on other tools for bringing greater prosperity and long term
stability to the District. Cities that have good public schools, safe
communities and strong families are cities that have strong economies.
If we focus on providing these elements in the District, we will go a
long way toward the economic independence the city needs and deserves.
One such tool Mayor Williams and I have developed--City Build Program
for Charter Schools--is a grant program for public charter schools to
locate in neighborhoods which have the near-term potential of
attracting or retaining residents to meet the goal of increasing the
population by 100,000 residents. This can be done by keeping the people
you have with services targeted to their needs that would otherwise
have moved to the suburbs for the child's public education,
transportation issues, or to find affordable housing.
In addition to the investment in these building blocks of
neighborhoods, the Committee has focused on ways to support the
development of infrastructure which the GAO identified as the primary
victim of an imbalance in the city's finances. While the President's
budget request has increased the level of projects recommended for
Federal funding each year, this year the President made a grave
oversight in not funding the Combined Sewer Overflow program. This 30-
year, billion dollar renovation of the underground sewer system, built
by the Congress in the 1800's, is a key to revitalization of the
Anacostia and Potomac waterfronts.
If the city is to have a beautiful baseball stadium at the
confluence of these two rivers, and a river walk all the way from
Maryland, and wonderful housing and shops at the South East Federal
Center, and a grand boulevard on M Street at the Navy Yard, and the
revitalization of Reservation 13 extending Massachusetts Avenue down to
the water, and recreation for youth and families at Kenilworth Park and
Poplar Point, and creating a sanctuary on Kingman Island, and all of
the other important improvements for the life of the city, its
residents and visitors--how are we to do this alongside a river which
suffers from over 80 overflows from the sewer system every year? How
are we to make the Anacostia River accessible when contamination is off
the charts?
I am pleased to see the Mayor has included funding for the plan to
renovate the Combined Sewer system on his list of Federal funding
priorities, however if the list is to be read in order of priority it
is last. I hope the Mayor and Chairman Cropp can provide some insight
into their lobbying efforts to ensure this critical project is funded.
Finally, a major area of annual concern on the D.C. bill is the
addition of social riders which require the city to limit their own
policies, a limitation which is not placed on other cities. I am
committed to treating the District like any other city when it comes to
spending locally raised taxes. To that end, I will not support efforts
to limit the elected officials in the practice of their duties.
I appreciate the witnesses' time and commitment to the District of
Columbia. I have greatly valued our partnership over the last four
years and I look forward to working together this year.
Senator Brownback. Thank you, Senator Landrieu.
We do have a vote on now, but I want to go to my colleague
Senator Allard for a brief statement, and then we will recess
until after the vote. Senator Allard.
STATEMENT OF SENATOR WAYNE ALLARD
Senator Allard. Thank you, Mr. Chairman.
I would just like to welcome the Mayor and Dr. Gandhi and
Chairman Cropp and Dr. Janey for appearing before the panel
here and associate myself with the comments of my colleagues.
Just one other concern that I would like to bring up. As
chairman of the Subcommittee on the Legislative Branch
appropriations, I have oversight on the new expansion here at
the Capitol. It is the visitor center there, and I just would
hope that as we move toward the concluding part of the
construction on this particular facility that we can make sure
that all our ducks are in order as far as meeting the
requirements for occupancy. There could be some issues that
could come up there and if you see any utility issues or
anything that could come up here on the last minute, please
work with the contractors and work with the Architect and
ourselves and see if we cannot begin to identify these problems
early on so that they will not end up in unnecessary delays as
we move toward closing down the project and getting the
certificate of occupancy.
I want to thank all of you for being here. I have another
subcommittee running, so I will not be able to be here for all
your testimony. But I will be reviewing it closely and I look
forward to working with the chairman on those issues that are
important to you.
Thank you very much.
Mayor Williams. Thank you.
Senator Brownback. Thank you, Senator Allard.
We have 5 minutes left in the vote. We are going to recess
the hearing. I would ask my colleagues, if we could, to go over
and vote and get back as soon as possible. As soon as I am
back, we will start with the presentation. My apologies to
this. It is just one of the hazards of the job that when they
call a vote you have got to go run and vote.
So the subcommittee will be in recess, hopefully for no
more than 15 minutes, and then we will reconvene.
I call the hearing back to order. Again my apologies for
the interruption on the energy bill we are voting on.
Mayor Williams, delighted to see you. I want to say
publicly, too, when I first came into the Senate, elected in
1996, the District of Columbia was in a very difficult
financial condition and many things were not moving in the
right direction. We had the emergency board. I am not putting
the right title on that. I was the chair of the authorizing
committee at that point in time. I worked with you some then.
This has been a dramatic turnaround. It has been a most
impressive turnaround. I want to compliment you in particular
about that because you have been at the center of much of that
change, that turnaround that has taken place, and it is very
good to see. I am looking forward to addressing the rest of the
issues that remain, but I do not want to take anything away
from the efforts that have been made and what has been
accomplished in really a relatively short period of time. So my
congratulations to you.
The floor is yours.
STATEMENT OF ANTHONY A. WILLIAMS
Mayor Williams. Thank you, Mr. Chairman. My full statement
has been submitted for the record of the subcommittee and I am
going to try to paraphrase wherever I can, not only to keep my
remarks within 5 minutes, but to allow you to hear from our
other presenters and to have the dialogue that you desire.
I want to thank you and ranking member Landrieu and the
other members of the subcommittee for the opportunity to
testify before you today. You have already mentioned, Mr.
Chairman, as has Senator Landrieu, the fiscal responsibility
that we have stressed in our city and the fiscal prowess that
we are now enjoying. But I do want to mention one thing in that
regard and that is the District's strong financial performance
occurs in spite of what I believe is a long-term structural
imbalance. Now, that may seem paradoxical. One would ask, how
can such an imbalance be real when the economy of the city is
so strong?
I believe that the explanation is twofold. First, our
residents are among the most heavily taxed people on Earth.
Second, the District is deferring massive investments in
critical services and infrastructure. Approximately $2.5
billion of infrastructure has been deferred over the years. Not
only outdated sewer system, fixing accumulated needs of our
streets, bridges, and mass transit, which have a homeland
security component because of our role as the National Capital
Region, but also in light of your remarks and Senator
Landrieu's remarks and in light of my colleague Dr. Janey I
would mention the massive deferral of investment in our schools
infrastructure. Whatever we may think about the operating
budget of the schools, there clearly is a need for investment
in our school buildings. I would agree with you, it really is
tragic if the schools have to be closed because our kids are in
100 degree or over classrooms.
Now, last year the subcommittee held a landmark hearing on
the District's fiscal challenges and your continued commitment
to resolution of this structural deficit will be critical to
putting us on a permanent and equitable financial footing. I
hope that we can continue in that effort. I would refer to the
subcommittee one promising vehicle, the District of Columbia
Fair Federal Compensation Act of 2005, which would provide the
District with annual Federal payment of $800 million a year
dedicated to transportation projects, debt service payments,
public school facilities, information technology investments.
It would be on a formula basis, not just for regular operations
of government but for strategic things that go to the long-term
undergirding of our city.
Now, very briefly, Mr. Chairman, in terms of our priorities
in our local budget, I just very briefly mention that one is
new communities, a major investment in housing and physical
infrastructure in our city's most challenged neighborhoods. We
have been very successful in working with two Presidents, both
Democrat and Republican, to bring HOPE VI projects to our city.
We believe very strongly in the role of mixed income
communities, not to displace our low income residents, but to
allow our low income residents to live in a healthy community
of a mix of incomes, both rental property and home ownership,
with all the amenities, the good schools, the libraries, the
recreation centers, all the amenities of a good neighborhood.
Great streets are another major investment in our city,
recognizing that in our urban areas of our country our great
streets are our major commercial corridors. To accomplish this,
we propose $88 million in investment in revitalization of major
corridors in our city, unleashing I believe economic potential
on major streets such as Georgia Avenue, H Street, Nannie Helen
Burroughs, Benning Road, and other neighborhood arteries.
Roads and bridges are a major priority and our budget
reflects this in a major new investment in our city's physical
infrastructure, starting with $230 million of local investment
in streets and bridges along the Anacostia Waterfront. This
project, which we funded $35 million in fiscal year 2006, will
make critical infrastructure improvements.
Education is a major part of our budget. I will allow Dr.
Janey in his time to stress the importance of education, but I
want to use this opportunity, Mr. Chairman, to state my full
and emphatic and unequivocal support for our superintendent.
Now, everybody knows that over the last year I spent a lot of
time trying to assume responsibility for the schools and the
people have spoken. The people are right in our democracy. So,
given where we are, I believe that the locus of authority and
responsibility has to be in one place. It cannot be in three
places, five places, eight places. It has to be in one place. I
believe that the locus of that authority and responsibility,
with the support of the Mayor, the support of the Council, our
nonprofits, our faith community, our business community, should
be in this superintendent. Dr. Janey knows that he has my
strong support as he meets a very, very heavy challenge.
Health and welfare and youth are a major investment in our
city, and our budget includes new investments in primary health
care services through community health centers, which would
improve our support for patients from underserved communities.
We also provide multiyear funding of $76 million for our 10-
year plan to end chronic homelessness, including investment in
wrap-around services.
We make a major investment in tax relief in our city of
some $88 million. I am particularly pleased that this tax
relief is spread across all income levels in our city.
Now, very briefly, Mr. Chairman, our request for Federal
funding includes, one, as you have come to know, members of
this subcommittee know, our strong support for what we call our
marquee Federal initiative, and that is the tuition assistance
grant program. This has been an absolute tremendous success and
we would ask for full funding. This program is funded at $33
million in the President's budget and we ask for your continued
support for this very successful initiative.
The consolidated laboratory, crime lab, we have enjoyed the
support of the subcommittee on that and we are requesting that
you match the President's mark of $7 million for this project.
A new mental health hospital in the city is also a major
initiative of ours. Last but not least--well, let me, before I
get to the last point, we continue our appeal to the
subcommittee for funding to provide for long-term control of
discharge into the Anacostia River. The D.C. Water and Sewer
Authority (WASA) is embarking on a 30-year plan to fix the
system in order to drastically reduce pollution in our
waterways, and we ask that the committee support this program
in the amount of $30 million.
This is--the Federal Government plays a major role in the
pollution status of the Anacostia River because most of the old
city is occupied by the Federal Government. The lack of storm
and sewage drainage separation is a result of decisions made
way back by the Federal Government. The Federal Government is
our major corporate partner of all of our corporate partners.
For that reason, we would ask that the subcommittee continue
its investment in the Anacostia River, as it has in so many
different ways, working with our local leadership and certainly
with Congresswoman Norton, who in general I want to applaud for
all her leadership on these things.
Then, Mr. Chairman, I reserve for my last appeal something
that I know you are interested in. This is the result of bad
decisions and management over years and years and years, as you
know, a high number of ex-felons in our city, who come back to
our city every year. I know this is something that you care
about. We have identified access to housing as one of a number
of important risks to recidivism for individuals making the
transition from prison back to society.
To address this need and to reduce the chance that today's
returning prisoners will become tomorrow's homeless and go
through that revolving door and end up back in prison, we
propose a $5 million level of funding to do, within a mixed
income setting--we are not talking about segregating our ex-
felons, but within a mixed income vibrant community--$5 million
to house our ex-felons as we provide them one-stop service to
get them back on their feet, get them their training, and get
them into jobs.
PREPARED STATEMENT
So, Mr. Chairman and Senator Landrieu, that is my
testimony. Again, thank you for your partnership. As I close my
remarks, I would again make my continued yearly annual appeal
for full representation for our beautiful Nation's capital.
Senator Brownback. Thank you, Mayor, and thank you for the
discussion and the specifics that you lay out in front of us. I
look forward to the question and answer session.
Thank you very much.
[The statement follows:]
Prepared Statement of Anthony A. Williams
Chairman Brownback, Ranking Minority Member Landrieu, and other
distinguished members of this subcommittee, thank you for the
opportunity to testify before you today in support of the District of
Columbia's fiscal year 2006 budget and financial plan. I continue to
appreciate the support and commitment that this committee has provided
to our efforts to improve the District of Columbia as a place to live,
work, and visit.
With our fiscal house in order, city services improved, and a
robust environment for economic and housing development, we now face
the challenge and opportunity to ensure that the rising tide we have
created lifts all communities.
My remarks this morning will focus on three main goals we have for
working with this subcommittee:
--Maintaining fiscal responsibility;
--Responding to citizens' priorities with local budget decisions; and
--Pursuing federal investments that address our special status as the
nation's capital and invite partnership with the federal
government on local priorities.
MAINTAINING FISCAL RESPONSIBILITY
The District has achieved a tremendous amount of financial progress
over the past decade under the leadership of my administration and the
City Council and diligence of the Chief Financial Officer. Fiscal year
2004 marked the District's eighth consecutive balanced budget; the
District has an A rating from all three credit rating agencies which is
the highest level we have achieved since the inception of Home Rule; we
are maintaining a cash reserve balance of about $250 million, which is
among the strongest in the country; and our fund balance exceeds $600
million. The turnaround and success of the District, impressive on its
own merits, is truly laudable when you consider how much we have
achieved over such a short period of time.
In fiscal year 2006, the District's baseline general fund revenue
is projected to grow by 5.6 percent. This strong revenue growth, along
with our robust reserves from prior years, have allowed us to submit an
fiscal year 2006 budget of $7.35 billion in total funding that supports
34,635 full-time equivalent (FTE) staff. In local funds, this budget
proposes $4.95 billion in funding and supports 26,787 FTEs.
Despite the temptation to allocate all available resources to
programs during strong fiscal years, this budget reflects a high
standard of fiscal responsibility by providing for $88 million in new
tax relief. This budget also responsibly ensures that we do not rely on
one-time funding for long-term programs and more than half of the
growth in this budget comprises one-time expenditures that are not
built into the District's baseline budget.
Even more impressively, we have accumulated this record despite a
long-term structural imbalance, which is estimated by the Government
Accountability Office to be between $470 million and $1.1 billion per
year. The GAO cites multiple factors causing this imbalance: the high
cost of providing services in the D.C. metropolitan area, the relative
poverty of our population, and federal restrictions on our revenue
collection authority.
The District's strong financial performance in spite of a long-term
structural imbalance may appear paradoxical. How can such an imbalance
be real when the economy is so strong? The explanation is twofold.
First, our residents are among the most heavily taxed in the nation,
and, second, the District is deferring massive investments in critical
services and infrastructure. Approximately $2.5 billion of
infrastructure has been deferred, including renovating crumbling
schools, repairing our outdated sewer system, and fixing accumulated
needs in our streets, bridges and mass transit system.
As we seek solutions to address the structural imbalance and
address our long-standing problems, it is clear that taxing our
residents more or providing fewer services are not viable alternatives.
Nor can we solve our long-term challenges through additional borrowing.
This year, our budget includes a capital outlay of almost $500 million
in new spending, much of which is supported by a one-time windfall of
recent, hard-earned surpluses. Though this allows us to begin to
address our most pressing capital needs, we remain unable to meet our
accumulated needs on our own. An option proposed by the GAO is a change
in federal policy to expand the District's tax base or to provide
additional financial support.
One very promising vehicle for resolving this imbalance is the
``District of Columbia Fair Federal Compensation Act of 2005''. This
bill would provide the District with an annual federal payment of $800
million a year dedicated to transportation projects, debt service
payments, public school facilities, or information technology
investments. This approach to addressing the District's structural
imbalance would allow the federal government to invest in
infrastructure that benefits the federal government itself, the
Washington metropolitan area, as well as the District of Columbia. Last
year, this committee held a landmark hearing on the District's fiscal
challenges and your continued commitment to a resolution to our
structural deficit will be critical to putting the District on
permanent and equitable financial footing.
In addition to addressing the federal contribution to our budget,
we also need to repair the federal process for reviewing our budget.
This year, the President again endorsed budget autonomy for the
District of Columbia and legislation has been introduced in the
Congress to provide this authority. This legislation, besides being a
well-deserved advancement of Home Rule, would significantly streamline
and rationalize our budget process by allowing the city to better align
local funds with oftentimes unpredictable and shifting needs. This
year, we are hopeful that the Congress will pass legislation this
session to provide for budget autonomy. In the meantime, we hope you
consider intermediate measures to streamline our budget modification
process throughout the fiscal year to allow us to better respond to
future unanticipated needs. For example, our budget includes language
that would allow the District to spend up to an additional 6 percent of
our total revenues without coming back to Congress for supplemental
budget authority, provided that additional revenues are certified as
available by the Chief Financial Officer. This would provide us with
the flexibility to respond to changing revenue realities at the local
level in a more timely matter than the supplemental appropriation
process provides.
FUNDING CITIZEN PRIORITIES
This budget funds groundbreaking initiatives that will reshape the
physical landscape of the District of Columbia and strengthen our
social fabric in a fiscally responsible and balanced manner. This
budget has been developed around the core principles of fiscal
responsibility, fairness, strategic investments in critical social
needs, and improving our infrastructure. With input from residents, the
priorities addressed in this budget are housing, employment, better
transportation infrastructure, targeted services for youth, and
continued commitment and support to education and public safety.
The fiscal year 2006 Budget and Financial Plan will lift all
communities by making major new investments in the following
initiatives:
New Communities
New Communities is a major investment in the housing and physical
infrastructures of the city's most challenged neighborhoods. Although
many District neighborhoods are undergoing rapid change and
transformation, there are still places in the city where crime,
unemployment, and truancy converge to create intractable physical and
social conditions. The New Communities initiative is more than the
bricks and mortar transformation of neighborhoods. It is a
comprehensive community development program aimed at lifting people and
neighborhoods by addressing a community's social and economic ills,
along with its physical problems. The long-term goals of New
Communities are to meet the needs of lower-income District families and
residents by providing critical social support services; decreasing the
concentration of poverty and crime; and enhancing access to education,
training and employment opportunities, but this effort will begin
immediately with a large-scale investment in our housing infrastructure
with a special focus on public housing.
Great Streets
It is important to extend the District's downtown economic success
to the neighborhoods throughout the city by leading private investment
with public investment. To accomplish this, we propose to securitize
new bus shelter revenue to raise approximately $88 million to invest in
the revitalization of the District's corridors, unleashing the
commercial potential of Georgia Avenue, H Street, NE, Nannie Helen
Borroughs, NE, Benning Road NE and other neighborhood arteries. In
order to complement this investment in physical infrastructure with the
revitalization of the commerce along these streets, we are dedicating
an additional $16.6 million to attract new businesses and to help
existing businesses flourish.
Bridges and Roads
Our budget reflects a major new investment in our city's physical
infrastructure, starting with a $230 million local investment in the
District's streets and bridges along the Anacostia River. This project,
which is funded at $35 million in fiscal year 2006, will make critical
infrastructure improvements needed to alleviate congestion and overflow
traffic in surrounding neighborhoods. In addition, this budget
dedicates approximately $23.2 million in additional resources for
street, sidewalk and alley paving.
Education
Our fiscal year 2006 budget includes a total of $1.1 billion in
local funds to educate approximately 80,000 students within the
District of Columbia Public Schools (DCPS) and public charter schools.
This funding level represents an increase of $101 million, or 10.5
percent, over the fiscal year 2005 budget. The fiscal year 2006 budget
is aligned with the Superintendent's core budget request of $775
million, provides an additional $25 million to support strategic
educational investments at both DCPS and charter schools, funds eleven
new charter schools, and allocates $20 million for additional salary
step increases.
To support DCPS capital needs, this budget provides $147 million in
capital funding to support rehabilitation and modernization of D.C.
Public School buildings. In addition, this budget includes funding for
a new public school modernization fund, which will provide an
additional $150 million for capital investments. These resources will
be made available to the school system provided that DCPS meets
criteria regarding co-location, special education space needs, and
coordination with other public facilities.
Health and Welfare
In the area of health care, the fiscal year 2006 budget
demonstrates the District's continued commitment to providing health
services to residents, particularly those who are underserved. This
budget augments primary health care services and increases support for
community health centers, which will result in the ability to support
additional patients from underserved communities. This budget also
includes multi-year funding of $76 million to support the District's
ten-year plan to end chronic homelessness. This funding will go towards
providing enhanced wraparound services for homeless families and
individuals, building new housing assistance centers, providing
eviction prevention services, and creating subsidized housing.
Children and Youth
Children and youth are among the most vulnerable of our residents.
This budget supports additional funding to provide education, health,
enrichment and other opportunities for our children and youth, which is
critical in preventing juvenile violence and providing meaningful
supports so that young residents grow into productive, engaged members
of the District's community.
Tax Relief
Starting in fiscal year 2006, District residents will benefit from
$88 million in new tax relief. This tax package provides for a balance
between income tax relief and property tax relief that is especially
targeted to low-income families. All property owners living in their
homes and coping with rapidly rising home value assessments will
benefit from $211 in tax relief from an increase in the homestead
deduction from $38,000 to $60,000. Low-income homeowners will be
further protected from rising tax bills by a new provision that will
allow households earning less than $50,000 per year to defer any
property tax increases until they sell their house. This will provide
for neighborhood stability, especially for seniors who have difficulty
meeting rising property tax costs in rapidly changing neighborhoods.
