[House Report 104-96]
[From the U.S. Government Publishing Office]



104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                     104-96
_______________________________________________________________________


 
DISTRICT OF COLUMBIA FINANCIAL RESPONSIBILITY AND MANAGEMENT ASSISTANCE 
                              ACT OF 1995

                                _______


 March 30, 1995.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

_______________________________________________________________________


 Mr. Clinger , from the Committee on Government Reform and Oversight, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 1345]

      [Including cost estimate of the Congressional Budget Office]
    The Committee on Government Reform and Oversight, to whom 
was referred the bill (H.R. 1345) to eliminate budget deficits 
and management inefficiencies in the government of the District 
of Columbia through the establishment of the District of 
Columbia Financial Responsibility and Management Assistance 
Authority, and for other purposes, having considered the same, 
report favorably thereon without amendment and recommend that 
the bill do pass.

                            I. Bill Summary

    As offered the District of Columbia Financial 
Responsibility and Management Assistance Act of 1995 is 
intended to:
         [1] Create a five (5) member financial control 
        Authority appointed by the President in consultation 
        with Congress. The members will serve three year terms 
        which will stagger after the first term. Qualifications 
        for Authority appointment are to have a degree of 
        expertise in finance or management and have no direct 
        commercial ties to the District. All Authority members 
        must be District of Columbia taxpayers.
          [2] Heighten the responsibilities of the District of 
        Columbia Inspector General to conform with the Federal 
        Inspector General regulations/criteria.
          [3] Create the position of Chief Financial Officer 
        (CFO) of the District of Columbia. The CFO is appointed 
        by the Office of the Mayor with the advice of the City 
        Council. The Authority must confirm the Mayor's choice. 
        Duties will include; financial responsibilities of the 
        Mayor, tax collection and assessment, all bill paying, 
        approving certain contracts, allocating available funds 
        in compliance with appropriations, and to ensure that 
        the budget and financial plan is adhered to.
          [4] Create an extensive and detailed five year 
        financial plan for the District.
    This act is intended to redress the fiscal and management 
problems that confront the District of Columbia and thereby 
engender improved fiscal relations between the Federal 
Government and the District Government.
    The Authority will be assisted in its work by a small 
professional staff. It can also hire experts and consultants 
and accept federal service personnel (with or without 
reimbursement) as are deemed necessary by the Authority. The 
Authority may also obtain information directly from Federal and 
District agencies with the District government required to 
comply with said requests. The Authority also has civil 
enforcement and subpoena power. The Authority is required to 
comply with the Sunshine Act, Privacy Act, and the Freedom of 
Information Act (FOIA).
    The five-year financial plan sets certain criteria and 
standards which are designed to allow the Authority to better 
play a controlling role in the budgetary procedures of the 
District. This plan is designed to project revenues and 
expenditures on a year-by-year basis for each District fund. 
The methods utilized to project all revenues and expenditures 
must be stated and explained in a clear and concise fashion. 
The proposed budget must be balanced on a modified accrual 
basis by FY 1999 (October 1, 1998 to September 30, 1999). 
Audited operating expenditures may not exceed operating 
revenues in FY 1999 and beyond (this is the audit). If funds 
are borrowed from dedicated accounts they must be restored in a 
timely fashion. The financial plan will also serve to enhance 
the District's creditworthiness. The Authority will also have 
the ability to impose standards and guidelines which will apply 
to the financial plan.
    The Mayor will be required to submit the financial plan, 
which is included in each year's budget, to the Authority and 
the Council by February 1. The Authority will have a thirty day 
period to review the Mayor's plan and budget and certify 
whether it is approved or rejected. This will commence a 
process by which the Mayor and the Council will each have two 
opportunities to gain Authority approval of the financial plan, 
including the budget. The Authority will provide 
recommendations during each review process.
    If during the second review process the Council's plan and 
budget are not approved, the Authority forwards the Council's 
revised financial plan and budget, which also contains the 
Authority's recommendations to bring the plan and budget into 
compliance, to the District Government and the President for 
forwarding to Congress. Mid-year revisions to the plan are 
allowed but must include the reasons for change and offsets in 
spending or revenues to maintain viability of the financial 
plan.
    The Mayor shall be required to submit quarterly reports on 
revenues and spending including actual cashflow statements to 
the Authority.
    In the event there is a discrepancy from the plan or budget 
in either revenues or spending the Mayor must report that 
discrepancy to the Authority along with any explanation. If the 
Authority finds no compelling reason, then a variance is 
declared unless the District government takes necessary action 
to bring spending into compliance with the budget. If the City 
fails to do this, the Authority may withhold its distributions 
to the District from borrowed funds or direct the Secretary of 
Treasury to withhold Federal grants until compliance is 
obtained. The Authority does have the right to review all 
contracts for compliance with the financial plan. The Authority 
must review all labor contracts before approval and the Mayor 
may propose financial plan revisions or offsets to bring the 
proposed contract into compliance with budgetary guidelines. If 
the District fails to come into compliance the Authority may 
withhold its borrowed funds distributions from the District or 
direct the Secretary of the Treasury to withhold Federal grants 
until compliance is obtained. The Authority may also review all 
contracts for compliance with the financial plan.
    The District may not borrow funds without approval of the 
Authority. The borrowing and its debt service must be 
consistent with the financial plan's borrowing estimates. In 
the event the City goes directly to the Treasury, the funds 
would be deposited with the Authority, which will allocate them 
(in compliance with the financial plan, as needed by the 
District). If the Authority itself borrows on behalf of the 
District then the funds are deposited with the Authority and 
distributed to the District, as needed in compliance with the 
purpose of the borrowing.
    To continue the recovery process, the Authority may at any 
time submit to the Mayor, Council, the President, and Congress 
recommendations on actions the District or the Federal 
Government could take to improve the financial health and 
stability of the District government, the management efficiency 
and professionalism of the District government, the economic 
redevelopment of the District of Columbia, or any other action 
that the Authority believes would be in the best interests of 
the District of Columbia.
    The City must notify the Authority and Congress if it does 
not adopt any specific recommendation along with reasons for 
that action. The Authority may implement rejected 
recommendations after Congressional consultation. If 
recommendations are adopted then the Mayor must report to the 
Authority and Congress specific implementation plans and 
milestones.
    The initiation of a control period exists upon enactment 
and if the Authority goes into a noncontrol period it can be 
re-initiated.
    The Act would also amend the Home Rule Act to provide for 
the position of a CFO. The CFO is appointed by the Mayor during 
a control period with approval of the Council and the 
Authority. During control periods, in the event that there is a 
cause for dismissal of the CFO, that act can only be made with 
the consent of the Authority. During a control period, the CFO 
supervises and performs all of the financial responsibilities 
of the Mayor as well as those duties normally assigned to the 
position. These duties include all tax collection and 
assessment, all bill paying, approving contracts, allocating 
available money in compliance with appropriations, and ensuring 
that the budget is adhered to.
    New standards for the existing District of Columbia 
Inspector General (IG) are also included in the Act. These 
standards are designed to increase the regulations regarding 
this office so that it confirms with the Federal IG. The IG 
budget cannot be reduced or altered by the Mayor or the 
Council. The IG is appointed for a six-year term which will 
allow it no to conform with the four-year mayoral term. During 
a control period, the IG will be appointed by the Mayor with 
the approval of the Council and the Authority. The IG is also 
given the authority to manage the annual audit contract.
    Certain enhancements to the power of the Council in 
relation to the Mayor are also included in the Act.
             II. Legislative Hearings and Committee Action

    The problems this legislation is designed to alleviate now 
approach horrendous proportions. The District of Columbia 
(``The City'') is facing its worst crisis in over a century. 
Every Member of Congress is familiar with The City's financial 
woes. Many Americans know of its severity.
    In the several months that the 104th Congress has been in 
session, the House Committee on Government Reform and 
Oversight's Subcommittee on the District of Columbia and its 
counterpart on the House Committee on Appropriations have 
endeavored to ascertain the severity of the District's 
financial travails and considered the options available for 
relief. The Subcommittee conducted two briefings on the 
situation, one with the Honorable Marion Barry, Mayor of the 
District of Columbia, and the Honorable David Clarke, Chairman 
of the City Council, and another with representatives of the 
General Accounting Office (GAO), which has been auditing The 
City's finances. The Subcommittee on the District of Columbia 
has also conducted three hearings.
    The first was a joint hearing with the House Appropriations 
Subcommittee on the District of Columbia at which Mayor Barry 
and GAO representatives testified. The other two hearings 
focused on mechanisms state governments have utilized to assist 
cities for which they bore responsibility to overcome 
structural deficits not unlike those of the District of 
Columbia. The Subcommittee heard testimony from GAO officials, 
state and local officials, and representatives from the private 
sector who had either served on such boards or worked with 
them.
    Former New York Governor Hugh L. Carey, who created and 
chaired the Emergency Financial Control Board in New York City 
two decades ago, testified before the Subcommittee at the March 
2, 1995 hearing. He stated that an oversight board, similar to 
this legislation, was neither ``a hairshit'' (i.e., 
penitential); nor ``a straight jacket'' or a ``restraining 
sheet'' (i.e., designed to restrict the ability of local 
government to function). But, it was somewhere between ``Slim 
Fast and Weight Watchers''--a budgetary regimen to produce 
fitness over a designated period of time. The Committee finds 
this to be a very good definition.
    Governor Carey's testimony also articulated the 
unmistakable message that among all the things such boards are, 
they are not panaceas. They are not the answer in and of 
themselve's. Such control boards have nothing inherent that 
guarantees success. Whenever they succeeded it was with the 
full cooperation of The City administration, from the mayor on 
down, the active participation of the business community, and 
the assistance of organized labor.
    The Subcommittee held a markup of H.R. 1345 on March 29, 
1995. The full Committee held a markup on March 30, 1995. In 
each instance, the bill won unanimous support of the Committee 
members.
              III. Background and Need for the Legislation

             a. the district of columbia's financial crisis

    The District of Columbia is insolvent: The City does not 
have enough cash to pay all of its bills. It is spending at a 
rate in fiscal year 1995 (October 1, 1994 to September 30, 
1995) that would exceed its mandated expenditure limits by more 
than $600 million, nearly 20 percent above its congressional 
appropriation. Millions of dollars in unpaid bills are 
accumulating, threatening basic services provided through 
private contractors. Many District programs are under court 
order to address fundamental weaknesses. And, there is 
widespread belief that The City has too many employees and does 
not provide customer service of an acceptable quality.
    The District did not reach this crisis point overnight. 
Nearly five years ago, the Commission on Budget and Financial 
Priorities of the District of Columbia (commonly known as the 
``Rivlin Commission'') noted that the District ``confronts an 
immediate fiscal crisis'', and made a multitude of 
recommendations to the District to deal with that crisis. For 
the most part, these recommendations were not followed. Since 
the Rivlin Commission report until fiscal year 1994, in most 
years the District's general fund was ``balanced'', however The 
City's cash position has deteriorated alarmingly in recent 
years. This occurred despite receiving additional cash 
infusions and revenues totalling nearly a billion dollars since 
1991. Last summer, the GAO issued a report concluding the 
District is faced with both unresolved long-term financial 
issues and continual short-term fiscal crises. In that report, 
the GAO detailed the District's cash and budget situation, 
focusing on how cash balances declined even though budgets were 
reportedly balanced after a general obligation bond issue in 
1991. In fiscal year 1994, the District posted a $335 million 
deficiency, the largest since the Home Rule Act.
    Last fall, in response to the burgeoning financial crisis, 
Congress mandated $140 million in reductions to expenditures 
for the District's fiscal year 1995 appropriation, stipulated 
harsh financial penalties for failure to comply with the 
appropriation financial targets, establishing a 33,588 ceiling 
on fulltime employee equivalents (FTEs), and initiated several 
actions to upgrade and expand the scope of financial disclosure 
to Congress.
    Despite these actions, the District has refused to 
undertake meaningful measures to reduce spending. With more 
than half the current fiscal year elapsed, the District has 
still not disclosed how $140 million in mandated cuts to 
agencies will be allocated. District agencies still operate on 
spending plans based on the original ``pre $140 million cut'' 
budget. In his revised budget for fiscal year 1995, Mayor Barry 
asked for $267 million in additional revenue and the lifting of 
the spending cap. In addition, the fiscal year 1996 budget 
proposal calls for expenditure cuts of less than three percent 
and an increase of more than 200 FTEs.
    The District of Columbia is a governmental entity that has 
responsibilities of a state and county, as well as those of a 
city. As such, the District must provide a variety of services 
and programs for its residents and visitors including police 
and fire protection, local transportation, Medicaid, hospital 
care, sanitation services, employment assistance, education, 
and housing. The District currently provides these services 
with a total budget of $4.4 billion. The Congress appropriates 
approximately $3.3 billion of this total. These appropriated 
funds include a federal payment of about $650 million and $2.7 
billion of locally generated income taxes, property taxes, 
sales taxes, and other such sources of revenue. In addition, 
The City receives approximately $1.1 billion in non-
appropriated funds that include federal grants, as well as 
reimbursements for services. The largest of these non-
appropriated funds are the federal portions of the Medicaid and 
Aid for Families with Dependent Children programs. The 
District's annual federal payment is intended to compensate the 
District for nonreimbursed services provided to the Federal 
Government and deficiencies in the District's tax base 
resulting from federally imposed limitations on The City's 
ability to raise certain tax revenues.
    Total District revenues have increased by 27 percent since 
fiscal year 1989. The largest percentage growth has occurred in 
non-appropriated funds and the federal payment, which grew at 
68 percent and 43 percent, respectively. During the same 
period, the District's local sources of revenue grew by 13 
percent. In recent years, not only has the District been 
affected by a sluggish local and regional economy, but its 
financial condition has been aggravated by the migration of a 
significant number of middle class taxpayers to the suburbs, 
leaving behind a greater overall percentage of residents who 
are most in need of government assistance and services.
    Although the District of Columbia Self-Government and 
Governmental Reorganization Act (Home Rule Act), Public Law 93-
198, confers limited autonomy to the District over its local 
affairs, it also provides for oversight by Congress. For 
example, the Home Rule Act required the District to submit 
balanced budgets to the Congress and preludes the District from 
obligating or expending funds unless approved by Congress. 
Under the Home Rule Act, the District can issue general 
obligation bonds only for capital projects or to refinance 
existing debt. Issuance of bonds for other purposes requires 
amending the District's charter. In August 1991, in the wake of 
a financial crisis, Congress amended the District's charter to 
authorize $331 million in general obligation bonds to pay 
accumulated bills and provide the District with working 
capital. When receiving the $331 million authorization, 
District officials described the amount as sufficient to 
eliminate the District's negative financial position, including 
$284 million which had existed when the Home Rule Act was 
enacted. In addition, District officials maintained that this 
bond issuance would reduce the need for short-term borrowings. 
The legislation authorizing the bonds required the District to 
utilize these funds rather than rely on short-term borrowings.

1. Evolution of the financial crisis

    In the 1980's the District's general fund operated with 
revenues in excess of expenditures in most years. In November 
1990, the Rivlin Commission warned of impending financial 
disaster, predicting budget deficits of $90 million in fiscal 
year 1990 and $200 million in fiscal year 1991. The Rivlin 
Commission issued a series of recommendations, including 
reducing District staff by 6,000 FTEs. The Rivlin Commission 
report observed that unless major steps were taken the District 
would face a $700 million deficit by fiscal year 1996. This is 
the magnitude of the deficit facing the District today.
    From fiscal year 1991 through fiscal year 1993, the 
District submitted budgets to the Congress that showed 
expenditures and receipts in balance. However, even though the 
budgets were balanced, and despite receiving cash from a $331 
general obligation bond issue in 1991, The City's cash position 
declined substantially. During this period, various factors 
helped the District balance its budget, including nearly $400 
million in increased federal payments and $225 million in 
additional budgetary authority from other measures. These other 
measures included transferring funds from the Water and Sewer 
Fund, not recording a Washington Metropolitan Area Transit 
Authority payment when due against appropriated expenditures, 
and changing the legal definition of the property tax year.
    After three years of positive general fund balances, the 
District recorded a $335 million dollar deficit in fiscal year 
1994. Of this total deficit, $116.8 million was in appropriated 
funds. Deficits were recorded in most appropriated expenditure 
functions and subfunctions, including Health and Welfare 
(primary Medicaid), $71 million; Schools, $14 million; Fire, 
$13 million; Police, $12 million; and Public Works, $21 
million. The remaining $218.6 million resulted primarily from 
adjustments related to Medicaid and D.C. General Hospital. The 
Medicaid increase related to cost settlements of prior year 
Medicaid program expenses that the District will be required to 
repay to the Federal Government during fiscal year 1995. The 
$85 million adjustment for the D.C. General Hospital receivable 
account recognizes that its loans are noncollectible due to the 
hospital continuing to operate at a deficit.
    Although between fiscal years 1991 and 1993 the District's 
general fund has shown small surpluses, the District's cash 
position steadily deteriorated. This decline would have been 
much worse had the District made all required payments when 
due. Specifically, in fiscal year 1993 the District deferred 
nearly $100 million in payments to the pension fund and the 
Washington Metropolitan Transit Authority. Deferred payments 
also occurred in fiscal years 1991 and 1992. At the end of 
fiscal year 1994, deferred payments became even greater. If the 
District had made all payments when due it would have depleted 
its cash reserves by the end of fiscal year 1994.
    Demonstrating further the scope of the declining fiscal 
posture at the end of each fiscal year the District 
increasingly relied on the federal payment, which is usually 
received in the first month of the fiscal year, to cover bills 
from the previous fiscal year. For example in fiscal year 1991, 
soon after receiving the $331 million from the general 
obligation bond issue for the operating deficit, the bills from 
the previous fiscal year (1990) consumed about 39 percent of 
the federal payment. Fiscal Year 1995 prior obligations are 
$126 million more than the Federal payment. Current trends 
indicate that the situation will be much worse at the end of 
this fiscal year as the penalties established in the fiscal 
year 1995 appropriations act are factored into the financial 
equation.
    The District's budgeting process has also been problematic, 
contributing greatly to the financial crisis. The District's 
original budget estimates for revenues have been overly 
optimistic in recent years, with actual revenues falling far 
short of original estimates and actual expenditures exceeding 
original budget estimates. For fiscal years 1991 through 1993, 
the shortfalls were primarily attributable to (1) income tax 
revenues where original budget estimates exceeded actual 
revenues by about $100 million in both fiscal years 1991 and 
1992, and by $34 million in fiscal year 1993; and (2) sales 
taxes, where fiscal year 1991, 1992, and 1993 estimates 
exceeded actual revenues by $58 million, $6 million, and $39 
million, respectively. Additionally, Department of Human 
Services' expenditures exceeded original budget estimates by 
$64 million in fiscal year 1992 and $82 million in fiscal year 
1993.
    For some fiscal years the District has submitted more than 
one supplemental budget. In fiscal year 1993, the District 
submitted three supplemental budgets, the third one being 
approved on October 29, 1993. But even with three 
supplementals, actual expenditures for some activities exceeded 
the final supplemental budget authority. For example, actual 
personal services expenses in the Fire Department, Human 
Services, Public Works, and Public Schools exceeded the 
supplemental budget by amounts ranging from $2 to $12 million. 
Furthermore, these supplemental budgets have not included the 
operating deficits of the D.C. General Hospital, which totalled 
$109 million as of September 30, 1993.
    For fiscal year 1994, a supplemental budget was submitted 
for approval by Congress in April 1994 that proposed $29.8 
million in spending increases and $55.8 million in new 
revenues. These changes were needed to compensate for 
shortfalls in original revenue estimates and expenditure cuts 
submitted by the District that were not realized. However, even 
with this supplemental, as noted earlier, the District recorded 
the largest deficit in fiscal year 1994 since the Home Rule Act 
became law.
    Not only have budget estimates been unrealistic in both 
revenue and expenditure projections, the fiscal year 1995 
budget and long-term financial plan have yet to be finalized. 
The District's multiyear plan reveals the gap between expected 
revenues and expenditures expanding to as much as $1.8 billion 
by fiscal year 2001. Even with full implementation of the 
undefined management initiatives and expenditure cuts included 
in the Mayor's recent budget proposals the shortfall will be 
nearly $500 million in fiscal year 2001. (The Mayor's revised 
fiscal year 1995 and fiscal year 1996 budgets are discussed 
later.) However, these financial plans do not include 
substantial potential costs that the District could incur for 
court orders and consent decrees involving corrections, foster 
care, juvenile rehabilitation, and mental health treatment. 
While the District either has agreed or been ordered by the 
court to implement remedies, District officials do not know how 
much it will cost to fully undertake the required measures. 
Over a longer time period, the District is still confronted 
with an unfunded pension liability of more than $4 billion. 
Furthermore, The City's most most recent capital budget does 
not include many needed projects and does not include financing 
for many authorized projects. The capital budget also pays the 
salary of between 900 and 1,000 FTEs. Financing is restricted 
because of statutory limitations on the total amount of 
District indebtedness. For example, the capital budget does not 
include most of the nearly $1 billion that will be required for 
improvements to Water and Sewer plants and D.C. Public School 
buildings.

2. Congressional actions related to fiscal year 1995 budget

    The Congress passed the District of Columbia Fiscal Year 
1995 Appropriation Act and the Federal Payment Reauthorization 
Act of 1994, which mandated a number of actions. Specifically, 
the 1995 Appropriation Act capped the amount of expenditures 
for fiscal year 1995 at $3.25 billion, $140 million below the 
budget that the District submitted to the Congress. In 
addition, total disbursements can not exceed total receipts as 
penalties are imposed to enforce the spending lids. It also 
limits the total number of FTE positions to 33,588, and 
requires several periodic financial reports.
    The potential penalties for overspending contained in the 
1995 Appropriation Act are substantial. Assuming that the 
authorized Federal payment for fiscal year 1996 of $660 million 
is appropriated, the fiscal year 1995 Appropriation Act would 
require the District to escrow twenty percent ($132 million) of 
the fiscal year 1996 Federal payment. The Congress required the 
escrow to force the District to reach the spending levels 
mandated by the Act and pay certain ``penalties'' to the U.S. 
Treasury if the fiscal year 1995 spending reductions were not 
made. As the Act's conference report explains, the District is 
to pay from the escrow and, if necessary, other District funds 
(1) the amount that actual expenditures were not reduced by the 
$140 million, and (2) the amount, if any, actual disbursements 
exceeded actual receipts. Table 1, illustrates the amount of 
the ``penalties'' given various possible spending levels.

       TABLE 1.--POTENTIAL FISCAL YEAR 1995 SPENDING CAP PENALTIES      
                        [In millions of dollars]                        
------------------------------------------------------------------------
                                        $140                            
                                      million   Disbursements           
                                       budget   over receipts    Total  
                                        cut        penalty      penalty 
                                      penalty                           
------------------------------------------------------------------------
Hypothetical examples: Amount that                                      
 actual expenditures exceed budget                                      
 and disbursements exceed receipts:                                     
 \1\                                                                    
    $0 or less.....................         $0           $0           $0
    $100...........................       $100         $100         $200
    $267...........................       $140         $267         $407
    $407...........................       $140         $407         $547
    $631...........................       $140         $631         $771
------------------------------------------------------------------------
\1\ These hypothetical examples assume that the amount actual           
  expenditures exceed the budget and disbursements exceed receipts are  
  equal. In actual practice, these amounts would probably be different. 
                                                                        
Source: GAO calculations.                                               

    The acts also require several periodic financial and 
performance reports. For example, the Federal Payment 
Reauthorization Act of 1994 requires the Mayor to submit to the 
Congress:
          An annual performance accountability plan (beginning 
        March 1, 1995) for all departments, agencies and 
        programs, including the performance goals;
          an annual performance accountability report 
        (beginning March 1, 1997) that discusses actual 
        performance achieved compared to the goal and the 
        status of any court orders applicable during the year 
        and actions needed to comply;
          an annual five-year financial plan for the District 
        (beginning March 1, 1995) that describes the steps to 
        eliminate any differences between expenditures from, 
        and revenues attributable to, each fund of the District 
        during the first five fiscal years beginning after the 
        submission of the plan; and
          an annual financial plan report (beginning March 1, 
        1997) on the extent to which the District was in 
        compliance during the preceding year with the 
        applicable requirements of the financial plan.

