and almost nothing on health and welfare while half of the District's money goes into those three areas. Because of such differences, city by city comparisons are meaningless, unless you combine all the state-run programs inside a city with its local budget. In fact, more money is spent per capita by non-federal governments in six states-Alaska, California, Hawaii, Nevada, New York and Wyomingthan is spent per capita in the District.

Assumption: Compared to other cities, the District's welfare costs are stupen

dous.

Facts: A Census Bureau report shows that eight states spend more per capita on welfare than does the District. A recent survey by the District Government shows that Baltimore, Boston and San Francisco-cities in our population bracket-spend more money and more dollars per capita, on welfare than does the District.

Assumption: Compared with other places, the District severely shortchanges its public school system.

Facts: In fiscal 1969, the District spent more per pupil on operating the elementary and secondary schools than did 13 of the 15 cities in the 500,000 to 1,000,000 population group. Similarly, the District spent more per pupil in operating costs than did Prince George's or Fairfax counties and about 94 percent of that spent by Montgomery County.

When you cut through all these assumptions, you have some facts that can be applied to the specific problems now facing Congress and the city. These facts lead us to urge:

That the City Council approve promptly the increase in real and personal property taxes asked by Mayor Washington. The taxpayers can afford it, the city needs the funds, and prompt action would be an earnest to Congress.

That Congress approve the increases in income and gasoline taxes asked by the city government. These will not place the city out of line with its suburbs or with other cities in the tax burden on local citizens.

That Congress adopt the 30 percent federal payment formula which would do away with the barter system for federal aid that distorts the city's fiscal situation each year.

That Congress approve the increases in the local budget asked by the city government. Despite today's level of government spending here, particularly in the schools, the city has a long way to go to make up for the years of neglect prior to 1965; catching up is expensive.

That Congress face the fact that it has an obligation to pay for the retroactive pay increases it is about to grant and rather than try to shove part of the burden of inflation back on a city which doesn't have the money and can't afford to divert it from the urgent needs.

Beyond this, if Congress readily wants the District government to economizeand its members talk about that every year-it must give the city power to reorganize and to control its own administration. The waste in the city budget (and there is waste) cannot be eliminated as long as a 19th century administrative system designed to give individual congressmen extraordinary and inordinate power over our affairs blocks any effort to eliminate programs that are no longer useful or to transfer funds from less urgent to more urgent programs.

To put it very mildly, the financial situation in this city is not good. But, with the single exception of the property tax, it is a situation that Congress-and only Congress can improve.

[From the Washington Star, June 7, 1970]

THE DISTRICT'S UNWORKABLE BUDGET SYSTEM

The bad news from the House Appropriations Committee last week on the District budget-$182.2 million cut from a proposed $825.1 million for the year starting July 1-was the worst ever. Indeed, if the city actually were to be clouted with a haymaker of that magnitude, the result would be disastrous.

But no one expects that the committee action, approved by the House on Thursday, will stand up. Now that the annual city-congressional budgetary charade has peaked at the critical level which demands that something must be done, the corrective wheels already are starting to turn. When they have finished turning, the local government in all likelihood will wind up in a familiar position. It will not have all the money it needs, and certainly not all it has asked for. But it will have enough to survive for another year.

This is the likelihood; it is still not a certainty. Some $144 million worth of public construction, ranging from schools to a new sewage treatment plant, depends on Congress' willingness to do something about the District's borrowing authority, which expires this year. Unless a boost in the local gasoline tax is authorized, the city highway fund will be flat broke. And before funds can be added to the budget for a myriad of other deleted needs, Congress must authorize an increase in the annual federal payment to the city.

This is a tall legislative order, which constitutes the first priority of business. But it is not the essence of the problem.

As great as the District's need is for immediate dollars, the real trouble is a budgetary system which is politically unworkable, and which desperately needs to be changed.

Year after year, the District lacks revenues to finance a realistic budget. Until additional revenues are pushed through Congress by the House and Senate District Committees, therefore, the Appropriations Committees of the House and Senate are unable to approve a balanced city budget. And the District Committees, year after year, fall down on the job, chiefly because of inaction in the House. The chaos spawned by this pattern of confusion reached the ultimate absurdity in 1969, when Congress finally got around to approving the District budget just before Christmas, nearly six months after the current fiscal year began. But Congress has not, as a matter of fact, produced a local budget on time since 1960. Last December 22, very much to their credit, Chairmen Natcher and Proxmire, speaking respectively for the House and Senate appropriations subcommittees which handle the District budget, wrote Mayor Washington that no such thing would be permitted to occur again. This year, they said, the city budget would be turned out, come hell or high water, before the new year begins on July 1. The local government, they told the mayor, should cooperate by submitting a budget whose requests were in balance with the revenues available under existing law.