This budget also includes income tax reductions. First, the local
Earned Income Tax Credit (EITC) program is being improved to make it
one of the most generous programs in the nation by increasing our
refundable credit from 25 percent of the federal benefits level to 35
percent of the federal level. Also, for the first time, program
benefits will be expanded to cover non-custodial parents who are paying
their child support. This provides a work incentive and ensures the
equal treatment of parents. In addition to targeted income tax relief,
this budget includes a $500 increase in the standard deduction and a
$130 increase in the personal exemption, which will benefit all
taxpayers in the city. These income tax proposals will provide a more
progressive complement to the broad tax changes that will be triggered
by tax parity in fiscal year 2006. Tax parity reduces the rates of all
three of the District's income tax brackets, including a reduction in
the top rate from 9.0 percent to 8.7 percent.
PRIORITY FEDERAL FUNDING FOR CRITICAL PROJECTS
These local investments will leverage the strength of our economy
to lift all communities by investing new resources in our
neighborhoods, our infrastructure, and our more challenged communities.
Connecting these communities to the economic vitality we are
experiencing in many parts of the District is paramount to the
continuation of the District's renaissance.
The President's fiscal year 2006 budget has recognized the
importance of partnering and contributing toward several of the
District's top priorities, including full funding for the Tuition
Assistance Grant Program, inflation-adjusted funding for the Three-
Sector Education Initiative, funding for the Consolidated Laboratory
Facility, funding for the Anacostia Riverwalk and Trail, which is part
of my Anacostia Riverfront Initiative, funding for the Criminal Justice
Coordinating Council, and funding for the Emergency Planning and
Security Cost Fund.
The Tuition Assistance Grant Program is a marquee federal
initiative that has been a tremendous success. This program compensates
the District for our lack of a state-like university system by allowing
our high school graduates to attend out-of-state public universities at
in-state tuition rates and providing grants for attending selected
private universities. Program costs have continued to grow rapidly due
to rising tuition costs nationwide and rising program participation.
This program is funded at $33.2 million in the President's budget and I
ask you to continue your support for this successful initiative by
fully funding the President's mark.
Another critical program which was first funded by this
subcommittee, and funded for the first time this year by the President
at $7 million, is the Consolidated Laboratory Facility. This laboratory
will combine forensics capacities, our medical examiner functions, and
our various public health laboratories into a single combined facility,
leveraging our capital investment and providing the District with
state-of-the-art forensics analysis capacities for the first time at
the local level. This will free up resource at the federal facilities
which we are currently using for testing while providing additional
surge capacity for lab needs throughout the Washington area.
In addition to these important funded projects, our budget request
to the Congress includes requests for the following projects that are
worthy of congressional attention:
--Mental Health Hospital.--The city is constructing a new hospital on
the St. Elizabeths campus which will allow us to continue to
implement court-mandated improvements in services to our
patients. Our current facilities do not meet the standards of
care required of the District and the costs of operating our
existing buildings are increasingly cost prohibitive.
Currently, approximately 17 percent of inpatients that we serve
are referred to the city by federal agencies and courts.
Therefore, we are seeking a contribution for our capital
investment in this new facility at a pro-rated commensurate
level of $32 over the next three years and $17 million in
fiscal year 2006.
--Ex-Felon Housing.--We have identified access to housing as one of
the most important risk of recidivism for individuals making
the transition from prisons back into society. To address this
need, and reduce the chance that today's returning prisoners
will become tomorrow's homeless, we propose a $5 million ex-
felon housing program to provide organizations and developers
with an incentive to construct housing specifically for the ex-
felon community. Once this housing is in place, we will devote
our existing resources to providing the job training, mental
health, and other public services necessary to provide these
returning prisoners with a true opportunity to return to
society as productive citizens.
--WASA's Long-Term Control Plan.--As you know, I believe that the
Anacostia River is one our most precious and under-appreciated
assets as a city. Improving public access and for the
tremendous natural amenities along the Anacostia River is a
driving priority of my administration, but my vision for the
revitalization of the Anacostia River will not be possible
unless we clean up the river by fixing our combined sewer
system that currently deposits waste into the river throughout
the year. The D.C. Water and Sewer Authority is embarking on a
30-year plan to fix this system in order to drastically reduce
pollution in our waterways and I ask that you support this
critical program in an amount of $30 million.
--Fire/EMS Command Center.--The District's emergency response
functions are outdated and in need of repair. As the fire
department for the nation's capital, including the U.S.
Capitol, the headquarters for the Fire and Emergency Medical
Services is inadequate and does not meet the specifications for
a modern emergency response in high-threat environment. The
District currently has plans in place to leverage private
investment to improve our fire command capacity and in addition
provide for new and necessary storage facilities for homeland
security emergency response equipment and is requesting a $10
million contribution as part of our budget to support this
investment.
--Downtown Circulator.--The city will soon launch a new bus service
designed to link the Central Business District and key federal
destinations. The Downtown Circulator project will provide the
22 million visitors to Washington, DC with an inexpensive and
easy way to move around the Monumental Core while helping to
mitigate the impact of street closures for security purposes.
The service will connect several of the District's most popular
destinations for residents, tourists and even federal
employees. In the future, the system could also be adopted by
federal agencies as cost-saving replacement for private vehicle
fleets and shuttle services. The federal government has
contributed to this project in fiscal year 2004 and fiscal year
2005 and the District is requesting an additional $1 million in
fiscal year 2005, which the District will match with local
funds on a one-to-one basis on top of considerable support from
the city's tourism and business sectors.
DEMOCRACY FOR THE NATION'S CAPITAL
Having outlined our budget objectives, it is important to keep in
mind a District priority whose value is beyond fiscal measure, and that
is our democratic rights. 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.
The United States is continuing to sacrifice hundreds of lives and
billions of dollars to spread democracy worldwide, yet denies full
democracy to more than a half a million people at its very heart. I
urge you to end this injustice and provide the city with full voting
representation in the Congress. Anything short of full democracy for
our residents should be at the level of personal outrage for all
Americans.
In recent years, this subcommittee has successfully resisted
efforts to add undemocratic social riders to our appropriations bill.
No matter what any Senator's opinion may be on the topic at hand, we
hope this body will respect the right of District residents to decide
local matters, just as the residents do in our 50 states. We also hope
this body will repeal riders that restrict our ability to make
decisions about spending local funds on needle exchange programs and
lobbying.
This concludes my remarks today. Thank you for the opportunity to
testify before you today and I look forward to answering any questions
you may have.
Senator Brownback. Chairperson Cropp.
STATEMENT OF HON. LINDA CROPP, CHAIRMAN, CITY COUNCIL
Ms. Cropp. Thank you very much. Good morning, Chairman
Brownback, Senator Landrieu. I am pleased to be here with my
colleagues to testify today on the District's budget for fiscal
year 2006. This budget represents the ninth year in a row for a
fiscally sound and balanced budget. The budget is also a
reflection of our resolve to stand as one government that will
remain fiscally prudent and responsible.
The budget represents the District's reinvesting in itself
and in our future. We have committed resources and services for
our citizens through revitalization of our neighborhoods,
investment in our youth, and protection of our most vulnerable
citizens, promotion of continued economic stability and growth,
health programs, child care, and education.
We will invest in our employees with pay raises and
prudently set aside $138 million for future employee health and
retirement benefits. These funds will become mandatory in
fiscal year 2008 and it is good that we made the decision to
allocate them at this time when we have the money.
Fiscal discipline has always been and will be a top
priority of our legislative agenda. We will not only demand it
of the executive branch, but we also practice it ourselves. The
various forms of fiscal discipline from rainy day savings
funds, financial safeguards, insurance and investment policies,
economic triggers for pay-as-you-go capital financing, that we
have demanded and imposed upon ourselves in the past several
years have yielded significant returns to the District of
Columbia. This is reflected in the District government
receiving for the seventh consecutive year an unqualified audit
opinion and a positive future outlook of increased ratings from
bond rating agencies.
THE BUDGET PROCESS
During the Council's 56 day review period, we held 66
hearings totaling 322 man-hours where we provided an
opportunity for the public to come in and have their input on
our budget. The Council worked diligently with the Mayor in
aligning our 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, has been realigned. We will devote
funds to our infrastructure through investment of over $300
million in pay-as-you-go funding. For example, funds were
redirected and targeted for projects with higher priority and
more critical needs, such as schools for children and housing
for low and moderate income individuals.
HIGHLIGHTS OF THE FISCAL YEAR 2006 BUDGET
On May 10 the Council approved a $4.9 billion spending plan
that provides for adequate funding for basic city services and
programs. The budget earmarks $1.2 billion for public schools
and public charter schools. The schools funding increased by
$65 million, human services programs by another $65 million,
and there was an increase in child care specifically by $11.5
million in the hopes that we could get more of our families out
to work.
We have selectively adjusted tax rates to make
homeownership more affordable and to reward the hard work of
our citizens and businesses. In total, taxes were reduced by
$94 million.
FEDERAL BUDGET REQUEST
I would also like to ask for your help in obtaining an
approval of an extension of the District's tax incentives that
are to expire at the end of the year. The first time home buyer
credit, the enterprize zone credit, and the revenue bond
program are important to economic development in the District
of Columbia. The first time home buyer credit attracts
residents to our city and assists persons in purchasing homes
that might not otherwise have had an opportunity to do so. The
enterprise zone credit and the revenue bond program are real
incentives for attracting businesses to operate within the
District, and it is important to our economic growth that these
tax incentives be reauthorized.
While speaking about items of importance to the District, I
would like to mention one other item that is not directly
related to the budget. You have heard it before: voting
representation. But it is something that is so extremely
important to the citizens of the District of Columbia, who pay
almost $3 billion in Federal taxes. It is important for the
image of this country, the leader of the free world, to provide
to all of its citizens the same rights we fight for abroad, the
right for all citizens to be represented by the persons they
elect.
A number of different types of legislation have been
introduced in the House and in the Senate. Congresswoman
Eleanor Holmes Norton's bill, H.R. 398, is an example of one
bill. Hopefully, you will be able to embrace one of those bills
so that the District's citizens can no longer--will no longer
be disenfranchised.
BUDGET AUTONOMY
Just like the other 50 States, the District should be
solely responsible for approving its own local spending.
Achieving such budget autonomy will allow the District to
implement its budget in a timely manner and will assist in
improving the city's fiscal management.
I want to thank the subcommittee and the Senate for
supporting this initiative in the past and would ask for you to
do it again in support of S. 800 the District of Columbia
Budget Autonomy Act of 2005.
FEDERAL CONTRIBUTION
The District is always challenged in developing its budget
due to ongoing structural imbalance that exists between its
spending needs and its revenue generation capacity. As noted in
the General Accounting Office May 2003 report, the imbalance
ranges between $400 million to $1.1 billion annually. The
report also noted that the cost of providing public services is
much higher in the District than it is in the average State due
to the relatively large poverty population, poor health
indicators, high crime, and high cost of living. The report
stated that the District has a very high revenue capacity and
the city is already taxing toward the upper limit of our
revenue capacity, thereby creating a punitive tax structure.
The congressional limitation on the District's ability to
tax certain institutions and persons severely restricts the
District's ability to raise revenue needed to cover both the
operational and infrastructure costs.
Recently, many of you have heard of the budget surplus that
the District has. The budget surplus is only on one end, the
management end, due to good management of the day to day
operations of the city's budget. But while we have a surplus on
that end, it cannot be thought of as a total surplus because we
have a deficit in our infrastructure when you look at what our
capital needs are, when you look at our school system.
When the issue was brought up of closing the schools, the
average age of the District's schools is 80 years of age. So
you will see that our capital side is where we cannot continue
to borrow money because we are at our capacity, our limit. So
we do not even have the dollars necessary or the capacity to go
out on Wall Street and borrow the dollars to fix up our
schools, which probably need $1 to $2 billion. If we did then
our bond rating would go down. So we are caught between a dog
and a tree and that is not a good position.
So the infrastructure situation with the District is one
that we really need to have changed, and it is not because of
mismanagement in the District government, but it is because of
the unique situations as to how the budget is set. I would ask
that at some point that the Congress look at some type of
special funding plan for the school system and for Metro.
Metro functions as a way to bring in Federal workers into
the District of Columbia. When you look at our capital budget,
the herculean share of the city's capital budget is spent in
two areas: the D.C. Public School system, where we see there
are even greater needs, and Metro. So I hope that that is
something that we can look at in the future.
CONCLUSION
Finally, as you consider our appropriations we 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 109th
Congress. We urge you to pass the budget as is, without any
riders. This much anticipated fiscal year 2006 budget is
important because it shows how the Mayor and the Council can
work together and underscores our commitment to make
Washington, DC, one of the best-governed cities in the Nation.
The District's financial problems of the 1990s combined
with the national recession earlier this decade, as well as the
September 11 attacks, created an environment where we had to
disinvest in our budget. Over the past 2 fiscal years, however,
we began the process of reinvestment in our city. This fiscal
year 2006 budget represents a great leap forward.
We will be responsive to our constituents who call the
District of Columbia their home. We will work with the Mayor,
the Congress, and the surrounding governments to achieve our
mutually shared goals. Together with the Mayor, we will produce
good, responsible budgets that invest dollars in making the
District of Columbia a much better place for all.
Thank you very much.
Senator Brownback. Thank you very much, Chairperson Cropp.
I appreciate that.
[The statement follows:]
Prepared Statement of Linda W. Cropp
Good morning, Chairman Brownback, Senator 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 2006.
INTRODUCTION
The fiscal year 2006 budget represents for the ninth year in a row,
a fiscally sound and balanced budget. This budget is also a reflection
of our resolve to stand as one good government that will remain
fiscally prudent and responsible. The efforts of the Council and the
Mayor, working together, has created a spending plan that continues to
provide the services needed to make the District a better place in
which to live, to work, to raise a family, and to visit. The budget
represents the hard work of all thirteen Council members and the
efforts of our ten standing committees. The Council and the Mayor will
continue this collaborative effort throughout the year in order to
manage government spending.
This budget represents the District reinvesting in itself and our
future. We committed resources in services for our citizens through
revitalization of our neighborhoods, investment in our youth,
protection of our vulnerable residents, promotion of continued economic
stability and growth, health programs, childcare and education.
We will invest in our employees with pay raises and prudently set
aside $138 million for future employee health and retirement benefits.
These funds will become mandatory in fiscal year 2008 and it is good
that we made the decision to allocate them now.
Fiscal discipline 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 Capital Financing--that we
have demanded of, and imposed on ourselves in the past several years,
have yielded significant returns to the District of Columbia. This is
reflected in the District Government receiving for the seventh
consecutive year an unqualified audit opinion and a fiscal year 2004
Comprehensive Annual Financial Report (CAFR) showing a balanced budget.
The District continues to maintain an ``A'' rating from all of the Wall
Street financial rating agencies.
In 2005 the Council passed the fiscal year 2006 Budget Submission
Requirements Resolution of 2005. It established the date for submission
of the Mayor's proposed budget. It required performance plans and
reports, and that certain information and documentation be submitted to
the Council along with the proposed budget.
THE BUDGET PROCESS
During the Council's fifty-six days review period 66 hearings
totaling 322 man-hours were conducted. These public hearings are an
important part of the budget process. The public hearings provide the
citizens and our workforce with an opportunity to comment on and
critique programmatic and funding needs, and the performance of
government agencies. This feedback is essential in reaching the
decisions and determining the recommendations of each committee in the
mark-up of the agency budgets.
The Council worked diligently with the Mayor in aligning 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. We will devote funds to our infrastructure through direct
investment of over $300 million in ``Pay-As-You-Go'' funding. For
example, funds were redirected and targeted for projects with higher
priority and critical needs, such as schools for the children and
housing for low and moderate-income residents.
The Mayor submitted the budget to the Council on March 21, 2005.
The proposed local budget was $4.903 billion, an increase of $712
million or 17.1 percent above the revised fiscal year 2005 budget. The
Council carefully reviewed the proposed expenditures to ensure that
priority programs were properly funded. Adjustments were made through
hard decisions between competing program preferences and by rooting out
unnecessary budget cushions within the request.
HIGHLIGHTS OF THE FISCAL YEAR 2006 BUDGET
On May 10 the Council approved the $4.949 billion spending plan
that provides adequate funding for basic city services and programs.
This funding level for fiscal year 2005 represents a growth of 18
percent over the revised fiscal year 2005 local budget. The budget
provides $116.6 million for the production of low and moderate-income
housing and increases the funding for childcare, substance and drug
abuse treatment, and health care for uninsured residents. In keeping
with the seven goals on the Council's legislative agenda, schools
continue to receive significant funding. The budget earmarks $1.2
billion for public schools and public chartered schools. The schools
funding increased by $65 million, human services programs by another
$65 million and the Council is increasing child-care by $11.5 million.
We selectively adjusted our tax rates to make homeownership more
affordable and to reward the hard work of our citizens and businesses.
In total, taxes were reduced by $94 million.
In order to address the Council's concerns about the growth of
spending in certain agencies while still wanting to finance programs
important to the District's most vulnerable residents, a Pay-Go
contingency fund was established. The fund would provide additional
financial support to certain agencies once they demonstrate the need
for these additional funds. Requests to expend money from the Pay-Go
contingency fund require approval by the CFO, the Mayor and the
Council.
FEDERAL BUDGET REQUEST
The Council supports the Congressional budget request items
included in the Mayor's proposal. However, I would like to highlight
the Tuition Assistance Grant Program (TAG). The TAG program has been
extremely successful in the District. A total of 4,645 students are
receiving funds this year from the program. TAG has had a significant
impact on furthering the education of these students. Therefore, it is
important that the additional $33.2 million be provided to continue to
fully fund this program.
I would also like to ask for your help in obtaining approval of an
extension of the District's tax incentives that are to expire at the
end of this year. The First Time Homebuyer credit, the Enterprise Zone
credit and the revenue bond program are important to economic
development in the District. The First Time Homebuyer credit attracts
residents to the District and assists persons in purchasing homes that
might not otherwise have an opportunity to do so. The Enterprise Zone
credit and the revenue bond program are real incentives for attracting
businesses to operate within the District. It is important to our
economic growth that these tax incentives be re-authorized.
While speaking about items important to the District, I would like
to mention one other item that is not directly related to the budget,
i.e., voting representation. It is important for the image of this
country, the leader of the free world, to provide to all of its
citizens the same rights we fight for abroad, the right for all
citizens to be represented by persons they elect.
A number of pieces of legislation have been introduced,
Congresswoman Eleanor Holmes Norton's bill, H.R. 398 ``No Taxation
Without Representation Act of 2005'' and its companion piece introduced
by Senator Joseph Lieberman, S. 195, would treat the District as a
State with full voting representation in the House and the Senate.
Representative Thomas Davis' bill, H.R. 2043, ``District of Columbia
Fairness in Representation Act'' would add two seats to the House, one
to the District of Columbia and one to State of Utah, which narrowly
failed to secure a fourth Congressional seat after the 2000 census. In
Representative Davis' bill the District would be treated as a
Congressional district for the purpose of representation in the House.
Representative Dana Rohrabacher's bill, H.R. 190, ``District of
Columbia Voting Rights Restoration Act of 2005'' would treat the
citizens of the District as residents of the State of Maryland for the
purpose of participating in elections for the House and Senate. While
each piece approaches the issue in a different way, the key point is
that they all call for voting rights to be granted to the citizens of
the nation's capital. I ask that you support voting rights for the
District of Columbia.
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 assumed responsibility for the cost of the
contributions to the police, firefighters, and teachers retirement
plans, various Court services and portions of other state functions.
It is worth recalling that when the 1997 Revitalization Act was
passed, one recommendation was that Congress would not need to review
or approve the District's budget because the city would no longer
receive any federal payments. At a minimum, Congress should no longer
approve the local portion of the District's budget. Under such a
proposal the Mayor would notify the Committees on Appropriations of the
House of Representatives and Senate in writing 30 days in advance of
any obligation or expenditure. Just like the other 50 states, the
District should be solely responsible for approving its own local
spending. Achieving such budget autonomy will allow the District to
implement its budget in a timely manner and will assist in improving
the city's fiscal management. I want to thank the Subcommittee and the
Senate for supporting this initiative in the past and would ask for
your support of S.800 the ``District of Columbia Budget Autonomy Act of
2005''.
The District Government is always challenged in developing its
budget due to the ongoing structural imbalance that exists between its
spending needs and its revenue generation capacity. As noted in the
General Accounting Office's May 2003 report the imbalance ranges
between $400 million to $1.143 billion per year. The report also noted
that 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. The report stated that the District has a very high
revenue capacity, and the city is already taxing toward the upper limit
of our revenue capacity, thereby creating a punitive tax structure.
