The evidence that Washington is, indeed, another city in trouble looms up at all points: from deteriorating neighborhoods to crime, from inadequate schools to widespread poverty, from health problems to an overburdened court system. There are no easy answers or single solutions. It is obvious, however, that there can be no remedies at bargain-basement prices.

The District's revenue sources must be widened dramatically in order, first, to meet the city's current and urgent needs and, from that point, to provide assured future funding for long-term programs and projects.

The Commissioners, therefore, are most pleased at this opportunity to urge enactment of revenue-raising legislation for the capital city.

More specifically, we strongly support Chairman Bible's bill (S. 1218), which carries the Administration's plan for an equitable financing partnership effort by local residents and the Federal Government for the capital city.

In our opinion, the other measure before this Committee, H.R. 8718, would be of tremendous help on a relatively short-term basis, but would fall short of authorizing the full revenue needs in the years ahead. (Exhibit A shows the revenues to be provided under these two bills.)

At the risk of burdening the Committee with too much detail, let me offer this background information before turning to a discussion of the pending bills' Federal payment and loan provisions:

The Federal Government's special contribution toward the cost of running the capital currently is made by an annual appropriation, which is limited by a fixeddollar ceiling set by legislation. This maximum figure now is $60 million.

The Federal payment goes into the city's general fund, which finances such major programs as education, public safety, health, welfare, recreation and the library system. Certain other activities, such as highways, water and sanitary sewage, are fed by earmarked fees, charges and taxes, and do not at this time present a financing problem.

The District borrows from the U.S. Treasury to assist in the financing of long-term construction projects. Currently, Congress has set the general fund borrowing total at $290 million, of which $50 million is designated for the rapid rail transit system, and $40 million for the recently authorized Federal City College and Washington Technical Institute. The actual amounts permitted to be borrowed each year are determined through the appropriations process.

Under present law, the authority to borrow is not extended after repayment, and the $290 million will all be earmarked by the end of the forthcoming fiscal year.

Mr. Chairman, as you know, S. 1218 would provide a new method of determining both the Federal payment authorization and the District's annual borrowing authority for the general fund.

Under this measure, the Federal payment authorization each year would be equal to 25 percent of general fund revenues from local taxes. The bill's companion provisions call for a borrowing maximum that would be set by limiting the amount available each year for debt retirement to 6 percent of the general fund tax yield plus the authorized Federal payment.

It seems clear to us that Senator Bible's bill would allow predictable and orderly financing to meet the essential long-range needs of the District.

The House-passed bill adopts some desirable features of the Administration measure. The bill picks up the Administration's borrowing authority proposal, but with this major stipulation: at the end of three fiscal years, the maximum debt figure would be frozen until changed by Congress. H.R. 8718 increases the Federal payment authorization by a flat $10 million, from $60 million to $70 million. Exhibit A, again, shows the difference in the revenue amounts that would be provided by the two bills.

As I noted earlier, Mr. Chairman, the city is facing both a current and a longrange revenue crisis. The immediate money problem is clearly reflected in heavy cuts in the District's House-passed budget for the fiscal year beginning July 1. And on the long-term level, the spending needs of the District mount at an accelerated pace.

At the risk of sounding an overly dramatic note, the Commissioners believe that Washington-along with other major cities-clearly is at a crisis point. You might ask, why is the District, with its relatively stable population total, in such immediate need of money? There are a number of elements, including the inflationary factor. But population characteristics offer the best single

answer.

In little more than a decade, the city has undergone dramatic and far reaching changes in the characteristics and capabilities of its population.

The District has a high proportion of elderly individuals, broken families, dependent children, and low-income residents handicapped on skills, education, and family background. The following table points up significant shifts in the District's population:

As shown in Exhibit B on the easel, our estimates of future funding needs show that enactment of S. 1218 along with substantial increases in local taxes will be needed in the years ahead to finance the city's spending requirements.