But the budget proposed by the mayor and submitted by President Nixon to Congress on March 31 was widely unbalanced, as everyone-Chairmen Natcher and Proxmire included-knew it would be. Apart from legislation to finance the pending teacher-police-firemen pay bill, the House District Committee has not lifted a finger to provide additional revenues. And Natcher's appropriations subcommittee, having inadequate funds to work with, accordingly was compelled to piece together last week's inadequate budget.

Congress is not the only villain in this drama. The District government is culpable in a variety of ways. Its communications with Congress are virtually non-existent. Until last week, for example, the staff of the Senate District Committee says that it was unaware of the impending expiration of the city's vital borrowing authority. It apparently had never been contacted directly on the subject by anyone in the city government. This, to say the least, is hardly the way to cement relations with those upon whom the city depends in a very practical sense, for its survival. With that sort of communication gap, it is easy to see why there may be some lack of a sense of urgency about District affairs on the Hill. The present budgetary crisis of the local government points up the desperate need for the District to be granted voting representation in Congress. Liaison, in dealing with the immensely complicated District-Federal relationship, cannot be a part-time function. The District needs full-time representation for the benefit of Congress in performing its responsibilities no less than for the city's own sake. But even if representation were granted, some way also must be found, within Congress, to unsnarl the budgetary tangle which results from the fact that the two District Committees must produce the city's revenues while the Appropriations Committees decide how the money is to be spent.

The House District Committee, which must initiate action on District tax revenues, could certainly expedite things if it chose. But the political fact is that it cannot be counted upon to do so. One reason for this reluctance, rightly or wrongly, is that committee's southern-conservative leadership has a vast distrust of the present city government's ability to run the District prudently, without

waste.

If a solution is to be found, therefore, it lies in a revamping of the basic process of handling the revenue-budget problem. We have two suggestions.

The most sensible solution would be for the Congress to empower the District to raise its own taxes-and agree in advance, as President Nixon has urged, that the federal-payment share of the budget will be pegged each year to a set percentage of the local taxes raised.

This procedure would not involve Congress' yielding control over the fiscal affairs of the District. Congress would continue to control the budget itselfdetermining how the money is to be spent.

But such a procedure would force the District to present a balanced budget each year, since it could propose to spend no more money than it was assured of having in hand. The budget could then be handled, in an orderly manner, by the Appropriations Committees alone.

Failing this reform, and assuming a continuation of the annual need for both new revenue legislation and action on the budget itself, surely the subcommittees of the District and the Appropriations Committees in each house of Congress could at least meet jointly early each year to hear the District's justifications of its requests in both categories. By this means, working cooperatively together, perhaps the two committees could reconcile their decisions and speed along the budgetary process.

The chief difficulty with the latter alternative is that congressional committees are intensely jealous of their jurisdictions and prerogatives. We do not suggest, however, that any jurisdictions or prerogatives be surrendered.

The fact is that the present system, over many years, has proved itself unworkable. Congress owes the people of this Nation's Capital a better deal.

Senator EAGLETON. We understand that Mr. Thomas J. Owen, Jr., has some travel conflict and we will accommodate him at this time if our other witnesses will so indulge.

STATEMENT OF THOMAS J. OWEN, JR., CHAIRMAN, MUNICIPAL FINANCE COMMITTEE; AND CHARLES COON, BOTH OF THE METROPOLITAN WASHINGTON BOARD OF TRADE

Mr. OwEN. Mr. Chairman, I am Thomas J. Owen, president of Thomas J. Owen & Sons, and I appear here today as chairman of the Municipal Finance Committee of the Metropolitan Washington Board of Trade.

Mr. Chairman, I have with me Mr. Charles Coon on the staff of the Metropolitan Washington Board of Trade.

Mr. Chairman, my committee, the Municipal Finance Committee, has studied the budget for the District of Columbia for fiscal year 1971. We have found it a difficult but not an impossible task for interested citizens with limited time and resources to fully inform themselves on all aspects of the city's proposed spending.

I appear before you today, therefore, not as an expert on the District budget but as the representative of Washington's business community which is concerned about revenues, the municipal tax base and the capital program of the city.

With respect to S. 3903, the board of trade enthusiastically endorses this proposal for the adoption of a Federal payment to the District of Columbia equal to 30 percent of the District's tax revenues.

The United States, our largest employer, is not carrying its fair share of local government costs. This inequity is particularly serious in view of consistent tax increases levied against business at a time when drastic steps are needed to maintain and, hopefully, enlarge our tax base. The increasing taxload is one of the important factors encouraging business to move out of the District. This exodus clearly must be halted and a taxation policy favorable to the private economy instituted.

The formula proposed in S. 3903 is an important step in redressing the balance of fiscal responsibility. We urge the adoption of the formula principle.

In the letter to the Speaker of the House on March 4, 1970, transmitting the 30-percent formula proposal, the District government pointed out that the formula approach would, in addition to helping defray costs resulting from the Federal presence, compensate the District to some degree for revenue loss-primarily property and corporate income tax. The District has a shrinking tax base, and we urge the adoption of policies and programs which will help stop this erosion.

