Federal Payment to the District of Columbia:

Experience Since Home Rule and Analysis of Proposals for Change

GGD-81-67: Published: Apr 23, 1981. Publicly Released: Apr 23, 1981.

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In 1973, Congress passed the home rule legislation that set up the District of Columbia's first elected government, which took office in 1975. This legislation increased the District's Federal payment authorization so that presently about $300 million, or 21 percent, of the District's operating budget comes from a direct Federal payment. Congress is faced with the issues of whether to increase the $300 million now authorized for the Federal payment to the District and whether to make other changes in the way the payment is provided to the District government. District officials would like to have the Federal payment determined by some formula, preferably a set percentage of District revenues. GAO investigated the role of the Federal payment in financing the budget of the District of Columbia and evaluated proposals to establish the payment on a formula basis.

Although the Federal payment has increased since home rule, the payment has declined in relation to the District's total budget and in purchasing power. Local tax collections have increased by more than the general rate of inflation, and the tax burden on moderate and upper income households is higher than in surrounding jurisdictions. However, the District's tax base is strong and should continue to almost keep up with inflation without rate increases. GAO believes that the issues associated with the desirability of a Federal formula payment would be easier to resolve if: (1) there was an explicit effort by Congress, the Office of Management and Budget, and the District government to establish service goals for the District's population and service groups in an inflationary environment; (2) the informative content and reliability of budget information provided by the District government to the City Council, the public, and Congress were improved; and (3) the District government made improvements in program and financial management. GAO also believes that some of the benefits associated with a formula approach could be achieved by other changes in the way the Federal payment is authorized and appropriated and in the way the District budget is reviewed by Congress.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Although the recommendation is still valid, GAO must close the case because there is no longer a D.C. audit site staff available to perform followup work, and such a staff is not expected to be available in the future.

    Recommendation: The Mayor of the District of Columbia should present meaningful comparisons of past trends and assumptions about the future in such areas as the relationship of the budget to changes in the city's population and service groups and the impact of inflation and other changes in the economy on revenues and expenditures.

    Agency Affected: District of Columbia

  2. Status: Closed - Not Implemented

    Comments: Although the recommendation is still valid, GAO must close the case because there is no longer a D.C. audit site staff available to perform followup work, and such a staff is not expected to be available in the future.

    Recommendation: The Mayor of the District of Columbia should specifically show the relationship between each year's appropriations, each year's actual obligations, and each year's revenue and cash position.

    Agency Affected: District of Columbia

  3. Status: Closed - Not Implemented

    Comments: Although the recommendations is still valid, GAO must close the case because there is no longer a D.C. audit site staff available to perform followup work, and such a staff is not expected to be available in the future.

    Recommendation: The Mayor of the District of Columbia should comply with the Self-Government Act provision to present consistent information for the current budget year, for the 3 previous fiscal years and, (on a projected basis) for the following 4 fiscal years. All of the information should be readily identifiable in the city's budget. Such information is needed for all revenues by: major types, appropriations, and obligations for personnel and other major categories of expense; annual full-time equivalent employment in positions actually filled; and grant and other data. If budget categories change, such as changing the definition of the general fund, sufficient information should be provided to allow reasonably accurate comparisons to be made, as the Self-Government Act intended.

    Agency Affected: District of Columbia

 

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