88

formula is

calculated

on the basis of five ratios: 20

per cent, 25 per cent, 30 per cent, 33 per cent, and 40

per cent.

If the Federal payment were to equal 20 per cent of local revenue, the amount allocated to the District Government would fall below the actual and projected levels through FY 1988. A 25 per cent ratio would result in a modest improvement over the actual and projected levels for the years after FY 1985. It would require a 30 per cent ratio of Federal to local revenue to effect a sizeable increase in the Federal payment beyond the amount already projected. As the ratio is increased to 33 per cent, the margin of improvement over the present projection gets wider. A 40 per cent Federal to local revenue ratio would double the payment by FY 1988, and would be about 2 1/2 times the projection by

the level

FY 1991.

The argument for the adoption of a formula-based Federal payment to the District of Columbia was stated President Nixon in 1969. In his

clearly

by

recommendation

to Congress that a Home Rule government

67-297 - 87 - 22

89

be instituted in the District of Columbia, the President

stated that:

still

"... The District of Columbia cannot achieve strong and efficient government unless it has ample and dependable sources of financing. Sound financing can be achieved only if the Federal Government pays its appropriate share.

I therefore recommend that the Congress authorize a Federal payment formula, fixing the Federal contribution at 30 percent of local tax and other general fund revenue.

This formula would equitably reflect the Federal interest in the District of Columbia....

Enactment of a formula approach would be a significant step toward effective government in the District. It would tie the level of Federal aid to the burden of local taxes on the District's Citizens. It would also provide the District with a predictable estimate for use in the annual budget process, thus allowing it to plan its expenditures more accurately and imaginatively for the growing needs of its population. A similar formula, dealing with District borrowing authorization, was enacted by the Congress more than a year ago--and has already proven its worth in improved budgetary planning.

The proposed Federal payment formula would not involve an automatic expenditure of Federal funds. The Federal payment would still have to be appropriated by Congress.

The arguments set forth by

President Nixon are

being advanced by those who support the continuation of the Federal payment. If the District of Columbia becomes the state of New Columbia at some point

90

in the future, it could rely on the same rationale to

support its case for the continuation of the Federal payment.

Section Y

STATUS OF FEDERAL PROGRAMS

The purpose of this section is to determine the

extent, if any, to which

statehood would change the

District of Columbia's access to Federal programs. A comprehensive examination of the District government's receipts under major Federal

Government programs was

if the District

it would neither

undertaken. The results indicate that of Columbia were to become a state gain nor lose any significant level of Federal funds. At the present time, the District of Columbia receives Federal funding as follows:

Where funding is available to local governments only, the District is funded as a local government e.g., the Department of Housing and Urban Development, Community Development Block Grant

Program.

Where funding is available to state governments

only, the District is designated by the statute or

92

regulations to receive Federal funds along with the 50 states and U.S. Territories or is treated as if it were

a state.

Where Federal funding is available to state and local governments or to local governments through the state, the District generally is treated as a

state.

On balance, then, the

District of Columbia is

presently treated as a state. There are few, if any, major funding sources that would become available to the District as a result of statehood. The major programs funded to local

governments geneRally have provisions

for state funding where the local government is not an

applicant.

The

examination of the status of Federal programs as a result of statehood was based on a review of those District of Columbia programs included in the budget for Fiscal Years 1986 and 1987. The Fiscal Year 1986 reference is the Congressionally approved budget. The Fiscal Year 1987 reference is the Mayor's proposed

budget.