The Congressional limitations on the District's ability to tax
certain institutions and persons severely restrict the city's ability
to raise the revenue needed to cover both operational and
infrastructure costs. These limitations are reflected in the streets
and schools in need of repair. While the city currently has a
management surplus of day-to-day operations, these dollars are
insufficient to cover the total cost of infrastructure improvements.
The inability to fund infrastructure costs are not due to
mismanagement by the District Government. As noted earlier, the
District Government has maintained an ``A'' rating by the financial
rating agencies over the last few years. It is due to the inability to
tax revenue at its source and other infrastructure issues addressed in
the 2003 GAO report.
Congresswoman Eleanor Holmes Norton has introduced Bill H.R. 1586,
the ``District of Columbia Fair Federal Compensation Act of 2005''. The
bill outlines the unique situation of the District of Columbia as a
federal city. It proposes an annual federal payment of $800 million
with provisions to adjust the number in the future. The $800 million
would be made available to address important structural needs of the
city, which the District Government cannot fully fund from its current
budget. Transportation and street maintenance, information technology
and DCPS capital improvements are essential to the running of the city.
I ask for this Subcommittee to support this legislation and encourage
adoption by the Senate.
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 109th Congress. Furthermore, we
urge you to pass the budget as is, without any extraneous riders. This
much anticipated fiscal year 2006 budget is important because it shows
how the Mayor and the Council can work together and underscores our
commitment to make Washington D.C. one of the best governed cities in
the nation.
The District's financial problems of the nineties combined with the
national recession earlier this decade, as well as, the September 11th
attacks created an environment, where we had to disinvest to balance
our budget. Over the past two fiscal years, we began the process of
reinvestment and this fiscal year 2006 budget represents a great leap
forward.
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.
I thank you for this opportunity to present the fiscal year 2006
budget and these issues of major importance to the District of
Columbia.
Senator Brownback. Dr. Gandhi, and if you could stay within
the timeframes. We are going to be running tight on this
hearing and we both would like to have some exchanges back and
forth. So I will probably put the hook on the last two
witnesses a lot tighter than I have on the front two.
Dr. Gandhi.
STATEMENT OF NATWAR M. GANDHI, Ph.D., CHIEF FINANCIAL
OFFICER
Dr. Gandhi. Thank you, Mr. Chairman. Good morning, Mr.
Chairman, Senator Landrieu, and members of the subcommittee. I
am Natwar M. Gandhi, Chief Financial Officer of the District of
Columbia, and I am here to testify on the District's 2006
budget request and the overall health of the District's
finances.
The Congress created the Office of the Chief Financial
Officer to preserve, protect, and enhance the District's
financial viability and credibility at all times. I am pleased
to report to this subcommittee, Mr. Chairman and Ms. Landrieu,
that the District has again made substantial progress in the
past year, marking the eighth consecutive year of fiscal
recovery.
We again achieved a balanced budget and received a clean
audit opinion from our external auditors and improved the
District's financial infrastructure. The graph on the chart
before you, sir, illustrates the turnaround in our general fund
balance from a negative $518 million in 1996 to a positive $1.2
billion at the end of 2004. Many cities that have gone through
control period experience, such as New York, Philadelphia,
Cleveland, none has been able to come back as well and as fast
as the District has.
Roughly half of that fund balance is reserved as a result
of congressional mandate or is legally reserved for bond
escrows or other purposes. The fund balance is likely to climb
in the current fiscal year to reach an unprecedented level of
approximately $1.3 billion.
Our emergency and contingency reserves totaled $285
million, among the highest such reserves as a percentage of the
budget of all major cities or States in the Nation. Last year,
recognizing that our reserves were strong, Congress lowered
reserve requirements to 6 percent from 7 percent. This fiscal
year we estimate these reserves will be about $250 million, an
amount that is still expected to be among the highest in the
country.
We have again received favorable reviews from the bond
rating agencies. Standard & Poor raised the rating on the
District's general obligation bonds to A from A minus, and
Fitch placed the District's A minus rating on a positive
outlook for a possible upgrade.
Again, this year I must stress that it is time to grant the
District of Columbia local budget autonomy--can I illustrate a
point, sir? Do you have a question on this?
Senator Brownback. My eyes are not quite as good as they
used to be, so I am trying to make sure----
Dr. Gandhi. Well, I can withhold my testimony to explain
this.
Senator Brownback. Please go on. Please proceed.
Dr. Gandhi. All right. Because what really matters here is
that in the mid-90s we were very near bankrupt and today we are
really a welcome presence on Wall Street. We have accomplished
this financial stability by institutionalizing changes that
have been commended by rating agencies and investors. We are
monitoring the budget on a constant basis and have enabled
decisionmakers to receive timely and accurate information on
which to make informed judgments.
Without budget autonomy, we must prepare specific spending
plans and revenue estimates at least 9 months in advance of the
beginning of the actual budget year, a constraint under which
no other State or municipal government operates. This issue of
timing has added far greater uncertainty in budget planning and
has posed more difficulty in executing the budget as well.
In fiscal year 2006, the District's certified general fund
revenue is forecasted to be $4.8 billion, an increase of about
14 percent over 2005. Underlying the District's robust revenue
growth is continued strength in the District's real estate
market and strong growth in personal income.
As Chief Financial Officer, sir, I believe that it is not
the role of the government to amass a large amount of cash when
needs for infrastructure and other prudent investments must be
met. The magnitude of resources available for budgeting both
from the improved level of current revenues and the sizable
accumulated surplus in the fund balance provides an opportunity
to address critical needs of the District. Accordingly, the
proposed budget before you, sir, would result in a reduction in
the general fund balance of about $610 million. This amount is
composed almost entirely of one-time spending and reduction of
large pension liabilities that our Council Chair, Mrs. Cropp
talked about and programs to address critical social needs that
the Mayor talked about.
I believe this spending level and the uses of fund balance
are fiscally prudent and will not endanger the District's sound
financial position or our strong credit standing. This is
demonstrated in the 5-year proposed budget and financial plan
attached to my testimony. Unlike any other jurisdiction, the
District prepares a 5-year plan so as to assure the Congress
that the District will remain financially viable for 5 years.
Since Mrs. Cropp and the Mayor talked about structural
imbalance, I will not go into that. I would simply note that
the GAO's structural imbalance report identifies about $470
million to about $1 billion of structural imbalance, this
structural imbalance somehow has to be helped by the Federal
Government. There are not enough local resources to address the
imbalance, and I request and strongly urge, that Congress take
positive action on Congresswoman Norton's bill, the District of
Columbia Fair Federal Compensation Act of 2005, (H.R. 1586).
PREPARED STATEMENT
That concludes my oral remarks, Mr. Chairman, and I request
that my written testimony be made part of the record. I will be
pleased to answer any questions you or Mrs. Landrieu may have.
Thank you.
Senator Brownback. Your formal testimony will be made part
of the record. We look forward to the discussion.
[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 2006 budget request to the Congress. My remarks will
briefly touch on the fiscal year 2005 financial outlook, the fiscal
year 2006 request, and the overall health of the District's finances.
CONTINUING FINANCIAL STRENGTH
The Congress created the Office of the Chief Financial Officer to
preserve, protect and enhance the District's financial viability and
credibility at all times. I am pleased to report that the District has
again made substantial progress in the past year, marking the eighth
consecutive year of fiscal recovery. We again achieved a balanced
budget and received a clean audit opinion from our external auditors
and improved the District's financial infrastructure. The graph on
Attachment 1 illustrates the turnaround in our general fund balance
from a negative $518 million in fiscal year 1996 to a positive $1.2
billion fund balance at the end of fiscal year 2004. Roughly half of
that fund balance is reserved as a result of Congressional mandate, or
is legally reserved for bond escrows or other purposes. The fund
balance is likely to climb in the current fiscal year to reach an
unprecedented level of approximately $1.3 billion.
Our emergency and contingency reserves totaled $285.4 million,
among the highest such reserves as a percentage of budget of all major
cities or states in the nation. Last year, recognizing that the
District's reserves were strong, Congress enacted legislation lowering
the total reserves required to 6 percent from 7 percent. This fiscal
year, we estimate that the emergency and contingency reserves will be
about $249 million, an amount which we expect will still remain among
the highest in the country.
We have again received favorable reviews from the bond rating
agencies. Standard & Poor's raised the rating on the District's general
obligation bonds to A from A- last November and at the same time, Fitch
Ratings placed the District's A- rating on positive outlook for
possible upgrade. The graph in Attachment 1 also shows the history of
the District's ratings by all three major bond rating agencies.
We continue to strive to improve on this record of accomplishment.
Our standardized spending plans for all agencies allow us to monitor
results against those plans, and we continue to control agency spending
using our online financial management tools. Spending plans are one
component of the District's own Anti-Deficiency Act designed to hold
financial and program managers accountable for achieving program
results within approved budgets. We have built performance budgets
across all agencies that set specific targets which are benchmarked
against best practices in local government.
Again this year, I must stress that it is time to grant the
District of Columbia local budget autonomy. We have accomplished
financial stability by institutionalizing changes that have been
recognized by rating agencies and investors in the District's bonds and
notes. We have established systems to monitor our budget on a constant
basis and have enabled decision makers to receive timely and accurate
information on which to make informed judgments. Without autonomy we
must prepare specific spending plans and revenue estimates at least
nine months in advance of the beginning of the actual budget year, a
constraint under which no other state or municipal government must
function. This issue of timing has added far greater uncertainty in
budget planning and formulation and has posed more difficulty in
executing the budget as well. We have been fortunate in recent years in
finding that our revenues have far exceeded our forecasts, but such
time constraints have forced us to be overly conservative in our
estimates, and have prevented us from providing tax relief or larger
service benefits to our taxpayers as a result of those excess revenue
collections. Congresswoman Eleanor Holmes Norton has introduced the
District of Columbia Budget Autonomy Act of 2005, H.R. 1629, and
Senator Collins introduced an equivalent bill, S.800, which would allow
the Mayor and City Council to enact the locally funded portion of the
District's annual budget. We appreciate the interest of this
Subcommittee on the matter of budget autonomy and urge the Congress to
consider the bills favorably.
BEGINNING FUND BALANCE, GENERAL FUND
As noted in the fiscal year 2004 Comprehensive Annual Financial
Report (CAFR), the District concluded fiscal year 2004 operations with
a $1.215 billion general fund balance (i.e., net accumulated surplus).
Based on current revenue and expenditure estimates, the General
Fund is expected to end fiscal year 2005 with an operating surplus of
$320.6 million. The general fund balance is likely to reach $1.35
billion at the end of fiscal year 2005.
FISCAL YEAR 2006 REVENUES
In fiscal year 2006, District's certified general fund revenue is
forecasted to be $4.81 billion, an increase of 13.8 percent over fiscal
year 2005 approved budget after tax policy changes. Underlying the
District's robust revenue growth is continued strength in the
District's real estate market and strong growth in personal income.
Substantial increases in prices and the number of transactions in both
residential and commercial real estate markets were major sources of
revenue gains in fiscal year 2003 and fiscal year 2004, and are
expected to contribute significantly to fiscal year 2005 and fiscal
year 2006 revenues. Going forward, our revenue projections assume
District personal income will grow between 5 and 6 percent annually,
and the financial markets will continue their recovery.
The fiscal year 2006 Proposed Budget includes tax policy reductions
of $35.0 million and revenue shifts to capital of $30.0 million. The
tax policy reductions include an increase in the homestead deduction,
an increase in the local Earned Income Tax Credit, increases in both
the standard deduction and the personal exemption, and a property tax
deferral for low-income homeowners. The revenue shift to capital is to
provide a dedicated stream of revenues to finance major investments in
bridges and roads.
FISCAL YEAR 2006 PROPOSED EXPENDITURES
As Chief Financial Officer, I believe that it is not the role of
government to amass large amounts of cash when needs for infrastructure
improvements and other prudent investments in the future must be met.
The magnitude of resources available for budgeting, both from the
improved level of current revenues and the sizable accumulated surplus
in the fund balance, provides an opportunity to address critical needs
of the District.
Accordingly, this proposed budget would result in a reduction in
the general fund balance of $610 million, to a balance of $740.2
million, from the projected year-end fiscal year 2005 fund balance.
This amount is composed almost entirely of one-time spending or
transfers for future and retroactive pay-as-you-go capital funding, a
reduction of a large pension benefit liability, policy shifts to
special purpose and capital funds and operating budget programs to
address critical social needs. I believe the spending levels and the
uses of fund balance contained in this budget proposal are fiscally
prudent and will not endanger the District's sound financial position
or our strong credit standing. As shown in the table below, the Mayor
and Council have weighed these financial opportunities in formulating
policy goals for fiscal year 2006, as incorporated into this proposed
budget.
TABLE 2.--GENERAL FUND PROPOSED FISCAL YEAR 2006 BUDGET SUMMARY
[In millions of dollars]
------------------------------------------------------------------------
Amount
------------------------------------------------------------------------
Total Revenues............................................ 4,871.2
Less Recurring Budget Expenses............................ (4,804.9)
-------------
Excess Revenues........................................... 66.3
Less Tax Policy Reductions and Revenues Shift to O type (65.0)
and Capital..............................................
Add Appropriated Fund Balance............................. 591.6
-------------
Sources for Program and Fiscal Policy Initiatives......... 592.9
Less Non-recurring Budget Expenses........................ (399.8)
Less Fiscal Policy Initiatives............................ (191.8)
-------------
Projected fiscal year 2006 Operating Margin............... 1.3
------------------------------------------------------------------------
The fiscal year 2006 general fund budget spending proposal of $5.40
billion is 19.8 percent higher than fiscal year 2005 approved spending
of $4.5 billion. This represents increases in both recurring expenses
and the one-time uses of fund balance which I discussed previously.
Recurring budget expenses of $4.80 billion are a net increase of $467
million, or 10.8 percent, over the fiscal year 2005 approved budget.
TABLE 3.--GENERAL FUND FISCAL YEAR 2006 BUDGET SUBMISSION
[Dollars in millions]
----------------------------------------------------------------------------------------------------------------
Fiscal year Fiscal year Percent
2005 2006 Change change
----------------------------------------------------------------------------------------------------------------
Recurring Budget Expenses................................... $4,337.8 $4,804.9 $467.1 10.8
Program Policy Initiatives:
Nonrecurring Budget Expenses............................ 165.0 192.8 27.8 16.8
PayGo Capital (Nonrecurring)............................ ........... 207.1 207.1 n/a
-------------
Net Change: Recurring Expenses and Program Policy Initia- ........... ........... 702.0 ...........
tives......................................................
-------------
Non-recurring Fiscal Policy Initiatives:
Post Employment Health Benefits......................... ........... 138.0 138.0 n/a
Contribution to Capital Fund Balance.................... ........... 53.8 53.8 n/a
---------------------------------------------------
Total General Fund Request............................ 4,502.8 5,396.6 893.8 19.8
----------------------------------------------------------------------------------------------------------------
FINANCING THE BUDGET REQUEST
To finance both the program and fiscal policy initiatives, the
District utilizes $591.6 million from the accumulated fund balance. The
planned drawdown of fund balance will reduce the accumulated general
fund balance to a projected $740.2 million by the end of fiscal year
2006.
TABLE 4.--FISCAL YEAR 2006 GENERAL FUND BALANCE ANALYSIS
[In millions of dollars]
------------------------------------------------------------------------
------------------------------------------------------------------------
Projected Beginning Fund Balance (October 1, 2005)........ 1,350.6
Appropriated for Fiscal Year 2006......................... (591.6)
Projected Fiscal Year 2006 Operating Margin............... 1.3
Projected GAAP Adjustments................................ (20.0)
-------------
Projected Ending Fund Balance (September 30, 2006)........ 740.2
------------------------------------------------------------------------
PROPOSED FISCAL YEAR 2006 GROSS FUNDS BUDGET
The proposed fiscal year 2006 gross funds operating budget is $7.35
billion, an increase of $1.07 billion, or 17.0 percent, over the
approved fiscal year 2005 gross funds budget of $6.29 billion. The
$1.07 billion expenditure increase is comprised largely of a $893.7
million increase in the General Fund budget, which reflects the program
policy initiatives and fiscal policy initiatives discussed above. The
other $171.9 million increase in non-local funds reflects projected
expenditures in federally funded programs ($169.0 million), including
Medicaid; and private grants ($2.9 million).
TABLE 5.--FISCAL YEAR 2006 GROSS FUNDS BUDGET BY FUND TYPE
[Dollars in millions]
----------------------------------------------------------------------------------------------------------------
Fiscal year Fiscal year Percent
Fund Type 2005 2006 Change Change
----------------------------------------------------------------------------------------------------------------
Local....................................................... $4,170.1 $4,949.5 $779.4 18.7
Special Purpose (O Type).................................... 332.8 447.1 114.4 34.4
---------------------------------------------------
Subtotal, General Fund................................ 4,502.8 5,396.6 893.7 19.8
===================================================
Federal..................................................... 806.3 931.4 125.1 15.5
Federal Medicaid Payment.................................... 963.8 1,007.6 43.9 4.6
Private Grants.............................................. 13.3 16.2 2.9 21.8
---------------------------------------------------
Total Gross Funds..................................... 6,286.2 7,351.8 1,065.6 17.0
----------------------------------------------------------------------------------------------------------------
CAPITAL IMPROVEMENTS PLAN
The District faces a wide variety of infrastructure needs, placing
great demands on its Capital Improvements Plan (CIP). The total
proposed appropriation request for the fiscal year 2006-fiscal year
2011 CIP is $2.176 billion for all sources (including the Highway Trust
Fund). This six-year plan includes a net increase in local budget
authority of $778 million ($1.073 billion of new budget authority
offset by $295 million of rescissions). The increased budget authority
will be financed by General Obligation (G.O.) bonds, the Master
Equipment Lease Program, asset sales and PayGo financing. The fiscal
year 2006 capital program consists of $737 million in planned local
non-streets capital expenditures (financed by up to $495 million in new
G.O. bond issuance, $199 million of PayGo transfers from the General
Fund balance, and $43 million from other sources), as well as $60
million of expenditures from the Local Streets Maintenance fund.
PERFORMANCE BUDGETING
This budget also reflects our continued progress implementing
performance-based budgeting (PBB). In fiscal year 2005, we transitioned
11 new agencies to PBB for a grand total of 67 agencies now fully
enrolled in PBB for fiscal year 2006. These 67 agencies account for
nearly 63 percent of the District's annual gross operating budget.
Transition to PBB is a key accomplishment because it establishes a
clear relationship between the funding that agencies receive, the
programs they operate, and the results that they must achieve. A
critical component of PBB is development of programmatic benchmarks to
assist policy makers, District executives and the public in assessing
the value of the District's programs and determining opportunities for
improvement. The current set of benchmarks for District programs has
grown from 39 benchmarks for 18 agencies in fiscal year 2005 to 71
benchmarks for 26 agencies in the fiscal year 2006 proposed budget.
STRUCTURAL IMBALANCE IN THE DISTRICT'S BUDGET
Mr. Chairman, despite this record of balanced budgets, there
remains an ongoing, long-term financial problem, and that is the issue
of the structural imbalance. This serious situation has been documented
a number of times by sources outside the District including most
notably by the General Accounting Office in report GAO-03-666 back in
May 2003. This report defines a financial structural imbalance as the
inability to provide a representative array of public services by
taxing at representative rates. The District is the only city in the
nation that has no state to share costs or underwrite expenditures in
whole or part. The District bears about $500 million annually in costs
of mental health, human services, child and family services, a
university, motor vehicles licensing, taxation, insurance regulation,
public service commission, and other services performed at the state
level.
The District's primary employer--the federal government--has
exempted itself from taxation on its property and its income. Further,
the preponderance of workers in the District of Columbia are exempt
from D.C. income tax because they reside in the neighboring states of
Maryland and Virginia. Finally, the District is the only municipality
in the nation that must exercise the responsibilities of a city, a
county, a state and a school district. Although the District has the
authority for all types of taxes typically levied by states and
municipal governments, it does not have the corresponding tax base
sufficient to pay for the services it must provide.
Again this year, I must ask the Subcommittee to consider the
necessity of providing some additional federal consideration of the
District's infrastructure needs. The District has pressing
infrastructure needs--mostly in our schools, streets and
transportation--that we cannot possibly fund locally. D.C. already has
the highest per capita general obligation debt in the nation and,
according to the GAO report, a tax burden that is 18 to 33 percent
higher than average for the states. Our only options for addressing
these infrastructure needs locally are:
--Adding even more debt per capita;
--Increasing the tax burden per capita--an action that is likely to
discourage potential residents and employers and possibly drive
current residents out of the city; or
--Reduce delivery of other services--a very difficult choice in a
city with a large population of people in need.