Existing legislation is expected to produce $405.8 million in fiscal 1968 and $453.2 million in fiscal 1973.

If Congress enacts the Administration's bill, and appropriates the full authorized revenue amounts, we still would need an additional $15 million in local taxes in fiscal year 1969, rising to $90 million total in fiscal year 1973 to close the revenue-spending gap.

Corresponding increases in the Federal payment and loan appropriations will be required-ranging from $10.6 million in 1968 to $53.6 million in 1973 for the Federal payment, and from $34.2 million in 1968 to $90.4 million in 1973 for loans. I should note that the District's budget officials consider these future funding estimates to be, if anything, on the conservative side. The projections do not, for example, include the requirements for two important programs—and community renewal and model cities.

In our opinion, these burgeoning revenue needs can be met only through the proposed local-Federal partnership effort.

Mr. Chairman, unless major steps are taken promptly, our urban problems will spread and crystallize. Delay, from the revenue standpoint alone, will mean an increase in the cost of remedial action at some future date.

Let me touch briefly upon a few of the major programs that helps explain the almost stunning estimates of future spending needs.

First is the public school system. In the long run, the schools must provide the answer to most of the city's interrelated urban ailments. Improving the quality of education is a key element in the solution of such problems as crime, unemployment and poverty.

Lack of revenues, which continues to hamper the development of the District's educational programs, was a major factor in the House reductions in proposed school spending for fiscal year 1968. By referring to the attached Exhibit C, you will note that the total reduction was $62.7 million. Of this amount, reductions in the school budget accounted for $46.7 million; recreation, $4.8 million; health and welfare, $7.7 million; public safety, $1.2 million; and $2.3 million for all other activities.

To point up the impact of the immediate revenue shortage, let me cite some examples of what the $7.3 million reduction in school operating funds would mean : (1) A reduction of 289 teachers from 400 requested to 111. The 400 requested are needed to provide highly individualized instruction for approximately 21,000 students who are from two or three years below grade level, based on their reading achievement. New programs are essential for these students, who have not responded to conventional teaching efforts.

(2) A reduction of 149 teaching positions-from 202 requested to 53. The 202 requested are needed to reduce class sizes to Board of Education standards of not more than 25 per class and pupil-teacher ratios of 24-to-1 in the elementary schools and 21-to-1 in the secondary schools. The following table shows how the District currently compares with the neighboring school systems in pupil-teacher ratios:

It should be noted that a large elementary class (grades 1-6) is generally defined as from 30 to 35, and a small elementary class, from 20 to 25. Thus, the new ratios would allow the District to move from the lower limits of a large class to the upper limits of a small one. Smaller class sizes also would place the District in a stronger competitive position in recruitment; teachers, of course, tend to find the smaller suburban area classes, with their smaller percentage of educationally handicapped students, more attractive.

(3) elimination of all 75 teachers requested to start a prekindergarten program for about 3,000 four-to-five-year olds. This total is only 43 percent of the prekindergarten population in the socially deprived areas of the city. Many children start kindergarten or first grade with their educational development lagging by one or two years.

Again referring to Exhibit C attached, you will note that our school construction requests-totalling $63.2 million for 66 projects-were reduced to $23.8 million. Of the requested $63.2 million total, $40.7 million is needed for projects which, when completed, will reduce overcrowding and replace obsolete buildings. As shown in Exhibit D on the easel, the need to rebuild and upgrade the school system during the period 1968-1973 is expected to cost nearly $318 million. These funds would provide:

23 projects-496 classrooms-$32.2 million-to eliminate overcrowding,

53 projects-1,787 classrooms-$149.8 million-to reduce class size,

20 projects-438 classroms-$55.5 million-to replace obsolete schools,

4 projects-$30.0 million-for special schools including relocatable (moveable) prekindergarten classrooms,

$17.0 million-for modernization of existing schools,

$31.2 million-improvements to existing schools.

