tions and the amount of local revenues (by prescribing all except the property tax rate), it can balance the income and outgo side of the District's budget only by adjusting the remaining variable, the Federal payment. Since this is done in the context of each year's budget, it creates the uncertainties to which reference was made earlier.

If expenditure levels here are conspicuously higher than the community's political leadership itself would choose, after balancing the people's desire for more services against their willingness and ability to pay for them—in other words, if the city's expenditure levels are importantly influenced upward by the Congress and the Administration-than the gap between revenue requirements and locally available resources can be bridged only out of National (U. S. Treasury) resources.

One encounters considerable reluctance among those concerned with the District's fiscal policies to acknowledge the predominance of Federal influence in shaping District finances. It is an understandable reluctance since it has important implications for the realization of home rule.

So long as Congress retains control over the expenditure side and over the larger portion of the revenue side of the District's budget, it is idle to proceed as if the local government and its constituency were fiscally sovereign; as if the Congressional responsibility consisted solely of a "payment" to compensate for mandated exemptions and the extraordinary municipal costs occasioned by the Federal presence. It surely is unrealistic to assume that from this day forward, the city's spending and tax levels will be conditioned only by the kind of political constraints that bind popularly elected local policy makers sensitive to the pocketbook motivations of their respective local constituencies. Congressional and Administration involvement in local government program

goals is and must remain substantial. If a hot line does not now connect the District Building with the command posts at the ends of Pennsylvania Avenue, there certainly is use for one!

It is not advocated, but it would not be illogical to view the financing of the District, at Congressionally prescribed levels, as a Federal responsibility to which the local community is required to make a contribution on the basis of a tax effort commensurate with the tax efforts of comparable communities. Acceptance of this formulation would imply that the widely endorsed goal of political home rule can be realized separately and apart from fiscal home rule. A distinction between political and fiscal home rule is without precedent but should not be ruled out on that account in a federal-city relationship that also is without precedent.

A reconciliation of these unique relationships between fiscal control, home rule, and the Federal payment will be pressing for increasing attention so long as the spotlight remains focused on the city's social needs. For the next two or three years, however, a payment approximating a 30 percent relationship to general fund revenues may suffice to cover most pressing needs, especially if the revenue producing capability of the tax system is gradually augmented along some of the lines here proposed.

About one-fourth of recent capital expenditures have been covered by debt financing. As indicated in the immediately preceding chapter, the District's borrowing operations are explained more by tactical than financial management considerations. Under present legislation, the District's general fund debt service obligations (interest and principal repayment) may not exceed 6 percent of general fund revenues from taxes and the authorized Federal payment. This formulation of the debt limitation becomes frozen in fiscal

year 1970 and will need to be renewed and possibly liberalized on a current revenue basis.

POLICY IMPLICATIONS FOR THE DISTRICT

The intended implication of the preceding discussion is that for the present at least, the elastic variable in the District's fiscal equation is the Federal payment. It is the residual called upon to absorb the impact of the Congress's and the Administration's ambitions for the quality of District Government services, the lengths to which they oblige the District to go toward supporting itself from its own local resources, and the extent to which the District is permitted to exercise its taxing jurisdiction over groups now favored by immunity from taxation. In the absence of a consensus on the dollar equivalents of the many variables involved, the District's prospects for Congressional compassion and understanding can be augmented only by its demonstration of exemplary diligence and efficiency in the utilization of the financing resources left in its discretion. More specifically, its claim for favorable Congressional consideration of its legislative needs will improve as:

The revenue potential of local taxing resources, particularly of the property tax, is maximized;

Efficiency in the use of appropriated and federal grant funds is improved; and

The potential of both expenditure and tax policies for advancing the social and economic objectives of the community are maximized.

To these ends, the District will want to improve its economic and fiscal planning and its municipal management tools. The development of staff competence in all the specialities required to realize these goals will pose problems for the District. While

it is essentially a city administration, its responsibilities embrace both municipal and state functions, and also those that in most places are performed by other overlapping governments. It will not be able to provide these activities with adequate administrative supervision without the appearance of over-staffing unless it succeeds in developing exceptional administrative efficiency.

The assistance the District is already receiving from the U.S. Bureau of the Budget in developing budgetary procedures and controls is an important step forward, but more is required.

The District would be materially aided by the assistance of the Office of Statistical Standards in the Bureau of the Budget in preparing a Statistical Plan designed to produce, on a continuing basis, the social, economic, and fiscal data it needs to develop an economic-fiscal program and to keep it under continuing surveillance.

Further, the District would benefit from the help of the Office of the Secretary of the Treasury in developing the staff competence it needs for evaluating alternative tax and fiscal policies in terms of their impact on tax revenues and economic development.

Finally, the District would be materially assisted by help from its Congressional "friends" in developing acceptable procedures for speeding up the calendar of its tax and appropriation legislation and for securing more expeditious processing of its other legislative needs.

These, briefly, are some of the "next steps” that will help carry the District of Columbia toward the goal the President must have had in mind just a few weeks ago: "Throughout my years as President, I have looked to Washington, D.C. to set the pace for all the cities of this Nation in meeting the needs of the people."