The GAO report stressed the unique financial challenges the
District faces in generating the funds to finance usual and necessary
services, and identified an annual structural imbalance of $470 million
to $1.14 billion between the costs of delivering typical services and
the revenue available from typical tax burdens, based on fiscal year
2000 budget and data. Over the years, the District dealt with this gap
by neglecting infrastructure needs and assessing very high taxes.
For example, our capital program is constrained by limited
operating revenues to support debt service as well as by the impact of
prudent debt ratios and debt affordability determinations. The
District's capital needs are now estimated to be about $7 billion, but
our capital spending plan in fiscal year 2006-fiscal year 2011 for
which we have identified funding sources is only about $2 billion,
leaving a gap of about $5 billion. If borrowing occurs as planned, our
tax-supported debt per capita will rise to over $11,000 by fiscal year
2009.
Again this year, Congresswoman Norton has introduced a bill, the
Fair Federal Compensation Act of 2005, H.R. 1586 to address the
structural imbalance, to relieve some of the unsustainable burden on
the D.C. government and residents and businesses and to prevent another
fiscal crisis for the capital city. We urge Congress to take action to
enact this important legislation.
CONCLUSION
Mr. Chairman, this concludes my remarks. I request that my written
testimony be made part of the record. I will be pleased to answer any
questions you or the other members may have.
RESERVE REQUIREMENTS
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal year--
Fund Type -----------------------------------------------------
2004 2005 2006 2007 2008 2009
----------------------------------------------------------------------------------------------------------------
Emergency & Contingency Cash.............................. 285 249 254 258 302 307
Budgeted.................................................. 50 50 50 50 50 50
-----------------------------------------------------
Total............................................... 335 299 304 308 352 357
----------------------------------------------------------------------------------------------------------------
Cash Reserve Requirements Reduced from 7 percent to 6 percent: Emergency Reserve changed from 4 percent to 2
percent; and Contingency Reserve changed from 3 percent to 4 percent.
DISTRICT OF COLUMBIA FISCAL YEAR 2006-2009 PROPOSED BUDGET AND FINANCIAL PLAN--GENERAL FUND
[In thousands of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal Year--
------------------------------------------------------------------------------------------
2005 2005 2006 2007 2008 2009
2004 Actual Approved Revised Proposed Projected Projected Projected
--------------------------------------------------------------------------------------------------------------------------------------------------------
Revenues:
Taxes.................................................... 3,665,195 3,628,730 3,875,218 4,101,533 4,330,091 4,610,561 4,890,072
General Purpose Non-Tax Revenues......................... 324,493 292,447 330,973 340,522 342,896 338,513 346,573
Special Purpose (O-type) Revenues........................ 240,253 208,624 236,026 264,254 273,603 280,326 287,789
Transfer from Lottery.................................... 73,500 71,100 70,000 73,100 73,100 73,100 73,100
------------------------------------------------------------------------------------------
General Fund Revenues.................................. 4,303,441 4,200,901 4,512,217 4,779,409 5,019,690 5,302,500 5,597,534
==========================================================================================
Bond Issuance Costs...................................... ........... ........... 15,400 40,000 16,000 16,000 15,615
Payment-in-Lieu-of-Taxes from WASA....................... ........... ........... 1,500 1,576 1,622 1,669 1,717
Transfer from Federal and Private Resources.............. ........... 6,361 6,361 6,502 6,646 6,807 6,979
Fund Balance Use......................................... 129,128 165,015 165,015 591,642 ........... ........... ...........
Transfer to Special Purpose Revenues..................... ........... ........... ........... ........... ........... ........... ...........
Transfer to Capital...................................... ........... ........... ........... (30,000) (30,300) (30,603) (30,909)
Revenue Proposals/One-time Revenue....................... ........... 128,107 76,600 8,729 7,607 9,367 11,137
------------------------------------------------------------------------------------------
Total General Fund Resources........................... 4,432,569 4,500,384 4,777,093 5,397,858 5,021,265 5,305,740 5,602,073
==========================================================================================
Expenditures (by Appropriation Title):
Governmental Direction and Support....................... 231,364 315,813 327,899 340,859 326,649 336,654 346,999
Economic Development and Regulation...................... 148,949 241,570 216,715 328,156 246,557 252,885 259,394
Public Safety and Justice................................ 746,066 790,815 799,194 827,037 864,258 884,495 917,173
Public Education System.................................. 1,029,193 1,067,666 1,055,821 1,189,302 1,194,175 1,228,423 1,263,822
Human Support Services................................... 1,117,035 1,192,755 1,244,598 1,307,530 1,345,993 1,401,101 1,458,860
Public Works............................................. 314,620 327,936 328,334 366,101 373,427 388,605 404,451
Financing and Other...................................... 400,963 511,692 468,917 588,717 607,655 642,994 678,362
Cash Reserve (Budgeted Contingency)...................... ........... 50,000 15,000 50,000 50,000 50,000 50,000
Lease Purchase Costs..................................... ........... ........... ........... ........... ........... 20,000 25,000
------------------------------------------------------------------------------------------
Subtotal, Operating Expenditures....................... 3,988,190 4,498,247 4,456,478 4,997,702 5,008,714 5,205,156 5,404,062
==========================================================================================
Paygo Capital............................................ ........... ........... ........... 207,083 10,000 ........... ...........
Transfer to Trust Fund for Post-Employment Benefits...... ........... ........... ........... 138,000 ........... 81,000 86,200
General Fund Contribution to Capital Fund Balance........ ........... ........... ........... 53,800 ........... ........... ...........
------------------------------------------------------------------------------------------
Total General Fund Expenditures........................ 3,988,190 4,498,247 4,456,478 5,396,585 5,018,714 5,286,156 5,490,262
==========================================================================================
Operating Margin, Budget Basis......................... 444,379 2,137 320,615 1,273 2,551 19,583 111,810
==========================================================================================
Beginning General Fund Balance............................... 897,357 1,215,015 1,215,015 1,350,615 740,246 722,798 722,380
Operating Margin, Budget Basis............................... 444,379 2,137 320,615 1,273 2,551 19,583 111,810
Projected GAAP Adjustments (Net)............................. 2,407 (20,000) (20,000) (20,000) (20,000) (20,000) (20,000)
Deposits into Reserve Funds (From Fund Balance).............. (31,609) (19,041) 36,032 (4,489) (4,570) (43,113) (5,428)
Deposits into Reserve Funds (To Cash Reserves)............... 31,609 19,041 (36,032) 4,489 4,570 43,113 5,428
Tax Increment Financing (TIF) Reserve (From Fund Balance).... ........... (9,710) (9,710) (9,710) (9,710) (9,710) (9,710)
Unspent TIF Reserve.......................................... ........... 9,710 9,710 9,710 9,710 9,710 9,710
Fund Balance Use............................................. (129,128) (165,015) (165,015) (591,642) ........... ........... ...........
------------------------------------------------------------------------------------------
Ending General Fund Balance............................ 1,215,015 1,032,137 1,350,615 740,246 722,798 722,380 814,190
==========================================================================================
Composition of Fund Balance:
Emergency Cash Reserve Balance (2 percent, formerly 4 163,091 179,930 83,126 84,622 86,145 100,516 102,325
percent)................................................
Contingency Cash Reserve Balance (4 percent, formerly 3 122,318 124,520 166,251 169,244 172,290 201,032 204,651
percent)................................................
Fund Balance not in Emergency & Contingency Reserves..... 929,606 727,687 1.101,238 486,381 464,363 420,832 507,214
------------------------------------------------------------------------------------------
Ending General Fund Balance............................ 1,215,015 1,032,137 1,350,615 740,246 722,798 722,380 814,190
--------------------------------------------------------------------------------------------------------------------------------------------------------
Senator Brownback. Dr. Janey, it is good to see you again
in this hearing and I look forward to your testimony.
STATEMENT OF CLIFFORD JANEY, Ph.D., SUPERINTENDENT OF
SCHOOLS, DISTRICT OF COLUMBIA PUBLIC
SCHOOLS
Dr. Janey. Thank you very much.
I am going to make some adjustments in my testimony to
observe the need for us to have some dialogue, but my brevity
in no way should diminish I think some of the important issues
that face us, not only as a school district but as the District
of Columbia.
Thank you for providing me the opportunity, Chairman
Brownback and Senator Landrieu. I believe the fiscal year 2006
budget request reflects the collaborative spirit necessary for
an educational agenda to be realized. I believe we must move
aggressively to meet the needs of our students and our goal
must be to regain our public credibility, improve student
performance, raise our expectations, and establish a real
system of accountability.
With this in mind, the fiscal year 2006 budget was designed
to begin to address some of the malaise in our system by
proposing new initiatives that address three key goals. They
are: boosting and sustaining academic performance; improving
our facilities; updating and upgrading our instructional
technology.
To a certain extent, we will be able to accomplish this by
investing our allocated money for fiscal year 2006 of $775
million in quality academic programs and operational reforms.
If we continue to stay focused on our common goal of improving
the quality of education for D.C. students, we can accomplish
even more. The support and leadership of the Board of Education
and the fact that Mayor Williams, Chairperson Cropp, and Dr.
Gandhi have been accessible and responsive to the children,
families and communities as we have developed this budget
process has been critical to the success of the process thus
far.
Our base budget for fiscal year 2006 was $775 million, but
in the development of the budget we realized that there were
some educational investments that would be unfulfilled but were
critical to our ambitious academic agenda. However, the board
and I agreed that we would live within the amount we were
allocated for 2006, different from previous years.
However, the Council helped us secure an additional $15
million to prevent a loss of 269 teaching positions. I thank
Chairperson Cropp, her colleagues and others who were very
helpful in that regard.
In addition, we received an interdistrict transfer of $3.7
million for private special education out of State tuition
payments. So our revised budget amount is $794 million, with an
additional $21 million to support unmet needs in our budget.
Thus our total appropriated amount for fiscal year 2006 is $815
million in local funds.
The projected Federal grant revenues for fiscal year 2006
total $145 million and we have other funding streams that
brings our budget up to approximately $1.1 billion.
Another area where we have received additional needed
support from the Mayor and the Council on the operating side of
the budget is in the area of facilities. We have received an
additional $6 million to open up schools this year. We have
targeted a number of schools for landscaping, painting,
sprucing up, looking at our gymnasia and our cafeterias.
To give you a sense of the condition of our buildings,
however, 86 of our 147 schools are more than 50 years old and
another 41 are 75 years of age or older. Between 1982 and 2000,
just a scant number of schools have been fully modernized. I
cannot overstate the simple premise that every student needs
and deserves a decent learning environment.
To meet our most urgent facility needs in the context of
fiscal realities, we developed the transition capital
improvement plan adopted by the Board of Education in March of
this year. This plan allows for more effective and strategic
use of funds. It allows us to expand opportunities to partner
with charter schools through co-location.
I am going to start to wind up this presentation and this
testimony, but I would like to highlight a couple of
initiatives that have continued to be of importance to us in
the school district, the first of which is the Tuition
Assistance Grant program. This program has opened up college
opportunities to many families for the first time and provided
an additional incentive for middle class families to stay in
the city. To build upon this, we have entered into a
partnership with the College Board to promote development of
the skills students need to succeed in college, and our high
school guidance counselors have all been trained in the
benefits of promoting the tuition assistance program.
Based on its value to the development of our students and
the desirability of the city, we ask the committee to continue
funding this important initiative.
Further, with respect to school improvement and the $13
million appropriation coming from this subcommittee, I seek the
continued funding for school improvement. These funds have
enabled us to implement the Massachusetts learning standards
for this coming school year. I would ask the subcommittee not
to first insert special legislative language that might hamper
the continued implementation of these standards. The continued
funding is vital to the current academic reforms we have
instituted.
Our use of school improvement funds will enable us to do--
will enable us to continue to invest in the following key
areas, ranging from the implementation of the learning
standards, going fundamentally then with curriculum
instruction, having a clear and rigorous assessment system,
having the accountability that goes along with that, providing
professional development of our staff, and looking at
prevention through early intervention, that is establishing new
opportunities for 3- and 4-year-olds to come to the District.
I believe, in conclusion, this operating budget will
considerably advance our work at improving student achievement
and assisting us in changing the institutional culture of the
school system and make the necessary reforms so long needed.
PREPARED STATEMENT
This concludes my testimony and I, like my colleagues, will
be here to remain part of the dialogue.
Senator Brownback. Thank you, Dr. Janey.
[The statement follows:]
Prepared Statement of Dr. Clifford B. Janey
Good morning, Chairman Brownback, Senator Landrieu and Members of
the Senate Appropriations Subcommittee on the District of Columbia. I
am pleased to be here with Mayor Williams, Chair Cropp and Dr. Ghandi.
INTRODUCTION
I believe the fiscal year 2006 budget request act reflects the
collaborative spirit necessary for our educational agenda to be
realized. I believe we must move aggressively to meet the needs of our
students. Our goal must be to regain our educational focus, improve
student performance, raise student expectations and establish a system
of accountability. With this in mind, our fiscal year 2006 budget was
designed to begin to address the malaise in our system by proposing new
initiatives that address three key goals. The goals inherent in the
budget are to boost academic standards, improve facilities and update
and upgrade our instructional technology.
FISCAL YEAR 2006 BUDGET
Under the leadership of the board of education, along with the
support of those assembled here today, we began the budget process and
had to accept the widespread feeling that our schools operate in an
isolated and detached manner. We felt that addressing the public's
concerns would go a long way to improve the overall environment of
learning and boost student achievement. With this in mind, we began the
process of building a budget to encompass the feelings of stakeholders
and the desires of parents for more academic rigor.
To a certain extent, we were able to accomplish this by investing
our allocated amount for fiscal year 2006 of $775 million in quality
academic programs and operational reforms.
If we continue to stay focused on our common goal of improving the
quality of education for D.C. students, we can accomplish even more.
The support and leadership of the board of education and the fact that
Mayor Williams, Chair Cropp and Dr. Ghandi have been accessible and
responsive to our children, families and communities as we developed
our fiscal year 2006 budget has been critical to the success of this
process thus far.
Our base budget for fiscal year 2006 was $775 million, but in the
development of the budget, we realized there were educational
investments that would be unfulfilled but were critical to our
ambitious academic agenda. However, the board and I agreed that we
would live within the amount we were allocated for fiscal year 2006.
However, the council helped us secure an additional $15 million to
prevent the loss of 386 teaching positions. In addition, we received an
intra-district transfer of $3.7 million for private special education
out of state tuition payments. So, our revised budget amount is $794
million, with an additional $21 million to support the ``unmet'' needs
of our budget. Thus, our total appropriated amount for fiscal year 2006
is $815 million in local funds. The projected federal grant revenues
for fiscal year 2006 totals $145 million and we have other funding
streams that brings our budget up to $1 billion.
Another area where we have received additional needed support from
the mayor and council is in the area of facilities. We have received an
additional $6 million to open the schools this fall.
To give you a sense for the condition of our schools, eighty-six
(86) of our 147 schools are more than 50 years old. Another 41 are 75
years or older. And, between 1982 and 2000, only four schools were
added to or rebuilt.
I cannot overstate the simple premise that every student needs and
deserves a decent learning environment. To meet our most urgent
facilities needs in the context of fiscal realities, we developed the
transition capital improvement plan adopted by the board of education
in March 2005.
This plan allows for a more effective and strategic use of funds.
This also will allow us to expand opportunities for co-locating to
support charter schools. Most recently, we have identified ten schools
as possible co-location sites for charter schools to co-locate for this
fall one year. I envision there possibly will be greater opportunities
to co-locate or for charters to occupy additional buildings upon
completion of the master education plan. The rationale for the one-year
lease is to allow time for the development of this master plan, which
will guide both our academic and facilities plans for the coming years.
Tuition Assistance Grant Program
This program has opened up college opportunities to many families
for the first time and provided an additional incentive for middle
class families to stay in the city. To build on this, we have entered
into a partnership with the College Board to promote development of the
skills students need to succeed in college and our high school guidance
counselors have all been trained in the benefits of promoting the
tuition assistance program. Based on its value to the development of
our students and the desirability of our city, we ask the committee to
continue funding this important initiative.
School Improvement
Further, I seek the continued funding for school improvement. These
funds have enabled us to implement the Massachusetts standards for this
coming school year. I would ask the committee not to insert any
legislative language that would hamper the continued implementation of
these standards. The continued funding is vital to the current academic
reforms I have instituted. Our use of school improvement funds will
enable us to continue to invest in the following key areas:
--Curriculum and instruction.--Develop grade-by-grade standards in
science, social studies, and four electives. This process will
incorporate the best standards from around the country. At the
same time, English/language arts and mathematics curricula will
be developed and linked to textbook adoption.
--Assessments.--Implement periodic benchmark testing to monitor
progress of students throughout the school year, identify
students who need support so that help can be provided, and
help tailor training for teachers and principals to meet
students' needs.
--Accountability.--Adopt an effective schools initiative that is more
closely aligned with NCLB standards and will reach more schools
with additional support and resources. The research-based
approach, which is based on the successful performance
improvement mapping (pim) model being used in Massachusetts,
aligns more closely with federal standards in NCLB.
--Professional development.--Work with our standards content
consultants in an ongoing process to help teachers develop the
knowledge, skills and tools they need to take ownership of the
standards and curriculum.
--Prevention and early intervention.--Renewing the emphasis and
system wide mandate for early intervention in the context of
general education, including academic and behavioral supports
and other services for struggling students, will enable DCPS to
meet the needs of more learners, improve student achievement,
and reduce the number of inappropriate special education
referrals.
I believe this operating budget will considerably advance our work
at improving student achievement, assist us in changing the
institutional culture of this school system, and make the necessary
program and operational changes that will benefit the children in our
classrooms and, ultimately, the citizens of the District of Columbia.
This concludes my testimony. I will now answer any questions you
may have.
Senator Brownback. We will run the time clock 5 minutes
back and forth, so we will just try to ask some pretty good
questions and very quick questions and then do a couple of
rounds here if we can.
Dr. Janey, we held a hearing on education and both Senator
Landrieu and I are very concerned about what is taking place in
the D.C. system and the results or lack of results that have
taken place for school children in the District of Columbia. I
want to focus in on your physical plant issue if I could to
start off with, because you have noted, Chairperson Cropp has
noted, the dilapidated condition of your physical plant.
You have about 147 school facilities . What do you believe
that total number should be? Where do you think that number
should actually be, given what your enrollment is today and
where your students are located?
Dr. Janey. I cannot give you a precise number of schools
because we are currently in the process of building this plan.
By December of this year we will have a master education plan
that will really frame how many facilities that we should have
pre-K through 12, the types of uses for those facilities, so
that we would be able to have finally right-sized the District.
So we are in that process right now, Senator.
Senator Brownback. Could you give me any comparables in the
country of student population, of what the D.C. area is, and
what the number of school facilities would be in a comparable
district? You do not have it determined here yet, but what
would be a comparable in the United States?
Dr. Janey. Boston might be comparable in enrollment, give
or take 2,000 or 3,000, 4,000 students, and I believe their
number of facilities is probably 15 or 20 less, I think. But I
would not want to say factually for the record. But Boston is
somewhat comparable to the District of Columbia in enrollment.
Senator Brownback. I do not think you have closed any
schools since 1999. This was an issue when I was chairing the
authorizing committee before, that we need to get more
resources into fewer physical plants. We need to upgrade these
physical plants.
It is a similar thing that we are going through on military
bases across the country, across the world, is we are trying to
get into fewer buildings and get them upgraded so that they are
better. I have been in a couple of your physical plants. They
clearly need upgrading. There is just no question about it.
But there has a will to say, okay, we are going to take the
dollars that we have and we are going to put them in the
physical plants that we need, and the other ones, we are just
going to have to close.
I know this was a tough issue back then. It is a tough
issue now. I do not know if we need to provide assistance to be
able to strengthen your hand to be able to move forward on
that, but it strikes me this is going to be one of the
fundamental issues we are going to have to face, is get more
resources put into fewer physical plants for students.
Dr. Janey. I think the technical aspect of the issue,
meaning looking at the enrollment against the number of
schools, that is not the big lift. Looking at the types of
educational programs and services and then projecting over time
what the enrollment will be, that is a second consideration.
But when you talk about consolidation, when you talk about
closing schools, you talk about shared use of schools, often it
comes down to political will and where will people stand once
you make that decision.
Senator Brownback. I understand all of that. I understand
the difficulty.
Dr. Janey. So that it rests more in that area than it does
in the other two.
Senator Brownback. When the statement was made by the
former speaker about all politics is local, talk about schools
and it is real local, and it is a very tough issue to deal
with.
Dr. Janey. I have heard Mr. O'Neil say that many times.
Senator Brownback. Mayor Williams, thank you for your
presentation here. I want to go at one area and then I want to
come back to you, if I can, a little bit later. You talk about
the level of taxation within the District, some of the highest
taxation within the country. I think even Chairperson Cropp was
talking about a punitive tax structure, I believe is the terms
that I heard you use.
Do you have plans or should you or are you considering
plans for reduction of that tax structure within the District
of Columbia as a further effort and opportunity for growth for
the District of Columbia, if your tax structure is so punitive
and so high?
