authority of the Education Consolidation and Improvement Act of 1981. The District is now funded as if it were a state. The Impact Aid Program is available to local If the District were to become a educational agencies. affect this program which bases to which the area's revenue is Federal activities. Also, state it should not funding on the extent adversely affected by other statehood is not expected to affect the funding from sources such as the Vocational Education Program, Bilingual Education and Education of the Handicapped Programs. In FY 1986, the District received $14.4 million under the School Lunch and School Breakfast Programs. The U.S. Department of Agriculture treats the District as if it were a state. The Services District of Columbia's Department of Human receives a large amount of Federal funds. The Medicaid program is funded at $166 million in FY 1986. Eligible applicants under the program are state and local welfare agencies operating under an approved Medicaid state plan. Given the nature of the program, 14 statehood is not expected to have an adverse impact on the program. The Aid to Families with Dependent Children and the Women, Infants and Children Program are available to state and local governments. On balance, then, the Federal funding of District of Columbia programs is not expected to be affected negatively by statehood. Section II ECONOMY OF THE DISTRICT OF COLUMBIA The economy of the District of Columbia has always been, and continues to be, highly dependent upon Federal Government operations and policies in setting its pace and pattern of development. Historically, the economy of the Washington Metro Area has prospered with the expansion of Federal Government activities and Federal employment. In the last several years, the emphasis on curtailing the growth of, or reducing, employment in the Federal sector has had a moderating effect on the local area economy, especially in the District of Columbia. At the same time, the negative effects of curtailing direct Federal employment have been significantly offset by the policy of Federal contracting for professional and business services from the local private sector. This is one of the important factors in giving the Washington area economy a strong service orientation. 15 16 This section reviews the recent economic trends and the changing patterns of economic activity in the District of Columbia as compared with developments in the neighboring states of Maryland and Virginia. The changing structure of industry in the Tri-State Area is reflected through data on the employment patterns in the District of Columbia and in the neighboring states. The strong expansion from the 1982 recession is readily apparent in earnings data from each jurisdiction. Although the economic outlook is for more moderate growth in the next few years, the relatively lower dependence on the old-line heavy industries and the shift toward a fast-growing service sector in the 17 Changing Structure of Industry The structural changes in the Washington area economy are readily apparent in the employment patterns in the District of Columbia, Maryland, and Virginia. As shown in Table II-1, between May, 1980 and May, 1986 (latest available data), employment in the District of Columbia rose from 619,500 to 644,300, an increase of 24,800 jobs. During this period, its employment in services increased by 44,300 jobs, offsetting declines elsewhere and accounting for all of the expansion. The decline in government employment of some 18,600 jobs was the major negative factor along with smaller deductions in transportation and public utilities, manufacturing, and construction. The fact that the Washington Metro Area was never highly dependent upon heavy industry and manufacturing spared it from the depressed conditions currently being experienced in a number of other large metropolitan areas. The dependence on the service sector places the Washington area in a position to participate in the strong national trend toward service-oriented economic growth. It is noteworthy that the decline in |