Budget Autonomy - Why Congress Needs to Fix the Approval Process for DC's Budget

FACT SHEET

Currently, the federal government does not allow the District government to spend local tax dollars without Congressional and Presidential approval. This burden creates major service delivery problems for local residents and businesses. Specifically, there are five key reasons why Congress should change the current process:

1. No other city or state in America operates with this burden.

Unlike every other city and state in America, the District cannot budget and spend its locally-raised funds without approval from the President and Congress. All other local governments need and have the flexibility to spend locally-raised dollars according to their local laws.

2. Congressional delays prohibit implementation of new programs.

Virtually every year, Congress fails to approve the District's budget by the beginning of the fiscal year. In recent history, the average Congressional delay has been almost three months, which is almost a full quarter of the fiscal year. During these delays (continuing resolutions), critical new investments cannot be funded.

In FY02, for example, these delayed investments included new school nurses, prescription drug benefits, police equipment and staffing, fire fighter hires, and relocation costs for tenants moved from substandard housing.

This year, the Congressional delay is planned through February - almost half a year. That inaction has jeopardized new investments in foster care, public schools, and improved compensation for police and firefighters. For example, the CR has impacted the District of Columbia School system that requires $90 million more in local funding than was appropriated in FY02. The CR has slowed hiring for the Child and Family Services agency that is required to hire social workers in excess of the approved FY02 level.

3. Delays negatively affect marketability of District bonds.

The uncertainty about whether the District will have a budget at the start of the fiscal year must be disclosed to potential buyers of DC's municipal bonds. In general, greater uncertainty means higher interest rates for DC, which in turn means more of the budget goes toward paying interest, and less goes to other priorities.

4. Mid-year budget reallocations require an act of Congress.

Local governments need the flexibility to respond to rapid changes in their needs. The District is not allowed to significantly reallocate funds to meet changing needs without an act of Congress. Last year, for example, DC needed to reallocate funds to support the movement of children from foster care to adoption. This transfer of funding could not be complete for months until a supplemental appropriation bill moved through Congress.

5. Program managers must "use or lose" funding at the end of each year.

Congressional approval for spending expires at the end of the year, which punishes program managers who save funds by not allowing them to apply those funds to other purposes.

6. Congress can still provide oversight to the District under a different process.

The Constitution requires Congress to oversee the District as the nation's capital, but does not require approval of its budget. Under a streamlined budget process, Congress can provide all necessary oversight through passage of laws and appropriation of federal funds to federal priorities in the District.

In fact, despite the time consuming budget review process, recent history shows that neither Congress nor the White House have made any changes to the actual allocation of expenditures in the District budget. Instead, they have limited their changes to legislative provisions and direct federal appropriations - two things they can still affect under a changed process.

The Solution

The Fiscal Integrity Act of 2002 would maintain the current structure and process for federal oversight of the District with one exception: the District could establish and spend its local budget as would any other city or state. Congress and the White House would still provide oversight as required through the Constitution, but the mechanism for this oversight would be structured in a manner much less disruptive to District operations.

Specifically, Congress and the White House would continue to provide oversight by:

• Reviewing the District's annual budget for passive approval

• Monitoring an "early warning system" of financial reports to identify emerging problems

• Approving an appropriations act for the District, including funding for the Courts and other direct appropriations the federal government may wish to make

• Passing laws related to federal concerns in the nation's capital

To further ensure fiscal integrity at the local level, the proposed legislation also strengthens the independence of the Chief Financial Officer (CFO). This is accomplished through more clearly defining personnel authority, providing an extension of the CFO's procurement and personnel autonomy, tougher requirements for removal of the CFO, and other measures.

At present, this bill has been approved by the House Subcommittee on the District of Columbia, and has been introduced in the Senate. It's passage into law would represent a major step forward for effective government in the District.

For additional information on the District's budget process, contact the Senior Advisor for Budget and Finance, Office of the Mayor, at 202.727.1000.