THE FEDERAL PAYMENT

Currently, the District of Columbia receives from Congress an annual lump sum appropriation known as "the federal payment." The primary objective of the federal payment is to defray certain expenses of the District government associated with the activities of the federal government. The federal payment, also, compensates for fiscal constraints placed by Congress. To the extent that activities of the federal government continue to place otherwise uncompensated demands or limitations upon the State of New Columbia, there will continue to be economic and financial justificationa for an annual federal payment.

Conceptually, the federal payment began when the District of Columbia was established as the nation's capital in 1800.1 This payment was designed to mitigate many of the otherwise unfunded expenses of the District in its unique role as the capital city. The federal payment has been the subject of numerous studies and reports, beginning with a report issued by the House District of Columbia Committee in 1830. According to a compilation of these studies, The Federal Payment 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 stemming from 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 taxexempt property in the District of Columbia.

(2) All of these 22 studies and reports, individually or collectively, recognize and discuss certain burdens placed on local government resulting from the unique status of the District of Columbia as the seat of national government and ■ jurisdiction with state and local government responsibilities.

(3) All of these studies and reports acknowledge a federal responsibility to make available on a regular basis a significant federal payment toward local government expenditures.

(4) All of the 22 studies, reports, and related documents, collectively considered, include observations and recommendations advocating that the federal payment be (a) annual, (b) predictable, (c) encourage optimum efficiency and effort in local revenue development and operations, and (d) emanate from a rational, equitable, and mutually acceptable procedure.2

As such, the first three assertions provide a framework for any conceptual justification for the federal payment and the fourth assertion provides a framework for addressing the regularity and amount of the federal payment.

More specifically, the rationale for the federal payment has been offered from three primary perspectives:

a. The State Surrogate

3

c. The Cost of the Federal Presence

Each of these different perspectives acknowledges, in some way, the economic burdens inherent in the unparalleled status of the District of Columbia.

The State Surrogate

The justification of the federal payment on the basis of the "State Surrogate" rationale recognizes that the District of Columbia is the only city which suffers from the lack of economic support from a state. Other major cities can benefit from the

more diverse economic resource base of the states in which they are located; but the District of Columbia, in its role as the nation's capital, derives no such statewide benefits.

The District of Columbia, as is the case with many major cities, is a communications center; it is a financial center; it is a cultural center; and it provides a host of other diverse advantages for the region and for the nation. While the District provides incoming nonresident workers and visitors with the amenities of a major city, it is denied the opportunity to shift auch of the associated costs to many of those who may benefit

from its services.

The fiscal disadvantages suffered by the District of Columbia in this regard have been exacerbated by trends, during the past two decades, towards shifting various functional and financial responsibilities from localities to the state governments. This trend is even more pronounced for larger cities. For example, cities with populations over 500,000, the category in which the District would fall, transferred an average of 4.2 responsibilities, in contrast to the average transfer of 1.8

responsibilities for the least populous cities.4

It is within the foregoing analytical structure that the federal government is called upon to act as the "State surrogate" for the nation's capital. In describing the funding requirements of the District of Columbia, the Advisory Commission on Inter governmental Relations asserted that

...

the city is still at a net fiscal disadvantage as it is unable to benefit from the opportunity to shift certain expenditure functions (e.g. highways, education at all levels, welfare) to a State. It is within this general framework that the Federal payment is determined annually.5

Thus, the federal payment is justified under the current status of the District of Columbia as the only city that is not part of

a state.

Should the entity which is now the District of Columbia achieve statehood under the proposed legislation to establish the state of New Columbia, the economic and financial considerations of the "State surrogate" would not necessarily be removed. The political transformation to statehood would not inherently expand or diversify the economic base for the state of New Columbia, especially since the geographical boundaries are constrained. Consequently, the economic underpinnings of the "State surrogate" rationale would be applicable with regard to the state of New Columbia, and the federal payment would continue to be justified.

The Federal Interest

The second rationalization for the annual federal payment to the District of Columbia is based upon the concept of "the

Federal interest".

The idea that the federal payment to the

District of Columbia is warranted due to "the Federal interest"

refers to the expectation of the efficient and effective provision of a broad range of municipal and governmental services in the nation's capital.

The Federal interest, according to a study by the League of

Women Voters,

...

embraces more than simple protection or even adequate functioning. It also describes the desire of the Congress, the Federal government and the people of the nation as a whole for a capital of which they can be proud. The concept sets a high standard for the appearance and good name of the city.6

As stated, the federal interest includes the promotion of and support for the District of Columbia as a positive model for American cities.

Additionally, the federal interest includes a recognition of the unique and significant demands upon the District of Columbia due to the numerous and complex transactions associated with the functioning of the federal government. At a minimum, there is a federal interest in the physical infrastructure of the city; there is a federal interest in a high level of health and sanitation services, and there is a federal interest in the