At the present time, as indicated on Exhibit J, attached, the school system has a total of 4,726 classrooms. Of these, 578-528 elementary and 50 junioralthough in use, are considered to be obsolete. Current authorizations and appropriations through fiscal year 1967 wil provide for the replacement of 140 of these obsolete elementary classrooms. The remaining 438 are programmed for replacement during the 1968-1973 period. A further examination of Exhibit J shows that current authorizations will provide 471 additional classrooms. An additional 2,291 classrooms, which are highly dependent upon passage of new revenue legislation, are programmed during the 1968-1973 period. A summarization follows:

Total classrooms currently available..
Less: obsolete classrooms

Plus: obsolete classrooms replaced.
Classrooms currently authorized_.

Classrooms programmed-1968-1973--

Total classrooms available upon completion of program---

4, 726 578

4, 148

578

471

2, 291

7,488

The crime fight, Mr. Chairman, is another area that obviously will require increasingly heavier expenditures. Once again, the rising crime rate cannot be reduced with money alone, but increased funds are crucial for our crime-fighting programs.

We estimate the District will need an increase of at least $5 million a year for the next five years to carry out a meaningful attack on crime. To underline this point, this means an additional requirement of $25 million in five years, over and beyond the amount being spent now. These additional funds would be spent in the fields of police, court and legal services, along with rehabilitation of offenders and anti-deliquency activities.

Personnel costs are, of course, another major factor in the city's budget requests. During the past six years, the District's budget totals rose by about $125 million. Of this, about $62 million, or nearly half, represents such mandatory personnel costs as salary increases, and pension and retirement fund contributions.

On the same point, personnel services in the District's proposed budget represent about 73 percent of the total.

Congress last session approved authorizing legislation, sponsored by Senator Morse and Mr. Nelsen, for two public colleges in the District-the Federal City College and Washington Technical Institute. Here is a project of great merit, but nevertheless one that will add a sizeable, but as yet, undertermined amount to our future operating budget requirements.

As I explained earlier, the specific programs cited are merely examples, and fall far short of the list of expenditures that we must anticipate. The scope of anticipated general fund spending projects is reflected in the following table:

Our problem, Mr. Chairman, is simply one of limited resources, on the one hand, and what would appear to be unlimited requirements for services and facilities, on the other.

Like other central cities, the District's ability to raise revenues is limited by the fact that many District families earn low incomes and live in homes of low assessed value. These are the same families who require above average levels of costly city services such as education, recreation, health, welfare, sanitation, public housing, and police protection.

The District's tax base also is limited by exemptions. A total of 54 percent of the land area is exempted from real estate taxes, with the Federal Government holding about 45 percent of the city's land area.

In spite of these limitations, District taxes over the past five years have increased by $69 million or 33.8 percent. The personal income tax and several excise taxes were increased by Congress last year to produce an additional $12 million, and the Commissioners have increased the real estate and personal property rates for fiscal 1968 to produce an additional $8 million.

The Commissioners foresee the need for further increases in District taxes in fiscal year 1969 and future years. As I mentioned earlier, our present estimates indicate that, even with the increases in the Federal payment and borrowing authority provided by the Administration bill, we still would need substantial local tax increases to meet future spending requirements.

Realistically, District residents, like those of other major American cities, must be prepared to pay increasingly larger amounts in local taxes if their city's needs are to be fully met.

Mr. Chairman, we should not lose sight of of the obvious: District residents do not have an exclusive stake in the future of our city; the Federal Government, representing all Americans, has an inescapable responsibility for the welfare of the Nation's Capital.

What we need now, and what will be needed just as badly in the years ahead, is a more equitable Federal payment and additional borrowing authority. These, along with increased local taxation, are the only possible solutions.

Chairman Bible's measure is preferable to the House bill in that it provides increasing and predictable Federal support, and establishes what we feel is an equitable method for determining the amount of the Federal payment.