3. The District's response to the financial crisis

    The District has done little to effectively reduce spending 
in fiscal year 1995: proposing increasing amounts of 
expenditures in future fiscal years, including no net personnel 
FTE reductions in future budgets, and no meeting the reporting 
requirements stipulated in the fiscal year 1995 Appropriations 
Act. In fact, as of the middle of March, the District has not 
even allocated the $140 million in Congressionally mandated 
spending reductions to its agencies. The Congress mandated that 
total appropriated expenditures not exceed $3.254 billion in 
fiscal year 1995, but according to the District's own 
estimates, appropriated expenditures this year for The City 
could be nearly $3.9 billion. The District's revised fiscal 
year 1995 budget requests $3.5 billion in spending authority 
and an additional $267 million in additional federal revenue 
(purportedly for Medicaid). Even this level of spending is 
based on implementation of $364 million in expenditure 
reductions that at best are optimistic.
            a. Initial District actions to address overspending
    During the first part of fiscal year 1995, the District's 
attention was almost entirely on what was necessary to obtain 
the $250 million in short-term borrowing from Wall Street. The 
key action during this period was a consensus agreement among 
the D.C. Council Chairman and the current and former Mayor that 
included management actions and initiatives to reduce potential 
overspending and cut costs, a budget that would demonstrate the 
$140 million in budget cuts mandated by the Congress, and a 
positive cash position forecast based on the two aforementioned 
steps. The D.C. Council passed a revised budget on December 21, 
1994 that included (1) expenditure reductions and revenue 
increases of $448 million and (2) increased agency allocations 
and reprogrammings of $309 million. The net reduction of $139 
million included only $99 million in expenditure cuts and $40 
million in additional revenue. This $40 million increase was 
subsequently repealed. While the net amount met the $140 
million Congressional mandate, it failed to honor both the 
letter and the spirit of the intent of Congress, which had 
ordered all of the $140 million to be in expenditure 
reductions. Although, the net result of Council actions has 
been $99 million in cuts, these reductions have not yet been 
allocated to approve spending plans. As a result, District 
agencies are still operating on ``pre-$140 million cut'' 
spending programs.
    The District government also adopted an apportionment 
procedure in an attempt to control spending; but this process 
does not appear to be reducing expenditures. The District 
directed agencies to limit spending to 25 percent of their 
appropriation in the first quarter and 15 percent in the second 
quarter. However, these apportionments were also based on the 
originally submitted ``pre-$140 million cut'' budget and do not 
cover most expenditures. Both entitlement programs and 
personnel expenditures, which comprise 80 percent of total 
expenditures, are excluded from the allocation controls. In 
addition, the apportionment process could only be delay rather 
than reduce expenditures.
    Several District agency officials have indicated that 
personnel expenditures alone in the second quarter would exceed 
the 15 percent apportionment. For example, D.C. General 
Hospital officials stated that payroll costs in the second 
quarter would consume all of the apportionment, and Fire and 
Emergency Medical Service officials said that the February 17 
firefighter payroll put them over their allocation. For D.C. 
Schools, all of their allocation would be expended when the 
March 1 teacher payroll is due. As the District continues to 
process payroll accounts even though the apportionments are 
being exceeded, the result, according to agency officials, is 
no funds remain to purchase supplies. Fire and Emergency 
Medical Services officials said that their inability to 
purchase supplies could result in threatening situations. And 
the press has reported that D.C. General Hospital is facing 
shortages of critical medical supplies on a daily basis.
            b. Fiscal year 1995 revised and 1996 budgets request more 
                    Federal aid, cut little
    On March 8, 1995, Marry Barry transmitted a revised fiscal 
year 1995 budget and a fiscal year 1996 budget to the D.C. 
Council. The revised fiscal year 1995 budget asked for an 
increased expenditure level to $3.52 billion and $267 million 
in additional Federal aid. The fiscal year 1996 budget requests 
a slight reduction in spending of $3.41 billion, but still 
above the original $3.25 billion appropriated for fiscal year 
1995.
    The Mayor had previously announced that overspending in 
District agencies could result in $3.89 billion in expenditures 
or $631 million over the $3.25 billion expenditure limit 
established by the Congress. The District proclaimed that this 
deficit was comprised of Medicaid cost settlements and 
adjustments, agency overexpenditures, and the required $140 
million in Congressionally mandated cuts. In addition, the 
Mayor explained that there was a $91 million cash shortage, 
making the total shortfall $722 million.
    The revised fiscal year 1995 budget proposed to address the 
$631 million in agency overspending by (1) requesting an 
additional $267 million from the Federal Government, (2) 
requesting rescission of the mandated $140 million in budget 
cuts, and (3) ``reducing'' the overspending by $364 million. 
The spending cuts include agency reductions totalling $224 
million, $70 million in furlough and renegotiated salary 
agreements, and $70 million in debt restructuring.
    Although the budget proposes to reduce the overspending, 
many of the cuts envisioned are not specific and in some cases 
have already been superseded by events. For example, of the 
total of 224 million in agency cuts, based on plans describing 
these cuts, $190 million describe specific initiatives. The 
remaining $34 million in cuts are not specifically outlined. 
Other initiatives that are specific would generate little cash 
savings or simply transfer costs to other funds. For example: 
25 agencies planned to generate savings by eliminating 221 
vacant positions; four agencies were generating ``savings'' by 
transferring positions from appropriated to non-appropriated 
funds, and two agencies were transferring costs to other funds 
or agencies within the District.
    These specific examples illustrate these types of 
initiatives:
          the Department of Employment Services planned to 
        transfer $490,000 in costs to the Department of Human 
        Services,
          the Department of Consumer and Regulatory Affairs 
        planned to eliminate seven vacant positions, and
          the Office of Personnel planned to transfer 16 FTEs 
        to non-appropriated positions and eliminate eight 
        vacant positions.
    In other instances, the plans had been superseded by other 
events, as shown in the following examples:
          The Department of Corrections plans included savings 
        that would be realized from closing a prison facility, 
        halfway houses, and a drug counseling center. However, 
        the prison facility cannot be closed because of a court 
        order and the Mayor's office reversed its decision on 
        closing the halfway houses and drug counseling center. 
        These changes will result in the spending plans falling 
        short of spending cut targets by several million 
        dollars. In addition, the Corrections plan included the 
        reduction-in-force (RIF) of 241 employees. Prison 
        officials said there are currently 500 vacancies in 
        correctional officers, 300 of which are court-ordered 
        positions. Currently, staffing levels are maintained 
        through the extensive use of overtime. They noted that 
        a RIF of corrections officials would add to this 
        overtime spending.
          The Medicaid program initiatives were designed to 
        save $30 million. But the Mayor informed us that this 
        $30 million would not be saved and instead is including 
        this amount in the $267 million he is requesting from 
        the federal government.
    And finally, the D.C. public schools officials said that 
the $45 million amount used to indicate school overspending was 
overstated and that only $32 million in cuts were needed to 
meet their budget target. In total about $66 million of the 
$224 million in agency spending plan reductions are either not 
specified or would not generate actual savings.
    The remaining $140 million in savings is also tentative. 
The District said it would save $70 million in furlough and 
salary reductions. As of mid-March, just two furlough days had 
taken place with unknown savings and no pay reductions have 
been implemented. The remaining $70 million was to be realized 
from refinancing the outstanding debt. This task was made more 
difficult by the lowered District bond ratings and may not be 
realized.
            c. Medicaid spending and budgeting changes
    The largest action in the District's plan to close the 
revenue-spending gap in fiscal year 1995, is receiving $267 
million in an additional federal payment designated for 
Medicaid. The District said that the appropriated portion of 
Medicaid expenditures would climb to $550 million in fiscal 
year 1995 or $267 million more than the congressionally 
approved budget. However, according to estimates by GAO, nearly 
60 percent ($152 million) of this revenue is not needed for 
Medicaid cash expenditures that could occur in fiscal year 
1995.
            d. District not cutting personnel
    A key problematic area in the District is the management of 
personnel. The City has one employee for every eleven residents 
and many perceive service provided by District agencies to be 
poor. District personnel positions are financed by both 
appropriated and non-appropriated funds. the District reports 
personnel data in a variety of ways including FTEs, the number 
of personnel receiving paychecks, and full-time on-board staff. 
An FTE is used to measure the number of equivalent positions 
and takes into account how many hours are actually being 
worked. For example, two employees working half-time would be 
counted as one FTE.
    The GAO reported that information on the exact number of 
District personnel is difficult to verify. Different sources of 
funding compounded by the lack of integration among the 
payroll, personnel, and budgeting systems makes it very 
difficult to establish the exact number of personnel. Although 
most of the payroll function is centralized in the District's 
Controller Office, personnel records are less centralized. For 
example, the payroll for D.C. Public Schools is processed by 
the District Controller, but the School's personnel records are 
maintained in the school's own personnel office not the 
District's Office of Personnel. In addition, inconsistencies 
between personnel and payroll records were identified by 
Coopers & Lybrand as a part of its internal controls testing 
for the fiscal year 1993 financial statements. They pointed out 
that one-third of the payroll transactions they tested did not 
have any authorization, and nearly two-thirds did not have 
proper authorization.
    Internal controls for personnel and payroll in the 
District's Public Schools have been severely criticized by the 
District Auditor in a report issued in April, 1993. The report 
contained numerous instances of internal controls problems and 
concluded that:

          It is apparent that the Board of Education has no 
        credible financial controls or information checks and 
        balances in place to oversee the planning and spending 
        of education funds. The processes of planning, 
        budgeting, and spending have no apparent internal 
        controls. The lack of controls allows for personnel 
        expenses to exceed authorizations, and allows positions 
        to be created in excess of authorizations. It is clear 
        that there is no operating reconciliation of budget, 
        payroll and personnel.

    Reducing the number of District personnel has been a stated 
management objective for a number of years. Based on 
information from the District, between the first quarter of 
fiscal year 1993 and the first quarter of fiscal year 1995, the 
number of actual FTEs decreased from 46,422 to 44,438. During 
this period, appropriated positions decreased from 36,475 to 
34,394 and non-appropriated positions increased from 9,947 to 
10,044. The District of Columbia Fiscal Year 1995 Appropriation 
Act required that the total number of FTE positions financed 
from appropriated funds not exceed 33,588, which is 2,000 FTEs 
below the 35,588 contained in the original fiscal year 1995 
budget. On February 17, 1995, the District announced that it 
had reduced the number of FTEs by 3,058 to 32,530. This total 
is below the 33,588 ceiling, but the number of reductions 
warrants further explanation. Although, the District said it 
cut more than 3,000 positions, some of these positions were not 
staffed as of the end of fiscal year 1994. Specifically, as of 
September 1994 there were 33,675 actual FTEs on board. 
Therefore, the actual reduction since the beginning of the 
fiscal year in actual FTEs is 1,145. In fact, because the 
District had 33,675 actual FTEs on-board as of September 1994, 
the District only needed to cut 87 positions to meet the 
Congressionally mandated FTE limit.
            e. Required reports not being submitted
    As noted earlier, the District of Columbia Fiscal Year 1995 
Appropriation Act and the Federal Payment Reauthorization Act 
of 1994 each required several periodic financial and 
performance reports. However, the District has not complied 
with these reporting requirements. For example, even though due 
on March 1, 1995, the District has neither submitted the annual 
performance accountability plan, nor the annual 5-year 
financial plan. In addition, although the District submitted 
the first quarterly report on January 17, 1995, the report was 
incomplete and essentially useless.
    This report was to include:
          A cash flow statement that includes comparisons of 
        actual to forecasted cash receipts and disbursements 
        for each month and a cash forecast for the remainder of 
        the fiscal year,
          Explanations of the differences between actual and 
        forecasted amounts and the impact on cash and the 
        budget,
          An aging of accounts receivable and accounts payable, 
        and
          A report showing full-time equivalent (FTE) positions 
        by type of position and funding source.
    To respond to this requirement, on January 17, 1995, the 
District submitted more than 500 pages of documents. Although 
some valuable information was included in this data, for the 
most part, the information is not in a form that is useful to 
monitor the District's financial situation.
    First, the revised cash flow statement was not realistic. 
The statement projected that the ending cash balance for the 
fiscal year on September 30, 1995, will be $50 million. 
However, GAO testified that this projection was based on many 
unapproved actions, double counting of some items, and other 
unsupported financial data. According to GAO, when aggregated, 
these questionable items result in a cash position of negative 
$400 million at the end of the fiscal year. The GAO also 
reports that other adjustments to this cash flow statement 
would result in increasing the projected year-end cash deficit 
to nearly half a billion dollars.
    Another part of the quarterly financial report included a 
statement from the District's financial management system of 
first quarter expenditures. The report neither included 
summaries or analysis of the data, not projections of 
expenditures for the remainder of the fiscal year. This makes 
it impossible to utilize this report to compare actual first 
quarter expenditures with budgeted amounts or to project year-
end expenditures.
    Other parts of the quarterly financial report also did not 
provide useful information. The lists of unpaid vouchers 
(payables) and accounts receivable also were not summarized in 
the report. The legislation required an aging of payables and 
receivables. The lists of payables included a date for each 
line item, but this date is the date the voucher was entered in 
the District's financial management system and not the date of 
the voucher. This date is even more meaningless for this 
listing, because in the first quarter, as a part of the 
District's efforts to control cash, vouchers were held for 
extended periods being entered in the system.
    The quarterly financial report also included some data on 
The City's number of FTE personnel for various periods. 
However, the District did not submit several categories of 
required information on personnel, including the actual number 
of full-time, part-time, and temporary employees, and the 
source of funding for these employees.
    The District of Columbia's financial situation is 
uncontrolled. The District has not responded to congressional 
direction and continues to request additional federal funding, 
higher spending levels, and retention of its oversized 
workforce. Congress in the early 1990's provided substantial 
additional aid to the District with The City promising spending 
reductions. This did not happen. History has demonstrated that 
The City cannot or is unwilling to make the difficult decisions 
necessary to restore District finances to a sound position. The 
District needs the assistance of an outside entity to ensure 
that this is done.

                 B. Few options available for recovery

1. Why a financial control authority?

    As the foregoing demonstrates, the District of Columbia is 
experiencing a chronic and profound budgetary crisis. The 
City's problems exceed the challenge of debt management alone. 
The evidence and testimony before this Committee amply 
demonstrate that the problems creating budgetary shortfalls in 
The City result from over spending and poor management.
    In proposing to create a financial control authority, 
however, the Committee has considered a variety of other 
mechanisms for financial relief. These include indefinite 
deficit funding by the Congress, or a ``cash bailout''; a 
municipal reorganization under chapter 9 of the U.S. Bankruptcy 
Code; creation of a Federal receivership; and, retrocession of 
the District of Columbia to the State of Maryland. But these 
alternative remedies would too narrowly address the ``symptom'' 
of a runaway deficit without treating the underlying 
``disease.'' The District of Columbia's deficits are 
attributable to a myriad of problems, discussed supra, primary 
of which are municipal employment and service levels which 
exceed combined municipally-derived revenue and Federal aid.
2. Cash bailout

    Without meaningful government reform and strong fiscal 
discipline, there is absolutely no evidence that Federal loan 
guarantees or even large infusions of cash would relieve 
permanently the underlying causes of the current budget crisis. 
Some might argue that because the District of Columbia and 
Congress enjoy a unique Constitutional relationship, Congress 
should step forward and provide immediate financial relief. At 
best, this stopgap measure would be short term and would not 
resolve the problems that caused the immediate crisis. 
Moreover, Congress has tried this approach, only to find the 
District in worse financial condition after it acted.
    The District faced a cash shortage in 1990. At the time, 
the federal payment was permanently authorized at $425 million 
per year. The Congress has not raised the authorization or 
appropriation for several years. If the then existing law had 
continued from 1990, the District would have received the 
following federal payments:

FY 1991 federal payment authorized and             $425MM               
 appropriated.                                                          
FY 1992 federal payment authorized and             $425MM               
 appropriated.                                                          
FY 1993 federal payment authorized and             $425MM               
 appropriated.                                                          
FY 1994 federal payment authorized and             $425MM               
 appropriated.                                                          
FY 1995 federal payment would have been..........  $425MM               
                                                  ======================
      Total......................................  $2.125 billion       
                                                                        

    Instead, following Mayor Kelly's inauguration in January 
1991, Congress went to extraordinary lengths to help the 
District of Columbia. The following chart is quite instructive:

1991 Dire Emergency Supplemental...  $100MM + $100MM                    
1991 accumulated deficit bond        $331MM + $331MM                    
 authorization.                                                         
FY 1992 federal payment............  $630MM + $205MM                    
Formula federal payment ACT FY 1993  $624MM + $199MM                    
Formula federal payment ACT FY 1994  $632MM + $207MM                    
Federal payment FY 1995 (lower than  $660MM + $235MM                    
 authorized because of ``spike''                                        
 caused by changing property tax                                        
 year).                                                                 
                                    ------------------------------------
      Total........................  +1,277 billion more than District  
                                      would have received prior to 1991.
                                                                        

    So, Congress appropriated or allowed the District 
government to raise $1,277 billion more cash than it would have 
had otherwise from 1991-1995. The effect of Congress's 
generosity is plain to see in the current financial situation 
which is far worse than before.

3. Municipal reorganization under the U.S. Bankruptcy Code

    Although it would clearly come within Congress' authority 
under the Constitution's Bankruptcy Clause to amend the U.S. 
Bankruptcy Code to permit a chapter 9 filing by the District of 
Columbia, there is little practical significance or advantage 
to such a legislative gesture.
    It is not mere coincidence that none of the major cities 
that have worked with Control Board's have ever filed or 
successfully reorganized under chapter 9. Reorganization under 
the U.S. Bankruptcy Code is designed to facilitate debt 
management and thereby rehabilitate private or municipal 
debtors. Under chapter 9, the jurisdiction of the court is 
limited; it may not interfere with (1) the political or 
governmental powers of the debtor, (2) property or revenues of 
the debtor, or (3) the debtor's use or enjoyment of any income-
producing property. Hence, the Bankruptcy Code as it stands is 
neither intended to nor designed to promote judicial 
restructuring of a municipal government that suffers chronic, 
structural budget deficits.
    Chapter 9 was a logical remedy for Orange County, 
California, because it dealt primarily with debt-management 
issues. There, a fundamentally solvent municipal entity became 
insolvent very quickly as a result of its high-risk investment 
practices. But the issues facing the District of Columbia are 
much more entrenched and may require political and structural, 
as well as financial remediation.
    Testimony before this Committee suggests that Control 
Board's operate most effectively when they embody local 
cooperation for concerted, if unpopular, reform measures and 
external pressure to impose financial reform and oversight. The 
Committee believes that this balance will be most successfully 
achieved within a format that requires the District government 
to work under the potentially tighter and more far-reaching 
constraints imposed by the Authority created in this bill, 
rather than under the narrow powers granted a Federal judge 
under the U.S. Bankruptcy Code.
    Chapter 9 very explicitly reserves control of the municipal 
debtor to the debtor; the standing government is charged with 
the responsibility of engineering its own rehabilitation. 
Unlike a Control Board, the Court provides no mechanism for 
acquiring independent financial expertise services. Nor can it 
provide legally binding guidance to the debtor on 
administrative or structural reform. The Court's role is 
limited to confirming the legally-binding plan negotiated by 
the debtor and its creditors. Such plans generally contemplate 
restructuring of debt rather than more fundamental changes in 
governmental operations. Testimony before the Committee 
suggests that the Financial Control Authority created may 
provide a source of creative solutions to the District's 
underlying problems, and the mechanism to insure their 
implementation.

4. Receivership

    The to-date successful receivership of Chelsea, Mass. has 
been offered as a paradigm for restructuring the District 
Government. There are, however, few parallels between Chelsea's 
situation and the District's.
    The notion of a Federal receivership as a political and 
financial solution for a Federal enclave is essentially without 
precedent. Hence, the term ``receivership'' in this context 
connotes little more than the complete dissolution of home 
rule, with the replacement of local government by an individual 
with sweeping authority.
    Receivership is without precedent in the District's 
history. The Committee believes that such a draconian measure 
is not warranted at this time, and that it would be 
counterproductive. Testimony of those individuals associated 
with successful municipal rehabilitation revealed that 
effective, lasting reform must begin with new approaches to 
municipal operations. But the Committee believes that these 
reforms will only develop and endure if the D.C. Government is 
a responsible partner in its own inevitable, albeit painful, 
restructuring.
    Committee Chairman William F. Clinger, Jr. stated however 
during Committee consideration of the bill that, ``nobody 
should doubt the resolve of this Committee to take any steps 
necessary if District Government officials do not cooperate 
with the financial control board established by this 
legislation.''

5. Retrocession of the District of Columbia to the State of Maryland

    In 1846, the State of Virginia requested retrocession from 
the District for the portion of Alexandria County (presently 
Arlington County and much of the city of Alexandria) it had 
ceded on the grounds that the part of The City on its side of 
the Potomac was imposing an economic burden while the rest of 
the District was thriving. Congress granted the retrocession 
after a referendum on the matter passed in the affected area 
and after approval of the Virginia legislature. Hence, the 
District of Columbia today includes only territory that was 
once part of Maryland.
    Some have suggested that the District's financial problems 
could be alleviated by receding all but a de minimis reserved 
Federal enclave back to the State of Maryland. Legislation has 
been introduced in the 104th Congress to effectuate this 
partial retrocession. The question of retrocession of the 
District to Maryland has been considered in the past, usually 
in connection with the issue of voting representation. The 
practical, legal, and Constitutional obstacles to such a move 
are substantial. The argument is made that Maryland must 
formally accept retrocession, at the least, as Virginia did in 
1846. Moreover, one or more amendments to the Constitution may 
be necessary to effect a retrocession. First, the repeal of the 
Twenty-third Amendment allowing appointment by the District of 
electors to participate in the Electoral College. Second, it 
has been argued that Congress may not divest itself of 
responsibility for any portion of the District, in accordance 
with the Constitutional mandate to Congress of exclusive 
jurisdiction at Article 1, Sec. 8, clause 17.
    Given these political and legal obstacles, any process 
leading to a prospective retrocession would be cumbersome and 
lengthy. Most important, retrocession merely shifts 
jurisdiction over the District's problems; it offers no ready 
framework for introducing urgently needed fiscal and 
administrative reform. Finally, retrocession is ultimately a 
consensual political act for which no consensus is now 
apparent. Compared to a financial control authority, which can 
develop and implement expansive solutions, relying on 
retrocession seems unrealistic--and likely to divert attention 
from more immediate, productive approaches.

      C. EXPERIENCE WITH FINANCIAL CONTROL BOARDS IN OTHER CITIES

    Financial control boards have been created by State 
legislatures to oversee the financial recovery of several large 
U.S. cities since the mid-1970s. To illustrate the range of 
experience with financial control boards and provide a context 
for evaluating the situation in the District of Columbia, this 
section reviews five such occurrences:
          A. Chicago School District--the Chicago School 
        Finance Authority;
          B. Cleveland--the Financial Planning and Supervision 
        Commission;
          C. New York City--including both the New York State 
        Financial Control Board and the New York State 
        Municipal Assistance Corporation for the City of New 
        York (popularly known as MAC or ``Big Mac'');
          D. Philadelphia--the Pennsylvania Intergovernmental 
        Cooperation Authority (PICA); and
          E. Yonkers--the New York State Emergency Financial 
        Control Board for the City of Yonkers.
    The discussion focuses on six aspects of financial control 
boards:
          1. summary of the crisis that necessitated the 
        establishment of the board;
          2. duration of the board;
          3. board composition and appointment authority;
          4. staffing;
          5. enforcement authority, mechanisms, and penalties; 
        and
          6. effectiveness and advantages of the financial 
        control board in placing the jurisdiction on a sound 
        financial basis along with its concomitant limitations.

1. Summary of instigating crisis

            a. City loses access to the bond market
    Among the five locales examined, the event or circumstance 
that most often led to the establishment of a FCB was the city 
(or school district) losing its access to the municipal bond 
market. That is, the city was no longer able to borrow money on 
its own in the private capital markets. In most cases this 
transpired as the financial market decided that the city was no 
longer creditworthy.
    In his study of New York City, political scientist Robert 
W. Bailey distinguishes this type of ``financial crisis'' 
(referring to borrowing and cash flow) from a ``fiscal crisis'' 
(the imbalance between expenditures and revenues) or an 
``economic crisis'' (the deterioration of the employment and 
tax base). Bailey also refers to the ``politics of creditor 
intervention'' as a distinguishing feature of a financial 
crisis for a city. The point is that underlying economic and 
fiscal fundamentals of the city, in this case New York, may not 
have changed much in nature, they may have been exacerbated. 
What did change was the decision of creditors to no longer 
underwrite New York's dependence on borrowing to finance 
operating deficits and with unrealistic revenue or expenditure 
estimates.
            b. Situation deemed an emergency; underlying problem of 
                    several years' duration; little opportunity for the 
                    FCB to intervene preventively
    It is considered highly unusual for a state to intervene in 
the affairs of its subjurisdictions. Intervention is typically 
reserved for situations that can be classified as emergencies 
or disasters. In all five of the cases examined, the state 
waited until the crisis in the bond market occurred before 
taking steps to intervene by establishing a FCB. In retrospect, 
manifestations of the underlying problem were evident for three 
to ten years before the crisis erupted. Because they were 
established after the crisis had already occurred, the 
financial control boards did not have the opportunity to engage 
in ``preventive intervention.''
    Ohio adopted legislation in 1979 specifying the financial 
distress conditions under which the State could step into the 
affairs of any municipality. This laid the groundwork for 
subsequent intervention in Cleveland in 1980. In all of the 
other cases, the state adopted emergency legislation particular 
to the city in distress.
            c. New entity created by the State to issue bonds on behalf 
                    of the city; the Financial Control Board may be 
                    part of that borrowing entity, or separate
    For the city to regain access to the credit markets, in 
three cases examined, a new borrowing entity was established, 
distinct from the jurisdiction in financial distress. The new 
borrowing authority was a creation of the state government. In 
two cases, the borrowing agency itself exercised the functions 
of a FCB (the Pennsylvania Intergovernmental Cooperation 
Authority and the Chicago School Finance Authority). In another 
case, the borrowing agency worked in conjunction with a 
separate FCB (New York's Municipal Assistance Corporation as 
borrowing authority worked with the New York State Financial 
Control Board).
    The creation of a special borrowing authority has been a 
way to circumvent debt and tax limits previously imposed on the 
city by the state. It effectively increased the amount of 
permissible borrowing for the city. It also avoided the need 
for local voter approval of bond issues.
    No separate borrowing authority was set up for the City of 
Yonkers or Cleveland. In the case of Yonkers' first crisis 
(1975-78), it was able to reenter the bond market once the 
emergency FCB was established and the New York State 
Comptroller was empowered as fiscal agent of the city. In 
Yonkers' second crisis (1984), New York State loaned Yonkers 
the money through the State Insurance Fund. In the case of 
Cleveland, the local banks which normally financed Cleveland's 
operating and capital needs agreed to lend the money once the 
city agreed to certain budget requirements.
            d. New borrowing entity has a segregated revenue source, 
                    dedicated to servicing its debt
    The paramount concern of the FCB has generally been 
establishing the credit worthiness of the new borrowing 
authority. To that end, a revenue source was often designated 
to pay the interest and principal on the debt issued by the new 
borrowing authority. This may be either a new (or increased) 
tax, or an old revenue source (including state aid) that would 
otherwise have gone into the general revenues of the city. 
Importantly, the money to service the debt was kept separate 
from other funds of the city in distress. The money collected 
from the dedicated source was deposited into a special account, 
often maintained by the state, or by a private bank named as 
trustee. The debt issued by the new authority was explicitly 
not the responsibility of either the city or the state.
            e. The city's debt is restructured, from short to long-term
    A common component of a financial rescue plan has been to 
convert short-term into long-term borrowing to save the city 
money in the interim. This debt restructuring may require 
special permission from the state under the terms of the 
financial rescue agreement.
    It is generally considered fiscally imprudent to use long-
term debt to finance current operating deficits. Long-term debt 
is usually reserved to pay for capital investment projects 
which provide benefits over numerous future years. In the 
special case of a city in fiscal distress, exceptions were 
sometimes made to ``buy time'' to get the city's finances back 
in order. Because the repayment of principal is stretched out 
over more years, the annual carrying costs of a long-term bond 
could be lower than for a short-term note of similar principal 
amount, and more so if long-term rates were lower than short-
term rates. (Cumulative total interest costs, however, are 
likely to be higher with a longer payback period.)
            f. Reasons motivating the State to get involved
    Two main types of concerns have motivated and been used to 
justify state intervention into the affairs of their cities. 
One was the fear that the city's poor credit rating would spill 
over to the state itself or to other subjurisdictions and 
agencies. This could lower the credit rating and thereby raise 
the interest rate that those entities would have to pay on 
their own borrowings. In the worst case, access to the bond 
market might be denied for them as well.
    The other was the state's responsibility for the health and 
welfare of the citizens of both the distressed jurisdiction and 
others in the state. Negative economic ramifications from the 
distressed jurisdiction could hurt the economic well-being of 
other parts of the State.
            g. Reasons motivating the Federal Government to get 
                    involved
    The Federal Government became involved with New York City 
because the magnitude of the city's borrowing needs threatened 
to swamp the nationwide municipal bond market. This is not the 
reason for Federal concern in the case of the District of 
Columbia. The Federal Government's concern for the District 
stems from its ultimate responsibility for the health and 
welfare of the residents of the District (and, by their 
interconnectedness, neighboring jurisdictions) and its role as 
lender of last resort to the District.
    The Federal role in the New York City fiscal crisis of the 
1970s has two parts, sometimes referred to as New York I and 
New York II.
    New York I.--In December 1975, President Ford signed into 
law the New York City Seasonal Financing Act of 1975 (P.L. 94-
143). This provided for Federal short-term loans (up to one 
year) to the city in an aggregate outstanding amount not to 
exceed $2.3 billion. The loans were to be repaid by the last 
day of the fiscal year in which they were issued, and they 
were. The Federal Government was in essence providing the tax 
and revenue anticipation loans for the duration of the initial 
three-year financial plan. The authority to make loans under 
this act expired on June 30, 1978.
    New York.--On August 8, 1978, President Carter signed into 
law the New York City Loan Guarantee Act of 1978 (P.L. 95-339). 
Unlike the short-term loans under the 1975 law, the 1978 
extension authorized guarantees for the principal and interest 
on long-term loans. The total amount of guaranteed debt that 
New York City could issue was limited to $1.65 billion, 
allocated over four fiscal years: $750 million for fiscal year 
1979, $250 million for fiscal year 1980, $325 million for 
fiscal year 1981, and $325 million for fiscal year 1982.
    The loan guarantees could last for as long as fifteen years 
and would be available only for bonds sold to city or state 
pension funds. The guarantees formed an important part of a 
$4.5 billion financing package consisting of funds from both 
public and private sources.
    In both phases the Federal Government relied on the New 
York State Financial Control Board and the special deputy State 
comptroller as the oversight authority. No separate Federal 
oversight apparatus was established.

