energy. The funding level in PY 1986 was $7.2 million, with $6.2 million proposed for FY 1987. All states and same level proposed for FY 1987. This is a project grant program available to state and local governments. Here, also, statehood would have no likely impact. -0 FINANCIAL RESEARCH ASSOCIATES, INC. (202) 626-5600 John A. Colo, Ph.D. Lucy J. Reuben, Ph.D. FINANCIAL IMPLICATIONS OF STATEHOOD FOR THE DISTRICT OF COLUMBIA: SELECTED ISSUES by FINANCIAL RESEARCH ASSOCIATES, INC. Submitted To THE DISTRICT OF COLUMBIA STATEHOOD COMMISSION and THE DISTRICT OF COLUMBIA STATEHOOD COMPACT COMMISSION September 1986 SUMMARY AND OVERVIEW The objective of this study is to provide an analysis of certain issues concerning the econonic and financial inplications of statehood for the District of Columbia. There issues are directly related to the potential effects of statehood upon the sources of revenues that may be available to the District of Columbia. These issues, also, address the potential incremental costs of statehood. The primary topic of this study is the role of the federal payment in the fiscal integrity of the proposed state of New Columbia. The study, also addresses the taxing authority and responsibility under statehood and the increnental costs of statehood. In each case, the analysis focuses upon the economic and financial inplications of the issue. This exanination of the issues concludes that there will continue to be a significant role for the federal payment under statehood for the District of Columbia. There will continue to exist conceptual rationale for such a payment, and there will continue to be a need for such a payment. Further, there needs to be nore predictability in the amount of any such payment. Either a formula determination or a tie to a constant dollar anount would provide such predictability. However, if the state of New Columbia is granted the full fiscal and taxing authority of other states, the federal payment may not have to grow a. large as night otherwise be the case. Furthermore, u most of the mechanisms of statehood are already in place, the transition costs, which are one tine costs, may be adequately borne by the residents. The only significant additional aspect of the overall administrative and regulatory structure is an anticiapated judicial and prosecutorial division. In general, the government of the District of Columbia already successfully assumes several of the functions of municipalities and states. N THE FEDERAL PAYMENT Currently, the District of Columbia rocoivos from Congross an annuel lunp sun appropriation known as "the federal payment." The primary objective of the federal payment is to defray certain place otherwise uncompensated denands or limitations upon the State of New Columbia, there will continue to be econonic and financial justifications for an annual federal payment. Conceptually, the foderal payment began when the District of Columbia was established as the nation's capital in 1800.1 This paynent was designed to nitigate many of the otherwise unfunded expenses of the District in its unique role as the capital city. The federal paynent has been the subject of numerous studies and roports, beginning with a report issued by the House District of Colunbia Connittee in 1830. According to a conpilation of these studies, The Federal Paynent to the District of Columbia 1790 1980 (1) All recognize and discuss elements of the federal presence that restrict local development and revenue raising capacity, such as those factors stenning ron the planned, grand design of the Nation's Capital (extensive parks, and open spaces, broad avenues and streets, land unavailable for development, height limitations) and the expanding taxexenpt property in the District of Columbia. |