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Government and People
Testimony of Mayor Anthony A. Williams
Subcommittee on the District of Columbia
April 15, 1999
Chairman Istook, Congressman Moran, and Members of the Committee, thank you for the opportunity to testify before you today. It is indeed an honor and a privilege to share with the committee my administration's fiscal year 2000 budget for the District of Columbia and to discuss the progress we are making in our short term action plans.
Short Term Action Plans
In the first 100 days we have made rapid and substantial progress toward a government that works for everyone. We still have some work to do in some areas where we are behind, but as you can see from the handout (Appendix 1), we have met a significant percentage of our short- term goals. To briefly review, I have chosen to group the reforms around goals: A Clean City, A Safe City, Business Friendly City, First-Class Customer Service, Increased Employment Opportunities and Enhanced Neighborhoods.
I am proud of the progress we have made in the past three months, and I am committed to doing even more. But ultimately, the success of our efforts will depend not on short-term fixes, but on long-term planning and strategic investments in our infrastructure.
Budget Philosophy Bold Choices
Over the last few years, largely through the work we did in the CFO's Office, we have stanched the financial bleeding and stabilized the revenue stream. Through cooperation and hard work we have put the District temporarily on sound footing. However the fiscal health of the District needs to be pointed in a long-term corrective position. The people of the District deserve an innovative initiative that reflects the results of the election.
That is why I have proposed a bold budget for our city that will systematically upgrade our capacity to provide quality services to our residents particularly with regard to education, health care, and other basic services. I am in the process of working with the Council and the Control Board so that the budget sent to Congress will reflect these initiatives.
Let me tell you why I think it is so important for our city to make bold decisions now.
Even though the District of Columbia faces surpluses in the short term, difficult decisions lay ahead. We must plan for the inevitable return of the business cycle, which could send the national economy into a downturn. Our surpluses will be rapidly wiped out if the economy falters and we have let down our guard against inefficiency and waste. We need to retool and rethink our government to put the city on solid financial footing for both good times and bad.
The time has come for us to make the crucial decisions that will put us in a competitive position for the next millennium -- decisions about what the government can and cannot do, should and should not do. Decisions that will determine, to a large extent, whether our city ultimately succeeds or fails.
This budget takes those tough decisions head on. It will put the District on a path to a stable future, ensuring for years to come that Washington will be a source of pride for all Americans. Most importantly, it strengthens our investment in critical areas such as: supporting children, improving government services, rebuilding the human service network, and expanding the economy.
At this point, I would like to briefly discuss how my budget affects each of these priority areas and submit my full testimony for the record.
SUPPORTING OUR CHILDREN
The future of the District is vested in our children. Children are our most precious resource and the wisest investment for our city. Unfortunately, we have lacked a unified strategy or a strong enough commitment from the government to assure that our children are safe, educated, happy and healthy. The results are ominous:
These statistics highlight the moral imperative we face to renew and strengthen our commitment to children. This budget reflects that imperative, and follows through on my promise to devote $33 million toward children's programs.
Under my proposal, the children and youth investment partnership will distribute $33 million for out-of-school programs. This approach allows services to be competed by community organizations and government agencies. This is part of a new paradigm of public-private partnerships that is a core principle of my administration.
Some people have questioned whether it makes sense to provide these services through community organizations rather than government agencies. While I believe that our agencies have a critical role to play in the lives of our children, we need to make use of the energies and expertise of service providers in the community. I feel strongly that these programs should be community based designed by people familiar with particular neighborhood needs, and implemented by performance-driven, efficient non-profit organizations.
In addition to the $33 million, I have included more than $21.3 million for new and expanded District programs. These funds support child care, foster care programs, youth employment and internship programs, resources for public libraries, and services for youth in the juvenile justice system. Investments in foster care and juvenile justice will help better serve children and meet mandated court requirements and specific performance criteria.
f we are to build a stable and prosperous future for our city, we must have a well educated and prepared workforce. More fundamentally, education is about giving children a chance to fulfill their innate talents so that they can become all they are supposed to be in life. Simply put, we must do better for our children.
This budget will make a significant investment in capital improvements for our city's crumbling schools. We will invest $364 million in capital improvements. This will fund our program to renovate eight schools per year plus build two new schools and fund the bathroom renovation program.
Our students deserve to learn under a roof that doesn't leak. They deserve schools where bathrooms work and classrooms stay warm in the winter and cool during summer school.