This 1-to-4 ratio between the Federal payment authorization and local tax revenues reflects, to some extent, past Congressional action. The Federal payment authorization has been increased five times since 1947. Though not explicitly computed as a percent of local taxes, the authorized Federal payment at the time of three of these increases represented between 23 and 25 percent of local tax revenues. It would appear, therefore, that a level of 25 percent is in line with Congress' past action.

A lump sum payment authorization, as provided in the House-passed bill provides much needed additional revenue in the short run; this method, however, does not take into account changing requirements of future years. A Federal payment authorization based on a percentage of local tax revenues would enable the District to anticipate a specific amount in the early budgetary planning stage. Without this type of resource, the District will not be wholly free of the conditions of recent years, whereby the Appropriations Committees are forced to reduce our budgets because of lack of funds, or else to delay action well into the fiscal year involved.

The additional borrowing authorized in the House bill, while helpful, also provides only a three-year solution to our general fund capital outlay requirements. The Administration bill, however, would provide loan resources on a continuing basis.

S. 1218 would provide borrowing authorization ranging from $335 million in fiscal 1968 to an estimated $540 million in fiscal 1973, as shown in Exhibit F on easel. As I noted earlier, H.R. 8718 would relate the borrowing authority to general fund revenues for a period of only three years. The loan authority then remains constant until reviewed and changed by Congress. This plan, also shown on Exhibit F, authorizes borrowing of $333.8 million in fiscal 1968, $363.9 million in 1969, and $392.3 million in 1970 and succeeding years until changed by the Congress.

The flexible approach to general fund borrowing authorization proposed by both bills more nearly conforms to accepted principles of sound debt management. The objective of debt limitation is to hold the amount of debt a government may incur to a total which it has the capacity to repay. Therefore, Mr. Chairman, the District's borrowing authority would be limited by a realistic measure, the financial ability to support long-term debt service charges and repayments.

The maximum amount of debt which would be authorized by the pending bills is conservative in relation to prevailing local government borrowing practices in other cities. The outstanding indebtedness permitted under these measures is less than the estimated general fund revenues from local taxes and the Federal payment for the corresponding years.

In the 21 largest cities in the United States the ratio of revenue to debt, ranged from a low of slightly less than 1-to-1 to a high of 1-to-4, according to the latest Bureau of the Census survey of city government finances for fiscal 1965 (as shown in Exhibit G attached). The median level of indebtedness in these cities was almost double the revenues for the same year.

Available Federal grants also figure in consideration of future financial needs of the city. The District of Columbia receives Federal grants on the same basis as all other state and local governments. We expect to receive $128 million in fiscal 1967 and $167 million in 1968. A detailed listing of these grants is attached in Exhibit N. Over 50 percent of these totals is earmarked for highway projects. Grant funds, in most cases, do not diminish our needs for additional revenues, since practically all Federal grants are earmarked for special projects. In fact, they may place an additional financial burden on the city because they usually require local "matching" funds or initiate programs which ultimately require total financing by the city.

At this point, Mr. Chairman, I would like to comment briefly on the House floor amendment to H.R. 8718 that states that "residence, religion, race, color or national origin" shall not be a factor in filling District Government jobs.

The District does not, of course, give weight to religion, race color or national origin in hiring or recruitment. The inclusion in the amendment of the residence factor, however, is of some concern to us because it runs counted to a Commissioners' long-standing policy.

Under this policy, preference is given to a District resident for appointment or promotion when all other factors are equal. A resident, with his consequent obligation to pay local taxes, ordinarily would be expected to have a greater knowledge and interest in local affairs than would a non-resident.

The Commissioners, however, would not want their position on the House floor amendment to jeopardize chances of enactment of revenue legislation, which is of overriding importance to the city.

In conclusion, Mr. Chairman, the District of Columbia is the nation's ninth largest city. It is the center of the nation's fastest developing metropolitan area. In this role, Washington has, in full measure, all the problems of a rocketing urbanization.