District of Columbia: Fiscal Structural Balance Issues

摘要

The District of Columbia has historically faced many challenges due to its unique circumstances and role as the nation's capital. After several years of struggling with financial crises and insolvency in the early 1990s, the District has significantly improved its financial condition by achieving five consecutive balanced budgets, an upgraded bond rating, and unqualified, or 'clean,' opinions on its financial statements. More recently, however, District officials have sounded the alarm that the District faces an imbalance between its long-term expenditure needs for program services and capital investment, and its capacity to generate revenues over the long run. These officials assert that the District faces a fiscal structural imbalance as a result of several factors, many stemming from the federal government's presence in the city, the absence of a state to provide funding for the state-like services provided by the District, and restrictions on the District's tax base. In response to your June 26, 2002, letter, this report provides our preliminary assessment of several elements of the District's reported fiscal structural imbalance. However, we have not yet completed the work necessary to conclude whether, or to what extent, a fiscal structural imbalance may exist in the District. Specifically, you asked us to provide information on the following: the District's definition of fiscal structural imbalance and its contributing factors; the constraints on the District's revenue, including the prohibition of an income tax on nonresidents; the District's estimates of its spending requirements, including its cost estimates for providing services to the federal government and its spending for state-like functions; changes in the District's financial relationship with the federal government resulting from the National Capital and Self-Government Improvement Revitalization Act of 1997 (Revitalization Act); and alternative approaches to measuring structural imbalance in the District. The information being presented in this report is based on our work performed to date on this issue. We currently have ongoing work in this area and plan to issue a future report which will provide a more comprehensive analysis of the District's reported fiscal structural imbalance.