A tax policy that results in business expansion will mean increased revenues for the District under the 30-percent formula. We believe the adoption of the formula by the Congress and a positive taxation program by the District to encourage business expansion are basic elements to the generation of the economic growth so desperately needed in the District.

The board of trade questions the adequacy of the 30-percent figure. While we recommend the enactment of the bill, we hope the Congress will determine that a higher percentage would be more equitable.

As the seat of government, Washington is considered by foreign and domestic visitors as a microcosm of the United States. We talk about making Washington a model city, a success story for others to emulate. We want the city to be great. It is our view that significant new funding to help realize these worthy objectives cannot possibly be achieved through property taxes and, as I indicated, increasing this tax contributes to lessening the tax base. The board of trade urges the adoption of a higher formula percentage to permit a more concentrated attack on our problems.

The assumption by the United States of additional costs of operating the National Capital will be an encouragement to business, and even more so if accompanied by a halt in property tax increases.

While we approve of the proposed 30-percent Federal payment figure and urge enactment of this proposal, we wish the committee to understand and the record to show that we do not think the 30-percent formula is the ultimate answer to the size of the Federal payment. Principal factors such as inflation, increased government responsibilities, and the continued increase in the amount of tax-exempt land in the District clearly forecast that we and other taxpayers will seek an upward adjustment of this percentage in the future and perhaps as soon as next year.

While legislation is not involved, I wish the committee to be informed that we vigorously oppose an increase in the tangible personal property levy. As a matter of fact, this is an extremely unfair tax on business with large and slow turnover inventories which is being phased out in Montgomery and Prince Georges Counties. We should endeavor to phase it out in the District too.

With respect to S. 3904: In March, the Bureau of the Budget transmitted to the Senate the proposal empowering the District to issue obligations to finance District capital programs and to provide Federal funds for institutions of higher education. We urge the adoption of the administration's proposal, S. 3904, subject to the following comments:

We see a benefit to the District through the bonding process since it would be able to plan and execute a capital program over a period of years without being subject to any constraints that may be affecting the Federal budgetary climate. Section 4(A) of the bill appears to be

an effort to guarantee marketability of the bonds insofar as the credit of the District is concerned. The Bureau of the Budget indicates in its letter of transmittal, and I quote: "These District of Columbia bonds are, in essence, guaranteed by the Federal Government."

We are not quite sure whether the full faith and credit of the U.S. Government would be behind these bonds or not. The bill does not explicitly say so. If it is, all well and good. If it is not, the marketability of the bonds is in jeopardy. The community looks to the rail rapid transit system as the key to redevelopment of the District. Since bonds for the transit system would be covered under this bill, the matter of Federal guarantee is of unusual importance.

We assume that the capital financing plan does not alter the authority of Congress to approve or disapprove capital projects through the appropriation process. This is proper since capital expenditures should not be approved apart from all the other expenditures necessary to operating the Federal City.

Congressional approval of the proposal for Federal capital contributions for higher education is clearly called for in the bill. The bill's requirements for the submission of an education program and financial plan for the Federal City College and Washington Technical Institute are laudatory. The need for prompt improvement of these institutions of higher education and vocational training is apparent and we urge approval of these provisions.

Mr. Chairman, we recognize the need for prompt action on these matters, and I appreciate the opportunity to present the views of the board of trade at this time.

Thank you.

Senator EAGLETON. Thank you, Mr. Owen, and thank you, sir. John W. Hechinger, former Chairman, District of Columbia City Council.

STATEMENT OF JOHN W. HECHINGER, FORMER CHAIRMAN, DISTRICT OF COLUMBIA CITY COUNCIL

Mr. HECHINGER. Mr. Chairman, I appreciate your allowing me to testify, and I apologize for not having a written statement, but it was impossible on learning about the hearing last Friday.

However, I know that you have correctly expressed concern that there is very little demonstration of citizen interest on city matters. And I heard your pleas for support of the city on a recent television program last week where you defended our position vis-a-vis Congressman Broyhill, more eloquently than most residents. We love you and I wish to thank you in addition to testifying.

Senator EAGLETON. Let's not embrace in public. [Laughter.]

Mr. HECHINGER. I urge the passage of S. 3903, Federal payment bill, to set payment at 30 percent. With a fixed formula central budgeting can take place without the "Hairbrush-Harry Approach" that goes on every year.

This brinkmanship of suspense causes a great deal of whatever inefficiency may exist in the city administration that you ask the Mayor about a moment ago.

The Federal Payment Formula is to offset the 55 percent tax-exempt real estate, and to offset sales tax, payroll tax, corporate tax, transfer tax, franchise tax, utility tax, vehicle tax, gasoline tax and even more,