GENERAL STATEMENT

Senator PASTORE. All right, Commissioner McLaughlin, you may proceed in your own way.

Mr. MCLAUGHLIN. Mr. Chairman, we have Commissioner Karrick, with us today, and Commissioner Lane, I understand, will join us in a short time.

Mr. Chairman, the budget estimates of the District of Columbia for the fiscal year 1958, as submitted to Congress in January of this year, amounted to $206,843,100. However, House Document No. 116 contained amendments which increased the total requests to $207,249,900, which was the amount considered by the House.

HOUSE ACTION

The House allowed $192,530,300, the amount of the bill pending before you. The cuts were applied to almost every appropriation in the bill in part with the concurrence of the Commissioners.

In addition to reducing the estimates of appropriation for the District of Columbia, the House also eliminated $3 million from the authorized Federal payment of $23 million to the general fund.

This has the effect of reducing the revenues of the District. The authorization was established by Congress in the District of Columbia Revenue Act of 1956.

In the same act, District taxes were raised by over $8 million, including an increase in the real-estate tax of $1.8 million. These additional taxes are now being paid, but Congress failed to meet its share of the obligation in the fiscal year 1957 and the House has, for the fiscal year 1958, again failed to meet its obligation.

FEDERAL PAYMENT AN OBLIGATION

The Commissioners feel that this Federal payment is an obligation of the United States in view of the fact that in 1954 and 1956 when the authorized amount of the Federal payment was increased, it was raised sufficiently that in combination with local tax increases enough new revenue would be provided to finance pending obligations of the District.

In addition, the Public Works Act of 1954 provided for Government loans to the District repayable with interest.

It, therefore, appears to the Commissioners that this further accentuates the obligation of the Federal Government to appropriate the Federal payment in full each year, because it certainly is a further inequity to require payment by the District of interest on highway, water, and sewer loans when the Federal Government is declining to meet its moral obligation to pay $23 million per year to the general fund.

RESTORATION REQUESTED

Of the House reductions in the estimates of $14,719,600, the Commissioners are requesting restoration of $2,722,140.

In addition, there are amendments pending amounting to $2,254,900 Therefore, the total requests amount to $197,507,340, or $9,742,560, below the estimates. The major amendments will provide for an expanded public-assistance program and wage-scale increases.

REDUCTION IN GENERAL FUND

In the general fund, the House reviewed items totaling $162,030,532. This amount was reduced by $5,524,214, leaving in the bill pending before you $156,472,318.

The Commissioners are asking a restoration of $1,662,090 of this deletion and the insertion of amendments amounting to $1,794,900, which is an increase of $3,456,990 over H. R. 6500, as passed by the House, or a total request of $159,929,308. Adding a reserve of $1 million for supplementals, which, I may add, we have always had in the past, but we have not this time, and including the financing of 1947 capital outlay of $6,981,200, and deducting $6,303,000 of capital outlay to be paid in 1959, would result in a total requirement of $161,607,509.

If the Federal payment of $23 million is restored-of which $7 million must be applied to capital outlay under the statute-the official estimated revenue availability in the general fund, revised as of April 11, 1957, would amount to $159,715,590, or an apparent deficit of $1,891,918, if the restorations are approved.

INCREASE IN ESTIMATED TAX COLLECTIONS

However, our tax collections from individual incomes have exceeded our estimate of $11 million by five and a half million as of May 10, 1957.

The application of this excess to our revenue availability results in a surplus of $3,608,082. It is hoped that this surplus will ameliorate to some degree our financing of the District of Columbia public-works program which will enter its fourth year of operation in 1958.

May I add parenthetically at this point that we have indications of more than a half million dollars' decrease below our estimates on the various sales taxes and some liquor revenue; liquor-tax revenues are down a bit as well as auto excise taxes.

Senator PASTORE. You mean as of the end of the fiscal year?
Mr. MCLAUGHLIN. Yes.

Senator PASTORE. So what will be the amount over and above the estimates?

Mr. MCLAUGHLIN. Very probably, I think, there is an offset of a half million dollars as against that $521⁄2 million.

HIGHWAY FUND

With respect to the highway fund, it was estimated at the time of the House presentation that there would be an unappropriated surplus, at the end of fiscal year 1958, amounting to $65,599.

The House deleted items amounting to $8,035,486, but the loan authorization was reduced by $7,690,000, which resulted in a decrease of a like amount of revenue availability, leaving a surplus of $411,085. The Commissioners are requesting a restoration of $208,150, and amendments of $230,000, or a total of $431,150.

In addition, necessary reserves for supplementals amount to $138,600, which indicates a deficit of $165,666. However, one of the amendments is actually a reappropriation of $88,000 and, rather than change the loan authorization at this time, the obligations in this fund can be controlled to stay within the appropriations.

WATER FUND

Under the water fund, there was a reduction of $878,000 made by the House. The Commissioners are requesting reinstatement of $768,000 of this item, which will not be available for expenditure until 1959, and the previously estimated surplus including adjustments will be increased from $114,388 to $385,778.

SANITARY SEWAGE WORKS FUND

Although the sanitary sewage works fund was reduced by $164,000, the Commissioners are requesting only an amendment of $56,400. A review of revenues and adjustments will leave a surplus of $311,043 in this fund.

MOTOR VEHICLE PARKING FUND

In the motor vehicle parking fund, the House decreased the budget estimate by $83,900. The restoration of this item is being requested, and the estimated balance at the end of 1958 will be $1,374,839.

In closing, I would like to point out that in preparing a budget for the District of Columbia, the Commissioners always consider that the taxpayers are entitled to the services for which they pay. Many essential services rendered by District activities will either have to be curtailed or eliminated if the requested restorations are not granted.

