WASHINGTON -- After four years of watching the District of Columbia struggle to manage its finances, its basic services and its unique role as the nation's capital, President Clinton is proposing a virtual takeover of the district's governmental functions.
"This nation's capital city is in distress," said Mike McCurry, the White House spokesman. "The president wants to be a good neighbor -- and wants to live in a good neighborhood."
The plan calls for the federal government to assume responsibility for roads, prisons, courts and tax collection; to increase Medicaid aid; and to pay some pension obligations. In return, the city would give back -- at least for now -- responsibilities won during the successful fight for home rule in the 1970s.
Administering these functions will cost the federal government $3.9 billion over the next five years, says Clinton's budget director, Franklin D. Raines. The district would give up its $660 million annual payment from the federal government, which it receives in lieu of property tax revenue.
"We view this plan as a plan of tough love," Raines said. "It all depends on the city government taking certain actions to improve its performance."
Congress would have to approve the plan, which is not a certainty. Yesterday, Sen. Lauch Faircloth, a North Carolina Republican who is chairman of the Senate Appropriations Committee's D.C. subcommittee, called the plan a "rip-off" and a "bailout for a mismanaged city."
"In effect, the Republican Congress is getting the bill for past Democratic Congresses that refused to rein in the district," he said.
But it is future American taxpayers who stand to foot the bill for years of too many promises by the district's City Council. Beyond the immediate budget crisis, the projected shortfall for the pension fund for retired district law enforcement officers, firefighters, teachers and judges alone is $4.3 billion.
Clinton proposes having the government pick up the existing pension obligations beginning in 2007. In return, the city must close out its pension program, start another one and keep it fully funded.
The administration steered clear of more creative and contentious ideas, such as a "commuter tax" or a cut in income taxes for district residents, though Treasury Secretary Robert E. Rubin said he would propose tax incentive plans to encourage investment in the district.
In recent months, many voices have been raised in support of help for the city. Just yesterday, the Brookings Institution released a revenue plan for the district titled "The Orphaned Capital," calling for the federal government to act as a quasi-parent to the city.
Brookings proposes that the federal government deliver aid comparable to what states deliver to cities of the same size and cover half the cost of state-type services given to district residents.
"The city needs a state," said Carol O'Cleireacain, a visiting scholar who drafted the study. "That's something that when you come to this city as an outsider really hits you between the eyes."
Behind its well-kept monuments and historic attractions, there is a District of Columbia that tourists don't see: a 68-square mile city with a shrinking population of 550,000, underachieving schools, an alarming crime rate and little private industry upon which to rebuild a future.
In 1974, the federal government handed over responsibility for running the city to the residents. Blame for what went wrong is often filtered through the prism of racial politics, but few would disagree with the assessment made yesterday by Raines: that the federal government gave the district responsibilities for providing services without the means to raise the necessary money -- and that the district exacerbated these problems with poor management.
"It's now very plain to everyone that the federal government's relationship with the district is fundamentally flawed," Raines said. "The local, county and state responsibilities that we gave this city in 1974 have proven to be beyond the city's resources to deal with them. Local officials have not performed as well as they must in managing the city."
Some council members expressed concern about certain trade-offs in the plan -- particularly the proposed loss of the annual federal payment. "We still don't have the ability to generate sufficient revenues," said Councilman Harold Brazil.
But Eleanor Holmes Norton, the district's nonvoting delegate to Congress, predicted that Clinton's plan would save the city.
"We are hanging on for dear life," she told the Women's Democratic Club yesterday. "The president has come to the rescue."
Pub Date: 1/15/97