After adoption of statehood, although the Congress would no longer have a role in the adoption of the District's budget, the essential nature of the budget would be unchanged. The process would be less cumbersome, but the District, as a state, would not lose any guarantee that its appropriations could actually be spent, because the Congress does not now give such a guarantee.

The one area where the District does receive support from the Federal Government is through the Federal payment. Because the Federal payment and the Division of Expenditures, the actual appropriation for for District of Columbia government expenditures, are approved annually in the same act, the Federal payment is, I believe, often improperly confused with the appropriation of the District Budget. The Federal payment is a Federal appropriation to the District Government. It is a deposit by the Federal Government into the General Fund of the District of Columbia. It is a revenue source, but it is not an appropriation of funds to be spent by the District Government.

Indeed the preamble to each District appropriation act makes the bifurcation of the Federal payment and the Distict budget in the single appropriation act clear. The act is headed "AN ACT Making appropriations for the District of Columbia and other activities chargeable in whole or in part against the revenues of said District for the fiscal year ending 1,3 The first part is a Federal appropriation to be paid by the Federal Government to the general fund. The second part is the "state" appropriation made by Congress for the District from its own general fund.

3. ibid.

Since the general Federal payment and any specific Federal payments are payments to the District, not amounts approved for expenditure by the District in conducting its activities, the language appropriating the Federal payments is traditional Federal appropriation language stating that the funds for the payments shall come "out of any money in the [United States] Treasury." But, while that section of the annual appropriation act provides revenue to the District, it does not authorize the District to spend any funds; it merely transfers funds from the Federal Government to the General Fund of the District of Columbia. These funds are included in the "revenues of said District" mentioned in the heading of the act, which are then appropriated in the Division of Expenditures section of the act. The distinction is important. With regard to the Federal payment, if the funds were to fail to be paid to the District during the fiscal year, for instance for failure to meet a condition specified by the Congress in the appropriation of the

payment, 4 the funds would revert to the United State Treasury and not be

available to the District in future years. On the other hand, once Federal payment funds are paid to the District, they become an indistinguishable part of the revenue. If expenditures approved in the Division of Expenditures sections of the acts are not spent, and cash is available in the General Fund, the cash remains the property of the District and may fund future expenditures.

District's

4. for example, the FY 1986 Appropriation Act provides:

That none of these funds shall be made available to the District of Columbia until the number of full-time officers in permanent positions in the Metropolitan Police Department is at lease 3,880, excluding any such officers appointed after August 19, 1982, under qualification standards other than those in effect on that date.

It would have been less confusing over the years if the appropriation acts had been divided into separate acts, one appropriating the Federal payments, and one adopting the District budget. The Federal payment, should be viewed as an actual Federal expenditure, impacting on overall Federal expenditures and deficit, and separate from the Division of Expenses, which, although it is approved by the Congress in its paternal capacity, is the District's "state" budget for which the United States does not assume fiscal responsibility.

What effect, if any, will statehood have on the Federal payment?

The Federal payments, which are the only expenditure of Federal funds in the annual appropriation acts, are not a single payment, but several payments. The largest share is the Federal payment authorized in Section 502 of the Home Rule 5 Act, but there are also several other payments, which are not insignificant. In addition to the general Federal payment, there are annual payments in lieu of reimbursement for water and sewer charges service provided to the Federal Government authorized by Act of May 18, 19546 and to the District of Columbia retirement funds for police officers and firefighters, teachers, and judges approved by Act of November 17, 1979 7. For F.Y. 1986, these payments were $30.1 million

5. P.L. 93-198

6. 68 Stat. 102, D.C. Code sections 43-1552 and 1612

7. P.L. 96-122

8. P.L. 99-190

and $52.1 million, respectively.8

In addition, the Congress appropriates amounts for specific purposes on an ad hoc basis. In recent years these have included payments for the transfer of St. Elizabeth's Hospital and construction of a new prison." In Presidential Inaugural years, payment of Federal funds are made to the District to

compensate for

LEGAL BASIS OF THE FEDERAL PAYMENT

There are various arguments to justify the Federal payment. Other witnesses will discuss the reasons the Federal Government should recognize its obligations. The Committee has expressed an interest and concern as to whether statehood would have any effect on the continuation of Federal payments? Implicit in that question is the assumption that in the absence of statehood, the annual Federal payment will continue to be made in future years. That cannot be assumed. It must first be determined whether the Federal payment has any Constitutional, contract or compact status, or whether it is merely gratuitous. If it is merely gratuitous, there is no assurance that it will necessarily continue.

9. P.L. 98-621

10. P.L. 93-198, section 737(b); $2.3 million in F.Y. 1985, P.L. 98-473

Clearly, the existing Federal payment has no Constitutional basis. While the Constitution reserves exclusive legislative authority to the Congress over the Federal District, it contains no requirement that that District shall be entitled to 11

funding.

12

The

There is similarly no enforceable contract or compact between the District and Federal governments concerning the general Federal payment. Throughout the years, the provisions of the governance of the District have been decreed by Congress. The Congress which giveth the Federal payment can take it away. current authorization for the general Federal payment comes from section 502 of the Home Rule Act, as it has subsequently been amended, and is currently authorized at $425 million. Congress, having passed the Home Rule Act can repeal it or any part of it. And regardless of whether or not Congress changes the current authorization, it is under no requirement to appropriate any of the Federal payment in any year. The fact that the general Federal payment is "authorized" does not give the District any vested right to continue to receive a payment in that amount, or any payment at all. Indeed, for the first five years of Home Rule budgets, Fiscal years 1976 through 1980, the Congress appropriated over $100 million less than was authorized in the Home Rule Act. Prior to Home Rule, the

11. Article I, section 8, clause 17 provides:

...

Congress shall have the power To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, and to exercise like Authority over all places purchased by the Consent of the Legislature of the state in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings....

12. D.C. Code section 47-3406