NARPAC has been far from rigorous in the assembly of "official studies" dealing with the plight of the District. However, several of the most important are catalogued here:
FOUR SEMINAL REPORTS IN TURNING DC AROUND
(Adapted from GUPPI Meeting Minutes)
Four reports in particular highlighted the impending DC financial crisis, each emphasizing the depth of the problems and even proposing solutions. Many of these proposals are being restated by the Control Board and the White House now. The information and solutions have been available for years, but they have been largely ignored.
Our Children, Our Future, Revitalizing the District of Columbia Public Schools" by the Committee on Public Education (late 1980s), a joint project of the Board of Education and the Federal City Council which clearly documented a crumbling school system. Specifically, the system was over-staffed and lacked good management. The report went on to recommend that the city sell some schools, decrease administrative staff, privatize certain services, increase technology, increase pay and training of teachers, and reorganize the central offices, exactly what the Control Board recently recommended nearly a decade later.
Financing the Nation's Capital (The Rivlin Report) by the Committee on Budget and Financial Priorities of the District of Columbia (1990), sponsored jointly by Mayor Barry and Congress to look at the District government as whole. The Rivlin Commission"s first words were: "The District of Columbia faces an immediate fiscal crisis", pointing to a $100 million projected deficit in 1990 and up to $700 million in 1996. It was the Rivlin study that certified the disasterous condition of DC first brought to public attention by articles in the Washington Post in late 1994.
The report cited excessive staff, excessive delivery costs and other contributing factors to the fiscal crisis and the erosion of the District's population. The committee made over 90 recommendations such as decreasing police staffing, elimination 6000 positions, increasing spending on health and education, and improving automation. Several of the report's recommendations were beyond the control of the District government, however, including increasing the federal payment and utilizing a formula to determine it, and implementing a regional payroll tax.
FY94 Comprehensive Annual Financial Report for the DC, GAO: This report indicated the extent to which the DC's budget and financial management were out of control. It was this GAO report which started the formal process towards instating a Control Board-- primarily to fix the city's burgeoning financial crisis.
Assessing the District of Columbia's Future: A Report to the Federal City Council, by McKinsey and Company and the Urban Institute (1994) which again emphasized the impending financial crisis.
Four Years Later--the Rivlin Report Revisited, by KPMG Peat Marwick (1994), a scorecard of the Rivlin Commission recommendations and yet another assertion that the fiscal crisis was escalating.
A more recent ( Spring, 1997) set of reports by the DC Agenda Project's Task Force on District of Columbia Governance presents a broad range of recommendations for changes in DC's local government. Click here to review the findings of this major effort.
As is emphasized elsewhere throughout this website, most of DC's socio-economic problems are virtually identical to those of other American urban areas and their "central cities". Virtually all aspects of these broader national problems have been analyzed by Washington DC's Urban Institute, and scores, if not hundreds, of its full length reports are available on its excellent website.
The following Reports from the Control Board form the background against which many of the early Board actions have been taken--including the establishment of the new emergency board of trustees and chief executive officer:
o Children In Crisis: A Report of DC's Public Schools, (3 rpts)
Final Report of the Business Regulatory Reform Commission, August 1997 is the product of the Business Regulatory Reform Commision Act of 1994, which became law in March, 1995, after being passed by the DC Council, and approved by the Congress. It presents hundreds of recommendations for streamlining the various functions of the Department of Consumer and Regulatory Affairs, and for the elimination of many of the (unnecessary) regulatory boards and commissions.
Regular semi-annual reports of the DC Housing Authority Receiver are summarized as part of other discussions of progress in DC's extensive and seriously blighted public housing projects.
Tax Revision Commission Report
This widely neglected report on how to Revise DC's Antiquated Tax Structure is reviewed as part of the total NARPAC discussion of DC budgetary problems, which also includes a critique of a Brookings study of DC's Budgetary Structural Imbalance.
DC FY2000 Budget
NARPAC has prepared an analysis of DC's (much improved) FY2000 Budget as submitted, and compares it to the city's initial proposal.
Perhaps the most extraordinary report on the problems of the District of Columbia were recorded in the final report of a Congressional Commission empaneled some thirty years ago. It sounds eerily like this NARPAC web site, and we were fortunate to have this forgotten effort pointed out to us.