2. Duration of Control Board

    A FCB is intended to be temporary--to exist only so long as 
the city is considered to be in financial emergency or, at 
most, as long as debt issued under the FCB's authority remains 
outstanding. Experience caution, however, that an expected 
involvement of three years can turn into 10, 20, or more years.
    In his testimony before the Subcommittee on the District of 
Columbia, New York City Mayor Rudolph W. Giuliani expressed his 
belief that a limit should be placed on the lifespan of a FCB 
from the inception. The Mayor said, ``* * * a financial control 
board should have a beginning and an end. Once the city has 
regained fiscal discipline, the financial control board can 
become just another layer of bureaucratic oversight--and it can 
itself become a political tool. It should have a strict sunset 
period and be disbanded as soon as possible so a city can 
quickly gain self-sufficiency.'' He suggested a lifespan of one 
to three years. Mr. Giuliani, who became Mayor of New York in 
January 1993, confronts a FCB that has been in existence since 
1975, and on stand-by authority since mid-1986 when the 
conditions for truncating the FCB's powers were met.
    In contrast, Ohio Governor George V. Voinovich (formerly 
mayor of Cleveland) said, ``I chose to keep the Commission 
intact as long as I could, because it provided a buffer between 
me [as mayor] and our city council.'' Although Cleveland 
emerged from bankruptcy 13 months after the Financial Planning 
and Supervision Commission was established in 1980, the 
Commission remained in place for another 6 years, until all of 
the issued bonds were paid off in 1987.
            a. Actual experience
    In terms of duration, the FCBs examined fall into three 
groups: short-term (three to seven years); long-term (10 or 
more years); and interrupted-term (terminated or suspended once 
but later reimposed).
    Short term.--Cleveland's FCB was in existence for seven 
years, from 1980 to 1987. Philadelphia's, the newest FCB, 
established in June 1991, has now been in place for three and 
one-half years; the city administration hopes that the board 
can be terminated within 2 years.
    Long term.--For New York City, the Municipal Assistance 
Corporation, established in 1975, remains in existence 20 years 
later, albeit with reduced duties. The New York State Financial 
Control Board, also established in 1975, had most of its powers 
expire 11 years later, in 1986, but remains on standby 
authority.
    Interrupted term.--In the cases of both Yonkers and the 
Chicago School District, the powers of the FCBs were suspended 
when the jurisdictions in question achieved a balanced budget 
for the number of years specified by the governing legislation, 
only to be reinstated a number of years later when the city 
failed to submit a balanced budget. The first Yonkers FCB board 
existed for three years, from 1975 to 1978, when it was 
terminated; the FCB was reinstated in 1984 and remains in 
existence as of February 1995. The Chicago School Finance 
Authority can be characterized as both long-term and 
interrupted-term. First established in 1980, it remains in 
existence in 1995, 15 years later. For the period from 1988 to 
1993, however, while it continued to monitor, its review and 
approval authority with respect to the school district's 
financial affairs were significantly reduced; the Authority was 
given added duties related to implementing the State's 
educational reform plan (these school reform duties were later 
repealed, effective June 30, 1994). But in September 1993, when 
the school board failed to adopt a balanced budget, the 
financial powers of the School Finance Authority were 
reinstated and enhanced. Thus, its two terms of active 
involvement were 1980-88 and September 1993-present.
            b. General provisions for expiration of FCB
    The conditions that will permit a FCB to expire are 
typically set forth in the enabling legislation. The expiration 
date of the board has often been set as 6 months or 1 year 
after the end of the ``emergency period'' or after all the 
liabilities (bonds and notes issued or loans incurred) have 
been fully paid and discharged.
    The end of the emergency period is defined as the city 
meeting one or more financial conditions. One condition is that 
the city's budget has been in balance for a specified number of 
years. The requirement was 1 fiscal year in the 1975 Yonkers 
legislation, revised to three fiscal years in the 1984 Yonkers 
legislation, and six successive years of balanced budgets in 
the case of the Chicago School Finance authority. Another 
condition is that the city has presented a multi-year 
prospective financial plan with operating and capital budgets 
in balance. The number of years required in the financial plan 
ranged from two for the Chicago school board (recently reduced 
from three years), to three for New York City, four for Yonkers 
(replacing the initial requirement of only one year), and five 
for Philadelphia. The Ohio law did not specify a number of 
years.
    Some statutes also require that all bonds and notes or 
other loans involved in the rescue are fully paid for and 
discharged or otherwise provided for before the FCB can be 
fully dismantled (Chicago School Finance Authority, 
Philadelphia, New York MAC, New York FCB, and Yonkers 1984). 
These same statutes, however, may provide that, although some 
bonds might still be outstanding, the FCB's powers are to be 
scaled back to stand-by monitoring authority if the city has 
achieved a balanced budget for a specified number of years and 
is projected to continue to have a balanced budget for a 
specified number of future years.
    The maximum maturity period of the bonds issued becomes 
particularly relevant in those cases where the liabilities must 
be fully discharged before the FCB can expire. (The maximum 
term of the bonds is not typically specified in the enabling 
legislation; it appears to be left to the discretion of the 
borrowing authority.) In the case of the Chicago School Finance 
Authority's 1994A series, the maximum maturity was 15 years. In 
Philadelphia, the maximum maturity of any PICA bonds issued was 
30 years. New York's MAC issued bonds with maturities up to 30 
years.
    In some cases a ``no-later-than'' termination year is 
specified in the enabling legislation. For New York's Financial 
Control Board and MAC, it was 2008. (This corresponded to 
expecting the emergency period to end in 1978, plus a 30 year 
maximum maturity of MAC bonds.)

3. Board composition and appointment authority

    The FCBs examined had more differences in composition than 
features in common.
            a. Features in common
    The number of voting members of a FCB board has always been 
odd: five for Chicago and Philadelphia; seven for Cleveland, 
Yonkers, and the New York FCB; and nine for New York's MAC.
    The members of the FCB have typically served without 
compensation but were entitled to reimbursement for actual and 
necessary expenses.
    Most members of the FCB have been appointees rather than 
publicly elected officials. All of the FCBs have had appointed 
members. In addition, four FCBs have had ex-officio members, 
but many of those people hold appointed--rather than elected--
State or local positions. The ex-officio member of a FCB most 
likely to be an elected official has been the city mayor 
(Cleveland, New York FCB, and Yonkers). None of the members of 
the MAC board is permitted to be an employee of a Federal, 
State, or local government. In Ohio, the appointed members are 
not to have held public office for five years prior to their 
appointment, or to become a candidate while serving as a member 
of the commission.
    Most but not all of the financial control boards have been 
required to have one or more ex-officio members with budgetary 
expertise. This may be the State comptroller, treasurer, or 
secretary of the budget, and the city comptroller or director 
of finance.
            b. Differences among FCBs
    The FCB composition differed among the five cities examined 
in several aspects of political interest:
          Whether the membership of the FCB was determined 
        largely by the state versus whether the city had 
        significant representation; relatedly, what offices the 
        ex-officio members of the board held (whether state or 
        city offices);
          How the chairman was determined (whether the chairman 
        is beholden primarily to the state governor or was 
        selected by the board itself);
          Whether there were also non-voting members and who 
        appointed those non-voting members;
          Whether city employees were represented; and
          Whether the minority parties in the state and the 
        city were represented.
    On the Cleveland and Chicago FCBs, approximately half of 
the appointment authority was shared by the State with the 
city. Of five directors in Chicago, two are appointed by the 
Governor with the approval of the mayor, two are appointed by 
the mayor with the approval of the governor; the chairman is 
appointed jointly by the mayor and governor. Of seven 
commission members in Cleveland, the three appointed by the 
Governor and approved by the Senate came from a list of five 
submitted by the mayor and chairman of the city council. Of the 
four ex-officio members, two were from the State and two from 
the city. The Cleveland Commission elected its chairman and 
vice chairman from among its own members.
    At the other extreme, the Philadelphia board is almost 
entirely appointed by State executive and legislative 
officials. The only representative of the city is ex-officio, 
the City Director of Finance. Of the five appointed voting 
members, one is appointed by the Governor, and one each by the 
majority and minority leadership of the State House and Senate. 
The members of the board select officers from among themselves. 
It is customary, however, that the member appointed by the 
Governor becomes chairman.
    In the three New York State cases, the State, particularly 
the Governor, maintains strong control. But the city is 
guaranteed some representation. For the New York City FCB, of 
the three members appointed by the Governor with the advice and 
consent of the Senate, two must be residents of or have their 
principal place of business in New York City. Two of the four 
ex-officio members are from the city: the Mayor and the 
Comptroller. The State Governor, an ex-officio member, is 
designated by law as chairman.
    For New York's MAC, of the nine members appointed by the 
Governor, four are appointed upon written recommendation of the 
mayor. The Governor designates the chairman of MAC. Under the 
law governing the Yonkers Financial Control Board, the 
secretary of state--a State official appointed by the Governor 
and an ex-officio member of the board--is designated as 
chairman. The four appointed members are all appointed by the 
Governor with the advice and consent of the State Senate. The 
only voting member representing the city is ex-officio, the 
mayor of Yonkers.
    There are no non-voting members in the cases of Chicago, 
Cleveland, and New York's MAC. Two members of Philadelphia's 
FCB are non-voting, but they are ex-officio (the State 
secretary of the budget and the city director of finance).
    The two financial control boards created by New York State 
allow for a large number of nonvoting members: nine for New 
York City (compared with seven voting) and six for Yonkers 
(compared with seven voting). Exactly which State or city 
official may appoint a non-voting member is specified in the 
legislation. The non-voting members provide for representation 
of the minority as well as majority parties of the New York 
State House and Senate. In addition, in the case of New York 
City, both the minority and majority parties of the city 
council are represented. In the case of Yonkers, the county 
executive of Westchester may appoint a representative and the 
Board may designate a representative for Yonkers city 
employees.
    In Ohio, a person named serves for the life of the 
commission. The term for the Chicago School Finance Authority 
is three years, and for MAC is four years. In Philadelphia, the 
member's term is at the pleasure of, or at most coterminous 
with, the appointing authority's. A member of the New York City 
FCB serves at the discretion of the Governor.
    In the case of New York City, the role of a single 
individual, Felix Rohatyn, chairman of MAC, was of paramount 
importance in convincing the various parties to work toward a 
solution. Mr. Rohatyn, coming professionally from the 
investment banking community, had then and still maintains an 
extremely high level of credibility in the financial markets.
    It is considered important that the individuals serving on 
a board be qualified in terms of expertise and be committed to 
the endeavor. It is also considered important that board 
members be effective both in convincing the city to reform its 
financial practices as well as in representing the city's 
interests before the State legislature, executive agencies, and 
other officials in a position to aid the city. Several of the 
statutes specify that the appointed (non ex-officio) members of 
the control board should have their residency, office, or 
principal place of professional or business activity situated 
within the municipality.
    A number of witnesses at the hearings held by the 
subcommittee on the District of Columbia emphasized the 
importance of participation by members from the private 
business sector who volunteered their time and expertise to 
serve on the board. Former New York State Governor Hugh L. 
Carey, who served as the chairman of the financial control 
board for New York City, compared these private citizen members 
of the board to Harry Truman's ``Dollar-a-Year men'' in the 
40's and 50's, who were called upon to design the peacetime 
conversion of the United States after World War II. Mr. Carey 
described the NYSFCB as a ``consensus board to help the city.'' 
He also emphasized that the effort was bipartisan. He pointed 
out that the original control board and the original Federal 
involvement came about while Gerald Ford, a Republican, was in 
the White House, and the mayor and governor in New York were 
Democrats.
    Ohio Governor George V. Voinovich, who served as mayor of 
Cleveland during the time of the Financial Planning and 
Supervision Commission, said ``We insisted that the Commissions 
membership include local stakeholders, and not be completely 
controlled by the state.'' Local stakeholders included business 
and civic leaders of Cleveland.
    The question of whether the city's mayor should serve on 
the FCB was specifically addressed at the hearings. A 
distinction was made between whether the FCB is a ``control 
board'' or an ``oversight board.'' Former New York Governor 
Carey emphasized the importance of having the mayor ``at the 
table'' when the big decisions about the city's future are 
being decided by a control board. This does not require that 
the mayor be a voting member, but at least a nonvoting member 
of the control board. In contrast, Ronald G. Henry, the 
executive director of the Philadelphia Intergovernmental 
Cooperation authority from 1991 to 1994, expressed the belief 
that it would have been counterproductive to have the mayor 
serve on an oversight board.

4. Staffing

    The in-house staffs of oversight boards have typically been 
quite small--six positions (in Philadelphia and Yonkers) or 
fewer, including secretarial and administrative support staff. 
The largest, the New York Financial Control Board, had a staff 
of 25 in 1976, its first full year of operation, and 27 in 
1986, the year when many of its powers expired.
    Each FCB typically had had an executive director, a deputy 
executive director who may also be a financial analyst, a 
financial analyst, and two administrative assistants or support 
staff. In addition, there has typically been a general counsel 
(legal advisor), who may be either in-house staff or on outside 
contract.
    Each FCB has usually contracted with outside accountants 
and auditors to review the financial accounts of the city in 
question, and with outside financial advisors (underwriters) 
and bond counsel to manage bond issuance by the oversight 
board. Substantial powers were delegated to the outside 
accountants in some cases. This was particularly true under the 
Ohio law's provisions concerning the ``financial supervisor''--
the CPA firm to be retained by the financial planning and 
supervision commission for the city in distress.
    When the Chicago School Finance Authority (CFSA) had its 
financial powers reinstated and enhanced in 1993, the new 
position of inspector general was created to investigate 
allegations of waste, fraud, and financial mismanagement by 
employees of or contractors with the CFSA. The CFSA also has a 
corporate secretary, but no financial analyst.
    Some FCBs were authorized to request the loan of staff from 
the State or the local government. Some were also authorized to 
request that the city (or school district, in the case of 
Chicago) provide the control board with office space.

5. Powers of successful financial control boards

    In all the cases examined, the new borrowing authority and 
the FCB have been intended as temporary, not permanent 
institutions. The goal has been for the city to reestablish its 
financial viability within a reasonable number of years 
(specifically: to be able to independently reenter the bond 
market). The base of the problem, however, has been a city's 
inability to obtain sufficient revenue sources or to adequately 
control spending on its own. Consequently, in exchange for 
receiving temporary fiscal relief from the new borrowing 
authority, the city typically has given up some independence in 
shaping its own budget.
    There are several main ways in which FCBs have contributed 
to removing the obstacles cities were facing in trying to 
balance their budgets. They have:
          Provided city officials with the fortitude to cut 
        expenditures;
          Persuaded the city employee unions to accept wage 
        freezes, staff cuts, and increased flexibility in work 
        rules;
          Overridden local citizens' resistance to raising 
        local taxes;
          Convinced the State to loosen its restrictions on the 
        city's ability to levy taxes; and
          Obtained permission from the State to restructure the 
        city's debt obligations from short to long term, and 
        relax conditions related to tax and revenue 
        anticipation notes.
    An important overall design question has been whether it 
was necessary or helpful for the FCB to manage the city's 
budget in detail in order to accomplish the necessary 
discipline. Or, was it sufficient for an oversight board to set 
aggregate requirements, such as requiring a balanced budget and 
limiting the amount that the city could borrow. Most of the 
control boards reviewed here have focused on macromanaging by 
setting aggregate spending limits, determined by the estimated 
revenue available.
    To be successful, the oversight sanctions have had to be 
sufficiently punitive to motivate the city government to 
restore financial order so that oversight is no longer 
necessary. The powers actually exercised by FCBs have varied 
according to the local situation, most importantly the degree 
of cooperation and responsiveness from city officials and labor 
unions.
    In terms of attracting the attention of the city to the 
gravity of the situation, two of the most important powers for 
an oversight board seem to have been:
          The authority to enable the city to borrow or to 
        prevent it from borrowing; relatedly, the authority to 
        determine the amount of debt the city may issue; and
          The authority to prevent the jurisdiction from 
        spending any money whatsoever if it is not operating 
        under ``an approved financial plan,'' that is, a 
        balanced budget plan approved by the board as required 
        under the enabling law; the Chicago School Finance 
        Authority prevented the opening of the schools when the 
        Chicago school district did not have a balanced budget 
        and multi-year financial plan approved by the 
        Authority.
    In terms of guiding the city toward reformed behavior, some 
of the most important powers for an oversight board seem to 
have been:
          Authority to review the city's revenue estimates; if 
        the board does not approve the city's estimates, the 
        board makes its own revenue estimates; the approved 
        revenue estimates set the aggregate limit on 
        permissible spending;
          Authority to review the city's budget, requiring 
        quarterly or, if the situation is more serious, monthly 
        reporting by the city to the oversight board;
          Authority to require the city to improve its 
        accounting practices, normally by adopting Generally 
        Accounting Principles (GAAP); and
          Authority to require the city to submit to the board 
        for its review and approval a multi-year financial 
        plan, with the current year and each future year in 
        balance; the multi-year horizon pressured the cities to 
        take a more serious long-run approach to stabilizing 
        the financial operations and programs.
    In terms of forcing the city to reform its behavior, some 
of the most important powers for an oversight board seem to 
have been:
          Power of the purse strings; authority to take over 
        control of the city's budget, as ``fiscal agent,'' 
        collecting all revenues and making all disbursements; 
        (New York State Financial Control Boards for New York 
        City and Yonkers and the State Comptroller);
          Ability to withhold State grant monies and excess 
        monies from borrowing activity from the city, if the 
        city is not in compliance with the financial plan 
        (Philadelphia's PICA);
          Power to override old contracts, negotiate or 
        disapprove new contracts, and extract concessions from 
        contractors;
          Authority to review and approve or disapprove 
        collective bargaining agreements with the city workers' 
        unions, achieve bargaining agreements with no automatic 
        cost-of-living increases (or at least a wage freeze as 
        in New York City and Yonkers), and secure agreements 
        that increase the flexibility in union work rules;
          Authority to order cuts in the number of staff;
          Authority to order indefinite postponements or 
        cancellations of popular capital improvement projects 
        like libraries (New York City and Yonkers); and
          Authority to levy higher taxes on the city's existing 
        tax bases, without voter approval.
    In terms of obtaining help for the city from additional 
revenue sources, some of the most important powers for an 
oversight board seem to have been:
          Authority to request for increased state aid;
          Authority to ask the state to approve new non-
        property tax revenue sources for the city;
          Forcing the city to hold a referendum on increasing a 
        local tax; and
          Convincing the state legislative to adjust the rules 
        concerning the city's issuance of long-term debt as 
        well as the conditions applying to short-term tax and 
        revenue anticipation notes.
    In terms of protecting the bondholders, important powers 
and actions have been:
          Identifying a specific revenue source dedicated to 
        servicing the debt;
          Increasing the rate of an existing local tax (sales, 
        personal income, or real property) if necessary; and
          Depositing the earmarked revenue into a separate 
        account, maintained by the State or a private bank 
        designated as trustee.
    At the hearings held by the Subcommittee on the District of 
Columbia, Members of Congress asked the witnesses how much 
power they thought the FCB should have. New York Mayor Rudolph 
Giuliani expressed his belief that the mayor and city council 
should continue making the decisions so that they would be in 
shape to take back control. Mr. Giuliani did not favor granting 
the FCB independent borrowing authority. He stated that the FCB 
should work with the mayor and city council to achieve 
financial stability for the city.
    David Cohen, chief of staff to Mayor Edward Rendell of 
Philadelphia, viewed the mission of the Philadelphia 
Intergovernmental Cooperation Authority (PICA) as one of 
oversight rather than control. He felt that the FCB should not 
try to impose its own solution on elected officials, but rather 
function as a forum from which to encourage the elected 
officials to make the difficult decisions. For that indirect 
influence to be convincing, he said, the FCB needs to an 
enforcement mechanism and the will to implement it if 
necessary. Ronald Henry, former executive director of PICA, 
proposed that, in order for the financial situation to improve, 
local officials have to reach the point where they realize that 
serious changes are needed. In order to pressure local 
officials to make changes, he suggested that restrictions 
accompany any Federal leading to the District of Columbia in 
response to the current crisis.