I am proposing such a massive investment in schools to provide children a safe, clean and effective learning environment. Special focus will be put on technology upgrades in our schools to prepare students for the 21st century.
I am also recommending a 5 percent increase in teacher salaries. The fact is, we have by far the lowest teacher salaries in the region. It is hurting our ability to compete for the best and brightest educators. A large percentage of the District's teachers are fast approaching retirement age we need incentives to bring dedicated young teachers into our school system. We owe our children nothing less.
A first class education depends on first class schools, from kindergarten through college. While the need to invest in primary and secondary education is critical, we must also expand access to quality higher education for high school students. As a first step, we must improve opportunities for higher learning at the University of the District of Columbia.
The University of the District of Columbia
A historically Black, Land-grant University, and our only public, four-year institution of higher learning, the University of the District of Columbia has a critical mission for our city. As with institutions of higher education across the country, we must focus the mission of UDC and rebuild it into a high-quality institution. Our children deserve the best education we can offer and these graduates of UDC will be a part of our region's well- educated labor force. Again, this requires us to take a look at the current structure and focus of UDC and to make important decisions about its future.
UDC's campus desperately needs an overhaul costing in excess of $125 million. There is a proposal to move it across the river, but that is not the point. The point is that regardless of where it is located, do we go down the same track allowing it to continue unfocused or invest so that it survives and thrives.
My vision for UDC has several components. First, the District will invest $5 million as seed money for the UDC's endowment, to provide for the long term health and prosperity of the University. Second, the plan will allow us to capitalize the assets of UDC in order to have more resources available to further the University's educational mission. Third, I believe we must devise ways to provide dedicated revenue streams to the University to enhance its long-term stability.
Additionally, I believe we must refocus the energies of UDC to concentrate on technology and preparing students for the world of work. These changes are not easy, but are necessary if we are to build UDC into a first rate university that meets the needs of its students and the community in the next century.
College Access Program
A third part of our strategy to improve access to higher education is to work with public private partnerships such as the D.C. College Access Program. DC-CAP is a creative partnership including 15 companies and foundations a partnership that will awaken students to the opportunities available for higher education and make those opportunities possible by providing scholarships to make college affordable. DC-CAP is funded entirely by local corporate and foundation grants. It has already raised $14 million, and plans to raise a total of $20 million by the end of the year.
IMPROVING GOVERNMENT SERVICES
As part of this budget, I am proposing two major changes in the way our government serves its citizens. First, we must implement a series of reforms designed to invest in our workforce, promoting productivity, training, and more efficient service delivery. Second, where appropriate, we should introduce competition into our government, allowing our workers to make more money while providing residents better service at reduced cost.
Workforce Investment Strategies
To support ongoing efforts to improve workforce compensation and productivity, I propose a workforce investment strategy that addresses the pay disparity between union and non-union employees, links pay to performance, and improves training.
Pay parity will enhance morale and improve productivity. Under my proposal, pay parity will be achieved by FY 2002, beginning with a 3.8 percent base pay increase in FY 2000. In addition, I propose a 2.2 percent performance bonus fund for non-union workers, bringing the total increase to 6 percent in FY 2000. The effect of this proposal is to link part of employees' compensation to performance while, at the same time, achieving pay parity.
In addition to addressing pay parity, I propose a gainsharing initiative for certain programs that have measurable outcomes. When employees reduce costs through reengineering or other means and increase productivity, they are awarded a performance bonus for their efforts. By working with the unions, we can use gainsharing initiatives to improve services and reduce costs.
Human Resources Development
The employees of District government are our most important partners in building a government that is more responsive to the needs of citizens. Therefore, it is critical that the workforce is properly trained to do their job. Under my proposal, District employees will receive additional training to enhance their ability to provide quality services. This will include foundation skills (orientation, ethics), rehabilitative, and special skills training. This proposed workforce investment is a long-term strategic approach to improving management and compensating the workforce for a job well done.
Managed competition is a process whereby public and private entities compete for the provision of services. Cities across the country have used managed competition to improve service quality, efficiency, as well as reduce costs. I propose to work together with our labor unions to inject competition into certain government services. We will give our workers new opportunities for increased training, performance incentives, and the ability to rethink their work.