On September 20, 1970, the Congress passed Public Law 91-405 establishing a Commission to "study and investigate the present organization and methods of operation of all departments,...of the government of DC....to determine what changes are necessary to accomplish the policy of the Congress..." that is, "to promote economy, efficiency, and improved efficiency in the transaction of public business in the departments, bureaus, agencies, boards, commissions, offices, independent establishments, and instrumentalities of the District of Columbia..."
The 12- member commission was to be composed of four members appointed by each the President, the President of the Senate and the Speaker of the House. Due to delays in these appointments, PL 92-25 was passed by the Congress on June 4th, 1971, to extend the reporting date from the initial six months to 12 months. In the spring of 1971, President Nixon had suggested that the scope of the Commission's work be expanded to include its views on "expanded self-government for DC", but Congress eventually decided that "questions of charter" should be deferred so as not to conflict with other legislation pending in the Congress.
The following paragraphs near the beginning of the Commission's final
report recognize both the uniqueness of DC's position and its commonality
with other US metropolitan areas:
Since WWII, the vast Federal establishment has spread beyond DC into the adjoining suburbs of Maryland and Virginia. The Federal government owns more than 7% of all the land in the Washington Standard Metropolitan Statistical Area, less than one-fifth of which is in the District. Approximately 43.4% of the lad in DC is owned by the Federal Government; however, the percentage of federally owned land in Arlington County is almost as high. Of the 316,527 Federal employees in the Washington metro area in 1971, 110,468 worked outside the District. The Washington Metropolitan Region Development Act of 1960 recognized the growing metropolitan scope of the Federal establishment and proclaimed a Federal interest in area-wide planning, development, and intergovernmental cooperation. Still, while the Federal government has specific constitutional authority to "exercise exclusive legislation" within the District, its constitutional authority to act in Maryland and Virginia is no greater than in any other metropolitan area."The demographic changes impacting on DC were also surprisingly clear in 1972, as indicated by the selective quotes below. They are completely consistent with NARPAC's more recent annotated briefing on DC's current economic challenges.
DC has changed significantly since shortly after the end of WWII....between 1950 and 1970, when the population of the Washington metropolitan area was doubling to about 2.7 million, the population of DC was declining about 5% to about 750,000. Yet while the number of people living in DC remained more or less unchanged, there was a marked increase in population groups that tend to require more public services, and a decrease in the groups best able to pay for them.The Congressional goal for establishing the Commission was "to promote efficiency and economy in the District government and improvement in the services it provides", and the report concludes that "given the management tools it requires, there is no reason why Washington cannot become a prouder capital, a more desirable city in which to live, a stronger force in the metropolitan area, and even an example to other cities here and abroad of how to meet the urban challenge." NARPAC was incorporated some 25 years later with the same belief in mind! The principal findings of the Commission's report can be summarized within each of their categories:
Despite two major reorganizations within the last twenty years, the District Government, for several reasons, still lacks a clear focus of management accountability......
Tools for Modern Management: The Mayor-Commissioner currently lacks the tools he needs to manage the District Government efficiently and effectively. In general, he is not adequately equipped to anticipate future needs and to plan for them; to justify and execute approved programs through a useful and meaningful budget; to control expenditures through an accurate and timely accounting; to audit government operations for compliance with financial and management standards; to analyze operations and programs and improve thereon; and to evaluate performance in order to determine if objectives are being met....
Direction and control of an organization as large and diverse as the District Government requires superior management capability....the Mayor-Commissioner should be able to hold subordinate administrators accountable for results in their respective areas....
Departmental Organization and Management
A major obstacle to measuring cost-effectiveness is the limited amount of relevant, accurate data. The problem is complicated in many departments by a lack of specific goals and objectives against which to measure program accomplishments....
Relevant comments are also drawn from the Commission's assessment of each department and agency:
o The Metropolitan Police Department has increased significantly in size since 1965, and its budget has increased by $57 million, principally as the result of an increase from 3100 to 5100 authorized uniformed officers.....While the crime index was decreasing in the District, the rate at which crime cases were cleared was also falling...The MPD has since abolished the centralized east/west assignment areas and detectives are now working out of the district station houses...
o The Public School System suffers from internal management problems and from a lack of clarity in the relationship between the Mayor-Commissioner and the District Council on the one hand, and the Board of Education and school administration on the other, The District's public school system is the 12th largest in the nation, enrolling about 140,000 pupils, and its operating costs for FY72 represent approximately 25% of the total appropriations for the DC Government as a whole...
o Health Services are such that more than 30% of DC residents depend on the District Government to finance or provide all or part of their health care. These include 133,000 in the Medicaid program; 70,000 in the Medicare program; and 25,000 in the DC Medical Charities program....The major expense for health care occurs in manpower. A recent study indicated that 65-75% of hospital costs, 70-80% of doctors' office costs, and 90% of nursing home costs are attributable to manpower expenditures...