6. Effectiveness

    All of the FCBs examined can, at a minimum, be credited 
with accomplishing a temporary improvement in the financial 
situation of the city or school district for which they were 
responsible. But none can be credited with achieving a 
permanent solution. Witness the fact that FCBs have been 
reimposed on Yonkers and the Chicago School Board; New York 
City again faces a huge budget deficit; the city of Cleveland 
faces financial woes and, by a judge's order, the Cleveland 
School District was placed under the control of the Ohio State 
Superintendent of Schools in March 1995; and the long-term 
future of Philadelphia's finances remains open to doubt.
    While they may not have achieved permanent financial 
recovery, the cities probably could not have accomplish as much 
without a FCB. Even so, it is not clear how much credit should 
go to specific actions taken by the FCB--nor how much blame for 
failure. What is perceived to be the effectivness--or lack of 
effectiveness--of the FCB, may have been influenced greatly by 
related factors.
    In some cases, the very presence of a FCB and its 
accompanying powers may have served as a sufficient motivation 
to spur city officials into undertaking corrective actions on 
their own, even if the board itself did not take direct 
actions.
    One oversight institution on its own may not be enough. In 
the case of Yonkers, New York, the creation of the State 
Financial Control Board was not sufficient to restore investor 
confidence. In addition, the State comptroller had to be 
appointed as fiscal agent before Yonkers could reenter the bond 
market. Similarly, in the case of New York City, the creation 
of the Municipal Assistance Corporation was not enough. The New 
York State Financial Control Board had to be added before 
investor confidence was sufficiently restored. And, for a 
period, New York City also needed Federal loans and loan 
guarantees.
    In the cases of New York and Chicago, in particular, the 
FCBs effectiveness was augmented by research or advocacy 
provided by watchdog groups to both the oversight board and the 
city council or school board.
    The same state legislature which created the FCB can 
undercut long-term solutions by continuing to limit the city's 
ability to levy non-property taxes, mandating certain types of 
spending (e.g., for specific school programs), and setting 
local matching requirements for welfare, Medicaid, and other 
programs. The state legislature may create the FCB and permit 
additional borrowing, but not address the underlying structural 
and fiscal problems facing the city. State laws may severely 
circumscribe a city's authority to tax. States like Illinois 
and Ohio have been hesitant to grant authorization for levying 
local non-property taxes without approval by local referenda. 
Being limited to property taxes and state aid for financing is 
a particular problem for school districts.
    The financial problems facing cities have sometimes been 
exacerbated by mandates imposed by the Federal or State 
government, or by court order. Cities may have little control 
over the amount of State or Federal aid they receive or the 
mandated local percentage matching requirement for certain 
expenditure functions. In New York State, local governments are 
responsible for 25 percent of Medicaid and AFDC costs. Cities 
were under other outside pressures during the 1980s, namely 
court-ordered desegregation of schools and, in the case of 
Yonkers in particular, desegragation of housing. While 
protesting the housing court orders, Yonkers incurred 
substantial fines, exacerbating the financial distress. Chicago 
was under the pressure of a school education reform effort 
enacted by the State of Illinois in 1988 which mandated many 
changes in the delivery system.
    The FCB may represent an additional expense for the 
jurisdiction in distress. The expenses of the Chicago School 
Finance Authority are paid from the general State school aid 
that would otherwise be payable to the Chicago Board of 
Education for school purposes. In Philadelphia, the expenses of 
PICA are to be paid by the city. In contrast, in Ohio, expenses 
of the Financial Planning and Supervision Commission for a city 
are ``* * * payable solely from appropriations made by the 
general assembly.''
    City officials tend to resent micromanagement of city 
affairs by a FCB, more than macromanagement. City officials 
would typically prefer that the FCB set the total spending 
limit but let the city decide specifically where to cut 
expenditures. However, in cases where city officials face 
intransigence in securing agreement to budget cuts from city 
employees or program divisions within the city bureaucracy, the 
officials may find the presence of a FCB useful in providing 
them needed additional bargaining power. In such cases, 
micromanagement by the control board might be regarded as 
helpful. Micromanagement may also be more favorably received by 
the city if the control board and the city are dominated by the 
same political party. Under the New York State law, the 
Financial Control Board was prohibited from setting expense 
priorities for the city; MAC, however, is known to have put 
conditions on the city's use of surplus debt service funds.
    The finances of a city are influenced by the business cycle 
and shifting voter attitudes toward taxation and spending. 
These in turn influence the ability of the city to raise its 
own revenues and to receive assistance from higher levels of 
government, particularly the State. A State is more likely to 
offer assistance to its cities when the State itself is in 
better financial shape.
    The ability to achieve financial reform may be thwarted by 
conflicts within a city's own political structure, or between 
the city and the FCB. If the major and city council are in 
serious disagreement, it appears more difficult to make 
progress. If city officials have not agreed to the need for 
reform and if they have an antagonistic relationship with the 
control board, it is more difficult to make progress.
    In the other cities examined, the mayor in office at the 
time of the financial crisis was replaced at the end of his 
term. The financial control board was thus able to work with a 
new mayor who was generally more committed to budget reform 
than his predecessor.
    In Cleveland and Yonkers, the term of the mayor at the time 
was two years. (Subsequently, in both cities, the term has been 
increased to four years in an effort to strengthen the role of 
the mayor.) In Cleveland, the controversial Mayor, Dennis 
Kucinich, and the city council disagreed on how to solve the 
fiscal dilemma, and the city defaulted on $15.5 million short-
term notes in December 1978. As he explained at the hearings 
held by the D.C. Subcommittee, George V. Voinovich was 
Lieutenant Governor of Ohio in 1979 when he was recruited to 
return to Cleveland and run for mayor, in an effort to turn 
around the city's financial situation. He was elected and 
became mayor in November 1979. Unlike Kucinich, who had 
resisted State intervention, Voinovich welcomed the 
intervention of the State of Ohio which declared a financial 
emergency and established the Financial Planning and 
Supervision Commission in January 1980.
    Yonkers was placed under an Emergency Financial Control 
Board from 1975 through 1978. A control board was reimposed in 
1984. Although the city met one sunset requirement of 3 years 
of balanced budgets in fiscal years 1992-94, the control board 
remains in existence. Henry J. Spallone, the mayor during 1990 
and 1991, was focused on fighting the Federal court housing 
desegregation order. In 1991 his administration submitted a 4-
year financial plan that was not in balance, in violation of 
the law governing the State-imposed FCB. In 1990, Yonkers' 
voters approved a change to a ``strong-mayor'' form of 
government, effective in 1992. The position of city manager was 
abolished. Three-way controversies among the city manager, 
mayor, and city council were judged to have hindered efforts to 
deal effectively with the budget. The mayor's term was 
increased from 2 to 4 years and the mayor was given enhanced 
power over the budget and political appointments, previously 
vested in the city manager. The current mayor, Terrence 
Zaleski, elected in 1991, is the first to serve under the new 
rules. Part of Yonkers' recent difficulties in obtaining the 
required certification of its budget by the State comptroller 
stems from political differences between the Republican city 
council and the Democratic mayor which each propose their own 
version of the city budget and between the Republican council 
and the State Control Board appointed by the previous 
Democratic Governor of New York, Mario Cuomo. The newly elected 
Republican Governor George Pataki has not yet appointed new 
members to the Financial Control Board.
    In Philadelphia, Mayor Wilson Goode was in the third year 
of a four-year term in June 1991 when the city reached its debt 
limit and the Pennsylvania Intergovernmental Cooperation 
Authority was established. In November 1992, Philadelphians 
elected a new mayor, Edward Rendell, who was committed to 
bringing the city under better managerial control. Philadelphia 
achieved a small general fund surplus in fiscal years 1993 and 
1994.
    In New York City, Abraham Beame was in the second year of 
his 4-year term as mayor when the New York City fiscal crisis 
erupted in the summer and fall of 1975. While Mayor Beame 
remained in office until the end of his term, budgetary power 
was effectively transferred to the deputy State comptroller for 
the City of New York and the Emergency Financial Control Board 
chaired by Governor Hugh Carey. The authority of the Control 
Board during the 1975-78 emergency period has been described as 
``effective receivership over the city's budget and spending 
decisions.'' Edward Koch was elected mayor in November 1977.
    In Chicago, the school's superintendent and the School 
Board president at the time that the School Board's bond 
ratings were lowered in November 1979 both resigned before the 
School Finance Authority was established in 1980.
    The Committee finds that the foregoing discussion provides 
an ample foundation for the consideration and enactment of H.R. 
1345.
                      IV. Explanation of the Bill

    Section 1. Short Title; Table of Contents.--Subsection (a) 
establishes the short title, and subsection (b) sets forth the 
table of contents.
    Section 2. Findings; Purpose.--Subsection (a) provides that 
the Congress finds that: financial problems and management 
inefficiencies of the D.C. Government have led to a 
deterioration of services and a migration of residents and 
businesses out of the District; these problems must be resolved 
over a multi-year period; Congress must act to restore the 
District's ability to borrow from private capital markets; and 
failure to act could adversely effect the efficient operation 
of the Federal government.
    This legislation is a display of Congress's commitment to 
the District of Columbia. Strong action is being taken to 
assure the fiscal health of the District of Columbia in both 
the short and the long-term. Existing holders of District of 
Columbia debt should feel confidence in the future from this 
legislation.
    Subsection (b) provides that the purposes of this bill are 
to address and cure the fiscal, financial, management, and 
economic problems of the District of Columbia government. It 
also addresses the need to enhance the District's standing and 
access in the credit and capital markets.
    The District is the only city in the United States which 
funds state, county and municipal functions. The District pays 
the state, county and municipal portions of many costly federal 
programs. Medicaid is a prominent example. Very few cities pay 
for Medicaid costs and many states have sought relief from 
these costs. One in four District residents benefit from 
Medicaid. Another example is the prison system. Cities 
generally fund lockups but states fund prisons. In the course 
of writing this bill, the Treasury and the investment services 
indicated that the District's position would be strengthened by 
some indication that Congress was willing to consider funding 
some of the District's state and county responsibilities. A 
hearing has been held by the Subcommittee on the future of the 
Lorton prison facility and another has been scheduled. The 
Congress has indicated the need for the District to take 
substantial initiative on its own problems before federal 
relief will be considered. The Committee hopes that the 
imposition of this Authority will move the District decisively 
in that direction.
    Subsection (c) Establishes as rules of construction that 
nothing in this Act relieves any existing obligation to repay 
borrowed funds, or limits the constitutional authority of the 
Congress over the District.

          Title I--Establishment and Organization of Authority

    Section 101. District of Columbia Financial Responsibility 
and Management Assistance Authority.--Subsection (a) prescribes 
that the Authority is established under Congress' plenary power 
of exclusive legislation concerning the District of Columbia. 
While the Authority is established as part of the District of 
Columbia government, it is the Committee's strong intent that 
the Authority shall function and operate in an independent 
oversight capacity.
    Subsection (b) provides that the Authority's five members 
are to be appointed by the President, in consultation with the 
chairs of the House and Senate Appropriations Committees, the 
House Government Reform and Oversight and Senate Governmental 
Affairs Committees, and the Delegate from the District of 
Columbia, for an initial term of three years. The President 
shall designate one member as the chair.
    Subsection (c) provides that members of the Authority must 
have knowledge and expertise in finance, management and the 
organization or operation of business or government. The 
members must not provide goods or services to the District 
Government; not be an officer or employee of the District 
government; and during the most recent taxable year have paid 
personal income or business taxes to the District government.
    Subsection (d) provides there shall be no compensation for 
service, but allows reimbursement for reasonable and necessary 
expenses.
    Subsection (e) provides that the Authority shall adopt by-
laws, rules, and procedures governing its activities and will 
be subject to District of Columbia rules and regulations as it 
considers appropriate. The Committee specifically recommends 
that the District of Columbia government procurement, 
personnel, and contracting rules not be adopted by the 
Authority. The Committee further recommends that the Authority 
maximize its independence from the District government.
    Section 102. Executive Director and Staff of Authority.--
Provides that the Authority shall have an Executive Director 
appointed by the chair with the consent of the Authority. The 
Executive Director may appoint such staff as necessary with the 
approval of the chair. The Committee intends that the 
professional staff be held to the minimum level necessary to 
accomplish the Authority's duties. The Authority budget must be 
appropriated by Congress which intends to review each item 
carefully. Provides that civil service laws on competitive 
appointments, classification, and pay shall not apply to the 
Executive Director and staff. Upon request of the chair, the 
head of any Federal agency may detail personnel to assist the 
Authority. The Committee hopes that both the District 
government and the Authority utilize federal detailees for 
their expertise in specific areas of need in the District 
government.
    Section 103. Powers of Authority.--Provides for holding 
hearings and obtaining data from Federal and DC agencies.
    Subsection (e) provides subpoena power and for application 
to U.S. Courts for orders to enforce subpoenas.
    Subsection (f) provides that upon request, GSA may provide 
administrative support services on a reimbursable basis.
    Subsection (g) provides that the Executive Director may 
enter into contracts.
    Subsection (h) provides that the Authority may seek 
judicial enforcement of its authority to carry out its 
functions.
    Section 104. Exemption From Liability for Claims.--Exempts 
Authority and its members from liability for any obligation or 
claim against DC resulting from actions taken under this Act.
    Section 105. Treatment of Actions Arising from Act.--
Provides that any action taken against the Authority or arising 
out of this Act shall be brought in federal court and receive 
expedited consideration.
    Section 106. Funding for Operation of Authority.--
Subsection (a) provides that the Authority shall submit a 
proposed budget for each fiscal year to the President for 
inclusion in the annual budget of the District government not 
later than May 1st, but for FY 1996, not later than July 15, 
1995. No amount may be obligated or expended by the Authority 
unless it has been appropriated by Congress.
    Subsection (b) provides that soon after the appointment of 
its members, the Authority shall submit to the Mayor and 
President a description of the Authority's anticipated 
expenditures for FY 1995, and a request for reprogramming of 
funds previously appropriated to the District government. While 
the Committee is sensitive to the District government's concern 
on this matter, it is imperative that the Authority be able to 
utilize already appropriated funds as start-up funding. Once 
the Authority is operating and the expected borrowing is 
underway, the Authority will be funded completely from interest 
earned on funds in its escrow accounts.
    Subsection (c) points to sections 204(b)(1)(A) and 
213(b)(3) for provisions describing sources of additional funds 
available for the authority's operations.
    Section 107. Suspension of Activities.--12 months after the 
financial obligations of the Authority are discharged, it shall 
suspend activity and the terms of its members shall expire, but 
this does not apply in a control year. The President may 
reactivate the Authority upon being notified by the chairs of 
the house and Senate appropriation committees that the proper 
conditions exist and appoint new members if a control period is 
initiated any time after a suspension of activity has occurred.
    Section 108. Application of Laws of District of Columbia to 
Authority.--The Committee intends that the laws of the District 
shall automatically apply to the Authority only as listed here 
and that otherwise, as listed in subsection 101(e) above, only 
insofar as the Authority chooses. Neither the Mayor or the 
Council may exercise control or supervision over the Authority, 
nor may they enact any law or rule with respect to it. 
Subsection (d) provides that in any action brought by or on 
behalf of the Authority, it shall be represented by such 
counsel as it may select, but in no case by the Corporation 
Counsel of the District of Columbia.
                title ii--responsibilities of authority

Subtitle A--Establishment and enforcement of financial plan for 
        district government

    Section 201. Development of Financial Plan and Budget for 
District of Columbia.--Provides that for each fiscal year of a 
control period, the Mayor shall develop and submit a financial 
plan to the Authority. The plan shall cover the applicable 
fiscal year and the next three fiscal years, and shall contain 
specified information and also meet standards described in 
subsection (c). The Committee expects the Authority to set the 
format of the financial plan and to set up schedules and 
guidelines for the District government. The Committee further 
expects that considerable interaction between the Authority and 
the District government will enhance the District government's 
ability to design an appropriate plan and to meet the schedule 
necessary to comply with other provisions of the legislation.
    Subsection (d) repeals offsets against the Federal Payment 
provided for in section 138(c) of the FY 1995 Appropriations 
Act. The Committee notes that this provision affects the 
Appropriations Committee's language contained in the FY 1996 
District of Columbia Appropriations Act. The penalties imposed 
in that Act were designed to deal with a situation that has now 
been overtaken by events and the creation of this Authority 
addresses the long-term problem that the Appropriations 
Committee was concerned with. The Committee appreciates the 
indulgence of the Appropriations Committee in this emergency 
situation.
    Section 202. Process for Submission and Approval of 
Financial Plan and Annual District Budget.--Subsection (a) 
provides that a financial plan and budget should be submitted 
to the Authority and the Council by February 1 preceding a 
fiscal year of a control period.
    Subsection (b) provides that the Authority shall promptly 
review the financial plan and budget.
    Subsection (c) provides that if the financial plan and 
budget is approved by the Authority, the Authority shall 
certify this to the Mayor, Council, President, and Congress.
    If the Authority fails to give notice of its action on the 
financial plan within 30 days, it shall be deemed approved. It 
shall provide the Mayor, Council, President, and Congress with 
an explanation for its failure to provide notice.
    Not later than 30 days after receiving notice of the 
Mayor's financial plan and budget or revised plan being 
approved or, if both the Mayor's preliminary and revised plan 
have been rejected, a plan recommended by the Authority, the 
Council shall by Act adopt the financial plan and budget of the 
District government for the fiscal year and submit such 
financial plan and budget to the Authority.
    If the Authority determines that the financial plan and 
budget for the fiscal year submitted by the Council meets 
requirements under section 201, it shall approve the financial 
plan and budget and provide the Mayor, Council, President, and 
Congress with certification of its approval. The Council shall 
submit the financial plan and budget to the Mayor, the 
President and Congress.
    If the Authority determines that the financial plan and 
budget does not meet the requirements of section 201, it shall 
disapprove the financial plan and budget and provide the above 
parties with reasons and any recommendations for revisions.
    If the Authority fails to give notice of its action on the 
financial plan and budget within 15 days after receipt from the 
Council, they shall be deemed approved, and the Authority shall 
provide the Mayor, Council, President, and Congress with an 
explanation for its failure to provide notice.
    Not later than 15 days after receiving notice from the 
Authority that the financial plan and budget is disapproved, 
the Council shall submit a revised financial plan and budget to 
the Mayor and the Authority. If the revised financial plan and 
budget is approved, the Authority shall notify the above 
parties of such, and the Council shall then submit the revised 
financial plan and budget to the Mayor for transmission to the 
President and Congress.
    If the revised financial plan and budget is disapproved, 
the Authority shall notify the parties and provide them reasons 
for such disapproval, and shall submit a recommended financial 
plan and budget to the Mayor, Council, President, and Congress. 
The Counsil shall submit the disapproved revised financial plan 
and budget to the Mayor for transmission to the President and 
Congress.
    If the Authority fails to give notice of its action on the 
revised financial plan and budget within 15 days, it shall be 
deemed approved. The Authority shall provide an explanation for 
its failure to give notice.
    Not later than June 15 preceding each fiscal year which is 
a control year, the Authority shall: provide Congress with 
notice certifying its approval of the Council's initial 
financial plan and budget; provide notice certifying approval 
of the Council's revised financial plan and budget; or submit 
to Congress a recommended financial plan and budget for the 
District government.
    Subsection (d) provides that if the financial plan and 
budget is disapproved by the Authority, it shall provide the 
Mayor and Council the reasons for such disapproval and 
recommendations for revisions.
    Not more than 15 days later, the Mayor shall submit to the 
Authority and the Council a revised financial plan and budget. 
If the Authority approves the revised financial plan and 
budget, it shall certify same to the Mayor, Council, President, 
and Congress, and the Mayor shall submit the revised financial 
plan and budget to the Council.
    If the Authority disapproves the Mayor's revised financial 
plan and budget, it shall provide the above parties with a 
statement containing the reasons for such disapproval and 
recommended a financial plan and budget which it shall submit 
to the Mayor and Council. In addition, the Mayor shall submit 
the revised financial plan and budget disapproved by the 
Authority to the Council.
    If the Authority fails to give notice of its action on the 
revised financial plan within 15 days of receipt, it shall be 
deemed approved. The Authority shall provide the Mayor, 
Council, President, and Congress with an explanation for its 
failure to provide notice.
    Not later than 30 days after receiving the Mayor's approved 
revised financial plan and budget, or the financial plan and 
budget recommended by the Authority, the Council shall by Act 
adopt the financial plan and budget of the District government 
for the fiscal year and submit such financial plan and budget 
to the Mayor and the Authority.
    The financial plan and budget submitted by the Council 
shall be reviewed by the Authority and revised by the Council 
in the same manner as provided in paragraphs (3), (4), and (5) 
of subsection (c) above.
    The Committee understands the complicated nature of the 
budget process prescribed in this Act, however, every effort 
has been taken to remain within the parameters of the Home Rule 
Act while retaining adequate time for Congress to act on the 
necessary appropriations bill. The Committee insisted that the 
Mayor and Council have two turns at every stage of the budget 
process and was forced to compress the veto provisions of the 
Home Rule Act in order to maintain the necessary timeline. 
Otherwise, the process may have been easier or cleaner, but 
more violence would have been done to existing District 
government procedures.
    Subsection (e) permits the Mayor to submit to the Authority 
proposed revisions to the financial plan and budget for a 
control year at any time during the year.
    Subsection (f) amends section 603 of the Charter to permit 
the District to submit an unbalanced budget for a fiscal year 
which is consistent with the financial plan for that year. This 
subsection also sets forth an expedited veto provision during a 
control year.
    Subsection (g) amends D.C. Code sec. 31-103, and section 
452 of the Charter to permit the Mayor and Council to specify 
the purposes and amounts of expenditures within the annual 
budget for the Board of Education during a control year. The 
Committee understands the sensitive policy issues involved in 
this provision, however, the School Board budget is a 
significant portion of total District spending and its fiscal 
and management practices have been called into question by 
numerous sources. The Committee fully intends that the 
Authority will carefully examine the operations of the School 
Board and include it in the necessary actions to solve the 
District's budget, fiscal, and management problems.
    Subsection (h) amends section 422(3) of the Charter (which 
pertains to the District's merit personnel system for pre-1980 
employees) to provide that nothing shall prevent the District 
from separating an officer or employee subject to such system 
``in the implementation of a financial plan'' approved pursuant 
to this Act. The Committee intends to waive the current 
``super'' status of pre-1980 employees just as was done in 
1991, during the last fiscal crisis. The Committee fully 
expects that this waiver will be more forcefully and completely 
utilized on this occasion than was done in 1991.
    Section 203. Review of Activities of District Government to 
Ensure Compliance with Approved Plan and Budget.--Subsection 
(a) provides that each Act passed by the Council and approved 
by the Mayor (or allowed to take effect without the Mayor's 
signature) during a control period shall be submitted to the 
Authority for review to determine whether it is consistent with 
the financial plan and budget.
    If the Act is approved by the Authority, it shall notify 
the Council and the Council shall submit the Act to Congress 
for review pursuant to section 602(c)(1) of the Charter.
    If the Authority determines that an Act is significantly 
inconsistent with the financial plan and budget, it shall 
notify the Council and provide reasons, and may provide 
recommendations for modifications.
    The Authority shall have no authority to approve or 
disapprove emergency legislation. The Council may not submit 
any act to the Congress which has been found by the Authority 
to be significantly inconsistent with the applicable financial 
plan and budget.
    If the Authority failed to notify the Council of its action 
within seven days of receipt, the Act shall be deemed approved. 
At its option, the Authority may take an additional seven days 
if it so notifies the Mayor and Council within the first 7 
days.
    At the request of the Council, the Authority may conduct 
preliminary review of proposed legislation to determine its 
consistency with the financial plan and budget.
    It is the Committee's intent by this provision that proper 
care will be taken by the Council to understand and plan for 
the fiscal implications over several years of new legislative 
action. This would include legislation reducing expenditures as 
well as legislation increasing expenditures.
    The Committee expects the Authority to set up a procedure 
to quickly determine whether legislation has a fiscal impact or 
not and to expedite certification of non-fiscal matters. 
Particularly because of the Congressional review requirement, 
the Committee intends that the Authority will act to minimize 
unnecessary delay in implementing Council acts. The Committee 
explicitly states that the Authority is not to review 
legislation on a policy basis except as that policy affects or 
contains fiscal implications and impacts.
    Subsection (b) provides that during a control year, any 
labor contract, or other type of contract or lease the 
Authority may specify, which the Mayor proposes to enter into 
must be submitted to the Authority for prior approval. The 
proposed contract or lease may not be entered into unless the 
Authority determines that it is consistent with the financial 
plan and budget for the fiscal year.
    The Committee anticipates that the Authority will inject 
itself into the normal contracting process of the District 
government only to the extent necessary to ensure excellence in 
that procedure. The Committee insists that the Authority have 
the power necessary to accomplish the purposes of the 
legislation. If the Authority determines that it should look at 
significant numbers of District contracts then it has the power 
to do so. As the District government's performance improves it 
is anticipated that the Authority will be able to reduce its 
burden in this area.
    The Authority may require the Mayor to submit for its 
review any other contract or lease entered into during a 
control year which is executed after the Authority has approved 
the financial plan and budget for the year. If the Authority 
determines it is not consistent with the financial plan and 
budget, the Mayor shall take such actions as are within the 
Mayor's powers to revise the contract or lease, or shall submit 
to the Authority a proposed revision to the financial plan and 
budget so that the contract or lease will be consistent.
    The Authority may also require the Mayor to submit for its 
review any proposal to renew, extend, or modify a contract or 
lease in effect during FY 1995 to determine if it is consistent 
with the budget for that year approved under the FY 1995 
Appropriations Act.
    It is vitally important to begin to make substantial 
reductions in spending as soon as possible. The District 
government should not hesitate to move decisively on 
contracting and all other spending areas. ``Waiting for the 
Authority'' is not a reasonable approach for either the 
District executive or legislative branch to adopt at this time.
    In the case of a contract which is subject to the approval 
by the Council, the Mayor shall submit such contract to the 
Authority only after the Council has approved the contract.
    Subsection (c) provides that if the Mayor submits a 
reprogramming request to the Council during a control year, it 
must also be submitted to the Authority for review. The Council 
may not adopt a reprogramming until the Authority has provided 
the Council with its analysis of the reprogramming's effect on 
the financial plan and budget.
    This legislation amends the current budget process to 
require that all reprogramming be approved by the Council and 
that any increased spending in one area be offset with real 
reductions in another. The Council must be confident that the 
proposed offsets are adequate and that no overall increase in 
spending authority will be created. Therefore, the Authority 
must analyze the proposal so that the Council can have approved 
``scoring'' before it acts.
    Section 204. Restrictions on Borrowing by the District 
During Control Year.--Subsection (a) provides that the District 
government may not borrow money (including funds from the 
Treasury) during a control year unless the Authority certifies 
that the receipt of funds through such borrowing and the 
repayment of obligations incurred through such borrowing are 
consistent with the financial plan and budget for the year. If 
the borrowing is found to be inconsistent with the financial 
plan and budget, the Mayor may submit to the Authority a 
proposed revision to the financial plan and budget so that the 
borrowing will be consistent.
    During the 45 days following the appointment of the 
Authority's members, the District government may borrow from 
the Treasury without prior approval of the Authority. During 
the portion of FY 1995 which follows the above 45-day period, 
the District government may borrow from the Treasury if the 
Authority finds that the borrowing is necessary to meet the 
District's needs and that the District is making progress 
toward meeting its responsibilities under this Act.
    Subsection (b) provides that, beginning with FY 1996, any 
funds borrowed from the Treasury during a control year shall be 
deposited in an escrow account held by the Authority which 
shall expend a portion of the funds for its operations during 
the year in which the funds are borrowed, and allocate the 
remainder of such funds to the Mayor as it considers 
appropriate, consistent with the financial plan and budget for 
the year, and any withholding of funds pursuant to this Act.
    Subsection (c) amends Title VI of the District of Columbia 
Revenue Act of 1939 (D.C. Code 47-3401) by striking all after 
the heading and inserting the following:

