grown in a relatively steady pattern over the time period shown, from $25 million in 1960 to a projected $425 million in 1987. This growth in the dollar value of the federal payment canbe interpreted as, in part, reflecting increases in inflation as well as in the number and complexities of relevant federal government related activities. On the other hand, a distinctly different pattern emerges when the federal payment is compared with the contributions generated from local collections. The federal payment constituted an increasingly large proportion of the District' general revenues through fiscal year 1975, but declined thereafter. In 1960, the federal payment accounted for 12.5%, or $0.125, of every $1.00 available for general expenditures. 1975, the federal payment had grown to 26.7%, or $0.267, of every $1.00 available for general expenditures. By However, since 1975, the federal payment has failed to grow sufficiently to maintain its pre-Home Rule proportionate share of the District's General Fund. The projection for 1987, at 17.4%, shows the federal payment at a twenty-year low for proportionate contribution to the District's general revenue requirements. This means that the residents of the District of Columbia have been assuming an increasingly large share of the financial burdens of the nation's capital. Clearly there is some limit to the capability of the residents to absorb the financial burdens of the nation's capital without causing a flight of residents to the neighboring, less highly taxed state entities. Financial Research Associates, Inc., has explored the financial concerns that are likely to arise in the near future (specifically for the period 1988 1991) with the District of Columbia's possible ascendancy to Statehood. In that context, we have prepared a series of relevant projections as to the potential outcomes of the budgeting process. This approach quantifies and highlights the importance of the Federal Payments. In particular, we have explored future budget implications under the following conditions: (i) the growth rates in revenues and expenditures are projected (ii) future average annual growth rates are adjusted to reflect one possible unfavorable set of financial conditions, one possible normal set of financial conditions, and one possible se of favorable conditions. Within this report is a detailed description of the way in which the process works in the case of the unfavorable financial conditions. The rates that describe these conditions are given in Table VI. At this point we address the question as to what would be the outcome were budget line items to change in the period 1988-1991 at rates As similar to the arithmetic averages that held over the period 19821986. Those rates are given in Column 2 of Table III. Note that the extreme recent average annual rates of change in Gambling etc. and Economic Development and Regulation were curtailed significantly. may be seen, however, the average annual rates of growth in revenues, before adjusting for gambling etc., was 11x. In comparison, the unadjusted rate of change in expenditures averaged 12%. Together, these produced a trend that could not be sustained. 20 1. Actual annual average was 110x; projected 15% for 1988-1991. 2. Actual annual average was 69%; projected 12% for 1988-1991. The results of the extrapolation based on the rates in Column 2 of Table III are presented in Table IV. Particular attention should be given to the projections regarding Total Expenditures15 and the Federal Payments and the amount of the General Fund Revenues both before and after the inclusion of local revenues arising from Gambling etc. The net effect of the extrapolition is presented in Table V. In comparison with the Total Expenditures over the period 1988-1991, the General Fund excluding Gambling etc. wold be expected to slip into deficit based on the recent trends in revenues and expenditures. if the gambling revenues were included, then the deficit will be delayed, but is expected to arise within a few years. The point is that the Federal Payment annual changes would need to be increased, if the recent patterns of revenues and expenditures held in the future, and the District required balance in its General Fund. Indeed, as shown in the Memo item of Table V, were the Federal Payment to be excluded from the District's revenues, the General Fund would be permanently in deficit. Even 2223 |