Financial Management in the District Government is unusually complex because of the District's unique relationship with the Federal Government and its responsibility for a combination of state, county, and municipal functions. Since the District Government's revenue and funding arrangements are subject to most of the budget and accounting policies that apply to agencies of the Federal Government, they are not altogether comparable to those of other municipalities...
The DC Government could improve both its budgetary process and its relations with Congress (by several means)...For its part, the Congress should delegate to the District Government broader authority over local revenue issues, and greater reprogramming authority to meet changing needs and requirements after the budget is approved. It is important to arrive at an arrangement whereby Congress approves only the aggregate amounts for the operating and capital improvement budgets, leaving to the Council and the Mayor-Commissioner approval of the detailed budget items...These recommendations are designed not to dilute the Congress' constitutional responsibility for DC, but rather to establish a budgetary environment in which Congress could confidently delegate greater authority to the District Government without feeling compelled to exercise its responsibilities in excessive detail...
The Commission's study has emphasized the need for the District to establish performance standards which can be used to demonstrate increased productivity and to conduct continuing comparisons of District operations with those of reasonably comparable metropolitan centers. For government as well as business, the workload of individual workers and organizational units must be quantified wherever possible, recorded, and continuously analyzed in order to measure machine and manpower performance and determine future requirements...the Commission found little evidence of workload and productivity measurement in the DC Government.....Although DC Government manpower has grown from 29,242 in FY65 to approximately 40,000 in FY72, there are few measures of efficiency and effectiveness and little equating of workload to manpower requirements in the departments and agencies. There have been few attempts to analyze productivity as it relates to increases in numbers of employees, grade levels and average salaries. The use of production norms or performance standards is very limited throughout the DC Government.
With great media coverage, splendid color graphics, and a supporting cast of hundreds, the Brookings Institution's Center of Urban and Metropolitan Policy has launched a new report on the "State of Growth in Greater Washington, DC" with the support of many local and national foundations. This effort involved major contributions from Myron Orfield's Metropolitan Area Research Corporation (whose specialty is multi-color maps to show distribution of quality of life parameters); The Urban Institute (which focused on changing distributions in job opportunities and employment), and the Greater Washington Research Center (which specializes in demographic trends prepared by well-known regional demographer, George Grier).
In summary, the report acknowledges that the region has "experienced enormous growth and change in the 1990s (and) is enjoying economic growth and steady prosperity". However, it notes that the challenges of growth are broad and complex:
1. The Washington region is divided by race, income, jobs, and opportunity, with the eastern half of the region carrying the area's burden of social distress while the Western half enjoys most of the region's fruits of prosperity. It points out (repeatedly) that this "east-west fault line" (Rte 95 and 16th Street) "cuts through jurisdictions so that DC and its suburbs have both pockets of distress and areas of affluence". From this it concludes that "the divisions in this region cannot be explained as 'city vs suburbs', because even though many sections of DC and its inner suburbs are facing economic and social challenges, other parts of DC and those inner suburbs are affluent. It also notes that there is "inextricable linkage" between extensive growth in some (generally newer) communities, and less growth in others (generally older).
2. The Washington region has the resources to bridge this divide--primarily because the region is prosperous, and "the central city has traction in the new economy". Because of this traction, it asserts that the region's task is not bailing out a failed central city. It also notes that although this region includes two states and a "state-like" central city, and heavy federal government involvement, it has "a low degree of local fragmentation that makes building coalitions more possible than in other places".
3. The Washington region can grow smarter and must do this now. It asserts that "the regional debate is picking up momentum" and that "growth is not going to go away". However, it cautions that "if our regional divisions widen as growth proceeds, it will be difficult if not impossible, to create a region that is competitive, prosperous and livable."
NARPAC finds no fault with that overall conclusion, though it certainly did not require a study of this magnitude to reach it.
Brookings promises that this is only the first of a series of papers on the future of growth in the Washington region that build on these trends and identify a range of policy considerations on such pressing issues as transportation, affordable housing, and workforce development.