    Sec. 601. Transitional Provision for Short-Term Advances.--
Subsection (a) provides that the Secretary of the Treasury 
shall advance funds from time to time, out of money in the 
Treasury not otherwise appropriated, for the assistance of the 
District government in meeting general expenditures, as 
authorized by Congress. Advances shall be made subject to 
certain conditions, but no later than September 30, 1995. The 
District must demonstrate it is unable to obtain credit in the 
public credit markets. The Secretary must determine that there 
is reasonable assurance of reimbursement for the advance from 
the amount authorized to be appropriated for the Federal 
Payment. Each advance shall be in an amount designated by the 
Mayor, and shall, if for the purpose of meeting general 
expenditures, be subject to limits set by the bill. Any advance 
made before October 1, 1995, shall mature not later than 
October 1, 1995. The funds advanced shall be deposited with the 
District government unless the Authority requests that the 
Secretary deposit these funds with the Attorney.
    Subsection (b) provides that advances made after October 1, 
1995 are permitted, but are subject to similar conditions, 
though later deadlines. The aggregate maximum amount 
outstanding under this subsection for FY 1996 is the amount 
authorized to be appropriated as the annual Federal Payment for 
FY 1996.
    Section 602. Short-term Advances for Seasonal Cash Flow 
Management.--Subsection (a) provides that the Secretary of the 
Treasury may advance funds to the District government for the 
purpose of meeting its general expenditures, as authorized by 
Congress, at times of seasonal cash-flow deficiencies.
    Subsection (b) applies the same conditions as set forth in 
Section 601 above.
    Subsection (c) provides that the amount of all advances 
under this section shall not be greater than 100% of the amount 
authorized for the Federal Payment for the following fiscal 
year.
    Section (d) provides that the latest maturity date of an 
advance under this subsection shall be not later than 11 months 
after the advance was made.
    Subsection (g) provides that advances made under this 
section shall deposited by the Secretary with the Authority.
    Section 603. Security for Advances.--The Secretary may 
require such security for these advances as the Secretary deems 
appropriate.
    Section 604. Reimbursement to the Treasury.--With certain 
exceptions, the District government shall repay the advances 
made out of taxes and revenue collections. If on any date when 
a reimbursement payment is due to the Treasury, the District 
fails to make reimbursement, the Secretary shall withhold the 
amount due from the annual Federal Payment, or if this is not 
sufficient to obtain full reimbursement, the Secretary shall 
withhold from each grant, entitlement, loan or other payment to 
the District, not dedicated to making entitlement or benefit 
payments to individuals, an amount necessary to fully reimburse 
the Treasury for the payment not made. If this is not 
sufficient, the Secretary shall attach any and all revenues of 
the District and apply them toward reimbursement.
    Section 605. Definitions. Various terms are defined for the 
purposes of the amendment made by subsection (c) of section 204 
of this Act.
    Subsection (d) provides that any funds allocated by the 
Authority to the Mayor from funds in the Authority's account 
shall only be expended in accordance with the terms and 
conditions set by the authority.
    Subsection (e) provides that for the purposes of title VI 
of the District of Columbia Revenue Act of 1939, amounts 
expended for the operation of the Authority shall be considered 
amounts expended for the support of the District government.
    Section 205. Deposit of Annual Federal Payment With 
Authority.--Provides that during a control year, the Secretary 
shall deposit the annual Federal Payment with the Authority 
which shall allocate the funds to the Mayor in accordance with 
such terms and conditions as it considers appropriate to 
implement the financial plan for the year.
    Section 206. Effect of Finding of Non-Compliance with 
Plan.--Subsection (a) provides that not later than 30 days 
after each quarter, the Mayor shall submit reports to the 
Authority describing the actual revenues obtained, expenditures 
made, and cash flows during the quarter.
    Subsection (b) provides that if the Authority determines 
based on information it may obtain that the revenues or 
expenditures of the district during a control period are at 
variance with the financial plan and budget for the year, the 
Authority shall require the Mayor to provide additional 
information to explain the inconsistency.
    Subsection (c) provides that if, after receipt of an 
explanation from the Mayor, the Authority shall notify the 
President, Secretary of the Treasury, and congress of the 
variance, unless it finds the Mayor's explanation reasonable or 
the Mayor proposes remedial action which the Authority finds 
appropriate and consistent with the financial plan and budget, 
and the Mayor agrees to submit such reports as the Authority 
may require.
    Subsection (d) provides that if a variance is certified to 
exist, the Authority may withhold any funds deposited with it 
under section 204(b) or 205 which would otherwise be expended 
on behalf of the District. In addition, the Secretary of the 
Treasury may withhold any funds otherwise payable to the 
District under such Federal programs (other than entitlement 
programs) as the Authority may specify.
    Section 207. Recommendations on Financial Stability and 
Management Responsibility.--The Committee expects that some of 
the most important work of the Authority will be in working 
with the District government and designing recommendations to 
improve the operation of the District government whether that 
is in an area of direct financial impact or one of indirect 
impact by improving the efficiency of District employees or 
redesigning the District's government structure. The Committee 
urges both the District government and the Authority to take 
this section seriously and to strive to work together to 
improve the District government as the necessary changes are 
made.
    Subsection (a) provides that the Authority may at any time 
submit recommendations to the Mayor, Council, President, and 
Congress, on action the District or Federal governments may 
take to ensure compliance with the financial plan or to 
otherwise promote the financial stability, management 
responsibility, and service delivery efficiency of the 
District. A nonexclusive list of eight areas of recommendations 
is presented.
    Subsection (b) provides that not later than 90 days after 
receiving a recommendation from the Authority submitted under 
subsection (a), that Mayor and council shall notify the 
Authority, President, and Congress whether the District 
government will adopt the recommendation. If so, the Mayor 
shall provide a written plan to implement the recommendation. 
If not, the Mayor and Council shall provide explanations for 
the refusal to adopt the recommendation.
    Subsection (c) authorizes the Authority to take such action 
as it deems appropriate, with respect to any recommendation it 
has made to the District government which the Mayor or Council 
has indicated will not be adopted. Under subsection (b), the 
Authority must be notified of this decision within 90 days of 
the recommendation's submission. If the District government 
fails to make the required notification, the Authority may 
treat such failure as an indication that the recommendation 
will not be adopted. Also, if the District government does 
notify the Authority that it will adopt the recommendation, and 
then fails to do so to the satisfaction of the Authority, the 
Authority may take appropriate action under subsection (c).
    In the aforementioned instances, the Authority, after 
consulting with the chairmen of the House Committee on 
Government Reform and Oversight and the Senate Committee on 
Governmental Affairs, may take any action to implement its 
recommendation which the Mayor or Council has the authority to 
take. This includes, but is not limited to, structural reforms, 
personnel actions, and the enactment of local ordinances (with 
the same review by Congress as if enacted by the Council).
    Section 208. Special Rules for Fiscal Year 1996.--
Subsection (a) provides that not later than 45 days after the 
appointments of its members, the Authority shall review both 
the proposed FY 1996 budget and the multi-year plan which the 
District submits to Congress pursuant to the sections 446 and 
443 of the Charter. The Authority shall submit any 
recommendations for modifications to such financial plan and 
budget to the Mayor, Council, President, and Congress.
    Not later than 15 days after receiving such 
recommendations, the Council, in consultation with the Mayor, 
shall adopt a revised budget and submit this ``transition 
budget'' to the Authority, President, and Congress.
    Not later than 15 days after it receives this ``transition 
budget'' from the Council, the Authority shall submit a report 
to the Council, President, and Congress containing its analysis 
and any recommendations for revisions.
    Subsection (b) provides that the Mayor shall submit a 
financial plan and budget for FY 1996 to the Authority as soon 
as practicable after enactment of this Act. In accordance with 
the procedures applicable under section 202 of this Act, the 
Council shall adopt the financial plan and budget for FY 1996 
prior to the submission to the Authority of the FY 1997 
financial plan by the Mayor. Upon adoption of the FY 1996 
financial plan and budget by the Council, it shall be submitted 
to Congress as a supplemental budget request for FY 1996. Until 
the Congress enacts the financial plan and budget for FY 1996, 
the transition budget (as enacted by Congress) shall serve as 
the financial plan for FY 1996.
    Subsection (c) provides that during each month of FY 1996 
that precedes the adoption of the financial plan for that year, 
the Authority shall determine whether the Mayor is making 
appropriate progress in developing the financial plan and 
budget. If it finds that the Mayor is not, it shall certify 
same to the President and Congress. Such a certification may be 
cancelled if progress is found. At any time such a 
certification is in effect, the Authority may withhold funds 
from the Mayor.
    Section 209. Control Periods Described.--Subsection (a) 
provides that a control period is initiated whenever: (1) the 
Mayor borrows from the Treasury; (2) the District government 
fails to provide sufficient revenue to a debt service reserve 
fund of the Authority; (3) The District government defaults on 
any loans, bonds or other borrowing; (4) the District fails to 
meet payroll; (6) the existence of a cash deficit at the end of 
any quarter in excess of the difference between the estimated 
revenues and the estimated expenditures of the District during 
the remainder of the fiscal year together with the first six 
months of the succeeding fiscal year; (7) the failure of the 
District to make required payments relating to pensions and 
benefits of former and current employees; (8) or the failure to 
make required payments to any entity established under an 
interstate compact to which the District is a signatory.
    Events that would trigger reactivation of a control period 
under this section are modeled on the New York board 
legislation. The provision contemplates a state of financial 
affairs in the District that it is expected would not recur 
after the control period. Only if the District were 
substantially headed in the direction it now finds itself would 
the triggers apply. The standards for the provisions are 
important, however. They provide an objective, non-political 
and automatic reactivation of the Authority without the need 
for congressional intervention. Some of the triggers are 
designed to alert the Authority in time to prevent the serious 
financial condition the District finds itself in today. Others, 
such as the need to borrow from the Treasury, assure that the 
Authority would be up and running in time to accomplish the 
District's needs.
    Subsection (b) provides that a control period terminates 
when the Authority certifies that the District has adequate 
access to both short-term and long-term credit markets at 
reasonable rates to meet its borrowing needs, and for four 
consecutive years the District's expenditures did not exceed 
its revenues.
    Subsection (c) provides that a control period exists upon 
enactment of this Act.

Subtitle B--Issuance of bonds

    The Authority is set up under Congress's constitutional 
power over the District of Columbia as part and its government. 
Although the Authority is separate and apart from the District 
government for functional purposes, the Committee expects that 
the Authority will receive the same tax-exempt municipal bond 
status as the District government already enjoys.
    Section 211. Authority to Issue Bonds.--Provides that the 
Authority may, at the request of the Mayor and pursuant to an 
act of the Council, issue bonds, notes, or other obligations to 
borrow funds for the use of the District government, in such 
amounts as the Authority considers appropriate. Any funds 
obtained through such borrowing shall be deposited with the 
Authority, which shall disburse such funds to the District at 
such times and in such amounts as it considers appropriate, 
consistent with the specified purposes of such funds and the 
financial plan and budget.
    It is not the intent of this Act to limit or impede the 
authority of independently constituted agencies or 
instrumentalities with dedicated revenue streams (such as the 
Washington Convention Center Authority and the Housing Finance 
Agency) to borrow funds at the open market for their stated 
purposes.
    The Committee believes that the proposed new sports arena 
will be of fiscal and economic benefit to the District and, in 
addition, can be the cornerstone for highly beneficial new 
business development in the downtown area. The Committee favors 
the actions which have been taken and are being taken by the 
District to bring the arena project to fruition at the earliest 
practicable date. Accordingly, the Committee supports the 
District's current efforts to finance the one-time costs of its 
obligations under the agreement with a new Arena Tax and bank 
loans supported thereby, and it is the intent of the Committee 
that the Authority will do nothing to oppose these efforts.
    Section 212. Pledge of Security Interest in Revenues of 
District Government.--Provides that the Authority may pledge or 
grant a security interest in District revenues (including 
payments from the Federal government) to individuals or 
entities purchasing bonds, notes, or other obligations issued 
by it. The Authority may direct the Mayor to pledge or direct 
taxes or other revenues upon their collection to the Authority 
for this purpose.
    Section 213. Establishment of Debt Service Reserve Fund.--
The Authority shall establish a debt service reserve fund, 
consisting of such funds as the Authority may make available, 
to be used for the payment of principal and interest on bonds 
secured in whole or part by such fund. The Authority shall 
establish a minimum reserve fund requirement for this fund, and 
may not withdraw funds below the minimum requirement.
    Section 214. Other Requirements for Issuance of Bonds.--The 
Authority may not issue bonds, notes, or other obligations, 
secured in whole or part by its debt service reserve fund if it 
would cause the amount in the fund to fall below the minimum 
reserve amount set by the Authority. Any amounts provided to 
the District government through the issuance of bonds, notes or 
other obligations, shall be taken into account in determining 
whether the District has reached its debt limit.
    Section 215. No Full Faith and Credit of the United 
States.--Provides that the full faith and credit of the United 
States is not pledged for the payment of any principal of or 
interest on any bond, note, or other obligation issued by the 
Authority. The United States is not liable for any such 
payments.

Subtitle C--Other powers of authority

    Section 221. Duties of Authority During Year Other than 
Control Year.--Subsection (a) provides that during the period 
beginning upon the termination of a control period and ending 
with the suspension of its activities, the Authority shall 
conduct the following activities: (1) review budgets adopted by 
the Council; (2) prior to enactment of the budget by the 
Congress, prepare a report analyzing it and submit it to the 
Mayor, Council, President, and Congress; (3) monitor the 
financial status of the District government and submit reports 
to the Mayor, Council, President, and Congress; and, (4) carry 
out responsibilities with respect to outstanding bonds, notes, 
and other obligations of the of the Authority.
    Section 222. General Assistance in Achieving Financial 
Stability and Management Efficiency.--Provides that the 
Authority may undertake cooperative efforts to assist the 
District government in achieving financial stability and 
management efficiency, such as maintaining sound budgetary 
practices, avoiding interruptions in services, improving the 
delivery of services and the efficiency of management and 
supervision, and making recommendations to the President for 
transmission to the Congress on changes to this Act, or other 
Federal laws, or other actions of the Federal Government, which 
would assist the District government in complying with an 
approved financial plan and budget.
    Section 223. Obtaining Reports.--The authority may require 
the Mayor to submit reports on any financial or operational 
matter it desires.
    Section 224. Reports and Comments.--Subsection (a) provides 
that the Authority shall submit an annual report to Congress on 
the progress made by the District in meeting the objectives of 
this Act during the fiscal year.
    Subsection (b) provides that the Mayor shall also submit 
any report required to be submitted pursuant to section 456 of 
the Charter to the Authority for review. The Authority shall 
submit a report to Congress analyzing the completeness and 
accuracy of such reports.
    Subsection (c) provides that at anytime during a control 
year, the Authority may submit a report on any action taken by 
the District government which it determines will adversely 
affect its ability to comply with the financial plan or will 
have an adverse impact on the best interests of the District.
    Subsection (d) provides that at any time during the control 
period, the Authority may submit a report to the Mayor, 
Council, the President, and Congress on the effect of laws 
enacted [or proposed to be enacted] by Congress on the 
financial stability and management efficiency, financial plan 
and budget for the year, and on the District in general. Any 
such reports shall be available to the public.

                  title iii--miscellaneous provisions

    Section 301. Other District Budget Reforms.--Subsection (a) 
provides that all funds, including grant funds, shall be 
included in the budget request of the District government.
    The Committee strongly believes that the District of 
Columbia budget process has been seriously flawed and has 
contributed to the current distress of the District. For this 
reason, it is necessary to insist that the District of Columbia 
adopt a budget process where all funds are appropriated. In 
this fashion, the Council and the citizens of the District can 
easily understand the budget and can effectively deal with its 
entirety rather than continue to deal with it piecemeal as is 
now the case.
    Subsection (b) provides for restrictions on the 
reprogramming of funds. Any reprogramming request which the 
Mayor submits to the Council which provides for additional 
expenditures must be offset by reductions in another area.
    Subsection (c) provides that the Mayor shall submit to the 
Council a proposed supplemental or deficiency budget 
recommendation if the Council, by resolution requests.
    Subsection (d) provides that the Council shall submit an 
estimate of costs with each Act transmitted for review which 
covers each of the first years the new law is in effect.
    Subsection (e) provides for the reauthorization of the 
Federal Payment through FY 1999.
    The Committee would have preferred not to authorize 
additional expenditures in this legislation. As the process 
came together to provide adequate and certain support to the 
District while imposing the Authority into the governmental 
process it became apparent that the lack of an authorized 
Federal payment for the District after FY1996 was a significant 
obstacle. Specifically, the Treasury would not be allowed to 
secure its loans to the District in a fashion that the 
Congressional Budget Office would not ``score'' for budget 
accounting purposes if there were no authorized payment in 
future years. Therefore, the Committee reluctantly has 
reauthorized the current Federal payment through 1999.
    Section 302. Establishment of Chief Financial Officer of 
District of Columbia.--Subsection (a) amends the Charter to add 
a new section 424 establishing an Office of the Chief Financial 
Officer which shall be headed by the Chief Financial Officer 
(CFO) of the District of Columbia. The Office shall include the 
Office of the Treasurer, Controller, Office of the Budget, 
Office of Financial Information Services, and Department of 
Finance and Revenue. The Treasurer is to be appointed by the 
CFO.
    The subsection further provides that the CFO shall be 
appointed by the Mayor with the advice and consent of the 
Council, except that during a control period the Mayor shall 
consult with the Authority prior to nominating a candidate, the 
Council shall only review the nominee and the appointment shall 
be subject to confirmation by the Authority. The CFO shall be 
subject to firing for cause by the Mayor, except that during a 
control year, the Mayor may not remove the CFO without the 
consent of the Authority or the Authority may remove the Chief 
Financial Officer for cause. The CFO shall be paid at a rate 
determined by the Mayor, not to exceed Executive Level IV. The 
Committee expects the Mayor to recognize the vital role that 
the CFO will play in the implementation of this legislation and 
will compensate that person at the highest possible level.
    The subsection further provides that during a control year, 
the CFO shall: prepare the financial plans; prepare the 
budgets; assure that all financial information presented by the 
Mayor is consistent with the requirements of this Act; 
implement appropriate procedures and systems to ensure that 
budgeting, accounting, and personnel control systems are 
synchronized; prepare estimates of revenues which shall be 
binding on the Mayor and Council; supervise financial 
transactions; maintain systems of accounting; assume 
responsibility for the assessment of all property and for the 
levy and collection of all taxes; maintain custody of all 
public funds; maintain custody of all invested funds; 
apportioning the total of all appropriated funds so as to 
prevent a deficiency; certify all contracts as to the 
availability of funds; approve the payment of all bills and 
payrolls; and perform internal audits of accounts and 
operations.
    The subsection further provides that at all times, the CFO 
shall: supervise the Treasurer; administer all borrowing 
programs; administer the cash management program; administer 
the payroll and retirement systems; and prepare appropriate 
annual, quarterly, and monthly financial reports. This 
legislation in no way changes the functioning of the Retirement 
Board or its fiduciary responsibility for those funds under its 
control.
    Finally, the subsection provides that at all times the 
Treasurer shall assist the CFO in reporting revenues received, 
and perform such other functions as assigned by the CFO.
    Subsection (b) provides that the Mayor may not delegate any 
functions assigned to the CFO, without regard to whether such 
functions are assigned during a control year of any other year.
    Subsection (c) provides that D.C. Law 3-318 (D.C. Code 47-
314 et seq.) is repealed.
    Section 303. Revisions to Powers and Duties of Inspector 
General of District of Columbia.--Subsection (a) establishes 
the Office of Inspector General, to be headed by an Inspector 
General (IG) appointed by the Mayor with the advice and consent 
of the Council except that in a control year the Mayor shall 
consult with the Authority prior to nominating a candidate, the 
Council will have a limited review, and the Authority must 
confirm the appointment. The IG serves for a term of six years. 
The IG shall be paid at a rate determined by the Mayor, except 
that it shall not exceed Executive Level IV.
    The IG shall prepare and submit to the Mayor annual 
estimates of the expenditures and appropriations necessary for 
the operation of the Office for the year for inclusion in the 
District's annual budget. The Mayor shall forward the IG's 
estimates to the Council without revision but subject to 
recommendations. The Council may comment and make 
recommendations concerning the estimates, but shall have no 
authority to revise them.
    Upon receipt of the Federal Payment, the Mayor shall 
deposit a portion of the Payment equal to the estimated amount 
necessary for the IG's Office into a dedicated fund within the 
District government. Such amount shall be paid to the IG by the 
Mayor in such installments and at such times as the IG 
requires.
    Thirty days before the beginning of a fiscal year, the IG 
shall prepare a plan for audits to be conducted. The IG shall 
contract with an independent auditor to audit the financial 
statement and report.
    The IG shall have subpoena power to obtain testimony and 
the production of evidence relating to a matter under 
investigation.
    The IG shall report to the Authority, the Mayor and the 
Council during a control period. When not in a control period, 
the IG shall report to the Mayor and Council. The IG's reports 
shall be available to the public.
    Section 304. Council Approval of Certain Contracts.--
Provides that no contract involving expenditures in excess of 
$1,000,000 during a 12 month period may be made unless the 
Mayor submits the contract to the Council for its approval and 
the Council approves the contract. The contract shall be deemed 
approved by the Council if no member of the Council introduces 
a disapproval resolution within 10 days, or the Council does 
not disapprove the contract within 45 days of submission.
                           V. Roll Call Votes

    In compliance with clause 2(l)(2)(B) of rule XI of the 
House of Representatives, the Committee sets forth the record 
of the following roll call votes taken with respect to H.R. 
1345:

 committee on government reform & oversight, 104th congress, roll call

    Date: March 30, 1995.
    Final Passage of H.R. 1345.
    Offered By: Mr. Davis.

----------------------------------------------------------------------------------------------------------------
          Name               Aye       Nay     Present             Name               Aye       Nay     Present 
----------------------------------------------------------------------------------------------------------------
Mr. Clinger.............        X   ........  .........  Mrs. Collins--IL........        X   ........  .........
Mr. Gilman..............        X   ........  .........  Mr. Waxman..............  ........  ........  .........
Mr. Burton..............        X   ........  .........  Mr. Lantos..............  ........  ........  .........
Mrs. Morella............        X   ........  .........  Mr. Wise................        X   ........  .........
Mr. Shays...............        X   ........  .........  Mr. Owens...............        X   ........  .........
Mr. Schiff..............        X   ........  .........  Mr. Towns...............        X   ........  .........
Ms. Ros-Lehtinen........  ........  ........  .........  Mr. Spratt..............        X   ........  .........
Mr. Zeliff..............        X   ........  .........  Ms. Slaughter...........  ........  ........  .........
Mr. McHugh..............        X   ........  .........  Mr. Kanjorski...........        X   ........  .........
Mr. Horn................        X   ........  .........  Mr. Condit..............        X   ........  .........
Mr. Mica................        X   ........  .........  Mr. Peterson............        X   ........  .........
Mr. Blute...............        X   ........  .........  Mr. Sanders.............        X   ........  .........
Mr. Davis...............        X   ........  .........  Mrs. Thurman............        X   ........  .........
Mr. McIntosh............        X   ........  .........  Mrs. Maloney............        X   ........  .........
Mr. Fox.................        X   ........  .........  Mr. Barrett.............        X   ........  .........
Mr. Tate................        X   ........  .........  Mr. Taylor..............        X   ........  .........
Mr. Chrysler............        X   ........  .........  Ms. Collins--MI.........        X   ........  .........
Mr. Gutknecht...........        X   ........  .........  Ms. Norton..............        X   ........  .........
Mr. Souder..............        X   ........  .........  Mr. Moran...............        X   ........  .........
Mr. Martini.............        X   ........  .........  Mr. Green...............        X   ........  .........
Mr. Scarborough.........        X   ........  .........  Mrs. Meek...............        X   ........  .........
Mr. Shadegg.............        X   ........  .........  Mr. Mascara.............        X   ........  .........
Mr. Flanagan............        X   ........  .........  Mr. Fattah..............  ........  ........  .........
Mr. Bass................        X   ........  .........                                                         
Mr. LaTourette..........        X   ........  .........                                                         
Mr. Sanford.............        X   ........  .........                                                         
Mr. Ehrlich.............        X   ........  .........                                                         
----------------------------------------------------------------------------------------------------------------

    Totals: 45 Ayes.
          VI. Cost Estimate of the Congressional Budget Office

    In compliance with clause 2(l)(3)(b) of rule XI of the 
House of Representatives, the Committee sets forth, with 
respect to H.R. 1345, the following estimate and comparison 
prepared by the Director of the Congressional Budget Office 
under section 403 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, March 30, 1995.
Hon. William F. Clinger, Jr.,
Chairman, Committee on Government Reform and Oversight, House of 
        Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
reviewed H.R. 1345, the District of Columbia Financial 
Responsibility and Management Assistance Act of 1995. H.R. 1345 
was ordered reported by the House Committee on Government 
Reform and Oversight on March 30, 1995.
    Based on information provided by the U.S. Department of the 
Treasury, CBO estimates that enactment of this bill would have 
little or no net impact on the federal budget over the next 
five years. However, because the bill could affect the cost of 
mandatory direct loans, pay-as-you-go procedures would apply.

                          purpose of the bill

    To assist the District of Columbia in addressing its 
financial problems, H.R. 1345 would (1) establish a new entity, 
the District of Columbia Financial Responsibility and 
Management Assistance Authority, to advise the District and 
oversee its financial activities and (2) provide the District 
with additional access to short- and long-term debt financing.
    Responsibilities of the Authority.--The Authority would 
consist of five members appointed by the President in 
consultation with the Congress. During control periods (which 
are defined by section 209 of the legislation), the new 
Authority would review and approve annual financial plans and 
budgets submitted by the District. The financial plans would be 
required to move the District's budget into balance by 1999. In 
order to ensure that the actions of the District are consistent 
with the approved plan, the bill would require the Authority to 
(1) review District-passed legislation before it is submitted 
to the Congress, (2) approve or disapprove leases or contracts 
(including collective bargaining agreements) that the Mayor 
proposes to execute, (3) comment on budget reprogramming 
requests, (4) review the District's performance quarterly and 
report any variances between budgeted and actual transactions, 
and (5) approve all borrowing by the District, whether from the 
U.S. Treasury or in the private market. In addition, the 
Authority would control access to the annual federal payment to 
the District as well as any funds advanced to the District by 
the Treasury.
    Credit Financing.--The bill would provide the District with 
two sources of borrowed funds, advances to the District from 
the U.S. Treasury and borrowing by the Authority in the private 
market.
    Section 204 of the bill would amend section 47-3401 of the 
D.C. Code, relating to the authority of the District government 
to borrow from the U.S. Treasury. Under the bill, if the 
District is unable to obtain credit from commercial sources, it 
may requisition advances (subject to specified conditions and 
limits) in order to meet general expenditures as authorized by 
Congress. Transitional borrowing during fiscal years 1995 and 
1996 would have to be repaid by specified dates and would be 
limited to the amount authorized for appropriation to the 
District (the annual federal payment) for the following year. 
For other years, Treasury funds could only be used for short-
term cash-flow deficiencies (up to a maximum of 150 percent of 
the amount authorized for the annual federal payment for the 
following year) and would have to be repaid within 11 months. 
In all years, the Secretary of the Treasury would be required 
to charge interest on amounts borrowed and would be authorized 
to withhold from the annual federal payment or from certain 
federal grants any amounts needed to reimburse the Treasury if 
the District fails to repay its obligations. Any amounts 
borrowed would be deposited by the Secretary in an escrow 
account held by the Authority, which would have control over 
the timing, amount, and purpose of all withdrawals.
    Section 211 of the bill would permit the Authority to issue 
bonds or other obligations in order to obtain funds needed by 
the District. Any amounts borrowed by the Authority would be 
deposited in an escrow account and allocated to the District as 
the Authority finds appropriate. The Authority would require 
the District to transfer to a reserve fund for debt service 
sufficient taxes or other revenues to redeem the Authority's 
outstanding debt.

                      impact on the Federal budget

    Under Article I, Section 8, of the Constitution, the 
Congress has the power to ``exercise exclusive legislation'' 
over the District of Columbia. Nonetheless, the local receipts 
and expenditures of the District of Columbia have been excluded 
from the Federal budget since 1968, in accordance with the 
recommendation of the President's Commission on Budget 
Concepts. Because the proposed Authority would be created as 
part of the federal government's responsibility for governing 
the District of Columbia, the Authority's financial 
transactions would not be reflected in the federal budget.
    H.R. 1345 would affect federal spending to the extent that 
it increased or decreased the expected subsidy cost to the U.S. 
Treasury of borrowing by the District of Columbia. Although the 
amount of borrowing could be considerably higher under this 
bill than under existing authority, the change in the federal 
government's subsidy cost would be minimal. The advances made 
under this bill would be subject to very little risk because of 
provisions that (1) allow the Authority to control the amount 
and use of Treasury advances, (2) tie the amount of the maximum 
outstanding debt to the authorized annual federal payment, and 
(3) authorize the Treasury to withhold the federal payment as 
well as certain federal grants if the District misses a 
repayment. In addition, the bill would require the Treasury to 
charge interest on advances, whereas current law does not 
permit interest to be charged.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Deborah 
Reis and Rachel A. Robertson.
            Sincerely,
                                             James L. Blum,
                                   (For June E. O'Neill, Director).