Mayor Williams. Well, I can ask Chairman Cropp to speak to
the Tax Parity Act that the Council passed, what was it, in
1999 I believe, which provided for a series of reductions of
income tax in the city. We have worked together where we could,
certainly on a strategic basis, reducing taxes for business. I
have worked with the Council in providing cap relief for
property taxpayers, who are suffering from escalating housing
prices and hence assessments and hence levies, on the basis of
that.
In this year's budget there is $88 million in tax relief. I
think it is about $40 million of that is the latest tranche of
this Tax Parity Act, which I strongly support, because this
latest stage of the Tax Parity Act actually is providing
increasing tax relief to moderate and low income citizens. Then
we have also added to that, with the strong support of the
Council, additional tax relief that would total about $88
million.
One of the things I am particularly proud of is we say to
homeowners--there are two things, actually. Chairman Cropp can
speak to the latter. One is, if you are a homeowner, a
household making less than $50,000 a year, you do not pay
property taxes on your home until you sell it. I think that is
going to provide great relief for the strain faced by middle
income households, who are seeing their property values go up,
but those assessments and those property levies can be onerous.
Then number two--and I give her full credit for this--
Chairman Cropp, at her urging we have included in the budget
relief for custodial grandparents who are taking care of these
kids in many instances and should be supported. You talk about
supporting families. This is something I really salute her for,
providing hope for--providing help for these custodial
grandparents in terms of tax relief to allow them to shoulder
the burden of raising these children.
I do not know if you want to speak to any of those issues,
Chairman Cropp.
Ms. Cropp. Thank you, Mr. Mayor.
The Mayor and Council have worked very hard to look at ways
to reduce the burden for our citizens. We are challenged also
by our own success with regard to real estate property. What we
are finding in the District is that the housing costs have gone
up, they have tripled or quadrupled, but the salaries have not
matched it. The average cost of a house in the District is
roughly around $350,000, $375,000, where the average salary is
about $70,000, $75,000.
What we have now is we have some people, particularly
seniors, who may be in a house that they bought 50, 60 years
ago for $40,000, whose house may be worth about $500,000,
$600,000, $700,000, $800,000 now, but their annual income may
only be $25,000 to $40,000 a year. So the taxes are getting at
a level where either we force them to sell their house and
leave the District, because if they sold their house it is
nothing else they could buy in the District with that money.
So in the Mayor's budget, working with the Council, we have
devised a way to work with these seniors that they do not have
to pay the property taxes until after they sell their house.
However, there is another group who is impacted by this and
why the city needs to look at it. Let us look at new college
graduates, young professionals just starting out. The average
median income in the District of Columbia has just risen to
$89,000 for a family of four. That is not enough money to be
able to buy a house and deal with affordable living, housing.
So this budget is also dealing with that issue. We are
looking and wrestling with tax packages that will actually
reduce the rate that people pay on taxes and also we are
looking at the cap again. The cap appears skewed in the sense
that you say people who have a higher value house will get more
money and that is true, but it does not mean in the District of
Columbia that people who have a higher value house are rich
people.
Senator Brownback. In farm country we would say of a
farmer, he lives poor and dies rich. Just the income off the
farm is not that much, but he sits there for a number of years,
works hard with his family, and at the end of life he has some
value. But the income is not there. And so I really do applaud
your efforts to try to deal with that situation.
We should not have a punitive tax structure within the
District of Columbia. I am glad you are working to assess that.
Mayor Williams. Mr. Chairman, if I could just say one
thing. I think one reason why the taxes are high, I would get
back to our original testimony, is again because of this
structural imbalance. The Federal Government basically tells me
I only have access to half of my tax base. So you are trying to
run an operation with only half of your tax base, and if you
believe the GAO, which says that really there are costs beyond
our control, you are going to end up overtaxing that limited
base you have.
So while the relief that we have embarked on I think is
important, we cannot miss the underlying really critical
importance, I think, of addressing the structural deficit. I
would personally think that the Fair Federal Compensation Act
is one good way to do that.
Ms. Cropp. I was going to say the same thing, Senator. What
the Mayor is saying is absolutely factual. The District, not
unlike any other city, has a population that is older, sicker,
and poorer. Most cities get the help from their surrounding
areas to help offset that problem.
Ironically, the absolute reverse happens in the District of
Columbia. We help subsidize our more affluent suburban areas.
More than 56 percent of the people who work for the District of
Columbia government--not the Federal Government, not the
private sector, but the District of Columbia government--live
outside of the District of Columbia. That is not through our
control. That is through a Federal mandate that that occurs. So
we cannot even tax that revenue at its source.
For every dollar earned in the District of Columbia, we can
only keep 33 cents of it. The difference between other major
cities and the suburban areas surrounding it, the State helps
to offset that cost, that loss, and we have no offset for it.
Senator Brownback. I have gone 10 minutes instead of 5 and
I will give that to my colleague.
I do want to recognize Congresswoman Eleanor Holmes Norton,
a dear friend of mine. Over the years I have worked with her.
You were hiding behind the Mayor so I did not see or I would
have recognized you at the very outset.
Senator Landrieu.
Senator Landrieu. Thank you, Mr. Chairman. I also want to
acknowledge Congresswoman Norton who is here. I thank you for
your work and your support. Your input has been invaluable to
this subcommittee as we have worked through some of these
issues and I really appreciate your help and support.
I wanted to, Mr. Mayor, go on the record as supporting your
comments regarding the structural imbalance. As you know, the
record-setting report by GAO actually requested by the
Congresswoman and me was issued I believe 2 years ago now. We
did have a quite lengthy hearing on the subject. That report
basically in my mind put to rest the question as to whether a
structural imbalance exists.
It is clear that it exists. It is clear that it is between
$400 million, I think, Dr. Gandhi, $400 million and $1 billion.
It is clear from the exchange that we just had that as we move
to address that one of the real results could be a lowering of
very high tax rates in the District, which would be good for
everyone and a real benefit for future development.
So I know that there are several proposals. The
Congresswoman has a proposal. Several proposals have been put
forward. But Mayor, would you take a minute, and perhaps Dr.
Gandhi take a moment, to talk about some aspects of these that
you think are particularly encouraging or a way that you would
like us to try to think about approaching this? Would it be a
rebate of taxes that the District residents pay from the
Federal Government? Could the Federal Government look at some
other ways that we could fill that structural imbalance?
Because it is really a question as to what the Federal
Government can do.
Do you want to put anything into the record, comments on
that this morning?
Mayor Williams. Well, my own view, Senator Landrieu, is--
and I have stated this publicly a number of times; I would just
use this occasion again--is I really do believe that a
promising vehicle for addressing this is the District of
Columbia Fair Federal Compensation Act of 2005, which was
introduced by Congresswoman Norton. I think there are two key
provisions of this that I think are becoming in my mind in
running the city day to day.
One is it is an annual Federal outlay on a formula basis,
so you can resolve this matter once and for all and we do not
have to revisit this over and over again. I think there is a
lot to be said for settled expectations and everything else.
Number two, it would be dedicated to exactly the things
that this subcommittee has addressed, the GAO report addressed,
and we have heard today in testimony: the transportation
projects, the extraordinary debt service that the city has to
suffer because we do not have state support, public school
facilities, information technology.
I believe that a real offset of all this--number one.
Number two, a real offset of all this would be we would see
then with these investments increasing relief, not only for
individuals but also for businesses, because actually the GAO
will tell you, our Federal City Council will tell you--I am
getting now the councils mixed up--the Federal City Council
will tell you that the real extraordinary burden in terms of
taxation now is on our businesses.
So the Council has made progress and I salute them for
reducing the burden on our individuals. But if you are a small
business in the city or a business in the city, what you are
paying versus Maryland and Virginia is clearly extraordinary.
This would allow us to address that.
Senator Landrieu.
Senator Brownback. Dr. Gandhi.
Dr. Gandhi. I think the Mayor has spoken quite well on this
issue. I think what this chart shows, Mr. Chairman and Mrs.
Landrieu, is that the District can manage itself very well
financially. It is like we can manage a household very well.
The question is what happens when the roof falls down, what
happens if I have a flood in the basement? The larger
infrastructure issue is the only puzzle that needs to be
resolved, and that cannot be resolved locally.
I think Ms. Norton's proposed legislation is an excellent
idea. That would provide us the kind of recurring annual,
predictable budget relief that we need. But more important,
what we have there is basically a capital fund, that money
would be spent only on infrastructure, the buildings,
transportation, technology, debt service.
So it is not that Congress gives that money to the city and
we start five new programs and hire 1,000 new bureaucrats. No.
The funds would basically be taking care of an infrastructure
that needs to be repaired and should be worthy of the Nation's
Capital.
Senator Landrieu. Thank you. I would like to agree that I
think one of the strongest aspects of that proposal is that it
creates a capital fund which would be able to be accountable
and transparent. How the money was spent--it could be used at
discretion, of course, of the city, but could be a real signal
of strategic investments for the growth of the city and also
provide some tax relief across the board.
On that, I want to mention that I am particularly pleased
with the tax relief and the recognition of the rising value of
homes in the District--the blessing of that, but the burden to
people on fixed incomes, particularly seniors. I really want to
commend you, Chairman Cropp, for looking at that area, and the
Mayor, and trying to provide some relief in an innovative way,
so the city is not giving up revenue. It may be postponing it,
but it really allows those families to have some relief that is
so necessary today.
Ms. Cropp. Senator, if I may, on the capital fund issue
that you were talking with the Mayor and Dr. Gandhi about, to
say how important it is. Legally, the city has a 17 percent
ceiling on our budget that we cannot spend more in capital
projects. But the reality is that Wall Street, the bond rating
agencies, will not let us go over--Dr. Gandhi--probably about 8
or 9 percent?
Dr. Gandhi. Nine percent.
Ms. Cropp. Nine percent. We are fairly close to that level.
So that even if we decided as a city that we wanted, or even if
we had the money for the infusion for our schools, we could not
do it because our bond rating would then drop down and we are
just in a terrible position.
So this capital fund is just so very important for our
schools, as we look at Metro. Metro, which has been the pride
of the Nation, is now at an age where it needs to have a
reinvestment. So for our capital budget it really is
problematic. That capital fund will be very helpful.
Senator Landrieu. Well, I appreciate that. I would only say
that this is not the only city that has limits to its capital
expenditures. There are cities all over America that struggle
with these limits, put on either by themselves or by agencies
or by State governments or by necessity because of the
finances, and it is a complicated issue.
You can also use cash when it becomes available and not
increase your bonding capacity, and it is always good to use
cash when you have got it and not increase borrowing, and your
surpluses allow you to take that cash and use it wisely, which
you have done in your proposal.
But I want to get to, in one moment--the chairman has been
very gracious here. But I would like to get to you, Dr. Janey
and the Mayor, about the facilities issue for our schools.
There are a couple of solutions. I know these are difficult.
But one, the overall budget for the school system is $1.1
billion, which we are still trying to get a handle on exactly
how that breaks down per student compared to other cities,
which is the way I would like to compare it, not States,
because I think comparing it to States is apples to oranges,
but I think comparing it to cities accurately reflects the real
costs.
This is the document that I have for the record. I am
sorry, it is fiscal year 2003. I am sure it can be updated. I
do not have it this morning. But based on this document that we
had in fiscal year 2003, Orleans Parish, which is my home town,
was spending $6,500 per student, Baltimore was spending $10,000
per student, Milwaukee was spending about $11,000 per student,
and the District of Columbia was spending $13,000 per student.
Now, these numbers may have changed and if we can just get
this updated then we will know and put that into the record.
[The information follows:]
------------------------------------------------------------------------
Per Pupil
City Spending Enrollment
------------------------------------------------------------------------
Orleans Parish, LA............................ $6,560 70,246
Alameda Co. (Oakland), CA..................... $7,122 10,615
Houston, TX................................... $7,236 212,099
Kansas City, KS............................... $7,827 20,810
Baltimore, MD................................. $9,639 96,230
Cincinnati, OH................................ $9,677 42,715
Milwaukee, WI................................. $10,352 97,293
Montgomery Co., MD............................ $10,580 138,983
Alexandria, VA................................ $12,736 10,971
Washington, DC................................ $13,328 67,522
Arlington, VA................................. $13,334 19,135
------------------------------------------------------------------------
Source: U.S. Census F-33 Annual Survey of Local Government Finances for
2002-2003.
Senator Landrieu. But the point is that $1 billion plus
budget for the District schools is more than most cities of
this size and demographics have. One way to capture funding for
facilities is to have some savings or efficiencies, whether it
comes through some savings through facilities or operations. If
you had a 5 percent savings, which is $50 million, you could
take that money and bond it and create a bond issue to invest
in schools.
Another way is to use the assets of the school system
itself, which, Mr. Mayor, I understand that there are 39
schools on this list of surplus property. Fourteen have been
either leased or sold as according to the city law for charter
schools. But there are an additional 17 schools that could
either be leased according to now the local law and the Federal
law, to give a preference, a strong preference to charter
schools.
The money generated from these transactions could go to the
benefit of the school system. It could go to the benefit of the
school system. It does not have to go to the benefit of the
general fund of the city.
So there is a real win-win, Mr. Chairman, as we take steps
to co-locate, to make these vacant in some cases and surplus
facilities available to schools, to use the profits of that, if
you will, for the school system itself.
In addition, some of these buildings have been available
for housing under the control of the city through the control
board. They have been very successful housing developments. I
am aware of some of them. But again, the moneys that were
generated by the sale of those buildings could have gone back
to the school system. I do not think that happened. I think
that went back to the city general fund.
So I would just ask that we look at the assets of the
school system, how they can be better used to help the problem
that we have, and to recognize that there are right now,
without any additional Federal help, some real opportunities
for enhancements of these facilities.
Senator Brownback. As you can see, my colleague has dug
into this pretty deep and is quite committed to it, and I look
forward to working with her on some of these topics.
If I could turn quickly to a couple of things on another
set of topics. When I was the authorizing chair we did a number
of structural changes in the District of Columbia. This was in
1997. I think Connie Mack was one of the key individuals
involved in the negotiations. A lot of structural changes were
made at that time. That is when the homestead or the first time
home buyers accounts were put in place, which I think have been
very successful in the District of Columbia. We are trying to
replicate them in other places across the country.
One of the things that we had looked at and considered is
putting in place in the District of Columbia a flat tax making
the Federal income tax a flat tax in the District of Columbia.
It had pretty good support. I put in a bill along with
Congressman Paul Ryan on the House side. Jack Kemp supported
it.
One other item, though, I want to throw out for you. We did
several years ago individual development accounts, trying to
get people of low income to save. We had a Federal match of but
$2. For every $1 that the individual would save, we would match
it with $2, as an attempt to increase personal savings--and we
called it an individual development account. Let us start
building up this.
I was wondering, Mayor, in looking at the need to support
families, if we should try to expand that concept on marriage
development accounts, where a couple raising children but at a
low income level, not necessarily at a poverty level but at a
low income level, that we would try to use that same concept.
I put it out as something that we are looking at. I want to
see if the concept has worked for the individual development
accounts or not, if you look at it and say, well, it has worked
some, not that great, or if it has really worked well. Is that
something we could expand in this category to try to encourage
and support that institution where generally children thrive
the best? So I put that out for you.
We will look forward to working with you on this budget,
and on other items. Again, I congratulate you on the many areas
of improvement. We have got some possibilities and some things
to work on. I look forward to working with my colleague, who is
very knowledgeable and has been on this subcommittee for some
period of time.
ADDITIONAL SUBMITTED STATEMENT
The subcommittee has received a statement from Paul
Strauss, the shadow Senator for the District of Columbia which
will be placed in the record at this point.
[The statement follows:]
Prepared Statement of Paul Strauss
Chairman Brownback, Ranking Member Landrieu and others on the
subcommittee, as the elected United States Senator for the District of
Columbia I would like to thank you for the opportunity to present this
statement on behalf of the people of the District of Columbia.
I fully support the fiscal year 2006 Budget Request for the
District of Columbia. It is vital for my constituents that the Budget
Request is met in full. As the elected U.S. Senator for the District of
Columbia, I myself cannot vote on this appropriation. I am limited to
merely asking you to support their requests. Unlike citizens of any
other jurisdiction, we lack the legal rights to make these funding
decisions on our own. This is not just an issue of simply allocating
appropriations but, for the residents of our Nation's Capital, an issue
of fundamental justice.
The District of Columbia should not have to look to Congress for
financial determinations. Congress appropriates the money of local tax-
payers, which rightly should be appropriated by local government. The
money at issue is raised by taxing the local citizenry, and Congress
should have no authority to interfere. This is again a case where the
many restrictions on the District of Columbia's ability to self-govern
adversely impact the taxpayers of your own states. Today's hearing, an
exercise in bureaucracy, would be unnecessary if the District was free
to conduct its own budget. I have made this argument many times before
many committees of this body, and I will continue making it until the
District of Columbia becomes a state. Most importantly, as long as
Congress continues to control the District's budget, which should be
operated by the District, Congress has an obligation to fully fund the
budget request without hesitation.
Due to our lack of self-determination, we are unable to provide
certain government services on a local level. As long as Congress
continues to utilize city services, it has an obligation to fully fund
city services. It is essential to the District that Congress pass this
budget in time for the new fiscal year and avoid being held up in
continuing resolutions. If the District's Budget is held up, vital
spending adjustments are not allowed to be implemented and the cost of
debt services increases. Each day the budget is delayed is a further
impediment in our efforts to provide vital local services to the loyal
tax paying residents of the District of Columbia.
The predicament and unneeded bureaucracy of our budget being held
up every year can be resolved through Budget Autonomy. Our local budget
has no relevance to Congress or any of your constituents, and is an
unnecessary obligation on the national taxpayer and the national
legislature. Since fiscal year 1996, the District of Columbia has
unfailingly provided Congress with a balanced budget, consistently
demonstrating that it is a competent governing body. It therefore seems
extraordinary that such a proficient and capable body should not be
given the rights to pass its own budget without policy interference and
social riders regulating the government within the District. It should
be within the legislative remit of the District of Columbia to make its
own economic decisions, and not Congress.
The District of Columbia has submitted a budget that has called for
significant, increased investment in public services and education.
Mayor Williams, Chairman Cropp, and Chief Financial Officer Gandhi have
explained the specifics and I support their efforts. The budget request
is balanced, thorough, and accounts for the needs of the residents of
the District of Columbia. It will provide more money to be spent
adequately on education and family services on a per capita basis than
ever before. The money to be invested in education is crucial if we are
to be able to meet our aims of improving education for all who live in
the District.
I am the only elected official whose children attend D.C. public
schools. Our public schools have been making good progress, but we
still face huge barriers in our ability to provide a holistic
educational experience. For example, in 2005, 49 of the District's 167
public schools had no music teachers and 44 had no art teachers. My own
child's school, Stoddet Elementary, lacked a second grade teacher, and
the first and second grades had to be combined. Without the proper
funding, the District will never be able to break such barriers, and
the children who live in the District will always be at a disadvantage.
The District should be able to provide the type of education every
child in this country deserves. The budget request includes $1 billion
to fund our public schools. Of this, $779.3 million will be dedicated
to the District of Columbia's Public Schools; $234.4 million for the
District of Columbia's Public Charter Schools; and $25.2 million for
the Educational Investment Fund. The request also includes $147 million
in capital funding to support improvements to public school buildings
in the District. The request represents an increase of $81.6 million on
the fiscal year 2005. The additional request will be spent on improving
11 new charter schools and will create an Educational Investment Fund
to help improve student and school attainment. These investments will
help provide essential facilities that will help provide an appropriate
educational environment.
The public school administration has worked hard to build a budget
that will sustain the public school system. To avoid losing 386
teaching positions, $15 million was secured for the school budget. An
additional $6 million was secured to help open schools this fall. The
administration accepted this budget, and was confident that it could
operate within the amount allocated. In other words, there should be no
need to close any facilities. It is outrageous that D.C. schools should
be shut down to compensate, not for a deficit within the District's
budget, but rather for a deficit in the national budget. Students of
the District of Columbia should not be penalized for Congress's
inability to balance the budget.
In addition to allocation to public schools, the budget request
also includes monies dedicated to improving Higher Education and
lifelong learning in the District of Columbia. Higher Education is a
crucial part of our aim of improving education in the District. It is
essential that those who want to learn be given the opportunity to do
so regardless of their age or economic situation. The main focus of our
efforts will be improving the availability of programs and facilities
at the University of the District of Columbia. This includes an
allocation of $8.3 million to expand programs in sectors such as
nursing, social work, and teacher education; $8.2 million to extend
opening hours for libraries and to invest in additional facilities; and
$700,000 in financial aid to support a further 474 students from low-
income backgrounds. The budget request would help address some of the
problems faced by the District's Education Services, who continue to
achieve remarkable results in less than favorable conditions, by
providing funds for vital programs, facilities, and resources.