The assumption behind managed competition is that in most cases our workers are the best prepared, most experienced people for the job. Given the monopolistic nature of government, however, they lack incentives to go the extra mile required to provide the highest quality service at the lowest cost. Under this plan, workers will be allowed to organize themselves and bid for a contract to deliver certain government services. They will receive training and technical support to help them get organized and to prepare them
for a competitive bidding process. Contracts will be structured with incentives for efficiency and quality.
Productivity Savings and Productivity Bank
The Fiscal Year 2000 budget also includes line items for productivity savings of $20 million. Savings are expected because of investments the District made in FY 1998. The productivity bank is intended to be a revolving fund that will enable the District to finance projects that decrease the cost of delivering services or increase revenues. Funding for the bank totals $30 million in FY 2000.
REBUILDING THE HUMAN SERVICES NETWORK
The District currently spends about one-third of its budget on health care related services. Despite this spending, the health care system in the District fails to meet the needs of many residents. On a series of health status indicators, the District ranks poorly compared to other large cities. The District has higher than national average rates of infant mortality, homicide, and communicable diseases including HIV/AIDS. An alarming 17 percent of our citizens - 80,000 residents - lack health insurance coverage. This budget reflects my belief that we must fundamentally restructure the health care delivery system to provide access to quality health care to every District resident regardless of income level and geographic location.
Health Care Restructuring
The centerpiece of my health care initiative for the city is to build on recent health care expansions to children and families and guarantee the availability of comprehensive health insurance coverage to every District resident with income at or below twice the federal poverty level. These expansions will cut the uninsured rate by more than half, from 17 percent to 8 percent, putting us in the top ten percent of states, and first among benchmark cities. Washington can and should become a leader in health care coverage.
The second component of my health care plan is a new emphasis on primary care services, including substance abuse treatment. Although our city has enough overall primary care capacity, some areas of the city are dramatically underserved. My proposal will work to solve this inequity, building two replacement primary care facilities in wards 7 and 8. Through insurance coverage and capital investments, this budget will greatly increase access and resources available for primary care service to District residents.
The third priority in this area is to strengthen the health care delivery system and the "safety net." This proposal begins to achieve this goal by reducing the number of uninsured in the District, thereby reducing the burden of uncompensated care on health care providers. In addition, this proposal maintains funding for the uninsured. The proposal contains two accounts to fund contractual arrangements with the Public Benefits Corporation (PBC). These contracts will reimburse the PBC for services provided at D.C. General Hospital and the clinics to individuals who remain uninsured.
A fourth component of my health care plan is the establishment of a health care commission to make recommendations for the improvement of health care service delivery to District residents. The commission will devise ways of delivering equitable services to all of our communities.
Substance abuse treatment and prevention is also an important part of this initiative. The health care restructuring proposal includes the addition of substance abuse services as part of the standard managed care benefits package. Thus, all those newly insured and current Medicaid enrollees would have access to substance abuse services.
Welfare, Child Care, and Homeless Service
The FY 2000 proposed budget contains an increase of $13.5 million over FY 1999 for child care subsidies and facilities improvement. This increased funding supports subsidized child care for approximately 2,000 more children and increased child care subsidy rates. The FY 2000 budget includes $12 million for homeless services, which includes $200,000 for homeless shelter maintenance. In addition, the FY 2000 proposed budget includes $140.3 million for the Temporary Aid to Needy Families (TANF) Program. This budget supports the placement of 8,000 TANF recipients into work activities. Of the budgeted amount, $1 million in federal TANF funds are set aside separately within the budget for DHS to serve as a rainy day fund. These funds will remain deliberately unspent during FY 2000, ensuring that at least a carryover of $1 million will be available in FY 2001 and to begin to build a reserve to protect against future fiscal pressures.
EXPANDING THE ECONOMY
To support service delivery and to ensure financial prosperity, the District must invest resources wisely and continue to build on our recent financial progress. To this end, this budget includes proposals in the following areas:
Small Business Tax Relief
This initiative will provide substantial tax relief for small businesses, in the amount of $66.7 million the first year. Specifically, it will reduce filing thresholds; accelerate depreciation of electronic equipment; change the net operating loss deduction and eliminate carry-back of losses; eliminate the office of tax and revenue's professional license fee; restrict the arena fee to entities with District gross receipts over $3 million; reduce the commercial real property tax in the District's economic development zones; and eliminate the sales tax on internet access.