                   VII. Inflationary Impact Statement

    Pursuant to clause 2(l)(4) of rule XI of the House of 
Representatives, the Committee estimates that H.R. 1345 will 
have no significant inflationary impact on prices and costs in 
the national economy.

                     VIII. Compliance With Rule XI

    Findings and recommendations by the Committee on Government 
Reform and Oversight pursuant to clause 2(l)(3)(D) of rule XI 
of the House of Representatives are incorporated into the 
descriptive portions of this report.

                  IX. Budget Analysis and Projections

    This Act reauthorizes the annual Federal payment to the 
District of Columbia at an annual rate of $660 million.
        X. Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (existing law proposed 
to be omitted is enclosed in black brackets, new matter is 
printed in italic, existing law in which no change is proposed 
is shown in roman):

       THE DISTRICT OF COLUMBIA SELF-GOVERNMENT AND GOVERNMENTAL 
                           REORGANIZATION ACT
                            TABLE OF CONTENTS

             TITLE I--SHORT TITLE, PURPOSES, AND DEFINITIONS

Sec. 101. Short title.
     * * * * * * *
                     TITLE IV--THE DISTRICT CHARTER

                           Part A--The Council

     * * * * * * *

                            Part B--The Mayor

Sec. 421. Election, qualifications, vacancy and compensation.
     * * * * * * *
Sec. 424. Chief Financial Officer of the District of Columbia.
     * * * * * * *

            Part D--District Budget and Financial Management

               Subpart 1--Budget and Financial Management

Sec. 441. Fiscal year.
     * * * * * * *
[Sec. 451. Contracts extending beyond one year.]
Sec. 451. Special rules regarding certain contracts.
     * * * * * * *
            TITLE I--SHORT TITLE, PURPOSES, AND DEFINITIONS

          * * * * * * *

                              definitions

  Sec. 103. For the purposes of this Act--
          (1) * * *
          * * * * * * *
          [(10) The term ``District revenues'' means all funds 
        derived from taxes, fees, charges, and miscellaneous 
        receipts, including all annual Federal payments to the 
        District authorized by law, and from the sale of 
        bonds.]
          (10) The term ``District revenues'' means all funds 
        derived from taxes, fees, charges, miscellaneous 
        receipts, the annual Federal payment to the District 
        authorized under title V, grants and other forms of 
        financial assistance, or the sale of bonds, notes, or 
        other obligations, and any funds administered by the 
        District government under cost sharing arrangements.
          * * * * * * *
          [(14) The term ``resources'' means revenues, 
        balances, revolving funds, funds realized from 
        borrowing, and the District share of Federal grant 
        programs.
          [(15) The term ``budget'' means the entire request 
        for appropriations and loan or spending authority for 
        all activities of all agencies of the District financed 
        from all existing or proposed resources and shall 
        include both operating and capital expenditures.]
          (14) The term ``resources'' means revenues, balances, 
        enterprise or other revolving funds, and funds realized 
        from borrowing.
          (15) The term ``budget'' means the entire request for 
        appropriations or loan or spending authority for all 
        activities of all departments or agencies of the 
        District of Columbia financed from all existing, 
        proposed or anticipated resources, and shall include 
        both operating and capital expenditures.
          * * * * * * *

                     TITLE IV--THE DISTRICT CHARTER

                          Part A--The Council

                   Subpart 1--Creation of the Council

          * * * * * * *

                         powers of the council

  Sec. 404. (a) * * *
          * * * * * * *
  (f) In the case of any budget act adopted by the Council 
pursuant to section 446 of this Act and submitted to the Mayor 
in accordance with subsection (e) of this section, the Mayor 
shall have power to disapprove any items or provisions, or 
both, of such act and approve the remainder. In any case in 
which the Mayor so disapproves of any item or provision, he 
shall append to the act when he signs it a statement of the 
item or provision which he disapproves, and shall, within such 
ten-day period, return a copy of the act and statement with his 
objections to the Council. If, within thirty calendar days 
after any such item or provision so disapproved has been timely 
returned by the Mayor to the Council, two-thirds of the members 
of the Council present and voting vote to reenact any such item 
or provision, such item or provision so reenacted shall be 
transmitted by the Chairman to the President of the United 
States. In any case in which the Mayor fails to timely return 
any such item or provision so disapproved to the Council, the 
Mayor shall be deemed to have approved such item or provision 
not returned, and such item or provision not returned shall be 
transmitted by the Council to the President of the United 
States. In the case of any budget act for a fiscal year which 
is a control year (as defined in section 305(4) of the District 
of Columbia Financial Responsibility and Management Assistance 
Act of 1995), this subsection shall apply as if the reference 
in the second sentence to ``ten-day period'' were a reference 
to ``five-day period'' and the reference in the third sentence 
to ``thirty calendar days'' were a reference to ``5 calendar 
days''.
          * * * * * * *

                           Part B--The Mayor

          * * * * * * *

                           powers and duties

  Sec. 422. The executive power of the District shall be vested 
in the Mayor who shall be the chief executive officer of the 
District government. In addition, except as otherwise provided 
in this Act, all functions granted to or vested in the 
Commissioner of the District of Columbia, as established under 
reorganization Plan Numbered 3 of 1967, shall be carried out by 
the Mayor in accordance with this Act. The Mayor shall be 
responsible for the proper execution of all laws relating to 
the District, and for the proper administration of the affairs 
of the District coming under his jurisdiction or control, 
including but not limited to the following powers, duties, and 
functions:
  (1) * * *
          * * * * * * *
  (3) The Mayor shall administer the personnel functions of the 
District covering employees of all District departments, 
boards, commissions, offices and agencies, except as otherwise 
provided by this Act. Personnel legislation enacted by Congress 
prior to or after the effective date of this section, 
including, without limitation, legislation relating to 
appointments, promotions, discipline, separations, pay, 
unemployment compensation, health, disability and death 
benefits, leave, retirement, insurance, and veterans' 
preference applicable to employees of the District government 
as set forth in section 714(c), shall continue to be applicable 
until such time as the Council shall, pursuant to this section, 
provide for coverage under a District government merit system. 
The District government merit system shall be established by 
act of the Council. The system may provide for continued 
participation in all or part of the Federal Civil Service 
System and shall provide for persons employed by the District 
government immediately preceding the effective date of such 
system personnel benefits, including but not limited to pay, 
tenure, leave, residence, retirement, health and life 
insurance, and employee disability and death benefits, all at 
least equal to those provided by legislation enacted by 
Congress, or regulation adopted pursuant thereto, and 
applicable to such officers and employees immediately prior to 
the effective date of the system established pursuant to this 
Act, except that nothing in this Act shall prohibit the 
District from separating an officer or employee subject to such 
system [pursuant to procedures established by the Council for 
the separation of officers and employees whose positions are 
determined to be excess positions if the separation of such 
officer or employee is carried out during the 18-month period 
that begins on the date of the enactment of the District of 
Columbia Government Comprehensive Merit Personnel Act of 1978 
Emergency Amendment Act of 1991] in the implementation of a 
financial plan and budget for the District government approved 
under subtitle A of title II of the District of Columbia 
Financial Responsibility and Management Assistance Act of 1995. 
The District government merit system shall take effect not 
earlier than one year nor later than five years after the 
effective date of this section.
          * * * * * * *
  (6) The Mayor may delegate any of his functions (other than 
the function of approving or disapproving acts passed by the 
Council or the function of approving contracts between the 
District and the Federal Government under section 731) to any 
officer, employee, or agency of the executive office of the 
Mayor, or to any director of an executive department who may, 
with the approval of the Mayor, make a further delegation of 
all or a part of such functions to subordinates under his 
jurisdiction. Nothing in the previous sentence may be construed 
to permit the Mayor to delegate any functions assigned to the 
Chief Financial Officer of the District of Columbia under 
section 424, without regard to whether such functions are 
assigned to the Chief Financial Officer under such section 
during a control year (as defined in section 305(4) of the 
District of Columbia Financial Responsibility and Management 
Assistance Act of 1995) or during any other year.
          * * * * * * *
          chief financial officer of the district of columbia


  Sec. 424. (a) Establishment of Office.--
          (1) In general.--There is hereby established within 
        the executive branch of the government of the District 
        of Columbia an Office of the Chief Financial Officer of 
        the District of Columbia (hereafter referred to as the 
        ``Office''), which shall be headed by the Chief 
        Financial Officer of the District of Columbia 
        (hereafter referred to as the ``Chief Financial 
        Officer'').
          (2) Office of the treasurer.--The Office shall 
        include the Office of the Treasurer, which shall be 
        headed by the Treasurer of the District of Columbia, 
        who shall be appointed by the Chief Financial Officer 
        and subject to the Chief Financial Officer's direction 
        and control.
          (3) Transfer of other offices.--Effective with the 
        appointment of the first Chief Financial Officer under 
        subsection (b), the functions and personnel of the 
        following offices are transferred to the Office:
                  (A) The Controller of the District of 
                Columbia.
                  (B) The Office of the Budget.
                  (C) The Office of Financial Information 
                Services.
                  (D) The Department of Finance and Revenue.
          (4) Service of heads of other offices.--
                  (A) Office heads appointed by mayor.--With 
                respect to the head of the Office of the Budget 
                and the head of the Department of Finance and 
                Revenue--
                          (i) the Mayor shall appoint such 
                        individuals with the advice and consent 
                        of the Council, subject to the approval 
                        of the Authority during a control year; 
                        and
                          (ii) during a control year, the 
                        Authority may remove such individuals 
                        from office for cause, after 
                        consultation with the Mayor.
                  (B) Office heads appointed by chief financial 
                officer.--With respect to the Controller of the 
                District of Columbia and the head of the Office 
                of Financial Information Services--
                          (i) the Chief Financial Officer shall 
                        appoint such individuals subject to the 
                        approval of the Mayor; and
                          (ii) the Chief Financial Officer may 
                        remove such individuals from office for 
                        cause, after consultation with the 
                        Mayor.
  (b) Appointment.--
          (1) In general.--
                  (A) Control year.--During a control year, the 
                Chief Financial Officer shall be appointed by 
                the Mayor as follows:
                          (i) Prior to the appointment of the 
                        Chief Financial Officer, the Authority 
                        may submit recommendations for the 
                        appointment to the Mayor.
                          (ii) In consultation with the 
                        Authority and the Council, the Mayor 
                        shall nominate an individual for 
                        appointment and notify the Council of 
                        the nomination.
                          (iii) After the expiration of the 7-
                        day period which begins on the date the 
                        Mayor notifies the Council of the 
                        nomination under clause (ii), the Mayor 
                        shall notify the Authority of the 
                        nomination.
                          (iv) The nomination shall be 
                        effective subject to approval by a 
                        majority vote of the Authority.
                  (B) Other years.--During a year other than a 
                control year, the Chief Financial Officer shall 
                be appointed by the Mayor with the advice and 
                consent of the Council. Prior to appointment, 
                the Authority may submit recommendations for 
                the appointment.
          (2) Removal.--
                  (A) Control year.--During a control year, the 
                Chief Financial Officer may be removed for 
                cause by the Authority or by the Mayor with the 
                approval of the Authority.
                  (B) Other years.--During a year other than a 
                control year, the Chief Financial Officer shall 
                serve at the pleasure of the Mayor, except that 
                the Chief Financial Officer may only be removed 
                for cause.
          (3) Salary.--The Chief Financial Officer shall be 
        paid at an annual rate determined by the Mayor, except 
        that such rate may not exceed the rate of basic pay 
        payable for level IV of the Executive Schedule.
  (c) Functions During Control Year.--During a control year, 
the Chief Financial Officer shall have the following duties:
          (1) Preparing the financial plan and budget for the 
        use of the Mayor for purposes of subtitle A of title II 
        of the District of Columbia Financial Responsibility 
        and Management Assistance Act of 1995.
          (2) Preparing the budgets of the District of Columbia 
        for the year for the use of the Mayor for purposes of 
        part D.
          (3) Assuring that all financial information presented 
        by the Mayor is presented in a manner, and is otherwise 
        consistent with, the requirements of the District of 
        Columbia Financial Responsibility and Management 
        Assistance Act of 1995.
          (4) Implementing appropriate procedures and 
        instituting such programs, systems, and personnel 
        policies within the Officer's authority, to ensure that 
        budget, accounting and personnel control systems and 
        structures are synchronized for budgeting and control 
        purposes on a continuing basis.
          (5) With the approval of the Authority, preparing and 
        submitting to the Mayor and the Council--
                  (A) annual estimates of all revenues of the 
                District of Columbia (without regard to the 
                source of such revenues), including proposed 
                revenues, which shall be binding on the Mayor 
                and the Council for purposes of preparing and 
                submitting the budget of the District 
                government for the year under part D, except 
                that the Mayor and the Council may prepare the 
                budget based on estimates of revenues which are 
                lower than those prepared by the Chief 
                Financial Officer; and
                  (B) quarterly re-estimates of the revenues of 
                the District of Columbia during the year.
          (6) Supervising and assuming responsibility for 
        financial transactions to ensure adequate control of 
        revenues and resources, and to ensure that 
        appropriations are not exceeded.
          (7) Maintaining systems of accounting and internal 
        control designed to provide--
                  (A) full disclosure of the financial impact 
                of the activities of the District government;
                  (B) adequate financial information needed by 
                the District government for management 
                purposes;
                  (C) effective control over, and 
                accountability for, all funds, property, and 
                other assets of the District of Columbia; and
                  (D) reliable accounting results to serve as 
                the basis for preparing and supporting agency 
                budget requests and controlling the execution 
                of the budget.
          (8) Submitting to the Council a financial statement 
        of the District government, containing such details and 
        at such times as the Council may specify.
          (9) Supervising and assuming responsibility for the 
        assessment of all property subject to assessment and 
        special assessments within the corporate limits of the 
        District of Columbia for taxation, preparing tax maps, 
        and providing such notice of taxes and special 
        assessments (as may be required by law).
          (10) Supervising and assuming responsibility for the 
        levying and collection of all taxes, special 
        assessments, licensing fees, and other revenues of the 
        District of Columbia (as may be required by law), and 
        receiving all amounts paid to the District of Columbia 
        from any source (including the Authority).
          (11) Maintaining custody of all public funds 
        belonging to or under the control of the District 
        government (or any department or agency of the District 
        government), and depositing all amounts paid in such 
        depositories and under such terms and conditions as may 
        be designated by the Council or the Authority.
          (12) Maintaining custody of all investment and 
        invested funds of the District government or in 
        possession of the District government in a fiduciary 
        capacity, and maintaining the safekeeping of all bonds 
        and notes of the District government and the receipt 
        and delivery of District government bonds and notes for 
        transfer, registration, or exchange.
          (13) Apportioning the total of all appropriations and 
        funds made available during the year for obligation so 
        as to prevent obligation or expenditure in a manner 
        which would result in a deficiency or a need for 
        supplemental appropriations during the year, and (with 
        respect to appropriations and funds available for an 
        indefinite period and all authorizations to create 
        obligations by contract in advance of appropriations) 
        apportioning the total of such appropriations, funds, 
        or authorizations in the most effective and economical 
        manner.
          (14) Certifying all contracts prior to execution as 
        to the availability of funds to meet the obligations 
        expected to be incurred by the District government 
        under such contracts during the year.
          (15) Prescribing the forms of receipts, vouchers, 
        bills, and claims to be used by all agencies, offices, 
        and instrumentalities of the District government.
          (16) Certifying and approving prior to payment all 
        bills, invoices, payrolls, and other evidences of 
        claims, demands, or charges against the District 
        government, and determining the regularity, legality, 
        and correctness of such bills, invoices, payrolls, 
        claims, demands, or charges.
          (17) In coordination with the Inspector General of 
        the District of Columbia, performing internal audits of 
        accounts and operations and records of the District 
        government, including the examination of any accounts 
        or records of financial transactions, giving due 
        consideration to the effectiveness of accounting 
        systems, internal control, and related administrative 
        practices of the departments and agencies of the 
        District government.
  (d) Functions During All Years.--At all times, the Chief 
Financial Officer shall have the following duties:
          (1) Exercising responsibility for the administration 
        and supervision of the District of Columbia Treasurer 
        (except that the Chief Financial Officer may delegate 
        any portion of such responsibility as the Chief 
        Financial Officer considers appropriate and consistent 
        with efficiency).
          (2) Administering all borrowing programs of the 
        District government for the issuance of long-term and 
        short-term indebtedness.
          (3) Administering the cash management program of the 
        District government, including the investment of 
        surplus funds in governmental and non-governmental 
        interest-bearing securities and accounts.
          (4) Administering the centralized District government 
        payroll and retirement systems.
          (5) Governing the accounting policies and systems 
        applicable to the District government.
          (6) Preparing appropriate annual, quarterly, and 
        monthly financial reports of the accounting and 
        financial operations of the District government.
          (7) Not later than 120 days after the end of each 
        fiscal year (beginning with fiscal year 1995), 
        preparing the complete financial statement and report 
        on the activities of the District government for such 
        fiscal year, for the use of the Mayor under section 
        448(a)(4) of the District of Columbia Self-Government 
        and Governmental Reorganization Act.
  (e) Functions of Treasurer.--At all times, the Treasurer 
shall have the following duties:
          (1) Assisting the Chief Financial Officer in 
        reporting revenues received by the District government, 
        including submitting annual and quarterly reports 
        concerning the cash position of the District government 
        not later than 60 days after the last day of the 
        quarter (or year) involved. Such reports shall include:
                  (A) Comparative reports of revenue and other 
                receipts by source, including tax, nontax, and 
                Federal revenues, grants and reimbursements, 
                capital program loans, and advances. Each 
                source shall be broken down into specific 
                components.
                  (B) Statements of the cash flow of the 
                District government for the preceding quarter 
                or year, including receipts, disbursements, net 
                changes in cash inclusive of the beginning 
                balance, cash and investment, and the ending 
                balance, inclusive of cash and investment. Such 
                statements shall reflect the actual, planned, 
                better or worse dollar amounts and the 
                percentage change with respect to the current 
                quarter, year-to-date, and fiscal year.
                  (C) Quarterly cash flow forecast for the 
                quarter or year involved, reflecting receipts, 
                disbursements, net change in cash inclusive of 
                the beginning balance, cash and investment, and 
                the ending balance, inclusive of cash and 
                investment with respect to the actual dollar 
                amounts for the quarter or year, and projected 
                dollar amounts for each of the 3 succeeding 
                quarters.
                  (D) Monthly reports reflecting a detailed 
                summary analysis of all District of Columbia 
                government investments, including, but not 
                limited to--
                          (i) the total of long-term and short-
                        term investments;
                          (ii) a detailed summary analysis of 
                        investments by type and amount, 
                        including purchases, sales 
                        (maturities), and interest;
                          (iii) an analysis of investment 
                        portfolio mix by type and amount, 
                        including liquidity, quality/risk of 
                        each security, and similar information;
                          (iv) an analysis of investment 
                        strategy, including near-term strategic 
                        plans and projects of investment 
                        activity, as well as forecasts of 
                        future investment strategies based on 
                        anticipated market conditions, and 
                        similar information;
                          (v) an analysis of cash utilization, 
                        including--
                                  (I) comparisons of budgeted 
                                percentages of total cash to be 
                                invested with actual 
                                percentages of cash invested 
                                and the dollar amounts;
                                  (II) comparisons of the next 
                                return on invested cash 
                                expressed in percentages 
                                (yield) with comparable market 
                                indicators and established 
                                District of Columbia government 
                                yield objectives; and
                                  (III) comparisons of 
                                estimated dollar return against 
                                actual dollar yield.
                  (E) Monthly reports reflecting a detailed 
                summary analysis of long-term and short-term 
                borrowings inclusive of debt as authorized by 
                section 603, in the current fiscal year and the 
                amount of debt for each succeeding fiscal year 
                not to exceed 5 years. All such reports shall 
                reflect--
                          (i) the amount of debt outstanding by 
                        type of instrument;
                          (ii) the amount of authorized and 
                        unissued debt, including availability 
                        of short-term lines of credit, United 
                        States Treasury borrowings, and similar 
                        information;
                          (iii) a maturity schedule of the 
                        debt;
                          (iv) the rate of interest payable 
                        upon the debt; and
                          (v) the amount of debt service 
                        requirements and related debt service 
                        reserves.
          (2) Such other functions assigned to the Chief 
        Financial Officer under subsection (c) or subsection 
        (d) as the Chief Financial Officer may delegate.
  (f) Definitions.--In this section--
          (1) the term ``Authority'' means the District of 
        Columbia Financial Responsibility and Management 
        Assistance Authority established under section 101(a) 
        of the District of Columbia Financial Responsibility 
        and Management Assistance Act of 1995;
          (2) the term ``control year'' has the meaning given 
        such term under section 305(4) of such Act; and
          (3) the term ``District government'' has the meaning 
        given such term under section 305(5) of such Act.
          * * * * * * *

            Part D--District Budget and Financial Management

               Subpart 1--Budget and Financial Management

          * * * * * * *

                      submission of annual budget

  Sec. 442. (a) * * *
          * * * * * * *
  (e) The Mayor shall prepare and submit to the Council a 
proposed supplemental or deficiency budget recommendation under 
subsection (c) if the Council by resolution requests the Mayor 
to submit such a recommendation.
          * * * * * * *

                enactment of appropriations by congress

  Sec. 446. The Council, within fifty calendar days after 
receipt of the budget proposal from the Mayor, and after public 
hearing, shall by act adopt the annual budget for the District 
of Columbia government. Any supplements thereto shall also be 
adopted by act by the Council after public hearing. Such budget 
so adopted shall be submitted by the Mayor to the President for 
transmission by him to the Congress. Except as provided in 
section 467(d), section 471(c), section 472(d)(2), section 
483(d), and subsections (f) and (g)(3) of section 490, no 
amount may be obligated or expended by any officer or employee 
of the District of Columbia government unless such amount has 
been approved by Act of Congress, and then only according to 
such Act. Notwithstanding any other provision of this Act, the 
Mayor shall not transmit any annual budget or amendments or 
supplements thereto, to the President of the United States 
until the completion of the budget procedures contained in this 
Act. After the adoption of the annual budget for a fiscal year 
(beginning with the annual budget for fiscal year 1995), the 
Mayor may submit to the Council, and the Council may approve, a 
request for reprogramming of amounts in the budget, but only if 
any additional expenditures provided under such request for an 
activity are offset by reductions in expenditures for another 
activity.
          * * * * * * *

 [contracts extending beyond one year] special rules regarding certain 
                               contracts

  Sec. 451. [No contract] (a) Contracts Extending Beyond One 
Year.--No contract involving expenditures out of an 
appropriation which is available for more than one year shall 
be made for a period of more than five years unless, with 
respect to a particular contract, the Council, by a two-thirds 
vote of its members present and voting, authorizes the 
extension of such period for such contract. Such contracts 
shall be made pursuant to criteria established by act of the 
Council.
  (b) Contracts Exceeding Certain Amount.--
          (1) In general.--No contract involving expenditures 
        in excess of $1,000,000 during a 12-month period may be 
        made unless the Mayor submits the contract to the 
        Council for its approval and the Council approves the 
        contract (in accordance with criteria established by 
        act of the Council).
          (2) Deemed approval.--For purposes of paragraph (1), 
        the Council shall be deemed to approve a contract if--
                  (A) during the 10-day period beginning on the 
                date the Mayor submits the contract to the 
                Council, no member of the Council introduces a 
                resolution approving or disapproving the 
                contract; or
                  (B) during the 45-calendar day period 
                beginning on the date the Mayor submits the 
                contract to the Council, the Council does not 
                disapprove the contract.
                annual budget for the board of education

  Sec. 452. With respect to the annual budget for the Board of 
Education in the District of Columbia, the Mayor and the 
Council may establish the maximum amount of funds which will be 
allocated to the Board, but may not 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. This section shall not 
apply with respect to the annual budget for any fiscal year 
which is a control year (as defined in section 305(4) of the 
District of Columbia Financial Responsibility and Management 
Assistance Act of 1995).

             reductions in budgets of independent agencies

  Sec. 453. (a) * * *
          * * * * * * *
  (c) Subsection (a) shall not apply to amounts appropriated or 
otherwise made available to the District of Columbia courts or 
the Council[.], or to the District of Columbia Financial 
Responsibility and Management Assistance Authority established 
under section 101(a) of the District of Columbia Financial 
Responsibility and Management Assistance Act of 1995.