Besides money allotted to the education sector, the budget request
includes a significant allocation to children and family services,
namely the Children and Youth Trust Corporation, the Department of
Youth Rehabilitation Services, the Child and Family Services Agency,
and the Department of Human Services. The District of Columbia has made
great strides in tackling the problem of juvenile crime over the last
year, as the falling rate of crimes committed by juveniles illustrates.
However, we continue to strive to make further progress in this area
and to tackle the underlying causes of these problems. The Budget
request provides sufficient resources to be able to attack the causes
of many of the problems the district faces, and should therefore be
supported in full.
Included in the budget request is a $14 million allocation to
construct or improve 7 recreation centers; $6.5 million for child
services; and $13.5 million for juvenile intervention initiatives.
These improvements are crucial to the lives of thousands of juveniles
in the District who are striving to improve their lives, and who
deserve the opportunity to fulfill their potential. The budget request
would help fund these programs that would subsequently help address
problems such as crime and drug use, which continue to plague the
District of Columbia. Subsequently, this would reduce the burden on
your constituents whose taxes are being spent on the problems in the
District.
As well as the investment in youth, the budget request also
allocates significant investment in Health and Welfare services. This
includes an allocation of $9 million to expand healthcare services,
including dental and primary healthcare services; $8 million to provide
school nursing services; $14 million to help address the problem of
homelessness in accordance with the Districts 10 year plan; and to
begin the construction of Wellness Centers in Wards 4 & 6. Health and
welfare are key areas we need further investment if we are to be
successful in decreasing, and eventually eliminating, poverty in the
District. It is, therefore, imperative that the budget request should
be met in full in order for the District Health and Welfare Services to
continue their good work.
Congress should focus on the District of Columbia's budget in
respect to resolving the structural imbalance of the budget. The gap
between the District's ability to raise revenue at reasonable tax
rates, and the 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, citizens
should receive same the constitutional rights as all Americans. I would
go as far as to suggest that it is fundamentally un-American that the
population of the District of Columbia is not allowed to spend their
own taxes.
The government of the District of Columbia needs to be fairly
compensated by Congress for the services it provides to federal
agencies. This would serve as a solution to the structural imbalance
within the District budget. The District's budget represents the
citizens of the most unique city in the Nation. The District has
repeatedly provided Congress with a budget that has proven sensible and
attainable. The outlook for the current fiscal year 2006 is projected
as balanced with a surplus. The District Government itself is the best
evaluator of local expenditures. The 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.
The elected officials are persistent in attaining locally raised
revenue needed to fund various local interests such as public service
and education. The city should be allowed to utilize tax dollars in a
more flexible manner. This would subsequently give the District
government the ability to provide the community greater benefit from
the revenue. Flexible use of revenue specifically secures and
stabilizes public service departments within the city. My constituents
have the right to receive the needed revenue to meet their children's
educational needs. I urge you to approve the proposed budget, as it is
deemed necessary to aid the District. The District of Columbia has
submitted a timely budget so Congress has appropriate time to approve
it.
In closing, I wish to sincerely thank the subcommittee for holding
this hearing. I know that this subcommittee has been firmly committed
to meeting its fiduciary obligations. On behalf of my constituents, I
thank you for all your hard work and dedication and I look forward to
working with you in the future. In closing let me thank a member of my
legislative staff, Marta Mudri, for her assistance in preparing my
testimony.
ADDITIONAL COMMITTEE QUESTIONS
Senator Brownback. If there are any additional questions,
they will be submitted to each of the witnesses for their
response.
[The following questions were not asked at the hearing, but
were submitted to the District for response subsequent to the
hearing:]
Questions Submitted to Anthony A. Williams
Questions Submitted by Senator Sam Brownback
Question. Your fiscal year 2006 budget includes a total of $1.1
billion in local funds to educate approximately 80,000 students within
the District of Columbia Public Schools and public charter schools.
This funding level is a 10.5 percent increase over the fiscal year 2005
budget. Why do you continue to increase funding for schools while
enrollment declines?
Total enrollment for the D.C. Public Schools (DCPS) and the public
charter schools has in fact been quite stable. In 1997-1998, total
enrollment was 77,361 students, comprised of 77,111 DCPS students and
250 charter school students. In 2004-2005, total enrollment of 78,145
is slightly above the 1997-98 level, with 62,306 students in the D.C.
public schools and 15,839 students attending public charter schools.
The increased funding for schools in fiscal year 2006 reflects a
number of factors. First, the uniform per-student funding formula
increased by 3.07 percent this year to reflect inflation, but did not
cover the automatic pay increases provided to school staff that exceed
the inflation rate and are needed to keep D.C. schools competitive with
suburban jurisdictions. (At least three of the five surrounding
suburban jurisdictions offer higher entry-level salaries for teachers,
and all five have a higher top salary level). Therefore, the Council
added $14.9 million to the D.C. Public Schools budget to provide
schools with enough funding to cover these pay increases and avoid
layoffs, as well as a corresponding increase of $4.9 million to the
public charter schools to maintain equitable funding through the
uniform per-student funding formula.
Second, Mayor Williams proposed and the Council approved funding of
$21 million to support the reform initiatives of DCPS' new leadership,
which are squarely focused on academic achievement. Those include:
--development of standards for all subject areas and professional
development for teachers centered around the new content
standards;
--new textbooks aligned to the content standards;
--art and music programs for all schools that presently lack such
instruction;
--after-school reading and math programs;
--expansion of Advanced Placement and International Baccalaureate
programs;
--a ``Summer Bridge'' program for students entering high school with
low achievement scores;
--the creation of a principal leadership academy; and
--the opening of parent and family resource centers.
Charter schools also received a corresponding sum of $4.2 million
to institute programs to improve student achievement.
Special education is the other major area in which the budget has
grown. DCPS' fiscal year 2006 budget reflects an increase of $20.7
million in non-public tuition payments for students receiving special
education services at non-public institutions (much of which reflects
higher costs of tuition), as well as $6.8 million in tuition payments
for special education students in foster care ($3.8 million of which
reflects a budgetary transfer from the State Education Office rather
than a net increase). DCPS also received a $2.6 million increase to
provide educational services at a newly opened intake and assessment
center for youth in the juvenile justice system.
Question. I understand that only 50 cents of every operational
dollar spent by DCPS actually goes to directly educate children. The
national average is 61 percent. Why is this average so low and how have
city leaders proposed to change this?
Answer. The statistics cited above are from state-level data
published by the National Center for Education Statistics (NCES), which
defines ``classroom instruction'' as the amount of money spent on
teachers, aides, textbooks, and classroom supplies. Although DCPS is
below the national average in this category, it spends more than the
national average on ``student support'' (legally mandated special
education services such as assessments, speech therapy, occupational
therapy, and physical therapy, as well as counselors and social
workers), as well as ``instructional support'' (librarians,
instructional technology, standards, curriculum, assessments, and
teacher training, much of which is funded by federal grants that are
restricted to certain purposes).
According to the NCES data, DCPS' spending on classroom
instruction, student support, and instructional support totals 70
percent of its budget, which is almost identical to the national
average of 72 percent and is identical to the 70 percent figure for 20
urban school systems of similar size. The comparison group includes
such cities as Oakland, Atlanta, Boston, Baltimore, New Orleans, San
Antonio, and Milwaukee. Therefore, DCPS' spending on classroom and
instructional activities seems close to the national average and
similar to the spending patterns in other mid-sized cities, and its
spending for central administration appears to be just below the
national average.
Reducing special education costs through early intervention and
increasing the capacity of local schools to serve all children is key
to ensuring that more of the District's educational dollars flow to
direct instruction. DCPS' expenditures for special education tuition
payments at non-public schools and the transportation of special
education students are particularly high, as are costs for litigation
related to special education.
A number of initiatives are underway to control special education
costs and ensure that children can be properly served by the public
school system. The Prospect Learning Center, which serves elementary
and middle school students with learning disabilities, is newly
renovated and can now serve 120 students in a state-of-the-art
facility. DCPS has increased its internal capacity to educate students
with severe disabilities by creating more than 600 new seats for
autistic children; students who are hearing or vision-impaired;
children who are mentally retarded, learning disabled, or emotionally
disabled; and early childhood special education students. More than 75
percent of those seats have been filled. DCPS' data also shows that 200
students have returned from private placements to DCPS and that DCPS
has stabilized the number of students going out to private placements.
Overall, DCPS reports that it has established more than 400 new special
education seats in local schools for 2004-2005, bringing the number of
slots created in the past three years to nearly 1,800, and that
capacity will increase by another 600 seats in 2005-2006.
Expanding capacity within the school system and reducing the number
of private placements will in turn enable DCPS to reduce the large
costs it incurs to transport special education students to school.
Presently, the transportation office is run by a court-appointed
administrator. The cost of operating 600 bus routes to serve 4,000
children is approaching an annual rate of $75 million per year, and
must be reduced. One important step to reduce transportation costs is
under consideration by the Board of Education: purchasing buses to
reduce the cost of operating a fleet presently comprised of leased
buses. The District's Chief Financial Officer has projected the savings
at $5.6 million in fiscal year 2006 and $24.1 million between fiscal
year 2006 and fiscal year 2010.
The Mayor, Council, and Chief Financial Officer have also
implemented a system of performance-based budgeting that shows the
funding provided to particular programs or activities, rather than
budgeting only by ``object classes'' (such as personnel, fringe
benefits, and supplies) or organizational units. The fiscal year 2006
budget is the first that DCPS has prepared in the performance-based
format. The performance-based budget gives policymakers increased
ability to track where resources are going and will support the efforts
of the Mayor, Council, and Board of Education to maximize the funding
allocated to classroom instruction.
For example, the performance-based budget presents the budgets for
all of the central administrative or management functions (personnel,
procurement, information technology, financial support, policy
development, oversight, etc.), showing that central administrative
functions will cost $36.1 million in local funds in fiscal year 2006.
This amounts to just over 4 percent of DCPS' local funds budget.
Policymakers will now be able to budget explicitly for central
administrative and other functions to make sure that administrative
costs are controlled and that classroom spending is maximized.
The strong commitment of the Mayor and Council to focus resources
on academic achievement and classroom instruction was reflected in the
fiscal year 2006 budget cycle. As described in the answer to question
#1, Mayor Williams proposed $25.2 million in additional funding to
support academic improvement initiatives at DCPS and the public charter
schools. The Council approved the additional funding proposed by the
Mayor, and also added $19.8 million to the uniform per-student funding
formula that finances school-based instruction.
Question. Do you believe that Dr. Gandhi--your CFO--has sufficient
control over the D.C. Public Schools' expenditures? School spending
seems to increase every year with no improvement in student
performance.
Answer. As provided by the Financial Responsibility and Management
Assistance Authority (FRMAA) Act of 1995 (Public Law 104-8), the Chief
Financial Officer (CFO) has sufficient authority and control over DCPS
expenditures. The broad authority provided by FRMAA includes:
--implementing appropriate procedures and instituting such programs,
systems, and personnel policies to ensure effective budget,
accounting, and personnel control systems are in place;
--supervising and assuming responsibility for financial transactions
to ensure adequate control of revenues and resources, and that
appropriations are not exceeded;
--ensuring reliable accounting results to serve as the basis for
preparing agency budget requests and controlling the execution
of the budget;
--maintaining custody of all public funds belonging to or under the
control of the District government;
--apportioning all appropriations and funds made available during the
year for obligation in order to prevent obligations or
expenditures that would result in a deficiency;
--certifying all contracts prior to execution as to the availability
of funds;
--certifying and approving prior to payment all bills, invoices,
payrolls, and other claims, demands, or charges; and
--preparing monthly financial reports on DCPS' revenue and
expenditures.
The Office of the Chief Financial Officer (OCFO) has effectively
used this authority to monitor and control spending, identifying
potential over-spending and developing and recommending gap-closing
plans for approval by the Board of Education and the superintendent of
schools. The DCPS CFO has also played an important role in monitoring
the implementation and expenditure of federal grants, reducing the
total of lapsed grants from $687,000 in fiscal year 2003 to $165,000 in
fiscal year 2004.
For fiscal year 2006, the DCPS CFO will receive additional budget
authority of $300,000 and three full-time positions to create a special
education financial accountability unit within his office. This unit
will work with DCPS' Office of Special Education to implement rate-
setting agreements with special education providers, to document
information about the placement of children and the duration of these
placements, and to monitor and control costs.
______
Question Submitted by Senator Mike DeWine
BIOTERRORISM AND FORENSICS LABORATORY
Question. In the fiscal year 2005 appropriations bill, we included
$8 million for the architectural design and planning costs associated
with the construction of a new bioterrorism and forensics laboratory in
the District of Columbia. I am pleased that the President's budget
request for fiscal year 2006 built on that appropriation and included
$7 million for the laboratory.
How are you using the $8 million we provided in fiscal year 2005?
Please give me an outline of your timeline for completion of the
construction of the lab, and I would also like you to discuss the
operational costs for the lab once it is up and running.
Answer. In fiscal year 2005, the subcommittee provided $8 million
in funding for design, planning and procurement costs associated with
the construction of a new consolidated laboratory facility. We will
have obligated the entire amount by the end of the fiscal year. We have
been working on programming the services and facility needs for and
have spent $1 to $2 million to date. We plan to spend the balance to
conduct the procurement for design services this summer. Starting in
fiscal year 2006, we will begin the bidding and early construction
phases of the project and we plan to complete the project by fiscal
year 2009. We have reviewed more than a dozen sites for the lab and
have narrowed our choices to two. We expect to make a final decision
this summer.
The District plans to incorporate public health, forensics, medical
examiner, and bio-agent analysis capacity. We will also consider
options for adding additional local functions to the facility, which
may result in additional project costs up to as much as $250 million.
Once the facility is completed, we plan to fund the operational costs
for the lab with local resources. The District is currently expending
approximately $21.5 million on the functions to be relocated to the lab
(excluding detective costs) and once the lab is up and running, costs
are certain to increase as we have the capacity to provide services
that were previously beyond our capacity. These costs may rise to as
much as twice our current expenditures and we plan to fund these at the
local level.
______
Questions Submitted to Linda W. Cropp
Questions Submitted by Senator Sam Brownback
Question. Nationally, 34 percent of babies are born to single
mothers. In the District, 57 percent of babies are born to single
mothers. Research shows that 80 percent of long term child poverty
occurs in broken or never-married families. The beneficial effects of
marriage on individuals and society are beyond reasonable dispute. What
is the District doing to promote healthy marriage and reduce out-of-
wedlock births?
Answer. The District of Columbia provides a comprehensive network
of services available to families.
Within the Department of Human Services, the District initiated the
Strong Families Program (SFP) in October 2002 to provide comprehensive
case management services and family preservation support services to
vulnerable families in the District that present multiple, complex
challenges which place them at high risk for family separation and/or
disintegration. This program was created to serve as a ``safety net''
for TANF dependent/eligible families experiencing acute social,
emotional or familial distress. The program is structured to provide
prevention and early intervention services to families who would
otherwise become known to the District's child welfare, juvenile
justice, homeless, mental health or criminal justice systems.
Since its inception, the Strong Families Program has achieved the
following outcomes:
--Served 547 families in fiscal year 2005, and 434 families in fiscal
year 2004.
--Established satellite case management program offices at 13
underperforming schools in the District.
--Provided on-site, in home case management and family support
services to two (2) public housing sites.
--Formed partnerships with faith-based institutions and the District
of Columbia Public Schools (DCPS) to open Family Resource
Centers at select schools.
--Sponsored the District's first weekend Family Retreat to promote
positive family interactions, communications, parent respite
services and family development activities, for families served
by the program.
--Sponsored a range of school-based, family development activities
such as mother/daughter luncheons and teas, father/son
barbecues and family fun days, in partnership with DCPS. These
events are specifically designed to foster parent/child bonding
experiences, social skill development and parent to parent
socialization.
Within the Child and Family Services Agency, the District has
leveraged federal funding to jumpstart the Family Team Meetings (FTM)
program. This initiative is a strengths-based early intervention family
engagement model that brings families, community members, and child
welfare professionals together to discuss the safety concerns and the
needs of the child and his family. Occurring at the critical moment of
concern, the FTM process increases the opportunity for family
participation, identifies supports and resources in the extended family
and community, speeds the process for permanency, and ensures that
social workers base decisions on the best information available. Family
team meetings are being held for all children at-risk of removal and
for placement changes for children in foster care.
Since its inception on September 15, 2004, the Family Team Meeting
initiative has the following outcomes: 171 FTMs have been held; 326
children have been served; the average number of participants per FTM
is 11; and total number of family member participants is 732.
We expect that our focus on reunification through FTMs will result
in children returning home sooner. In addition, we are just beginning
to using FTMs for placement changes involving children, so families can
participate in placement changes and perhaps serve as resources for
children.
Question. You have requested a 30 percent increase in the Resident
Tuition Grant Program. Last year, the Congress provided an increase of
almost 50 percent over the fiscal year 2004 level. I understand that
enrollment continues to increase for this popular program. Do you
believe that this rate of increase will continue?
Answer. Cost increases for the Tuition Assistance Grant Program
over the last two years have been driven a rise in program
participation, nationwide increases in tuition costs, the phase-in of
the program to a full five cohorts, and our efforts to expand
eligibility. The District has also required rapidly rising
appropriations over the last two years because we no longer have a
balance of funding from prior years to help offset our rising costs.
Costs in the future will continue to rise, but will slow
considerably from the growth rates of recent years. We are no longer in
the program's phase-in stage and growth in tuition nationwide may slow
as states' budget crises ameliorate. Over the next several years, we
expect program costs to be driven by tuition cost increases and
moderately growing program participation, albeit at dramatically lower
levels than in recent years. (One area where we may see additional
program growth is within the District's Latino community).
Although we expect growth to slow, we still expect costs to rise
steadily over time at a rate that may be difficult for the federal
government to fund, given limitations on resources. Therefore, the
District is pursuing authorization for selected cost containment
measures that will allow us to take administrative measures to contain
the future growth of program costs.
Question. As I noted in my opening statement, the city is creating
jobs at a rate that is twice the national average, but only one-third
of the jobs that the District is creating are going to city residents.
Why is this and what is the District doing to change this?
Answer. During the last six years, we have added more than 60,000
jobs in the District, yet we still face employment challenges. Last
year, the unemployment rate in the District increased from 7.2 percent
to 8.2 percent. And broad citywide figures mask the reality that in
many communities unemployment is concentrated at much higher levels.
The District's budget this year included a package of legislative
proposals and funding initiatives to combat these disparities. These
initiatives aimed to lower the unemployment rate across the District,
but especially in communities east of the river, and ensure that
residents benefit from the city's significant increase in number of
jobs.
These proposals will help the District's hard to employ residents
overcome their barriers to unemployment, successfully compete in
today's labor market, and achieve economic self-sufficiency by
dedicating substantial resources to job preparedness, life skills,
leadership, and pre-apprenticeship training for adults and youth. In
order to complement these efforts, the District is also working to
secure cooperation and participation of private sector employers in
helping employ District residents to the fullest extent possible. These
proposals include the following:
--Invests an additional $6.4 million to train and provides summer
employment for 10,000 District youth between ages of 14 to 21.
--Invests $4.9 million in the Youth Leadership Institute and year-
round education and training for 465 hard-to-reach youth
between ages of 16 to 24.
--Invests $8.9 million in transitional employment and pre-
apprenticeship training assistance for 800 chronically
unemployed residents.
--Invests $150,000 to increase enforcement and monitoring of current
First Source hiring requirements and provide the Mayor
additional authority to increase First Source requirements in
certain industries.
In addition to these funding proposals, the District is also
considering legislation at the local level that will accomplish the
following:
--Creates a job opportunity bank, funded by District businesses
remitting one-half of one percent of the economic assistance
received from the District, to provide job training grants and
assistance to low-income District residents.
--Requires District-assisted employers to pay a living wage of $10.50
per hour or $9.25 per hour if health insurance benefits are
offered to employees.
Question. You are requesting $5 million to provide incentives to
developers and organizations to construct housing specifically for the
ex-felon community. Could you elaborate on this proposal? How will it
be implemented? How many ex-offenders are returning to the District
every year? What is the recidivism rate in the District?
Answer. The District is proposing federal funding for a new
initiative that would provide incentives to encourage developers and
non-profit organizations to rehabilitate or construct new housing for
reentrants in order to increase the pool of available housing for those
exiting the criminal justice system. We have identified access to
housing as one of the most important risks to recidivism for
individuals making the transition from prisons back into society. We
expect as many as 2,500 offenders to return to the District on an
annual basis in the years ahead, making efforts to combat recidivism as
important as ever.
Recidivism rates in the District are calculated by CSOSA. In fiscal
year 2004, the parole rearrest rate was approximately 13 percent; for
probationers, approximately 20 percent. Approximately 6 percent of the
total supervised population was convicted of a new offense in fiscal
year 2004, and approximately 2 percent were incarcerated as a result of
that conviction. In fiscal year 2004, approximately 11 percent of the
supervised population was revoked for violations of release conditions
(including arrest). The majority of revocations result in
reincarceration; approximately 10 percent of the supervised population
were incarcerated as a result of revocation.
