Washington. -- The government of the nation's capital faces a crushing $722 million deficit, and there's talk of revoking home rule and putting the city into receivership.
On the other side of the nation, big and boisterous Orange County, California, has filed for bankruptcy, and its losses may run as high as $2.5 billion.
Any government can get into serious trouble, and when one does, the visceral reaction is to pray for relief from above. The supervisors of Orange County thrashed around in vain asking federal or state relief to get them off the bankruptcy hook. In Washington, Marion Barry, a champion free spender during 12 earlier years as mayor, who must go on bended knee, begging for relief, to a conservative Republican Congress.
Orange County, with 2.4 million people and an estimated $80 billion-a-year flow of goods and products, will find a way to extricate itself. It has only its own negligence to blame for letting its county treasurer play high-risk games with so-called "derivative" investments.
The D.C. problem is much more serious. This is the capital city of rTC the United States, the place we receive diplomats and heads of state, convene our national legislature, administer our courts and departments of government. It's unthinkable to let it become an urban wasteland.
And the District, for all its wasteful ways, for its thousands of seemingly surplus employees, does have a case against Congress. The city can tax only 47 percent of the property and 34 percent of the income earned within its borders. It's been denied a commuter tax, so it can't tap suburban wealth. When Congress granted home rule, it slapped a huge pension obligation on the city.
In a desperate move to keep a semblance of home rule, Mayor Barry proposes a deal. The federal government would take over the city's court, prison and Medicaid responsibilities (including a gaping $267 million current Medicaid deficit). The District, in return, would trim 4,000 from the 45,000-person city payroll, reduce all city workers' pay 10 percent, and promise other economies.
The feds, in short, would pick up huge ongoing bills on a will-o'-the-wisp promise the District will take short-term budget hits and be less of a spendthrift in the future. There's zero chance of Congress approving without tough, ongoing fiscal oversight and ways to enforce frugality.
The real choice, in fact, is between some form of fiscal oversight board and a receivership. An oversight board was used to get New York out of its fiscal crisis of the '70s and Philadelphia out of its in the early '90s. In return for state loans or guarantees, a city agrees to stiff fiscal oversight of its affairs.
The system sounds good -- except that D.C.'s projected deficit is nearly 22 percent of its budget. New York's deficit was only 6 percent, Philadelphia's 10 percent. Without some fresh federal cash, it's hard to see an oversight board working.
Receivership ought to be a real option, especially if an oversight board is tried and doesn't work. When impoverished Chelsea, Massachusetts, faced a 24 percent deficit in 1991, Massachusetts suspended the stalemated, corruption-plagued city government and appointed an all-powerful receiver.
Rapidly, the receiver righted Chelsea. Senior managers got fired, bureaucracy was cut back, overtime restricted, services contracted out, unions tamed. A new, businesslike government was built from the ground up. Voters have overwhelmingly approved a new city charter and self-government is ready to recommence.
With a time limit, a receivership delivers the benefits of housecleaning and benign despotism without the downside danger of oppression.
But for Washington, there'd be tricky racial politics. An African-American as receiver would allay bitterness over replacement of an elected black city government. Former Virginia Gov. Douglas Wilder or former U.S. Rep. William Gray of Pennsylvania might be considered.
Ronald Henry, who ran the Pennsylvania state control authority overseeing Philadelphia's recovery, warns that whatever the District's past fiscal sins, it would be foolish to wield too heavy an ax. "Eviscerating services," he warns "will just promote the flight of taxpayers from the city."
Whether it's control board or receivership, Congress should demand an impartial report on what levels of revenue are required to run adequate municipal government for the United States' capital city. City taxpayers ought to pay their fair share -- but it is the federal government's responsibility to pay the rest.
Neal R. Peirce writes a column on state and urban affairs.