           Subpart 2--Audits and Accountability Requirements

          * * * * * * *

                performance and financial accountability

  Sec. 456. (a) * * *
          * * * * * * *
  (e) Submission of Reports to District of Columbia Financial 
Responsibility and Management Assistance Authority.--In the 
case of any report submitted by the Mayor under this section 
for a fiscal year (or any quarter of a fiscal year) which is a 
control year under the District of Columbia Financial 
Responsibility and Management Assistance Act of 1995, the Mayor 
shall submit the report to the District of Columbia Financial 
Responsibility and Management Assistance Authority established 
under section 101(a) of such Act in addition to any other 
individual to whom the Mayor is required to submit the report 
under this section.
          * * * * * * *

                        TITLE V--FEDERAL PAYMENT

          * * * * * * *

                        federal payment formula

  Sec. 503. (a) * * *
          * * * * * * *
  (c) There is authorized to be appropriated as the annual 
Federal payment to the District of Columbia for [fiscal year 
1996] each of the fiscal years 1996, 1997, 1998, and 1999 
$660,000,000.

            TITLE VI--RESERVATION OF CONGRESSIONAL AUTHORITY

          * * * * * * *

                       limitations on the council

  Sec. 602. (a) The Council shall have no authority to pass any 
act contrary to the provisions of this Act except as 
specifically provided in this Act, or to--
          (1) * * *
          * * * * * * *
          (8) enact any act or regulation relating to the 
        United States District Court for the District of 
        Columbia or any other court of the United States in the 
        District other than the District courts, or relating to 
        the duties or powers of the United States attorney or 
        the United States Marshal for the District of Columbia; 
        [or]
          (9) enact any act, resolution, or rule with respect 
        to any provision of title 23 of the District of 
        Columbia Code (relating to criminal procedure), or with 
        respect to any provision of any law codified in title 
        22 or 24 of the District of Columbia Code (relating to 
        crimes and treatment of prisoners), or with respect to 
        any criminal offense pertaining to articles subject to 
        regulation under chapter 32 of title 22 of the District 
        of Columbia Code, during the forty-eight full calendar 
        months immediately following the day on which the 
        members of the Council first elected pursuant to this 
        Act take office[.]; or
          (10) enact any act, resolution, or rule with respect 
        to the District of Columbia Financial Responsibility 
        and Management Assistance Authority established under 
        section 101(a) of the District of Columbia Financial 
        Responsibility and Management Assistance Act of 1995.
  (c)(1) * * *
          * * * * * * *
  (3) The Council shall submit with each Act transmitted under 
this subsection an estimate of the costs which will be incurred 
by the District of Columbia as a result of the enactment of the 
Act in each of the first 4 fiscal years for which the Act is in 
effect, together with a statement of the basis for such 
estimate.
         budget process; limitations on borrowing and spending

  Sec. 603. (a) * * *
          * * * * * * *
  (c) [The Council] Except as provided in subsection (f), the 
Council shall not approve any budget which would result in 
expenditures being made by the District Government, during any 
fiscal year, in excess of all resources which the Mayor 
estimates will be available from all funds available to the 
District for such fiscal year. The budget shall identify any 
tax increases which shall be required in order to balance the 
budget as submitted. The Council shall be required to adopt 
such tax increases to the extent its budget is approved. For 
the purposes of this section, the Council shall use a Federal 
payment amount not to exceed the amount authorized by Congress. 
In determining whether any such budget would result in 
expenditures so being made in excess of such resources, amounts 
included in the budget estimates of the District of Columbia 
courts in excess of the recommendation of the Council shall not 
be applicable.
  (d) [The Mayor] Except as provided in subsection (f), the 
Mayor shall not forward to the President for submission to 
Congress a budget which is not balanced according to the 
provision of subsection 603(c).
          * * * * * * *
  (f) In the case of a fiscal year which is a control year (as 
defined in section 305(4) of the District of Columbia Financial 
Responsibility and Management Assistance Act of 1995)--
          (1) subsection (c) (other than the fourth sentence) 
        and subsection (d) shall not apply; and
          (2) the Council may not approve, and the Mayor may 
        not forward to the President, any budget which is not 
        consistent with the financial plan and budget 
        established for the fiscal year under subtitle A of 
        title II of such Act.
          * * * * * * *
                              ----------                              

  SECTION 138 OF THE DISTRICT OF COLUMBIA APPROPRIATIONS, FISCAL YEAR 
                                  1995

                          spending reductions

  Sec. 138. (a) * * *
          * * * * * * *
  [(c) Enforcement.--
          [(1) Placement in escrow of portion of annual federal 
        payment.--Upon receipt of the annual Federal payment 
        for fiscal year 1996 authorized by sections 502(a) or 
        503 of the District of Columbia Self-Government and 
        Governmental Reorganization Act or made pursuant to any 
        other provision of law authorizing a Federal payment to 
        the general fund of the District of Columbia for fiscal 
        year 1996, the Mayor of the District of Columbia shall 
        place in escrow--
                  [(A) 10 percent of the Federal payment, for 
                purposes of enforcement of subsection (a); and
                  [(B) an additional 10 percent of the Federal 
                payment, for purposes of enforcement of 
                subsection (b)(1).
          [(2) Availability of escrowed amounts.--No portion of 
        the funds placed in escrow under paragraph (1) of this 
        subsection shall be available for use by the government 
        of the District of Columbia until the Mayor submits to 
        the Committees on Appropriations of the House of 
        Representatives and the Senate, the Committee on the 
        District of Columbia of the House of Representatives, 
        and the Committee on Governmental Affairs of the Senate 
        two reports, each certified by an independent public 
        accountant, on (A) the spending reductions required by 
        subsection (a) of this section, and (B) the 
        disbursements, net payables, and receipts covered by 
        paragraph (1) of subsection (b) of this section. In no 
        event shall the reports required by this paragraph be 
        submitted later than the date on which the Mayor issues 
        the Comprehensive Annual Financial Report of the 
        District of Columbia for the fiscal year ended 
        September 30, 1995.
          [(3) Amount of escrowed funds available.--Fifteen 
        days after submitting the reports required by paragraph 
        (2), the funds placed in escrow under paragraph (1) 
        shall be available for use by the government of the 
        District of Columbia only if--
                  [(A) the Mayor pays to the Treasury of the 
                United States the sum of--
                          [(i) the amount (if any) by which the 
                        actual reduction implemented under 
                        subsection (a) fails to achieve the 
                        reduction made by paragraph (1) of such 
                        subsection; and
                          [(ii) the amount (if any) by which 
                        the disbursements and net payables 
                        described in subsection (b)(1) exceed 
                        the receipts described in such 
                        subsection; and
                  [(B) such payment is made by the Mayor within 
                such fifteen-day period from the escrowed funds 
                or, if such escrowed funds are insufficient, 
                from other funds available to the government of 
                the District.
  [(d)] (c) Violation Reports.--Not later than the date on 
which the Mayor issues the Comprehensive Annual Financial 
Report of the District of Columbia for the fiscal year ended 
September 30, 1995, the Mayor, Deputy Mayor for Financial 
Management, and Controller shall jointly submit to the 
Committees on Appropriations of the House of Representatives 
and the Senate, the Committee on the District of Columbia of 
the House of Representatives, and the Committee on Governmental 
Affairs of the Senate a separate report on each fund described 
in paragraphs (2) and (3) of subsection (b) of this section 
that violated the limitation applicable to the fund. Each 
report shall contain, but not be limited to--
          (1) * * *
          * * * * * * *
  [(e)] (d) Definitions.--For purposes of this section--
          (1) * * *
          * * * * * * *
                              ----------                              

                       DISTRICT OF COLUMBIA CODE

                                Part I.

                         Government of District

          * * * * * * *

                        TITLE 1. ADMINISTRATION

          * * * * * * *

                        CHAPTER 11A. PROCUREMENT

          * * * * * * *

                Subchapter II. Procurement Organization

Sec. 1-1182.8. Creation and duties of Office of the Inspector General.

    (a)[(1) There is created within the executive branch of the 
District government the Office of the Inspector General. The 
office shall be headed by an Inspector General who shall be 
appointed by the Mayor with the advice and consent of the 
Council, without regard to party affiliation and solely on the 
basis of integrity and demonstrated ability in accounting, 
auditing, financial management analysis, public administration, 
or investigations. The Inspector General shall be a lawyer 
admitted to practice in the District of Columbia. The Inspector 
General shall serve for a term of 4 years, but in no event 
shall that term extend for more than 3 months beyond the term 
of the Mayor who appointed him or her. The Inspector General 
shall be subject to removal for cause only.
    [(2) All existing positions, funding, powers, duties, 
functions, and other resources presently assigned to the Office 
of the Inspector General, established pursuant to Mayor's Order 
79-7, dated January 7, 1979, are transferred to, and shall 
constitute the office created by this subsection.] (1)(A) There 
is created within the executive branch of the government of the 
District of Columbia the Office of the Inspector General. The 
Office shall be headed by an Inspector General appointed 
pursuant to subparagraph (B), who shall serve for a term of 6 
years and shall be subject to removal only for cause by the 
Mayor (with the approval of the District of Columbia Financial 
Responsibility and Management Assistance Authority in a control 
year) or (in the case of a control year) by the Authority. The 
Inspector General may be reappointed for additional terms.
    (B) During a control year, the Inspector General shall be 
appointed by the Mayor as follows:
          (i) Prior to the appointment of the Inspector 
        General, the Authority may submit recommendations for 
        the appointment to the Mayor.
          (ii) In consultation with the Authority and the 
        Council, the Mayor shall nominate an individual for 
        appointment and notify the Council of the nomination.
          (iii) After the expiration of the 7-day period which 
        begins on the date the Mayor notifies the Council of 
        the nomination under clause (ii), the Mayor shall 
        notify the Authority of the nomination.
          (iv) The nomination shall be effective subject to 
        approval by a majority vote of the Authority.
    (C) During a year which is not a control year, the 
Inspector General shall be appointed by the Mayor with the 
advice and consent of the Council. Prior to appointment, the 
Authority may submit recommendations for the appointment.
    (D) The Inspector General shall be appointed without regard 
to party affiliation and solely on the basis of integrity and 
demonstrated ability in accounting, auditing, financial 
management analysis, public administration, or investigations.
    (E) The Inspector General shall be paid at an annual rate 
determined by the Mayor, except that such rate may not exceed 
the rate of basic pay payable for level IV of the Executive 
Schedule.
    (2) the annual budget for the Office shall be adopted as 
follows:
          (A) The Inspector General shall prepare and submit to 
        the Mayor, for inclusion in the annual budget of the 
        District of Columbia under part D of title IV of the 
        District of Columbia Self-Government and Governmental 
        Reorganization Act for the year, annual estimates of 
        the expenditures and appropriations necessary for the 
        operation of the Office for the year. All such 
        estimates shall be forwarded by the Mayor to the 
        Council of the District of Columbia for its action 
        pursuant to sections 446 and 603(c) of such Act, 
        without revision but subject to recommendations. 
        Notwithstanding any other provision of such Act, the 
        Council may comment or make recommendations concerning 
        such estimates, but shall have no authority to revise 
        such estimates.
          (B) Upon receipt of the annual Federal payment for 
        the District of Columbia authorized under title V of 
        the District of Columbia Self-Government and 
        Governmental Reorganization Act, the Mayor shall 
        deposit a portion of the payment (equal to the estimate 
        of necessary appropriations described in subparagraph 
        (A)) into a dedicated fund within the government of the 
        District of Columbia.
          (C) Amounts deposited in the dedicated fund described 
        in subparagraph (B) shall be available solely for the 
        operation of the Office, and shall be paid to the 
        Inspector General by the Mayor (acting through the 
        Chief Financial Officer of the District of Columbia) in 
        such installments and at such times as the Inspector 
        General requires.
    (3) The Inspector General shall:
          (A) * * *
          (B) Act as liaison representative for the Mayor for 
        all external audits of the District government 
        [executive branch];
          * * * * * * *
          (E) Annually conduct an operational audit of all 
        procurement activities carried out pursuant to this 
        chapter in accordance with regulations and guidelines 
        prescribed by the Mayor and issued in accordance with 
        Sec. 1-1182.5 [and]
          (F) Forward to the Mayor and the appropriate 
        authority any evidence of criminal wrongdoing, that is 
        discovered as a result of any investigation or audit 
        conducted by the office[.];
          (G) Pursuant to a contract described in paragraph 
        (4), provide certifications under section 602(b)(5) of 
        title VI of the District of Columbia Revenue Act of 
        1939;
          (H) Pursuant to a contract described in paragraph 
        (4), audit the complete financial statement and report 
        on the activities of the District government for such 
        fiscal year, for the use of the Mayor under section 
        448(a)(4) of the District of Columbia Self-Government 
        and Governmental Reorganization Act; and
          (I) Not later than 30 days before the beginning of 
        each fiscal year (beginning with fiscal year 1996) and 
        in consultation with the Mayor, the Council, and the 
        Authority, establish an annual plan for audits to be 
        conducted under this paragraph during the fiscal year 
        under which the Inspector General shall report only 
        those variances which are in an amount equal to or 
        greater than $1,000,000 or 1 percent of the applicable 
        annual budget for the program in which the variance is 
        found (whichever is lesser).
    (4) The Inspector General shall enter into a contract with 
an auditor who is not an officer or employee of the Office to 
audit the financial statement and report described in paragraph 
(3)(G) for a fiscal year, except that the financial statement 
and report may not be audited by the same auditor (or an 
auditor employed by or affiliated with the same auditor) for 
more than 3 consecutive fiscal years.
    (b) In determining the procedures to be followed and the 
extent of the examinations of invoices, documents, and records, 
the Inspector General shall give due regard to the provisions 
of this chapter, as well as generally accepted accounting and 
procurement principles, practices, and procedures, including, 
but not limited to, federal and District government case law, 
decisions of the U.S. Comptroller General, and decisions of 
federal contract appeals boards.
    (c)(1) The Inspector General shall have access to all 
books, accounts, records, reports, findings [relating to 
contracts and procurement], and all other papers, things, or 
property belonging to or in use by any department or agency 
under the direct supervision of the Mayor necessary to 
facilitate the Inspector General's work.
    (2)(A) The Inspector General may issue subpoenas requiring 
the attendance and testimony of witnesses and the production of 
any evidence relating to any matter under investigation by the 
Inspector General.
    (B) If a person refuses to obey a subpoena issued under 
subparagraph (A), the Inspector General may apply to the 
Superior Court of the District of Columbia for an order 
requiring that person to appear before he Inspector General to 
give testimony, produce evidence, or both, relating to the 
matter under investigation. Any failure to obey the order of 
the court may be punished by the Superior court as civil 
contempt.
    (d)(1) The Inspector General shall compile for submission 
to [the Mayor and the Council], the Authority (or, with respect 
to a fiscal year which is not a control year, the Mayor and the 
council) at least once every fiscal year, a report setting 
forth the scope of the Inspector General's operational audit, 
and a summary of all findings and determinations made as a 
result of the findings.
    (2) Included in the report shall be any comments and 
information necessary to keep [the Mayor] the Authority, the 
Mayor, and the Council informed of the adequacy and 
effectiveness of procurement operations, the integrity of the 
procurement process, and adherence to the provisions of this 
chapter.
          * * * * * * *
    (4) The Inspector General shall make each report submitted 
under this subsection available to the public, except to the 
extent that the report contains information determined by the 
Inspector General to be privileged:
    (e) The Inspector General may undertake reviews and 
investigations, and make determinations or render opinions as 
requested by [the Director] the Authority. Any reports 
generated as a result of the requests shall be automatically 
transmitted to the Council within 10 days of publication.
    (f) In carrying out the duties and responsibilities 
established under this section, the Inspector General shall 
report expeditiously to the Attorney General whenever the 
Inspector General has reasonable grounds to believe there has 
been a violation of Federal or District criminal law.
(g) In this section--
          (1) the term ``Authority'' means the District of 
        Columbia Financial Responsibility and Management 
        Assistance Authority established under section 101(a) 
        of the District of Columbia financial Responsibility 
        and Management Assistance Act of 1995;
          (2) the term ``control year'' has the meaning given 
        such term under section 305(4) of such Act; and
          (3) the term ``District government'' has the meaning 
        given such term under section 305(5) of such Act.
          * * * * * * *
                                Part V.

                            General Statutes

             TITLE 31. EDUCATION AND CULTURAL INSTITUTIONS

          * * * * * * *

                     Chapter 1. Board of Education

          * * * * * * *

Sec. 31-103. Annual estimates.

    The Board of Education shall annually, on or before the 
21st day of December, transmit to the Mayor of the District of 
Columbia an estimate in detail of the amount of money required 
for the public schools for the ensuing year, and said Mayor 
shall transmit the same in his annual estimate of 
appropriations for the District of Columbia, with such 
recommendations as he may deem proper[.], except that in the 
case of a year which is a control year (as defined in section 
305(4) of the District of Columbia Financial Responsibility and 
Management Assistance Act of 1995), the Mayor shall transmit 
the same together with the Mayor's own request for the amount 
of money required for the public schools for the year.
          * * * * * * *

                 TITLE 47. TAXATION AND FISCAL AFFAIRS

          * * * * * * *

CHAPTER 3. BUDGET AND FINANCIAL MANAGEMENT: BORROWING; DEPOSIT OF FUNDS

          * * * * * * *

             Subchapter I. Budget and Financial Management

          * * * * * * *

[Sec. 47-314. Office of Financial Management established.

    [(a) Established.--There is established in the Executive 
Office of the Mayor, under the direction and control of the 
City Administrator, the Office of Financial Management, to be 
headed by an Assistant City Administrator for Financial 
Management. The Office of Financial Management shall include 
the Office of the Treasurer which shall be headed by a District 
of Columbia Treasurer (hereafter referred to as the 
``Treasurer'') who shall be subject to the direction and 
control of the Assistant City Administrator for Financial 
Management.
    [(b) Purposes.--(1) The purpose of the Office of Financial 
Management is to assist the Mayor and the City Administrator in 
the performance of the financial management functions of the 
District of Columbia.
    [(2) The purpose of the Office of the Treasurer is to be 
responsible for the functions of collection of District of 
Columbia funds, cash management, disbursement, and the 
investment of surplus funds. All such District of Columbia 
government functions shall be centralized within the Office of 
Financial Management under the control of the Treasurer.
[Sec. 47-315. Duties and responsibilities of Assistant City 
                    Administrator for Financial Management and 
                    Treasurer.

    [(a) The Assistant City Administrator for Financial 
Management shall be responsible for the administration and 
supervision of the Office of Financial Management, and may 
delegate and redelegate such powers as are warranted in the 
interest of efficiency and good administration, and shall:
          [(1) Administer all borrowing programs for the 
        issuance of long-term and short-term indebtedness;
          [(2) Administer the cash management program of the 
        District of Columbia government including the 
        investment of surplus funds in governmental and non-
        governmental interest-bearing securities and accounts;
          [(3) Administer the centralized District of Columbia 
        government payroll and retirement system;
          [(4) Govern the accounting policies and systems 
        applying to District of Columbia government agencies 
        and certain other agencies specified in the District of 
        Columbia Self-Government and Governmental 
        Reorganization Act (D.C. Code, Sec. 1-201 et seq.); and
          [(5) Prepare appropriate annual, quarterly, and 
        monthly financial reports of accounting and financial 
        operations of the District of Columbia government.
    [(b) The Treasurer shall be subject to the administrative 
control of the Assistant City Administrator for Financial 
Management. The Treasurer shall:
          [(1) Be responsible for the administration and 
        supervision of the Office of the Treasurer;
          [(2) Oversee and be responsible for the collection 
        and deposit of all taxes, license and permit fees, 
        fines and forfeitures, refunds, and other fees, 
        charges, and miscellaneous revenues as required by the 
        District of Columbia government, from the public, the 
        federal government or from any court, agency, or 
        instrumentality of the District of Columbia government. 
        Such collection and deposit function includes all 
        activities occurring from the time receipts are 
        initially received by the District of Columbia 
        government until they are deposited in such 
        depositories as may be designated by law. Receipts 
        include any coins, other cash, checks, or other method 
        of payment which pass into the custody of the District 
        of Columbia government. The Treasurer shall also 
        specify operation procedures and standards to be used 
        for all collection points, including the staffing with 
        employees of the Office of the Treasurer of any 
        collection point which uses automated cashiering 
        terminals;
          [(3) Have custody of all public funds belonging to or 
        under the control of the District of Columbia 
        government or its agencies and deposit all funds in 
        such depositories as may be designated by law;
          [(4) Administer all District of Columbia government 
        imprest funds;
          [(5) Perform all other functions previously delegated 
        to the D.C. Treasurer, except accounts receivable 
        processing, functions relating to the receipt and 
        processing of tax documents, the preparation of tax 
        documents for data processing, the billing of 
        delinquent tax accounts, and the enforcement of 
        collection of delinquent taxes; and
          [(6) Be responsible for assisting the Assistant City 
        Administrator for Financial Management in reporting 
        revenues received by the Treasurer to the Mayor 
        including, but not limited to, annual and quarterly 
        reports concerning the cash position of the District of 
        Columbia government. The annual report shall be 
        included as a part of the annual financial report of 
        the District of Columbia government as required by 
        Sec. 47-310(a)(4). The Mayor shall provide the reports 
        required by this paragraph to the Council of the 
        District of Columbia. The quarterly reports shall be 
        submitted not later than the 60th day after the quarter 
        for which such report is being submitted. The 1st such 
        quarterly report shall be submitted for the 1st quarter 
        of fiscal year 1981. The monthly reports shall be 
        submitted not later than the 20th day after the month 
        for which such report is being submitted. The 1st such 
        monthly report shall be submitted for the 1st month of 
        fiscal year 1981. The reports required by this 
        paragraph shall include:
                  [(A) Quarterly comparative reports of revenue 
                and other receipts by source including, but not 
                limited to, tax, nontax, and federal revenues, 
                grants and reimbursements, capital program 
                loans, and advances. Each source shall be 
                broken down into specific components;
                  [(B) Quarterly statements of the cash flow 
                including receipts, disbursements, net change 
                in cash inclusive of the beginning balance, 
                cash and investments, and the ending balance, 
                inclusive of cash and investments. Such 
                statements shall reflect the actual, planned, 
                better or worse dollar amounts and the 
                percentage change with respect to the current 
                quarter, year-to-date, and fiscal year;
                  [(C) Quarterly cash flow forecast reflecting 
                receipts, disbursements, net change in cash 
                inclusive of the beginning balance cash and 
                investments, and the ending balance, inclusive 
                of cash and investments with respect to the 
                actual dollar amounts for the quarter for which 
                the report is being submitted, and projected 
                dollar amounts for each of the next succeeding 
                3 quarters;
                  [(D) Monthly reports reflecting a detailed 
                summary analysis of all District of Columbia 
                government investments including, but not 
                limited to:
                          [(i) The total of long-term and 
                        short-term investments;
                          [(ii) A detailed summary analysis of 
                        investments by type and amount, 
                        including purchases, sales 
                        (maturities), and interest;
                          [(iii) An analysis of investment 
                        portfolio mix by type and amount 
                        including liquidity, quality/risk of 
                        each security, and similar information;
                          [(iv) An analysis of investment 
                        strategy, including near-term strategic 
                        plans and projects of investment 
                        activity, as well as forecasts of 
                        future investment strategies based on 
                        anticipated market conditions, and 
                        similar information;
                          [(v) An analysis of cash utilization, 
                        including:
                                  [1. Comparisons of budgeted 
                                percentages of total cash to be 
                                invested with actual 
                                percentages of cash invested 
                                and the dollar amounts;
                                  [2. Comparisons of the next 
                                return on invested cash 
                                expressed in percentages 
                                (yield) with comparable market 
                                indicators and established 
                                District of Columbia government 
                                yield objectives; and
                                  [3. Comparisons of estimated 
                                dollar return against actual 
                                dollar yield; and
                  [(E) Monthly reports reflecting a detailed 
                summary analysis of long-term and short-term 
                borrowings inclusive of debt as authorized by 
                Sec. 47-313, in the current fiscal year and the 
                amount of debt for each succeeding fiscal year 
                not to exceed 5 years. All such reports shall 
                reflect:
                          [(i) The amount of debt outstanding 
                        by type of instrument;
                          [(ii) The amount of authorized and 
                        unissued debt, including availability 
                        of short-term lines of credit, United 
                        States Treasury borrowings, and similar 
                        information;
                          [(iii) A maturity schedule of the 
                        debt;
                          [(iv) The rate of interest payable 
                        upon the debt; and
                          [(v) The amount of debt service 
                        requirements and related debt service 
                        reserves.

[Sec. 47-316. Transfer of powers, duties and functions to Treasurer

    [The following powers and duties and functions are 
transferred to the District of Columbia Treasurer:
          [(1) Those duties and functions of the Director of 
        the Department of Finance and Revenue as established in 
        Commissioner's Order No. 69-96, March 7, 1969 and as 
        set forth in:
                  [(A) Organization Order No. 3 of 1967, 
                Amendment No. 1, December 13, 1967, Part IV.C2 
                (e) (entitled Treasury Division), including:
                          [(i) Collecting revenues of the 
                        District of Columbia, accounting for 
                        and distributing all collections into 
                        appropriate revenue accounts, and 
                        depositing collections;
                          [(ii) Making and being accountable 
                        for disbursements in accordance with 
                        applicable law and regulations, in cash 
                        or by checks, based on vouchers and 
                        payrolls duly certified by a designated 
                        certifying officer;
                          [(iii) Being responsible for all 
                        balances in accounts held pursuant to 
                        the District of Columbia Depository Act 
                        of 1977 (D.C. Code Sec. 47-341 et 
                        seq.);
                          [(iv) Dispensing and accounting for 
                        tax stamps;
                          [(v) Being responsible for the 
                        custody of trust fund securities;
                  [(B) Mayor's Order No. 78-62, March 16, 1978, 
                Part I.B. relating to the implementation of the 
                District of Columbia Depository Act of 1977 
                (D.C. Code, Sec. 47-341 et seq.) and concerning 
                the following functions:
                          [(i) Demand deposits, pursuant to 
                        Sec. 47-343(c);
                          [(ii) Evaluation criteria, pursuant 
                        to Sec. 47-344;
                          [(iii) Limitation restrictions on 
                        amounts of public funds on deposit, 
                        pursuant to Sec. 47-345;
                          [(iv) Collateral requirements upon 
                        deposit of public funds, pursuant to 
                        Sec. 47-346;
                          [(v) Public disclosure relative to 
                        demand deposits, pursuant to Sec. 47-
                        347;
                          [(vi) Termination of depositories 
                        pursuant to Sec. 47-348; and
                          [(vii) Powers of the mayor relative 
                        to the making and enforcement of 
                        necessary regulations and the 
                        inspection and reproduction of 
                        depository compliance, pursuant to 
                        Sec. 47-349; and
                [(C) Mayor's Order No. 79-73, April 19, 1979, 
                concerning the following activities:
                          [(i) Functional and procedural 
                        authority over all collection and 
                        deposit points;
                          [(ii) Authority to approve the 
                        establishment of new collection points 
                        and to consolidate, abolish, or 
                        otherwise modify the overall 
                        configuration of collection points;
                          [(iii) Authority to specify operating 
                        procedures and standards to be used for 
                        all collections and collection points; 
                        and
                          [(iv) Authority to establish the mode 
                        of collections, for example, lock box, 
                        mail, over-the-counter, and other 
                        methods after discussions and in 
                        collaboration with the agency involved;
          [(2) Those duties and functions of the Director of 
        the Department of Transportation, relating to the 
        payment and collection of parking fines and penalties 
        pursuant to the District of Columbia Traffic 
        Adjudication Act of 1977 (D.C. Code Sec. 40-601 et 
        seq.), including:
                [(A) Approval of the use of credit cards for 
                payment of fines and penalties, pursuant to 
                Sec. 40-605 (b);
                  [(B) Collection of fines, penalties, and 
                fees, pursuant to Sec. Sec. 40-616 and 40-626;
          [(3) Any other functions which are now delegated to, 
        or vested in, the D.C. Treasurer through the Director 
        of the Department of Finance and Revenue, except those 
        functions relating to the processing of tax documents, 
        the preparation of tax documents for data processing, 
        and the billing of delinquent taxes, which shall remain 
        delegated to the Director of the Department of Finance 
        and Revenue.