Our ex-felon housing program will be integrated with the District's
ten-year plan to combat homelessness and individuals occupying this
housing will have access to the full range of social services provided
by the District of Columbia to at-risk populations, including job
training, substance abuse and mental health counseling. Integrating
housing solutions with social services is critical because almost 70
percent of returning offenders have a history of substance abuse and
face job placement barriers along with educational challenges.
We will administer the initiative within the Department of Housing
and Community Development (DHCD), which has the infrastructure in place
to monitor housing construction incentives as part of the Housing
Production Trust Fund. DHCD will issue a special Notice of Funding
Availability (NOFA) to solicit developers of these housing units. The
NOFA will include restrictions on developers using the funds:
developers must derive reentrant tenants from designated non-profit
support service agency; units must be dedicated to reentrants for a
period of at least five years; and operating funds for the first six
months of tenancy are eligible project expenses. This will allow us to
providing targeted funding that encourages the development of cost-
effective housing options for our ex-felons.
We will coordinate services for individuals residing in this
housing through the D.C. Re-entry Initiative. Services provided by the
initiative will include employment services and job-readiness training
are provided in partnership with the Department of Employment Services;
Unity Health Care provides health care delivery and is about to open a
new clinic for this purpose; UDC provides a GED program, as well as
college courses. Supportive services will also be provided by the
Department of Mental Health when needed.
______
Questions Submitted to Natwar M. Gandhi
Questions Submitted by Senator Sam Brownback
Question. According to GAO, the District of Columbia Public Schools
have had significant management problems. What are the critical
problems that have led to DCPS' inability to even account for the
number of employees on its payroll?
Answer. Prior to fiscal year 2004, the DCPS Office of Human
Resources (OHR) managed the employee roster (Schedule A) for the
agency. Recognizing that the OHR lacked the capacity and systems to
accurately manage this function, the new DCPS CFO assumed this
responsibility in order to accomplish accurate budgeting and achieving
a balanced budget. Even with the lack of an automated and integrated
Human Resources and Payroll system, the OCFO manually maintains the
Schedule A and has brought it to the point where the document is
current and portrays the correct number of employees, their salaries,
and their location in the agency. This document is critical in tracking
current and historic vacancies. A Human Resources and Payroll
management system is critical to sound management practices. The
current system is responsible for employees not being paid accurately
or receiving their salary increases or step movement on time. The DCPS
OCFO has invested significant resources into cleaning up this problem.
To date, all DCPS employees are receiving their correct salaries. The
DCPS OCFO maintains this manual process, but it is critical that the
system move forward with a more automated and integrated system.
Question. Why don't the D.C. Public Schools use the same
administrative and personnel management system as the rest of the
District government?
Answer. Several years ago, the DCPS began to develop and implement
an administrative personnel management system independent from the
District's systems. However, these systems did not develop to the
operational stage. The School Board and Superintendent partnered with
the District's Office of the Chief Technology Officer to move DCPS into
the District's personnel and procurement management systems. In
addition to partnering on these systems, the DCPS is also participating
in the District's budget system with other city agencies. In addition,
the DCPS will begin participating in the District's human resource and
payroll systems.
Question. As CFO, what authority do you have to control escalating
costs within the D.C. Public School System? What recommendations would
you make to help DCPS get its financial house in order?
Answer. With respect to the annual budget for the Board of
Education in the District of Columbia, the Home Rule Act allows the
District to establish the maximum amount of funds which will be
allocated to the Board, but does not allow the District to specify the
purposes for which such funds may be expended or the amount of such
funds which may be expended for the various programs under the
jurisdiction of the Board of Education. The primary control that the
CFO has with respect to the DCPS budget is to ensure that DCPS does not
overspend its annual appropriation. While the CFO has the authority to
require DCPS to curtail spending in the event a potential deficit is
identified, the specific strategies to implement this requirement falls
under the purview of the Superintendent and the Board. Over the past
several fiscal years, the OCFO has worked with the Superintendent and
the Board to identify potential overspending of the DCPS total budget
and develop viable and realistic strategies to curtail spending in a
manner that does not severely impact the main mission of the DCPS,
which is to educate the District's children. The success of this close
collaboration is evident in the fact that the DCPS has managed to close
its last two budgets in balance. For fiscal year 2005, it appears that
the DCPS budget will once again close in balance.
With regard to recommendations on strengthening the financial
position of the DCPS, the most important recommendation is to continue
the strong collaboration between the Superintendent, the School Board
and the OCFO in supporting the mission of the Superintendent and DCPS
strategic plans. It is my opinion that vital, stable and collaborative
DCPS leadership is the critical element in ensuring DCPS will continue
to manage its resources in a wise and prudent manner. The OCFO will
continue to support the DCPS leadership in this regard.
Question. What, if any, additional authority do you need as CFO to
focus on and correct the fiscal management problems facing the
District?
Answer. The OCFO is required to estimate revenues far in advance of
the fiscal year in order for the District to participate in the
congressional budget cycle. Granting the District budget autonomy would
allow the District to build a budget closer to the start of a fiscal
year and would allow the OCFO to provide more appropriately timed and
therefore more informed revenue estimates.
Question. One criticism of the GAO report on structural imbalance
is that the District has significant Medicaid billing and claims
management problems. How are you working to address this problem?
Answer. In 1999, recognizing that there were significant issues
with Medicaid billing and claims management, the District hired an
outside contractor to work with two of the public provider agencies,
the D.C. Public Schools (DCPS) and the Child and Family Services Agency
(CFSA), to increase Medicaid revenue for services provided by these
agencies. Concurrently, key issues relating to Medicaid billing and
claims management were identified, specifically:
--Maintaining appropriate documentation supporting Medicaid billing,
--Developing a clear comprehensive strategy to optimize Medicaid
revenues among the public provider agencies; and,
--Establishing standard business practices leading to the
identification of appropriate Medicaid-eligible programs and
services.
Since that time, improvements have been realized in the Medicaid
billing and accountability system within the public provider agencies.
Although the OCFO is not directly involved in the development or
modification of agency programs, the OCFO has been working with the
District's Office of Medicaid Operations Reform to address the key
issues noted above and establish a system of ongoing and routine
reports that will demonstrate improvements in the process for
calculating the Medicaid revenue each fiscal year and monitor Medicaid
revenues and expenditures.
Question. I understand that the District has made great strides to
get its financial house in order, but what are the remaining
problematic areas in the D.C. government in terms of financial
mismanagement? How are you addressing those areas?
Answer. The 2004 Annual Audit noted that there are no material
weaknesses to report (compared to three in fiscal year 2001 and two in
each of fiscal year 2002 and fiscal year 2003) and there were two
reportable conditions to be addressed (the same number as fiscal year
2003 but down from six in fiscal year 2001 and three in fiscal year
2002). Specifically, the areas to be addressed are (1) Management of
Disability Compensation Program and (2) Unemployment Compensation
Claimant File Management. A copy of the Management Letter and its
appendix are being submitted for the record. These documents provide a
robust explanation of the issues to be addressed as well as the OCFO's
response to these issues. As the documents will detail, both issues are
being appropriately addressed.
government of the district of columbia, office of the inspector general
management letter
April 8, 2005.
The Honorable Anthony A. Williams,
Mayor, District of Columbia, John A. Wilson Building, Suite 600, 1350
Pennsylvania Avenue, N.W., Washington, D.C. 20004.
The Honorable Linda W. Cropp,
Chairman, Council of the District of Columbia, John A. Wilson Building,
Suite 504, 1350 Pennsylvania Avenue, N.W., Washington, D.C.
20004.
Dear Mayor Williams and Chairman Cropp: In connection with the
audit of the District of Columbia's general purpose financial
statements for fiscal year 2004, KPMG LLP submitted the enclosed final
Management Letter. We are pleased to report, as noted by KPMG LLP, that
over the last 5 fiscal years there has been a marked improvement in the
management of the District's financial affairs. This Management Letter
details certain matters involving internal control and other
operational matters that require continued management attention which
is presented as follows:
--Appendix A--Reportable Conditions in Internal Control Over
Financial Reporting; and
--Appendix B--Other Observations and Recommendations on Internal
Control and Financial Operations.
KPMG set forth recommendations for correcting reportable conditions
and other deficiencies. While the Office of the Inspector General will
continue to assess the District agencies' implementation of
recommendations, it is the responsibility of District government
management to ensure that agencies correct the deficiencies noted in
audit reports. This Office will work with managers, as appropriate, to
help them monitor the implementation of recommendations.
If you have questions or need additional information, please
contact William J. DiVello, Assistant Inspector General for Audits, or
me at (202) 727-2540.
Sincerely,
Austin A. Andersen,
Interim Inspector General.
Enclosure: See Distribution List
DISTRIBUTION:
Mr. Robert C. Bobb, Deputy Mayor/City Administrator, District of
Columbia (1 copy)
Ms. Alfreda Davis, Chief of Staff, Office of the Mayor (1 copy)
Mr. Gregory M. McCarthy, Deputy Chief of Staff, Policy and
Legislative Affairs (1 copy)
Mr. Vincent Morris, Director, Office of Communications (1 copy)
The Honorable Vincent B. Orange, Sr., Chairman, Committee on
Government Operations, Council of the District of Columbia (1 copy)
Mr. Herbert R. Tillery, Deputy Mayor for Operations (1 copy)
Mr. Stanley Jackson, Deputy Mayor for Planning and Economic
Development (1 copy)
Mr. Neil O. Albert, Deputy Mayor for Children, Youth, Families, and
Elders (1 copy)
Mr. Edward D. Reiskin, Deputy Mayor for Public Safety and Justice
(1 copy)
Ms. Phyllis Jones, Secretary to the Council (13 copies)
Mr. Robert J. Spagnoletti, Attorney General for the District of
Columbia (1 copy)
Dr. Natwar M. Gandhi, Chief Financial Officer (5 copies)
Mr. Ben Lorigo, Executive Director, Office of Integrity and
Oversight, OCFO (1 copy)
Ms. Deborah K. Nichols, D.C. Auditor (1 copy)
Ms. Kelly Valentine, Interim Chief Risk Officer, Office of Risk
Management, Attention: Rosenia D. Bailey (1 copy)
Mr. Jeffrey C. Steinhoff, Managing Director, FMA, GAO (1 copy)
Ms. Jeanette M. Franzel, Director, FMA, GAO (1 copy)
The Honorable Eleanor Holmes Norton, D.C. Delegate, House of
Representatives Attention: Rosaland Parker (1 copy)
The Honorable Tom Davis, Chairman, House Committee on Government
Reform Attention: Melissa C. Wojciak (1 copy)
Ms. Shalley Kim, Legislative Assistant, House Committee on
Government Reform (1 copy)
The Honorable Rodney Frelinghuysen, Chairman, House Subcommittee on
D.C. Appropriations (1 copy)
Mr. Joel Kaplan, Clerk, House Subcommittee on D.C. Appropriations
(1 copy)
Mr. Tom Forhan, Staff Assistant, House Committee on Appropriations
(1 copy)
The Honorable George Voinovich, Chairman, Senate Subcommittee on
Oversight of Government Management, the Federal Workforce, and the
District of Columbia (1 copy)
Mr. David Cole, Professional Staff Member, Senate Subcommittee on
Oversight of Government Management, the Federal Workforce, and the
District of Columbia (1 copy)
The Honorable Richard Durbin, Senate Subcommittee on Oversight of
Government Management, the Federal Workforce, and the District of
Columbia (1 copy)
Ms. Marianne Upton, Staff Director/Chief Counsel, Senate
Subcommittee on Oversight of Government Management, the Federal
Workforce, and the District of Columbia (1 copy)
The Honorable Sam Brownback, Chairman, Senate Subcommittee on D.C.
Appropriations (1 copy)
Ms. Mary Dietrich, Appropriations Director, Senator Sam Brownback
(1 copy)
The Honorable Mary Landrieu, Senate Subcommittee on D.C.
Appropriations (1 copy)
Ms. Kate Eltrich, Clerk, Senate Subcommittee on D.C. Appropriations
(1 copy)
The Honorable Susan M. Collins, Chair, Senate Committee on
Governmental Affairs Attention: Johanna Hardy (1 copy)
The Honorable Joseph Lieberman, Ranking Minority Member, Senate
Committee on Governmental Affairs, Attention: Patrick J. Hart (1 copy)
______
KPMG LIP,
Washington, DC 20036, March 24, 2005.
government of the district of columbia letter to management on internal
control--september 30, 2004
To the Mayor and Council of the Government of the District of Columbia
Inspector General of the Government of the District of Columbia
Ladies and Gentlemen: We have audited the basic financial
statements of the Government of the District of Columbia (District),
for the year ended September 30, 2004, and have issued our report
thereon dated January 24, 2005. In planning and performing our audit of
the basic financial statements of the District, we considered internal
control in order to determine our auditing procedures for the purpose
of expressing our opinion on the basic financial statements. An audit
does not include examining the effectiveness of internal control and
does not provide assurance on internal control. We have not considered
internal control since the date of our report.
During our audit we noted certain matters involving internal
control and other operational matters that are presented in the
appendices for your consideration. These comments and recommendations,
all of which have been discussed with the appropriate members of
management, are intended to improve internal control or result in other
operating efficiencies.
Our audit procedures are designed primarily to enable us to form an
opinion on the basic financial statements, and therefore may not bring
to light all weaknesses in policies or procedures that may exist. We
aim, however, to use our knowledge of the District's organization
gained during our audit work to make comments and suggestions that we
hope will be useful to you. We would be pleased to discuss these
comments and recommendations with you at any time.
This report is intended solely for the information and use of the
Mayor and Council of the District, the Inspector General of the
District, District management, and others within the District
government and is not intended to be and should not be used by anyone
other than these specified parties.
Very truly yours,
KPMG LLP.
Executive Summary
Over the last five fiscal years, as the District's independent
auditors, we have witnesses marked improvement in the management of the
District's financial affairs. Important milestones that the District is
understandably proud to report to the Council and its citizenry are:
--Removal of Control Board oversight;
--Eight consecutive years of unqualified opinions on the District's
basic financial statements included in its Comprehensive Annual
Financial Report (CAFR);
--Return of operations that had been placed in receivership by the
District courts;
--Successful implementation of Governmental Accounting Standards
Board's Statement No. 34, the most far reaching change in
governmental accounting and financial reporting to date;
--Implementation of a District-wide financial and compliance audit of
its federal awards programs;
--Continuous improvement in General Obligation bond ratings from BBB
to A;
--Continuous acknowledgement of excellence in financial reporting
from the Government Finance Officer's Association (for its
CAFR, Budget Document, and most recently for its Popular Annual
Financial Report); and
--Continuous improvement in internal control, evidenced by the
reduction in the number of reported material weaknesses three
and reportable conditions six in fiscal year 2000, to zero and
two, respectively in fiscal year 2004.
Address Reportable Conditions
As noted above, the District has taken corrective actions to
address and eliminate a number of reportable conditions in internal
control, some of which were material weaknesses. The next step in
continuing to improve the District's financial reporting infrastructure
is to address the remaining reportable conditions highlighted in our
Report on Compliance and on Internal Control over Financial Reporting
Based on an Audit of Financial Statements Performed in Accordance with
Government Auditing Standards (Yellow Book Report), and to implement a
process to continuously monitor compliance with established internal
control policies and procedures.
Reportable conditions relate to significant deficiencies in the
design or operation of internal control over financial reporting that
could adversely affect the District's ability to record, process,
summarize, and report financial data consistent with the assertions of
management. These reportable conditions, while not as serious as
material weaknesses, warrant District management attention. Matters
currently classified as reportable conditions that are not considered
to be material weaknesses are as follows: Management of Disability
Compensation Program; and Unemployment Compensation Claimant File
Management.
These current year reportable conditions and our recommendations
are repeated in Appendix A. Our management letter comments, presented
in Appendix B, highlight other internal control and financial
management observations made during our audit, and what actions we
believe the District should take to ensure its financial management
infrastructure continues to improve. Management responses to our
observations and recommendations are included in Appendices A and B. We
have carefully considered those responses where management indicates
that it disagrees with either our observations or recommendations. We
continue to believe our comments are valid and that implementation of
our recommendations will result in stronger internal controls or
operational and financial management improvements.
New Accounting Pronouncements
Although there are no significant new accounting pronouncements
that will need to be implemented during fiscal year 2005, there were
two significant accounting pronouncements issued during fiscal year
2004 as Governmental Accounting Standards Board (GASB) Statements that
will significantly impact the District's future government-wide
financial position.
GASB Statement No. 43, Financial Reporting for Postemployment
Benefit Plans Other Than Pension Plans, an amendment to GASB Statement
No. 34, and GASB Statement No. 45, Accounting and Financial Reporting
by Employers for Postemployment Benefits Other Than Pensions addresses
accounting and financial reporting of post-employment benefits other
than pension benefits (OPEB) by employers and plans or other entities
that administer them. The principal impact of this Statement on the
District relates to post-employment healthcare benefits that the
District currently reports on a pay-as-you-go basis. GASB Statement No.
45 will require the District to accrue for post-employment benefits to
be provided to employees and retirees, thus adding a significant
liability not currently recorded in the District's government-wide
financial statements.
APPENDIX A.--REPORTABLE CONDITIONS IN INTERNAL CONTROL OVER FINANCIAL
REPORTING
I. Management of Disability Compensation Program
The District, through the Office of Risk Management (ORM),
administers a disability compensation program under Title XXIII of the
District of Columbia Comprehensive Merit Personnel Act of 1978. The
most recent actuarial loss reserve analysis was performed in fiscal
year 2002. For fiscal years 2003 and 2004, ORM has performed roll-
forward procedures, using underlying assumptions included in the last
actuarial report, in order to estimate the District's disability
compensation liability at each year-end. We recommended that an
actuarial analysis be performed for fiscal year 2004, however this
recommendation was not implemented. We believe that the use of data
that is more than one year old as a basis for these roll-forwards could
lead to significant differences between the estimated liability and
actual results for individual cases when complete data is available.
Further, the accuracy of the underlying data used in the District's
analysis has always been difficult to assess due to weaknesses in the
maintenance of supporting claims files.
The ORM does not perform a timely review of past claims to
determine whether the established reserves remain sufficient. In
addition, we determined through claims test work that certain reserves
were not removed timely from the tracking system, once a claim is
determined to be closed. These conditions increase the risk that the
underlying data, which is utilized for the District's roll-forward
procedures, may be over- or understated. Additionally, seven out of 81
disability claim case files selected for test work could not be located
for our review, and many of those that were provided for our review
required extraordinary effort on the part of ORM personnel to locate.
This is a similar result as noted in prior years.
We again recommend that ORM contract for an actuarial loss reserve
analysis to be performed during fiscal year 2005, and each year
thereafter. Additionally, we recommend that ORM:
--Review all active claim files on a periodic basis to determine if
the recorded reserve is sufficient or if the reserve needs to
be increased or decreased. The review of all active claim files
is imperative before each actuarial analysis is performed,
since an actuary would be utilizing such information in their
analysis.
--Develop an effective managerial system to file and maintain both
open and closed case files.
Management Response
ORM has requested monies for an actuarial report in its current
budget. It is expected that the actuarial report will take place within
the next fiscal year.
All Disability Compensation Program (DCP) files, both active and
archived, were housed by the Third Party Administrator (TPA), CLW/CDM,
Inc. in fiscal year 2004. CLW/CDM was responsible for maintaining all
supporting documentation in each claim file. ORM acquired these files
at the conclusion of the contract between the city and CLW/CDM in
November 2004. The contract expired pursuant to court order on Friday,
October 29, 2004. The archived files were subsequently moved and placed
in storage at the District of Columbia General Hospital (DCGH). The
active files were moved to 441 4th Street, NW, Suite 800 South. It is
assumed that all files were turned over to ORM; however, at this time,
it is difficult to verify this assumption. In addition, a number of
active claim files were erroneously placed in storage when they should
have been forwarded directly to ORM.
The Claims Supervisor of CLW/CDM, Inc. was charged with performing
timely reviews of the adjusters' decisions establishing reserves. ORM
was responsible for conducting periodic reviews of randomly selected
claim files to determine if appropriate reserves had been established
and/or removed. The previous database system did not allow ORM access
to all of the data maintained by CLW/CDM with regard to this aspect of
the claims. With the movement of the Third Party Administrator in-
house, and obtaining its own Riskmaster database, ORM now has the
ability to easily determine whether established reserves are
sufficient.
ORM has entered into a contract for services, which entails
capturing basic information on all claim files currently in storage
into an Excel spreadsheet. This electronic database will allow ORM to
effectively manage its closed case files. The new Riskmaster system,
which went into operation in November 2004, will allow ORM to
effectively manage all open claims files, and those, which are
subsequently closed.
