THE PRESIDENT'S NATIONAL CAPITAL REVITALIZATION
AND SELF-GOVERNMENT IMPROVEMENT PLAN:
The plan has two goals:
To revitalize Washington D.C. as the Nation's
To improve prospects for "home rule" to succeed.
The plan will:
Relieve the District government of major financial
and managerial responsibilities -- including
certain pension plans and parts of the criminal
justice system -- that are beyond its financial
capacity, and resolve the city's cash shortfall
that stems from its accumulated deficit;
Invest considerable resources to improve the
city's criminal justice system and capital
Strengthen the District's economic base; and
Draw on the Federal government's technical
expertise to help make the city government
effective in such areas as income tax collection,
education and training, housing, transportation,
and health care delivery.
Over five years, this plan will invest $3.9 billion of
Federal budgetary resources in the Nation's capital. Among
other things, the plan provides:
$885 million for new capital spending on prison
renovation and construction;
$891 million to operate prison facilities;
$681 million to operate the court system;
$125 million in 1998 to begin rebuilding the
city's transportation infrastructure;
$117 million to improve District tax collection;
$917 million to increase the Federal share of
D.C.'s Medicaid payments; and
grant and tax incentives for economic development
in the District.
In exchange, the plan will end the yearly Federal
appropriation and other payments to the District, saving
$3.56 billion over five years.
Thus, the net Federal costs of the plan come to $339 million
over five years.
The plan also proposes that the Federal government assume
responsibility for the District's existing pension plans for
law enforcement officers, firefighters, teachers, and
Upon their transfer to the Federal Government, the
plans would close (that is, they would accrue no
The existing pension assets would pay the
Starting in 2007, the Federal government
would pay off, over an extended period of
time, the $4.3 billion in unfunded liability
associated with these plans -- much of which
was transferred from the Federal government
to the District in 1979.
The District would establish new plans for current
Over five years, the plan would save the District about $770
Federal budget costs will be less than District
budget savings in part because pension assets,
rather than Federal budget resources, will be used
to pay beneficiaries until 2007.
The proposed Federal spending is all dependent on the
District government taking certain actions to improve its
performance -- as outlined in a Memorandum of Understanding
that will be reached between the Federal government, the
District government, and the Financial Authority.
The plan will benefit the city, the region, and the Nation:
It benefits District residents by reducing their
government's financial burdens, improving the delivery
of city services, and investing in the criminal justice
system, economic development, and transportation.
It benefits the region because of the city's economic
recovery; the financial support given to the police,
fire, teachers, and judges pension funds; the
rebuilding of the District prison system; and the
improvement of a key component of the regional
It benefits the Nation because it begins to create a
capital city that we can all be proud of, improves its
transportation system, and helps ensure the safety of
residents and visitors.
Details of the Plan
I. Functions assumed by the Federal government
The Federal Government would assume financial and
administrative responsibility for the District's
pension plans for police and firefighters, teachers,
Beginning in Fiscal Year 1998, the pension system
would be closed (i.e., no new benefits would
accrue) upon transfer to the Federal government.
The District would transfer to the Federal
government or its designee existing pension
assets, estimated to be worth over $3.3 billion,
leaving the Federal government to take on the
remaining $4.3 billion in unfunded liability. A
third-party Trustee would be appointed by the
Federal government to administer the plan and
invest pension assets.
This action would be conditioned on the District
signing a Memorandum of Understanding with the
Federal government requiring that the existing
pension plans be closed; the District would have
to set up new plans for its current and future
employees; the District would be responsible for
current employees who are not yet vested under the
existing system; the District would have to
provide adequate employment records to the
third-party trustee; and assets would need to be
transferred to a Trustee.
The Federal Government would take direct responsibility
only for funding the District Court System. The Courts
would remain self-managed.
The court system works well, and courts would
continue to be self- managed. The funding would
be requested for the Federal Judiciary and would
cost $129 million in the first year and $685
million over a five year period. The D.C. court
system would be funded through the Judiciary's
Administrative Office of the U.S. Courts. There
are no conditions for implementation because the
District court system is deemed to work well.
