WASHINGTON -- The chairman of the House Committee on the District of Columbia said yesterday that he will push for passage this year of a bill that would authorize a new formula that could increase the federal payment to the district.
But the Senate Appropriations Committee voted yesterday for a payment of $648 million, down $20 million from the level narrowly approved by the House the day before. The panel also voted to require the district to cut $75 million from its fiscal 1995 budget.
Rep. Pete Stark, the chairman of the House committee, said he would push for a new formula at a hearing he held a day after the House passed by three votes a budget package that would increase the annual federal payment to $668 million -- $20 million more than the level for this fiscal year. The package would also cut the city's $3.4 billion fiscal 1995 budget by $150 million.
John Hill Jr., a director in the General Accounting Office's accounting and information management division, said the cuts actually could amount to $225 million to $250 million because the district understated fiscal 1995 spending.
Stark, a California Democrat who is sponsoring legislation to change the formula on which the federal payment is based, said he will put forth a new bipartisan proposal that would not simply provide for more revenue. "It is clear from yesterday's House action that a key to success will be action by the district to control its own finances," he said. "I implore the district to demonstrate dramatic, visionary personnel, wage, and spending reductions."
Mayor Sharon Pratt Kelly said the share of the district's total revenue represented by the federal payment has fallen from 26.7% in 1975 to 19.8% in fiscal year 1995, which begins Oct. 1. She was joined in suppotting a formula-based increased federal payment by district council chairman David Clarke, who said the payment is compensation rather than a subsidy. Kelly said a formula-based payment would reassure financial markets by making revenue predictable.
Also at the hearing, Stark pointed to potential sources of new revenue for the district, including the Smithsonian Institution, Congress, and government- sponsored enterprises such as the Federal National Mortgage Association.
Another GAO official, Thomas McCool, testified against separate legislation sponsored by Stark to give the district the right to impose a corporate income tax on Fannie Mae, the Federal Home Loan Mortgage Corp., and the Student Loan Marketing Association. The bill would also require these organizations to maintain their principal offices in the district.
Clarke supports the measure, but Kelly opposed singling out organizations for taxation because businesses would be discouraged from operating in the district. Stark said the political climate for the measure might be bad, but he said the bill "makes sense" and is "doable." However, a Fannie Mac spokesman said the measure would not get past congressional banking committees.
Congress exempted the organizations from state and local taxes, except for real property taxes, in exchange for their performance of services such as providing primary and secondary markets for risky mortgages and student loans.
"If the exemption is removed for D.C. alone, the predominant effect will be on Fannie Mae," said McCool, who is an associate director in the GAO's general government division. Because of Fannie Mae's competition with Freddie Mac, which is located in Virginia, Fannie Mae "will have an incentive to reduce its tax bill by shifting activity out of D.C.," he said.