ORM expects to hire additional staff to provide more hands on file/
reserve reviews and to conduct periodic audits.
II. Unemployment Compensation Claimant File Management
The District's Department of Employment Services (DOES) is
responsible for the administration of the Unemployment Compensation
Program. In fiscal year 2004, the District made approximately $114
million in unemployment benefit payments to unemployed former employees
of private employers in the District and of the District and federal
governments.
While testing internal controls over benefit payments, we observed
that DOES was unable to locate 8 out of 30 claimant files supporting
these payments. Federal regulations require that DOES maintain
documentation supporting all payments of unemployment claims. We noted
that DOES has established policies and procedures requiring such
documentation be maintained. However, DOES has not created a system of
tracking the location of all claimant files and requiring such files to
be checked in and out by DOES personnel using the files. We recommend
that DOES create a database tracking the location of all claimant files
and require that this database be updated each time a file is moved to
a new location.
Management Response
Management concurs with the finding. If funding is available, DOES
will implement an imaging and retrieval system for Unemployment
Insurance documents. A pilot project is to commence within the next
three months for imaging and indexing quarterly contribution reports.
The imaging will be done by the contractor who currently enters data
from these reports.
Question. In his fiscal year 2006 budget request, the President
recommended that the Federal Government consider transferring ownership
of some of its property in the City to the District. Have you estimated
what kinds of revenues would accrue to the city if these transfers
occurred?
Answer. The President has not yet released a specific plan for
transferring ownership. Absent a plan that details the property and the
method and conditions for the transfer of such land, the OCFO cannot at
this time estimate revenues.
______
Questions Submitted to Dr. Clifford B. Janey
Questions Submitted by Senator Sam Brownback
Question. What has been the historic rate of growth in the Special
Education budget for the D.C. Public Schools?
Answer. Special education spending (which includes funds allocated
to local schools for special education, special education central
office functions, related service providers, nonpublic tuition,
transportation, attorney fees and special education hearings and
appeals) across all funds has increase by 33 percent between fiscal
year 2000 and projected spending for fiscal year 2005. The compounded
annual growth rate (CAGR) between fiscal year 2000 and fiscal year 2005
is 4.88 percent and the average growth across the six fiscal years is 6
percent.
Question. I understand that about 20 percent of the children in the
District have been identified as ``Special Education.'' How does this
compare to other cities? How does this compare to previous years?
Answer. Using enrollment figures from the October 2004 audit,
special education enrollment in DCPS was 18 percent; when the total
D.C. public enrollment (charter and DCPS) is used, the percentage of
students in special education drops to 16 percent. Special education
enrollment has remained relatively static during the last five years,
however, as DPCS enrollment decreases, the percentage that are special
education increases.
Question. Are you concerned that students are being inappropriately
identified as ``Special Education?''
Answer. In a comparative analysis of DCPS' Special Education
enrollment to other urban districts, we have found that DCPS has
similar levels of special education enrollment:
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Special Percent
District Education Total Special
Enrollment Enrollment Education
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Baltimore City.................................................. 14,012 108,015 13
Boston.......................................................... 11,433 58,310 20
Milwaukee....................................................... 16,518 101,000 16
Oakland, CA..................................................... 5,279 49,214 11
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What makes DCPS extraordinary different from nearly every other
school district in the country is the number of students attending
nonpublic schools. Twenty-four percent of DCPS special education
students are in nonpublic day programs, residential treatment
facilities or are wards of the District placed in foster homes and
attending public schools in surrounding counties. When students in
surrounding counties are moved to the ``public'' side of the count--
that is, they are served in public schools--the percentage of students
in nonpublic programs decreases to 21 percent of DCPS special education
enrollment and 19 percent of all D.C. public school (DCPS and charters)
special education enrollment.
For comparison, the percentage of special education students in
nonpublic placements is 4.5 percent in Boston and 5 percent in
Baltimore.
Question. What percent of DCPS' budget is being spent on special
education tuition and transportation?
Answer. Of the $1 billion DCPS budget for fiscal year 2005,
approximately 12 percent ($120 million) will be spent on special
education tuition and 8 percent ($75 million) on transportation.
Question. Why do DCPS budgets continue to rise every year, even
though enrollment is declining?
Answer. While enrollment at DCPS has declined over time, the number
of students for whom DCPS pays tuition at private institutions and
suburban schools has risen from 1,400 (SY 1999-2000) to 3,067 (SY 2004-
2005). These increases have resulted in higher costs for the provision
of mandated services.
The Local budget for DCPS has only grown at an average rate of one
percent since fiscal year 2002 when a budget reduction of five percent
that occurred in fiscal year 2003 is taken into account.
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Fiscal year--
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2002 2003 2004 2005 2006
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Local Budget.................................................. $749.2 $713.4 $753 $767.3 $815.2
Growth From Previous Fiscal Year (percent).................... N/A 094.78 5.55 1.90 6.24
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Even though DCPS has experienced a modest growth in budget, DCPS
has not had the ability to leverage these increases to support
programmatic expansion. In fact, the increases have not kept pace with
rising labor and mandated costs. As a result, DCPS has had to eliminate
and curtail viable academic programs.
Recent budget increases have been used to support previously
approved negotiated pay raises. Surrounding suburban districts, our
primary competition for teachers and principals, have been raising
salaries substantially beyond inflation, and as of next year, at least
three of the five are offering higher entering salaries than DCPS. All
offer higher maximum salaries than DCPS.
Additionally, DCPS has incurred higher costs associated with
payments in tuition for D.C. students in private special education and
suburban foster care placements, special education transportation, and
a few state agency costs such as educational services at juvenile
justice facilities; amounts that have grown enormously in recent years.
[In millions of dollars]
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Fiscal year--
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1995 2005 2006
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Negotiated Pay \1\ Raises....................................... .............. 40.4 ..............
Tuition-private placement \2\................................... 12.5 76.0 86.4
Tuition-foster care & DMH wards................................. ( \3\ ) 20.0 20.0
Transportation-special education \2\............................ 12.7 62.0 62.0
Attorneys' fees (winning parties)............................... .............. 9.8 6.8
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Total..................................................... 25.2 208.2 175.2
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\1\ Reflects incremental costs associated with fiscal year 2004 entitlement that permanently affected the base
in fiscal year 2005.
\2\ Will be higher than budgeted in fiscal year 2005 and fiscal year 2006 due to cost overruns incurred by court-
appointed transportation administrator ($75 million).
\3\ Not in DCPS budget.
Recognizing the shortfalls in DCPS' academic program,
Superintendent Janey presented $38.5 million worth of unmet initiatives
in an effort to move the system towards adequacy in programming. DCPS
identified $4.5 million in internal resources to be re-directed to
support this program and the City has proposed an additional $21
million. The remaining balance will be offset by the $13 million in
Federal Payment funding that is being requested as part of the Federal
Appropriation. This funding will support important programming such as:
their development of a comprehensive Art & Music program, and intensive
reading and math program for at-risk students, establishment of Parent
Resource Centers and continuation our School Accountability Model.
Question. It appears that, because of declining enrollment, it is
imperative that some schools be closed or co-located. What are your
plans to do that?
Answer. DCPS has developed a plan that serves as a bridge through
this transition period while the Superintendent's Master Education Plan
(MEP) is being developed. The MEP will provide recommendations
regarding academic program offerings, grade configurations,
neighborhood or cluster delivery models, Special Education
Instructional models as well as address issues relative to school
closures and co-locations. In line with this transition plan and as
required by law, the Board of Education has already approved the
Superintendent's plan for co-location in DCPS facilities. We are
currently reviewing responses to invitations to co-location for the 10
potential sites. This transition plan calls for the co-location of ten
schools that have been identified as potential co-location sites. Upon
completion of the Superintendent's Master Education Plan, this
transitional plan would be revised to specifically address issues such
as declining enrollment and/or requirements for closing schools.
Question. I understand that about one-third of DCPS teachers are
not certified. What progress are you making to ensure that all DCPS
teachers have the proper teaching credentials for the 2005-2006 school
year?
Answer. In March of 2005, we estimated that approximately 1,400
teachers did not have a current license. After requesting that these
individuals update their credential, as of June 20, 2005, DCPS has
identified 455 teaches with expired licenses and 533 teachers with no
record of licensure or slightly less than 20 percent (988) of the
teacher workforce. These teachers will be placed on a structured
program that will facilitate licensure update by June 2006. Those who
do not meet the respective milestones of this plan will be terminated
at the end of the 2005-2006 school year. To enhance compliance with
actions required to obtain licensure, DCPS has created the position of
Licensure Specialist that will oversee and monitor licensure status.
The position is expected to be filled by July 11, 2005. Additionally,
we are ensuring that all newly hired teachers have the proper
credentials prior to hire.
The State Education Office of Academic Credentials and Standards
(SEA-OACS) have collaborated with the DCPS-LEA Office of Human
Resources (HR) in identifying those individuals who hold a state
teaching license. The SEA-OACS is prepared to handle the large volume
of applications for license renewal that will occur as a result of the
DCPS Office of Human Resources' notification efforts. Our goal is to
maintain an application processing time of less than two weeks,
therefore ensuring that all applications received prior to August 19,
2005 are processed and licenses sent out before the beginning of
school.
Question. I understand that only 50 cents of every operational
dollar spent by DCPS actually goes to directly educate children. The
national average is 61 percent. Why is this average so low and how have
city leaders proposed to change this?
Answer. The source of the 50 percent figure is the U.S. Department
of Education's Fiscal Year 2002 Common Core of Data, by a definition
that includes only teachers, aides, texts and classroom supplies and
excludes such direct educational services as speech therapy,
librarians, library books, computer labs, guidance counselors and
school nurses. In that year:
--The District of Columbia reported spending for teachers, aides,
texts and classroom supplies was 50 percent.
--The District of Columbia was very high on the ``non-instruction''
category of ``student support,'' which means legally mandated
special education services (such as assessments, speech
therapy, OT/PT, psychological counseling), counselors, social
workers, attendance counselors, health services and the like.
--The District of Columbia was also very high on spending for
``instruction support,'' which means librarians; instructional
technology; and standards, curriculum, testing, teacher
training and testing.
--The District of Columbia was comparatively high on ``operations and
maintenance,'' which means custodians, utilities, repairs,
security, as well as on transportation, which is court-ordered.
--The District of Columbia was comparatively low on school
administration and food service, and average on central
administration/business services.
--Many of the ``non-classroom'' expenditures were funded by
restricted federal grants, including food service, anti-drug
and violence grants and No Child Left Behind grants for
standards, curriculum, testing and professional development.
Others are required by federal law and court mandates,
including special education assessments, special education
related services, and special education transportation.
In our own valuation of what is allocated to supporting students in
the classrooms, we expend nearly 60 percent of our resources to do so.
What worries me is that the definition of ``classroom,'' taken from the
National Center for Education Statistics (NCES), does not take into
account expenditures for critical services such as librarians,
counselors, nurses, attendance officers, and assessments, therapy and
transportation for special education students. We have high costs in
these areas because of high enrollment in special education.
The issue with the NCES definition is that DCPS funds much more
than teacher salaries and bureaucracy. According to NCES, we spend only
2.7 percent on general administration and 3.0 percent on business
services such as payroll, human services, and procurement. The rest
covers principals, libraries, counseling, special education related
services (e.g., speech therapy, OT/PT, social workers, psychologists),
teacher training, curriculum, testing, facilities, utilities, security,
transportation, and the free lunch program.
Further when you factor in our unique role as both a State and
Local Education Agency, we experience high expenditures in other
categories. For example, 11 percent of our work force is engaged in
transporting special education students to public, charter and private
schools, under the direction of a court-appointed administrator. This
translates into higher expenditure levels on the ``non-instruction''
category of ``support,'' which is required as part of court orders and
Individuals with Disabilities Education Act.
We do believe more classroom support is needed but not by
sacrificing librarians and counselors and elements of the
accountability system such as curriculum and standards, teacher
training, testing and other measures needed to comply with No Child
Left Behind. Moreover, it cannot come at the expense of disobeying
mandated special education requirements and health/safety issues DCPS
must face.
DCPS is aggressively pursing strategies to ensure that as much
resources as possible can be directed towards the classroom. In fact,
the Superintendent has commissioned the Council of Great City Schools
to conduct an adequacy study to determine system needs, if any. It is
hopeful that the findings from this study will provide District
Stakeholders with the total investments needed to fully support the
implementation of Statewide Standards and provide a better prescription
of how to allocate resources.
Question. What additional tools do you need to better manage the
D.C. Public Schools?
Answer. As I begin to implement the goals outlined in our
Declaration of Education, the strategic plan for the District of
Columbia Public Schools, I am cognizant that the managerial tools
needed to reform a school system are different from those needed to
sustain routine operations. In order to better align our educational
program objectives and priorities with our fiscal resources as we plan
long-term school improvements, it would be highly advantageous to have
an independent Financial Officer that reports to the Board of Education
and School Superintendent. While the school district would continue to
be governed by all applicable fiscal regulations, the perspective of an
independent CFO would be consistent with the mission of the school
district in service to children, rather than the mission of a financial
agency.
Also, because we have established new standards and will completely
overhaul our educational infrastructure, multi-year budgeting would
enable us to implement scheduled reforms without the threat of funding
uncertainties from year to year. In short, an independent Chief
Financial Officer and multi-year budgeting would anchor a long-term
strategic framework and afford the long-range planning and
implementation necessary to implement and sustain school improvements.
Question. How do you plan to use the $13 million that this
subcommittee provided in fiscal year 2005 and how do you plan to use
the $13 million that is being requested for fiscal year 2006?
Answer. I intend to use these funds appropriated in fiscal years
2004, 2005 and 2006 to specifically to accelerate the quality of
teaching in preparation for the implementation of the new academic
standards, curriculum, and aligned assessments. This will serve as the
basis for a carefully structured framework for accountability.
It is important to point out that all the improvement programs must
focus directly on teaching and learning. Research clearly shows that
for reform efforts to have a measurable impact, they must dramatically
change what occurs in the classroom. I believe by implementing new
standards, developing curriculum and school- and system-level
assessments, training administrators and teachers, securing high
quality curriculum materials, and providing the means to hold schools
accountable for results--all are critical elements that must come
together to achieve significant and sustainable improvements in
teaching and learning.
Through the plan, all of these elements will be optimized as part
of a coherent and mutually reinforcing whole. We will be able to
provide all District of Columbia Public Schools students with the kind
of high-quality classrooms they deserve:
--Classrooms where standards, curriculum, instruction, and
assessments are carefully aligned.
--Classrooms where every teacher clearly understands what is to be
taught and assessed.
--Classrooms where all students learn.
Question. Dr. Janey, in your written testimony, you mention school
improvement funds to be used to continue your investment in
professional development. I am aware of the statistic that some 30
percent of the teachers in the D.C. Public School system are not
certified. I believe that teachers are the most fundamental aspect of a
child's education and this fact concerns me greatly. What have you been
doing, and what are you planning to do, specifically, to ensure that
the teachers in your classrooms are qualified to provide a good
education?
Answer. To ensure our teachers are qualified to provide a good
quality education, we've developed a Professional Development Master
Plan that is intended to provide direction, guidance, and resources to
educators as they develop their Individual Professional Development
Plan (IPDP). We believe that effective professional development is on-
going, school-based (job embedded) and organized around collaborative
problem solving. The focus of our Professional Development Master Plan
is as follows:
--Develop knowledge and skills in teachers in order to impact student
achievement.
--Prioritization of goals based upon best practices with decisions
based upon objective evidence gathered over time.
--Linkage to district goals to support the improvement of the whole
system.
--Focused on enhancing the individual's knowledge of their field and
knowledge of learners and learning. To this end, there must be
an on-going assessment process, including self-evaluation and
feedback from others, to guide further development.
______
Questions Submitted by Senator Mary L. Landrieu
SCHOOL CONSTRUCTION
Question. Chairman Cropp and Dr. Janey, what mechanisms are you
considering to manage the $150 million bond proposal for school
construction? Would a venture capital entity work?
Answer. Project and capital program management for the D.C. Public
Schools is under the purview of the Board of Education and
Superintendent. A third-party entity, such as a venture capital entity
could work, and has been considered. The Superintendent has made clear
that he intends to transform his Office of Facilities Management to
better manage its projects and more efficiently use its capital
resources. The Superintendent has also stated that he is creating an
office of strategic partnerships that would leverage DCPS resources
with public and private entities to create alternative financing
mechanisms for the DCPS capital program. Additionally, the Office of
the City Administrator, Council staff, and DCPS staff are working
collaboratively to identify partnership opportunities and other means
to share and maximize resources through joint capital planning and
coordination.
Question. Can we finance some of the debt service from rent paid by
charter schools in co-location?
Answer. No. District law mandates that rent paid by charter schools
through co-location/lease arrangements must stay with the local
school--D.C. Code, Section 38-1831.01(b)(2).
Question. Dr. Janey, you have provided a list of 10 school
properties, which will be offered for co-location. When will a request
for proposals be issued to charter schools and what time frame will you
be signing leases for the fall semester?
Answer. Requests for Letters of Interest were posted on the DCPS
website from mid-May to mid-June. They are being reviewed now by Co-
location Review Committees (one for each school that received a Letter
of Interest). A public hearing is scheduled for June 29th, 2005 from 6-
8 p.m. at 825 N. Capitol St. The Superintendent will present his
recommendation for specific co-locations in July. It is anticipated
that the Board of Education will approve or disapprove any co-location
recommendations in July, and then for approved recommendations, direct
the Superintendent to execute leases on its behalf in July.
Question. Dr. Janey, for the record, please provide the per pupil
spending in DCPS and the components of that allotment (local, Federal,
other)? Please provide a comparison with per pupil spending in other
cities of similar size.
Answer. The referenced chart reflects the updated report conducted
by the NCES and the Census Bureau. Fiscal year 2003 is the most recent
year for which expenditure data are available, and if it follows
previous timing, the Census Bureau will put out fiscal year 2004 data
next March. That's as soon as an update could be provided. The only
national data for school districts that's collected using comparable
definitions are the NCES/Census data.
However, the following represents a regional comparison of Per
Pupil Expenditures conducted by an independent watch organization in
the D.C. area. We believe that regional comparisons are more useful
tools as they provide insight to the competitive landscape in the
Washington area and it accounts for regional cost differences that
national comparisons fail to incorporate.
Comparison with Suburban District Budgets
The chart below depicts the fiscal year 2005 per pupil budgets of
DCPS and its surrounding school districts. The Washington Area Boards
of Education (WABE) calculates the suburban numbers by a standardized
methodology that meets all the criteria above. We have applied the same
methodology to the DCPS budget and enrollment, but subtracted
transportation for all districts, since the transportation systems are
not comparable.
The WABE methodology as applied to DCPS includes most federal grant
funds and teacher retirement, which we added from the city budget. In
fiscal year 2005 DCPS has about $3,800 less per pupil than Arlington
County, about $2,100 less than Alexandria, and roughly the same as
Montgomery and Fairfax Counties. Prince George's County is far behind
all the others.
The WABE methodology includes all local and federal funding in the
districts' budgets except: Food service; Construction/capital; Debt
service; Summer school; Adult education; Special ed tuition and
transportation; Other state level costs (DCPS only): state agency
functions, charter school oversight; Federal funding for state agency
functions, private & charter schools, and short-term restricted
programs; and Private grants and intra-District transfers.
WABE figures include: Teacher retirement; Federal 2005 funding for
DCPS LEA: Titles I, II, IV, VI, VII, Vocational education, Special
education, Impact Aid, Indirect Cost, Head Start, Reading First, Tech
Literacy Challenge Fund, Comprehensive School Reform, State
Assessments.
What the chart above does not reflect is any factor for student
needs. As the chart below illustrates, DCPS has by far the highest
percentage of low-income students in the area, and a much higher
percentage of special education students, who receive higher cost
services, than do Fairfax and Montgomery Counties. Based on student
characteristics, DCPS should spend significantly more per pupil on
average than any of its suburbs.
Because Fairfax County Public Schools use the WABE overall per
pupil number and issue breakouts with per student budget allocation
figures for general education, special education and ESL education, we
have applied the WABE definitions and calculated DCPS budget
allocations for fiscal year 2005 for these three categories to compare
with Fairfax County allocations. Although the chart and figures are in
the same format as the chart above for Basis 2, the numbers are
different: those below include federal funds as well as local funds,
add Teacher Retirement, and eliminate a few local budget lines not
included in the WABE methodology.\1\
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\1\ Food service $2.8 million, summer school $2.4 million, capital
planning $0.3 million.
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CONCLUSION OF HEARINGS
Senator Brownback. Thank you for being here. Thank you for
your hearts and your commitments that are making lives better
for all people here and the people that come here.
With that, the hearing is recessed.
[Whereupon, at 11:43 a.m., Wednesday, June 15, the hearings
were concluded, and the subcommittee was recessed, to reconvene
subject to the call of the Chair.]