The Federal Government would assume financial and
administrative responsibility for the District's prison
system, including substantial capital investment in
modernizing the facilities.
The Federal government would take responsibility
for the District's sentenced prisoners (but not
presentenced prisoners), a responsibility that is
elsewhere borne by the States. During the
transition, funding for the incarceration of the
District's felons would be provided by the Federal
government to a receiver responsible to the
Control Board. Funding would include capital for
both construction of new facilities and
renovations of the existing facilities; Lorton
would continue to be used as a prison facility.
A receiver would be appointed to oversee the D.C.
Department of Corrections operations related to
incarcerated D.C. felons for a period of three to
five years, after which the Bureau of Prisons
would assume responsibility; prison facilities at
Lorton would be repaired and expanded.
The Federal government would accept all current
prisoners. The Federal government would accept
new prisoners only if they are sentenced in
accordance with Federal standards. The Bureau of
Prisons (BOP) would have flexibility in
transferring D.C. inmates elsewhere in the Federal
Prison System if needed to manage the inmate
population. Current D.C. prisons staff would be
required to meet Federal standards and reapply for
their positions. Finally, the Federal government
would assume responsibility after the transition
period for the District's parole system and
community corrections program.
The Federal Government will increase its share of the
District's Medicaid payments to 70%:
The Administration proposes to pay both the
Federal and "State" share of the District's
Medicaid costs, thereby reducing the District's
share to 30 percent (the maximum amount that can
be paid by localities in States that benefit from
a 50 percent Federal match). The District will
receive an estimated $156 million in FY 1998 for
this. The Department of Health and Human Services
will provide more intensive technical assistance
to help the District improve the management of its
Medicaid program and assure that Federal funds are
not mismanaged. The increased Medicaid funding
will be conditioned on the District following
various HHS suggestions for programmatic
Intermediate term financing of the accumulated deficit.
The Administration will propose legislation to
have the Federal Government provide intermediate
term (ten to fifteen year) financing for all or
part of the District's accumulated deficit, which
is estimated to be between $400 - $500 million.
The terms and conditions for such loans will be
determined later, but it is envisioned that:
Treasury interest rates would be charged.
The District could refinance the Treasury
loan at some later time after the District's
credit picture improves.
II New investments in infrastructure
The Federal Government will establish a National
Capital Infrastructure Fund:
In FY98, the Administration proposes providing
$125 million in seed money from the Federal
Highway Trust Fund to establish the NCIF. The
NCIF will fund transportation infrastructure
projects in the District which benefit residents
and commuters alike. This includes the
construction of local roads and bridges, the local
match for federal-aid road and bridge projects,
and capital expenditures for the Washington
Metropolitan Area Transit Authority (WMATA).
These funds will be available only for capital
projects; routine maintenance projects would not
The NCIF will be authorized to accept
contributions from other sources, e.g., payments
in lieu of taxes from tax-exempt organizations
such as universities and hospitals.
III. Economic Development
The Administration proposes to establish an economic
development corporation (EDC) as a non-Federal public
authority. The EDC would be funded, in part, with
Federal funds, with an increasing local and private
IV. Technical assistance to District government
Tax Collection: IRS would assume responsibility from
the District of Columbia for collecting D.C. individual
income taxes and payroll taxes, funded by an addition
to the IRS appropriation for that purpose. Expected
costs are $15 million in 1998 for startup and phase in,
and $25 million in FY 1999 and after for operations.
As a condition: specific authorizing legislation
setting out the functions and timing will be
required; IRS will be responsible for enforcement
and will use its current enforcement powers; IRS
will be responsible for management, tax return and
refund processing, customer service, compliance,
and computer operations.
Other Executive Branch Agencies will work with the
District to identify areas in which the Federal
government might provide technical assistance to help
the District government improve the efficiency with
which it delivers services.