[Sec. 47-317. Transfer of resources to Office.

    [All positions, including the position of D.C. Treasurer, 
property, records and unexpended balances of appropriations, 
allocations, and other funds available or to be made available 
relating to the functions assigned by Sec. 47-316 are 
transferred to the Office of Financial Management. These 
resources include those currently in the Department of Finance 
and Revenue, including the District of Columbia Treasurer, and 
the Department of Transportation, which are currently available 
and which relate to the functions assigned by Sec. 47-316. 
Excluded from transfer are existing positions and other 
resources of the Accounts Receivable and Processing Division of 
the Department of Finance and Revenue.]
          * * * * * * *
                  Subchapter IV. Reprogramming Policy

[Sec. 47-364. Council approval of non-offsetting budget modifications; 
                    exclusions.

    [(a) Absent any determination by the Mayor pursuant to 
Sec. 47-312 (a) that appropriations or funds are not available 
for payment of District of Columbia government obligations and 
therefore an apportionment of all appropriations and funds 
available with respect to a particular fiscal year is necessary 
under Sec. 47-310 (a) (9), the Mayor shall submit to the 
Council, for approval, any nonoffsetting budget modifications 
which may occur subsequent to the initial budget transmittal 
establishing the gross-obligation budget. The Council shall 
consider requests for approval under this section in the same 
manner as provided in Sec. 47-363 (e). All such determinations 
made by the Mayor pursuant to Sec. 47-310 (a) (9) shall be 
submitted to the Council in writing at least 10 days in advance 
of the implementation of any non-offsetting budget 
modification.
    [(b) The District of Columbia Board of Education, the 
District of Columbia courts, the Board of Trustees of the 
University of the District of Columbia, and the D.C. General 
Hospital Commission shall be excluded from the provisions of 
this section.]
          * * * * * * *

               TITLE VI--ADVANCEMENT OF MONEY BY TREASURY

    [The Secretary of the Treasury, notwithstanding the 
provisions of the District of Columbia Appropriation Act, 
approved June 29, 1922, is authorized and directed to advance, 
on the requisition of the Mayor of the District of Columbia, 
made in the manner now prescribed by law, out of any money in 
the Treasury of the United States not otherwise appropriated, 
such sums as may be necessary, from time to time, to meet the 
general expenses of said District, as authorized by Congress, 
and such amounts so advanced shall be reimbursed by the said 
Mayor to the Treasury out of taxes and revenue collected for 
the support of the government of the said District of 
Columbia.]
SEC. 601. TRANSITIONAL PROVISION FOR SHORT-TERM ADVANCES.

  (a) Transitional Short-Term Advances Made Before October 1, 
1995.--
          (1) In general.--If the conditions in paragraph (2) 
        are satisfied, the Secretary shall make an advance of 
        funds from time to time, out of any money in the 
        Treasury not otherwise appropriated, for the purpose of 
        assisting the District government in meeting its 
        general expenditures, as authorized by Congress.
          (2) Conditions to making any transitional short-term 
        advance before october 1, 1995.--The Secretary shall 
        make an advance under this subsection if the following 
        conditions are satisfied:
                  (A) the Mayor delivers to the Secretary a 
                requisition for an advance under this section;
                  (B) as of the date on which the requisitioned 
                advance is to be made, the Authority has not 
                approved a financial plan and budget for the 
                District government as meeting the requirements 
                of the District of Columbia Financial 
                Responsibility and Management Assistance Act of 
                1995;
                  (C) the date on which the requisitioned 
                advance is to be made is not later than 
                September 30, 1995;
                  (D) the District government has delivered to 
                the Secretary--
                          (i) a schedule setting forth the 
                        anticipated timing and amounts of 
                        requisitions for advances under this 
                        subsection; and
                          (ii) evidence demonstrating to the 
                        satisfaction of the Secretary that the 
                        District government is effectively 
                        unable to obtain credit in the public 
                        credit markets or elsewhere in 
                        sufficient amounts and on sufficiently 
                        reasonable terms to meet the District 
                        government's financing needs;
                  (E) the Secretary determines that there is 
                reasonable assurance of reimbursement for the 
                advance from the amount authorized to be 
                appropriated as the annual Federal payment to 
                the District of Columbia under title V of the 
                District of Columbia Self-Government and 
                Governmental Reorganization Act for the fiscal 
                year ending September 30, 1996; and
                  (F) except during the 45-day period beginning 
                on the date of the appointment of the members 
                of the Authority, the Authority makes the 
                findings described in section 204(a)(4)(B) of 
                the District of Columbia Financial 
                Responsibility and Management Assistance Act of 
                1995.
          (3) Amount of any transitional short-term advance 
        made before october 1, 1995.--
                  (A) In general.--Except as provided in 
                subparagraph (C), if the conditions described 
                in subparagraph (B) are satisfied, each advance 
                made under this subsection shall be in the 
                amount designated by the Mayor in the Mayor's 
                requisition for such advance (subject to the 
                approval of the Authority), except that--
                          (i) the total amount requisitioned 
                        under this subsection during the 30-day 
                        period which begins on the date of the 
                        first requisition made under this 
                        subsection may not exceed 33\1/3\ 
                        percent of the fiscal year 1995 limit;
                          (ii) the total amount requisitioned 
                        under this subsection during the 60-day 
                        period which begins on the date of the 
                        first requisition made under this 
                        subsection may not exceed 66\2/3\ 
                        percent of the fiscal year 1995 limit; 
                        and
                          (iii) the total amount requisitioned 
                        under this subsection after the 
                        expiration of 90-day period which 
                        begins on the date of the first 
                        requisition made under this subsection 
                        may not exceed 100 percent of the 
                        fiscal year 1995 limit.
                  (B) Conditions applicable to designated 
                amount.-- Subparagraph (A) applies if the Mayor 
                determines that the amount designated in the 
                Mayor's requisition for such advance is needed 
                to accomplish the purpose described in 
                paragraph (1).
                  (C) Aggregate maximum amount outstanding.--
                The sum of the anticipated principal and 
                interest requirements of all advances made 
                under this subsection may not be greater than 
                the fiscal year 1995 limit.
                  (D) Fiscal year 1995 limit described.--In 
                this paragraph, the ``fiscal year 1995 limit'' 
                means the amount authorized to be appropriated 
                to the District of Columbia as the annual 
                Federal payment to the District of Columbia 
                under title V of the District of Columbia Self-
                Government and Governmental Reorganization Act 
                for the fiscal year ending September 30, 1995.
          (4) Maturity of any transitional short-term advance 
        made before october 1, 1995.--
                  (A) In general.--Except as provided in 
                subparagraph (B), each advance made under this 
                subsection shall mature on the date designated 
                by the Mayor in the Mayor's requisition for 
                such advance.
                  (B) Latest permissible maturity date.--
                Notwithstanding subparagraph (A), the maturity 
                date for any advance made under this subsection 
                shall not be later than October 1, 1995.
          (5) Interest rate.--Each advance made under this 
        subsection shall bear interest at an annual rate equal 
        to the rate determined by the Secretary at the time 
        that the Secretary makes such advance taking into 
        consideration the prevailing yield on outstanding 
        marketable obligations of the United States with 
        remaining periods to maturity comparable to the 
        maturity of such advance, plus \1/8\ of 1 percent.
          (6) Deposit of advances.--
                  (A) In general.--Except as provided in 
                subparagraph (B), each advance made under this 
                subsection for the account of the District 
                government shall be deposited by the Secretary 
                into such account as is designated by the Mayor 
                in the Mayor's requisition for such advance.
                  (B) Exception.--Notwithstanding subparagraph 
                (A), if (in accordance with section 204(b)(2) 
                of the District of Columbia Financial 
                Responsibility and Management Assistance Act of 
                1995) the Authority delivers a letter 
                requesting the Secretary to deposit all 
                advances made under this subsection for the 
                account of the District government in an escrow 
                account held by the Authority, each advance 
                made under this subsection for the account of 
                the District government after the date of such 
                letter shall be deposited by the Secretary into 
                the escrow account specified by the Authority 
                in such letter.
  (b) Transitional Short-Term Advances Made on or After October 
1, 1995 and before February 1, 1996.--
          (1) In general.--If the conditions in paragraph (2) 
        are satisfied, the Secretary shall make an advance of 
        funds from time to time, out of any money in the 
        Treasury not otherwise appropriated, for the same 
        purpose as advances are made under subsection (a).
          (2) Terms and conditions.--
                  (A) In general.--Except as provided in 
                subparagraph (B), paragraphs (2), (4), and (5) 
                of subsection (a) (other than subparagraph (F) 
                of paragraph (2)) shall apply to any advance 
                made under this subsection.
                  (B) Exceptions.--
                          (i) New conditions precedent to 
                        making advances.--The conditions 
                        described in subsection (a)(2) shall 
                        apply with respect to making advances 
                        on or after October 1, 1995, in the 
                        same manner as such conditions apply 
                        with respect to making advances before 
                        October 1, 1995, except that--
                                  (I) subparagraph (C) 
                                (relating to the last day on 
                                which advances may be made) 
                                shall be applied as if the 
                                reference to ``October 1, 
                                1995'' were a reference to 
                                ``February 1, 1996'';
                                  (II) subparagraph (E) 
                                (relating to the Secretary's 
                                determination of reasonable 
                                assurance of reimbursement from 
                                the annual Federal payment 
                                appropriated to the District 
                                government) shall be applied as 
                                if the reference to ``September 
                                30, 1996'' were a reference to 
                                ``September 30, 1997'';
                                  (III) the Secretary may not 
                                make an advance under this 
                                subsection unless all advances 
                                made under subsection (a) are 
                                fully reimbursed by withholding 
                                from the annual Federal payment 
                                appropriated to the District 
                                for the fiscal year ending 
                                September 30, 1996, under title 
                                V of the District of Columbia 
                                Self-Government and 
                                Governmental Reorganization 
                                Act, and applying toward 
                                reimbursement for such advances 
                                an amount equal to the amount 
                                needed to fully reimburse the 
                                Treasury for such advances; and
                                  (IV) the Secretary may not 
                                make an advance under this 
                                subsection unless the Authority 
                                has provided the Secretary with 
                                the prior certification 
                                described in section 204(a)(1) 
                                of the District of Columbia 
                                Financial Responsibility and 
                                Management Assistance Act of 
                                1995.
                          (ii) New latest permissible maturity 
                        date.--The provisions of subsection 
                        (a)(4) shall apply with respect to the 
                        maturity of advances made after October 
                        1, 1995, in the same manner as such 
                        provisions apply with respect to the 
                        maturity of advances made before 
                        October 1, 1995, except that 
                        subparagraph (B) of such subsection 
                        (relating to the latest permissible 
                        maturity date) shall apply as if the 
                        reference to ``October 1, 1995'' were a 
                        reference to ``October 1, 1996''.
                          (iii) Aggregate maximum amount 
                        outstanding.--The sum of the 
                        anticipated principal and interest 
                        requirements of all advances made under 
                        this subsection may not be greater than 
                        the fiscal year 1996 limit.
                  (C) New maximum amount outstanding.--
                          (i) In general.--Except as provided 
                        in clause (iii), if the conditions 
                        described in clause (ii) are satisfied, 
                        each advance made under this subsection 
                        shall be in the amount designated by 
                        the Mayor in the Mayor's requisition 
                        for such advance (subject to the 
                        approval of the Authority).
                          (ii) Conditions applicable to 
                        designated amount.-- Clause (i) applies 
                        if the Mayor determines that the amount 
                        designated in the Mayor's requisition 
                        for such advance is needed to 
                        accomplish the purpose described in 
                        paragraph (1).
                          (iii) Aggregate maximum amount 
                        outstanding.--The sum of the 
                        anticipated principal and interest 
                        requirements of all advances made under 
                        this paragraph may not be greater than 
                        60 percent of the fiscal year 1996 
                        limit.
                  (D) Deposit of advances.--As provided in 
                section 204(b) of the District of Columbia 
                Financial Responsibility and Management 
                Assistance Act of 1995, each advance made under 
                this subsection for the account of the District 
                shall be deposited by the Secretary into an 
                escrow account held by the Authority.
                  (E) Fiscal year 1996 limit described.--In 
                this paragraph, the ``fiscal year 1996 limit'' 
                means the amount authorized to be appropriated 
                to the District of Columbia as the annual 
                Federal payment to the District of Columbia 
                under title V of the District of Columbia Self-
                Government and Governmental Reorganization Act 
                for the fiscal year ending September 30, 1996.
  (c) Transitional Short-Term Advances Made on or After 
February 1, 1996 and before October 1, 1996.--
          (1) In general.--If the conditions in paragraph (2) 
        are satisfied, the Secretary shall make an advance of 
        funds from time to time, out of any money in the 
        Treasury not otherwise appropriated, for the same 
        purpose as advances are made under subsection (a).
          (2) Terms and conditions.--
                  (A) In general.--Except as provided in 
                subparagraph (B), subsection (b)(2) shall apply 
                to any advance made under this subsection.
                  (B) Exceptions.--The conditions applicable 
                under subsection (b)(2) shall apply with 
                respect to making advances on or after February 
                1, 1996, and before October 1, 1996, in the 
                same manner as such conditions apply to making 
                advances under such subsection, except that--
                          (i) in applying subparagraph (C) of 
                        subsection (a)(2) (as described in 
                        subsection (b)(2)(B)(i)(I)), the 
                        reference to ``October 1, 1995'' shall 
                        be deemed to be a reference to 
                        ``September 30, 1996'';
                          (ii) subparagraph (C)(iii) of 
                        subsection (b)(2) shall apply as if the 
                        reference to ``60 percent'' were a 
                        reference to ``40 percent''; and
                          (iii) no advance may be made unless 
                        the Secretary has been provided the 
                        certifications and information 
                        described in paragraphs (3) through (6) 
                        of section 602(b).

SEC. 602. SHORT-TERM ADVANCES FOR SEASONAL CASH-FLOW MANAGEMENT.

  (a) In General.--If the conditions in subsection (b) are 
satisfied, the Secretary shall make an advance of funds from 
time to time, out of any money in the Treasury not otherwise 
appropriated, for the purpose of assisting the District 
government in meeting its general expenditures, as authorized 
by Congress, at times of seasonal cash-flow deficiencies.
  (b) Conditions to Making Any Short-Term Advance.--The 
Secretary shall make an advance under this section if--
          (1) the Mayor delivers to the Secretary a requisition 
        for an advance under this section;
          (2) the date on which the requisitioned advance is to 
        be made is in a control period;
          (3) the Authority certifies to the Secretary that--
                  (A) the District government has prepared and 
                submitted a financial plan and budget for the 
                District government;
                  (B) there is an approved financial plan and 
                budget in effect under the District of Columbia 
                Financial Responsibility and Management 
                Assistance Act of 1995 for the fiscal year for 
                which the requisition is to be made;
                  (C) at the time of the Mayor's requisition 
                for an advance, the District government is in 
                compliance with the financial plan and budget;
                  (D) both the receipt of funds from such 
                advance and the reimbursement of Treasury for 
                such advance are consistent with the financial 
                plan and budget for the year; and
                  (E) such advance will not adversely affect 
                the financial stability of the District 
                government;
          (4) the Authority certifies to the Secretary, at the 
        time of the Mayor's requisition for an advance, the 
        District government is effectively unable to obtain 
        credit in the public credit markets or elsewhere in 
        sufficient amounts and on sufficiently reasonable terms 
        to meet the District government's financing needs;
          (5) the Inspector General of the District of Columbia 
        certifies to the Secretary the information described in 
        paragraph (3) by providing the Secretary with a 
        certification conducted by an outside auditor under a 
        contract entered into pursuant to section 208(a)(4) of 
        the District of Columbia Procurement Practices Act of 
        1985;
          (6) the Secretary receives such additional 
        certifications and opinions relating to the financial 
        position of the District government as the Secretary 
        determines to be appropriate from such other Federal 
        agencies and instrumentalities as the Secretary 
        determines to be appropriate; and
          (7) the Secretary determines that there is reasonable 
        assurance of reimbursement for the advance from the 
        amount authorized to be appropriated as the annual 
        Federal payment to the District of Columbia under title 
        V of the District of Columbia Self-Government and 
        Governmental Reorganization Act for the fiscal year 
        following the fiscal year in which such advance is 
        made.
  (c) Amount of any Short-Term Advance.--
          (1) In general.--Except as provided in paragraph (3), 
        if the conditions in paragraph (2) are satisfied, each 
        advance made under this section shall be in the amount 
        designated by the Mayor in the Mayor's requisition for 
        such advance.
          (2) Conditions applicable to designated amount.--
        Paragraph (1) applies if--
                  (A) the Mayor determines that the amount 
                designated in the Mayor's requisition for such 
                advance is needed to accomplish the purpose 
                described in subsection (a); and
                  (B) the Authority--
                          (i) concurs in the Mayor's 
                        determination under subparagraph (A); 
                        and
                          (ii) determines that the 
                        reimbursement obligation of the 
                        District government for an advance made 
                        under this section in the amount 
                        designated in the Mayor's requisition 
                        is consistent with the financial plan 
                        for the year.
          (3) Maximum amount outstanding.--Notwithstanding 
        paragraph (1), the unpaid principal balance of all 
        advances made under this section in any fiscal year of 
        the District government shall not at any time be 
        greater than 150 percent of the amount authorized under 
        title V of the District of Columbia Self-Government and 
        Governmental Reorganization Act for appropriation as 
        the Federal payment to the District government for the 
        fiscal year following the fiscal year in which the 
        advance is made.
  (d) Maturity of any Short-Term Advance.--
          (1) In general.--Except as provided in paragraph (3), 
        if the condition in paragraph (2) is satisfied, each 
        advance made under this section shall mature on the 
        date designated by the Mayor in the Mayor's requisition 
        for such advance.
          (2) Condition applicable to designated maturity.--
        Paragraph (1) applies if the Authority determines that 
        the reimbursement obligation of the District government 
        for an advance made under this section having the 
        maturity date designated in the Mayor's requisition is 
        consistent with the financial plan for the year.
          (3) Latest permissible maturity date.--
        Notwithstanding paragraph (1), the maturity date for 
        any advance made under this section shall not be later 
        than 11 months after the date on which such advance is 
        made.
  (e) Interest Rate.--Each advance made under this section 
shall bear interest at an annual rate equal to a rate 
determined by the Secretary at the time that the Secretary 
makes such advance taking into consideration the prevailing 
yield on outstanding marketable obligations of the United 
States with remaining periods to maturity comparable to the 
maturity of such advance, plus \1/8\ of 1 percent.
  (f) 10 Business-Day Zero Balance Requirement.--After the 
expiration of the 12-month period beginning on the date on 
which the first advance is made under this section, the 
Secretary shall not make any new advance under this section 
unless the District government has--
          (1) reduced to zero at the same time the principal 
        balance of all advances made under this section at 
        least once during the previous 12-month period; and
          (2) not requisitioned any advance to be made under 
        this section in any of the 10 business days following 
        such reduction.
  (g) Deposit of Advances.--As provided in section 204(b) of 
the District of Columbia Financial Responsibility and 
Management Assistance Act of 1995, advances made under this 
section for the account of the District government shall be 
deposited by the Secretary into an escrow account held by the 
Authority.

SEC. 603. SECURITY FOR ADVANCES.

  (a) In General.--The Secretary shall require the District 
government to provide such security for any advance made under 
this title as the Secretary determines to be appropriate.
  (b) Authority to Require Specific Security.--As security for 
any advance made under this title, the Secretary may require 
the District government to--
          (1) pledge to the Secretary specific taxes and 
        revenue of the District government, if such pledging 
        does not cause the District government to violate 
        existing laws or contracts; and
          (2) establish a debt service reserve fund pledged to 
        the Secretary.

SEC. 604. REIMBURSEMENT TO THE TREASURY.

  (a) Reimbursement Amount.--
          (1) In general.--Except as provided in paragraph (2), 
        on any date on which a reimbursement payment is due to 
        the Treasury under the terms of any advance made under 
        this title, the District shall pay to the Treasury the 
        amount of such reimbursement payment out of taxes and 
        revenue collected for the support of the District 
        government.
          (2) Exceptions for transitional advances.--
                  (A) Advances made before October 1, 1995.--
                          (i) Financial plan and budget 
                        approved.--If the Authority approves a 
                        financial plan for the District 
                        government before October 1, 1995, the 
                        District government may use the 
                        proceeds of any advance made under 
                        section 602 to discharge its obligation 
                        to reimburse the Treasury for any 
                        advance made under section 601(a).
                          (ii) Financial plan and budget not 
                        approved.--If the Authority has not 
                        approved a financial plan and budget 
                        for the District government by October 
                        1, 1995, the annual Federal payment 
                        appropriated to the District government 
                        for the fiscal year ending September 
                        30, 1996, shall be withheld and applied 
                        to discharge the District government's 
                        obligation to reimburse the Treasury 
                        for any advance made under section 
                        601(a).
                  (B) Advances made on or after October 1, 
                1995.--
                          (i) Financial plan and budget 
                        approved.--If the Authority approves a 
                        financial plan and budget for the 
                        District government during fiscal year 
                        1996, the District may use the proceeds 
                        of any advance made under section 602 
                        to discharge its obligation to 
                        reimburse the Treasury for any advance 
                        made under section 601(b).
                          (ii) Financial plan and budget not 
                        approved.--If the Authority has not 
                        approved a financial plan and budget 
                        for the District government by October 
                        1, 1996, the annual Federal payment 
                        appropriated to the District government 
                        for the fiscal year ending September 
                        30, 1997, shall be withheld and applied 
                        to discharge the District government's 
                        obligation to reimburse the Treasury 
                        for any advance made under section 
                        601(b).
  (b) Remedies for Failure to Reimburse.--If, on any date on 
which a reimbursement payment is due to the Treasury under the 
terms of any advance made under this title, the District 
government does not make such reimbursement payment, the 
Secretary shall take the actions listed in this subsection.
          (1) Withhold annual federal payment.--Notwithstanding 
        any other law, before turning over to the Authority (on 
        behalf of the District government under section 205 of 
        the District of Columbia Financial Responsibility and 
        Management Assistance Act of 1995) any annual Federal 
        payment appropriated to the District government for any 
        fiscal year under title V of the District of Columbia 
        Self-Government and Governmental Reorganization Act, 
        the Secretary shall withhold from such annual Federal 
        payment, and apply toward reimbursement for the payment 
        not made, an amount equal to the amount needed to fully 
        reimburse the Treasury for the payment not made.
          (2) Withhold other federal payments.--If, after the 
        Secretary takes the action described in paragraph (1), 
        the Treasury is not fully reimbursed, the Secretary 
        shall withhold from each grant, entitlement, loan, or 
        other payment to the District government by the Federal 
        Government not dedicated to making entitlement or 
        benefit payments to individuals, and apply toward 
        reimbursement for the payment not made, an amount that, 
        when added to the amount withheld from each other such 
        grant, entitlement, loan, or other payment, will be 
        equal to the amount needed to fully reimburse the 
        Treasury for the payment not made.
          (3) Attach available district revenues.--If, after 
        the Secretary takes the actions described in paragraphs 
        (1) and (2), the Treasury is not fully reimbursed, the 
        Secretary shall attach any and all revenues of the 
        District government which the Secretary may lawfully 
        attach, and apply toward reimbursement for the payment 
        not made, an amount equal to the amount needed to fully 
        reimburse the Treasury for the payment not made.
          (4) Take other actions.--If, after the Secretary 
        takes the actions described in paragraphs (1) through 
        (3), the Treasury is not fully reimbursed, the 
        Secretary shall take any and all other actions 
        permitted by law to recover from the District 
        government the amount needed to fully reimburse the 
        Treasury for the payment not made.

SEC. 605. DEFINITIONS.

  For purposes of this title--
          (1) the term ``Authority'' means the District of 
        Columbia Financial Responsibility and Management 
        Assistance Authority established under section 101(a) 
        of the District of Columbia Financial Responsibility 
        and Management Assistance Act of 1995;
          (2) the term ``control period'' has the meaning given 
        such term under section 305(4) of such Act;
          (3) the term ``District government'' has the meaning 
        given such term under section 305(5) of such Act;
          (4) the term ``financial plan and budget'' has the 
        meaning given such term under section 305(6) of such 
        Act; and
          (5) the term ``Secretary'' means the Secretary of the 
        Treasury.
          * * * * * * *
                     XI. Committee Recommendations

    On March 30, 1995, a quorum being present, the Committee 
ordered the bill favorably reported.