To be prosperous, a city must have a strong and vital core, and we are moving forward with plans to ensure that our downtown remains an engine of economic growth. But economic development downtown cannot come at the expense of our city's greatest treasure the many diverse and unique neighborhoods from which is woven the fabric of our social and cultural life.
The District has many great neighborhoods, each with a rich history, traditions, and identity. Good people raise their families here. They worship, educate their children, and relax with friends all in our neighborhoods. If our city is to prosper, we must have healthy, vital neighborhoods.
This budget seeks to vastly upgrade the District's ability to address key neighborhood issues including jobs, affordable housing and clean streets. To do this, we will first upgrade our internal capacity to address neighborhood issues by putting more resources into the understaffed offices of planning and zoning. Second, we will dramatically step up street cleaning efforts and begin to coordinate cleaning efforts with community and private sector groups. Third, we will work through the National Capital Revitalization Corporation to leverage new investments in business and housing investments that will renew our neighborhoods, one block at a time.
Capital Financing Strategies
Financial management targets are policy parameters that are important in the budget and financial planning process and are designed to both guide policy decisions and help meet financial and operating goals. The specified targets should allow the District to retain resources necessary to meet all critical operating and capital needs during the planning period. Furthermore, these targets should allow for the retention of resources necessary to reverse economic decline and facilitate economic development that improves the life of District of Columbia citizens. The financial management targets for the District are: maintaining structural balance, maintaining a positive fund balance, reducing the debt burden, restructuring of long-term debt obligations, and improving the District's credit ratings.
A debt restructuring plan is also in this budget. I am proposing to restructure our front loaded debt to provide flexibility to fund tax relief. In addition, tobacco settlement securitization is a financial initiative that will also serve education. The FY 2000 budget includes $ l 6 million in additional revenues due to the securitization of tobacco settlement funds. This amount is fully committed to fund debt service for the rehabilitation of public schools and the construction of two new schools.
The $150 Million Financial Reserve
Let me mention one other point. In addition to my budget, I have also submitted a budget and financial plan that complies with the congressional mandate to budget for a $150 million reserve. However, I strongly believe that the provision for the reserve is an excessive requirement for three reasons:
First, it is unnecessary due to the current financial position of the District government. Based on the financial results of Fiscal Year 1998 and preliminary Fiscal Year 1999 revenue and expenditures projections, the District will have a positive fund balance of more than $300 million at the end of Fiscal Year 1999. This is over 6 percent of general fund expenditures, which is higher than the norm of 5 percent for a positive fund balance.
Second, it would prevent needed investments to improve service delivery in the District. Setting aside an additional $150 million reserve would severely limit the funds available for critical initiatives such as health care, education, and economic development.
Third, it is inconsistent with budget stabilization practices in other jurisdictions. Many states establish a 'rainy day' fund and use prior year revenues as a cushion against potential economic downturns. The District has projected a fund balance that can be used as a reserve without the need to contribute additional resources.
Even though it is well intentioned, setting aside a $150 million reserve is not the best strategy for putting the District on stable footing for the 21st Century. I am proposing strategic investments to train and prepare our workforce, repair our crumbling schools, and secure our infrastructure. We must address the problems that are steadily eroding the long-term viability of our city.
TOWARD THE 21ST CENTURY
This budget sets out aggressive policy goals for our children, our schools, our health care system, and our neighborhoods. It provides new investments our citizens want and deserve. To meet these goals without exposing the District to the danger of another financial collapse, we need a smaller, more efficient government. We need to fundamentally rethink how the government is delivering services to our citizens. We need to change minds, attitudes, and old habits.
The District has come farther and faster toward economic and financial recovery than perhaps any city in the nation. Unlike New York or Philadelphia, we have engineered this recovery without resort to borrowing. Not long ago, it seemed inconceivable that we would now face surpluses instead of deficits. This remarkable recovery has come about because of a number of factors, including a strong economy, better tax collection, and tough fiscal discipline.
As I have said many times, however, the best time to fix the roof is when the sun is shining. We stand at the brink of an unprecedented era of hope and promise for our city. We need only have the courage to seize that future for our children. The time has come for bold leadership and difficult choices. We must not let our children down.
ACHIEVING OUR GOALS
Goal: A Clean City
Goal: A Safe City
Goal: A Business-Friendly City
Goal: First-Class Customer Service
Goal: Increased Employment Opportunities
Goal: Enhanced Neighborhoods
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