GAO: District Faces Permanent Deficit

Posted June 6, 2003 at 2:30pm

In response to a General Accounting Office study showing the District of Columbia faces a structural imbalance of at least $470 billion annually, D.C. Del. Eleanor Holmes Norton (D) announced Thursday she will once again seek federal funds for the city.

The GAO report examined the District’s ability to fund an average level of public services — such as education — based on its tax revenue and federal aid, and compared those findings with a national average for taxation and spending.

“The existence of this structural deficit means that, even if the District were managed efficiently, the District would have to impose above-average tax burdens just to provide an average level of services,” the report states.

Norton requested the GAO study in 2002 along with Sen. Mary Landrieu (D-La.), ranking member of the Appropriations subcommittee on the District of Columbia, following the release of studies by McKinsey & Co. and the Brookings Institution, which also found structural imbalances.

“If the saying ‘three strikes and you’re out’ means something, then I hope, ‘three strikes, you’re in,’” Norton said.

In referencing the report’s findings, which state that the deficit is primarily caused by “factors beyond the direct control of District officials,” Norton agreed with GAO, saying it would not be beneficial to raise District taxes or reduce local services.

However, the report also cites the city’s current management deficiencies, stating, “The District’s long-standing management problems waste resources that it cannot afford to lose and draw resources away from providing even an average level of services.”

While agreeing that the District needs to continue to address its management issues, Norton said to maintain the city’s fiscal health in future years, “There is only one place for the District to go and that is some form of federal contribution.” [IMGCAP(1)]

The lawmaker plans to reintroduce a version of the Fair Federal Compensation Act, which she proposed in the 107th Congress. That bill would have transferred 2 percent of federal income taxes paid by non-District residents who work in the city, or about $400 million annually, into a special fund to be used for infrastructure revitalization and debt repayment.

As for whether a new version of the bill will gain passage in a Republican-controlled Congress during a fiscal year in which many states are facing budget shortages, Landrieu said, “We’re just beginning the process and we remain optimistic.”

Norton said such funding would not interfere with another bill she is sponsoring which would give the District budget autonomy for locally raised funds.

“We’re not claiming to be a colony of the Congress or of the United States and therefore you ought to support us,” she said. “The reason that some sort of federal contribution is appropriate, is that the federal government puts constraints on the nation’s capital” such as the inability to tax federally owned property.

During a House Appropriations hearing on the District, D.C. Mayor Anthony Williams (D) said he does not expect the city to be able to maintain a balanced budget, as it has done in recent fiscal years.

“The federal government requires that the District provide services like a state, but unlike every other state in the nation, the District is prohibited by the Congress from collecting a non-resident income tax,” Williams said. “As a result, the District must fund expenditures far greater than the revenues provided through a reasonable level of taxation.”