The Commissioners wish to express their appreciation of the privilege of appearing before your committee and to thank you for the opportunity of presenting their recommendations on the District of Columbia appropriation bill for 1958.

(Additional statement of Mr. McLaughlin follows:)

STATEMENT OF COMMISSIONER ROBERT E. MCLAUGHLIN ON FEDERAL

PAYMENT

Mr. Chairman, we are requesting the restoration of $3 million in the Federal payment to bring it up to the $23 million amount authorized by the Revenue Act of 1956 (Public Law 460).

The year 1946 seems to be the starting point for District of Columbia largescale budget difficulties. It was the beginning of inflation as far as the District was concerned, and necessitated 15 days of hearings before the Joint Subcommittee on Fiscal Affairs during the 1st session of the 80th Congress, on methods of acquiring additional revenue through taxes and other means.

Out of this hearing came amendments to the Revenue Act of 1939 which imposed approximately $91⁄2 million in increased taxes (general fund) upon our residents. In that year (1947) the Federal Government was paying $8 million as its share toward the expenses of the District of Columbia government. Up to 1947 the water fund received no portion of the annual payments made by the Federal Government.

The Congress, having considered all the facts, in the Revenue Act approved July 16, 1947, provided in article VI as follows:

"For the fiscal year ending June 30, 1948, and for each fiscal year thereafter, there is hereby authorized to be appropriated, as the annual payment by the United States toward defraying the expenses of the government of the District of Columbia, the sum of $12 million, of which $11 million shall be credited to the general fund of the District of Columbia and $1 million shall be credited to the water fund of the District of Columbia."

This relief carried us into the fifties. Then came the District of Columbia Public Works Act of May 18, 1954, amending the Revenue Act of 1947.

It was estimated that by this act our residents would pay $14.5 million per annum (all funds) additional taxes each year. As its part toward this great program, Congress provided as follows:

"Sec. 2. (a) For the fiscal year ending June 30, 1955, and for each fiscal year thereafter, there is hereby authorized to be appropriated, in addition to the sums appropriated under section 1 of this article, an annual payment by the United States toward defraying the expenses of the government of the District of Columbia in the sum of $9 million: Provided, That so much of the aggregate annual payments by the United States appropriated under this article to the credit of the general fund as is in excess of $13 million shall be available for capital outlay only, and then on a cumulative total basis only to the extent of not more than 50 percent of the cumulative total of capital outlay appropriations payable from such general fund which becomes available for expenditure on or after July 1, 1954. "(b) If in any fiscal year or years, a deficiency exists between the amount appropriated and the amount of $20 million authorized by this article to be appropriated, additional appropriations are hereby authorized for subsequent fiscal years to pay such deficiency or deficiencies."

Our burdens being greater than we could bear compelled us to return to the Joint Fiscal Committee for additional taxes. As a result Public Law 460, District of Columbia Revenue Act of 1956, was passed. By it, the income tax and other taxes were raised to produce approximately $8 million (general fund) in 1958 and each year thereafter. As a result of the understanding with Congress, the Commissioners raised the real-estate taxes approximately $2 million a year. The Congress having again considered all the facts, amended section 2 of article VI of the Revenue Act of 1947 by increasing its authorization of Federal payment $3 million so that the total is now $23 million. Section 2 now reads as follows: "There are hereby authorized to be appropriated, in addition to the sums appropriated under section 1 of this article, as annual payments by the United States toward defraying the expenses of the Government of the District of Columbia, the sum of $9,000,000 for each of the fiscal years 1955 and 1956, and the sum of $12,000,000 for each fiscal year thereafter: Provided, That so much of the aggregate annual payments by the United States appropriated under this article to the credit of the General Fund as is in excess of $13,000,000 for each of the fiscal years 1955 and 1956, and $16,000,000 for the fiscal year 1957 and subsequent fiscal years shall be available for capital outlay only, and then on a cumulative total basis only to the extent of not more than 50 per centum of the cumulative total of capital outlay appropriations payable from such General Fund which becomes available for expenditure on and after July 1, 1954.

The taxpayers as the committee can well understand had no way of escape and have been compelled to meet these very heavy increases in taxes.

The Federal Government on the other hand has failed to meet its obligation. Because the increase in the Federal payment was a part of the program of increased taxes on District of Columbia residents, the Commissioners feel that the Congress has a moral obligation to pay the full $23 million and meet its part of this increased tax program.

In 1956 it appropriated $18 million in lieu of the authorized $20 million. In 1957 it appropriated $20 million in lieu of the authorized $23 million. As to this $5 million the Commissioners are content to withhold claim therefore until its new capital program is ready for submission.

As to the $3 million withheld by the House, the Commissioners most earnestly request full restoration.

On July 5, we appeared before the Senate Appropriations Committee on the supplemental appropriation bill for 1957 and presented considerable historical data in reference to the Federal payment. At this time, we merely wish to refresh your recollection with a brief résumé of the Federal payment history up to and including 1947.

The Organic Act of June 11, 1878, contained the first legislative provision definitely recognizing the obligations of the Federal Government to share in the cost and development of the District. It provided in part, that

"To the extent to which Congress shall approve of said estimates, Congress shall appropriate the amount of 50 per centum thereof; and the remaining 50 per centum of such approved estimates shall be levied and assessed upon the taxable property and privileges in said District other than the property of the United States and of the District of Columbia; ***”

From 1878 until around 1910 the financial scene was comparatively peaceful in the District of Columbia. Estimates of appropriations and revenues were submitted to the Treasury and transmitted to Congress. Funds were appropriated and spent. The 50-50 distribution was approximately complied with. Between 1902 and 1910, when the District had insufficient funds to meets its obligations, the Secretary of the Treasury was authorized to advance funds. The act of March 3, 1909, provided that the expenses of all departments charged