The Brookings Institution itself surely has traction--at least compared to NARPAC, Inc.--and criticisms of this report may not serve a constructive purpose (i.e., to restore pride in America's capital city). Nevertheless, analysts are a lot like dentists: few have good things to say about their colleagues' work. But in the context of positive encouragement, NARPAC suggests the following comments regarding the planned future reports:
1. Colored maps can only go just so far--particularly if they are arbitrarily constrained by, say, data availability rather than geography. Maps that ignore topography and pre-emptive land-use (viz. federal lands) are misleading. They can also mislead by disregarding density of population and population subsets (such as the rich and the poor).
But most troublesome is the failure to center the map east and west due to the peculiarity that Howard and Anne Arundel Counties, East of DC, (with more resources than Frederick, Prince William, Loudoun, and Stafford Counties together) are arbitrarily excluded. A properly centered and colored map will cause the "East-West fault line" to disappear. The clusters of wealth, poverty, race, poor schools, and jobs are little different than in any other US metro area.
2. While problems may appear to be independent of the jurisdictions that overlay the geography, surely the solutions are jurisdiction-dependent, almost to the exclusion of geography. For instance, it is the resources available per capita beyond those required to provide essential services in each jurisdiction that will dictate what's available for intra-jurisdictional investment or inter-jurisdictional leveling. Simple bar charts by jurisdiction are far more informative concerning resources and expenditures than maps.
And comparisons by jurisdiction rather than by census tract or zip code are surely both appropriate and informative. NARPAC disagrees with Brookings that "the region cannot be described as strong suburbs surrounding a weak city". It is true from the standpoints of economics, education, crime, job growth, government efficiency, the ability to attract new residents and/or high-tech businesses, and even more important from the standpoint of political clout on Capitol Hill. To deny these imbalances will only delay their resolution, and ultimately impede regional prosperity.
3. The notion that the Washington Metro Area has no problem which pits the suburbs against the "central city" (and its 'inner city subset') is almost certainly counter-productive. Few things are more stark than the differences in available resources to solve the perceived inequities. While this parameter may not please the purist, the ratio of welfare recipients to households earning more than $50K annually is a very good indicator of the ability to meet both present demands and future desires. By Grier's 1996 numbers, DC has 45% of the persons in poverty, but only 8% of the households with incomes above $50K.
By (dubious) extrapolation, by 2010 DC could be home to 54% of individuals needing health/welfare assistance, and only 5% of those wealthy enough to contribute to their plight. Perhaps more critical, DC has an even higher--and growing--share of concentrated poverty: in 1980, DC held 79% of the region's census tracts containing more than 20% persons in poverty, and by 1990 that share had risen to 87%, including all the tracts with more than 40% of its residents below the poverty line. These are the tracts where poverty turns to blight, high crime rates, and dysfunctional schools.
Resource sharing within the Washington Metro Area is essential if the region is to develop a level socioeconomic playing field. Wharton studies referenced in the Brookings summary support this obvious conclusion.
4. The suggestion of some Utopian solution as noted in Orfield's report that "in the end, the goal of regional reform is to create thriving, mixed-income neighborhoods in all communities of the region." is almost certainly neither realistic nor desirable. The vision of a regional map all tinted the same color of pinkish blue seem to NARPAC to be a folly. There is no evident groundswell for people of all ages, sexual persuasions, color, nationality, religion, or politics to live cheek by jowl, nor is there any evident desire to reside right next to one's place of work. There is no evidence to support the concept that Nirvana includes socioeconomic homogenization.
Even in nature, pure compounds are no stronger than metallic alloys or crystalline composites (such as steel and granite). Indeed, the trick is to assure the bonding between the disparate elements, not to homogenize or otherwise undifferentiate them. Mechanisms to do this vary from public/subsidized housing and taxation policies to public transportation, adult education and job retraining. There is a surprising lack of creative public policy to discourage neighborhood degeneration.
5. Finally, there seems to be a dirth of dynamic regional socioeconomic modelling to move urbanologists beyond colored maps to animated computer screens. Given the highly complex problems now routinely synthesized in computer models, demonstrating the dynamics of urban sprawl should be relatively simple. This may be the necessary precursor to the development of public policy initiatives designed to reverse the development and spread of urban blight.
The annual report of the Federal Interagency Forum on Child and Family Statistics, entitled "America's Children: Key National Indicators of Well-Being, 2000" has recently been published and contains useful information not only on current national statistics, but on changes over the past 20 years. NARPAC thinks these changing circumstances are worth noting, both in the aggregate and in some cases by race. Unless otherwise noted the changes noted below are from 1980 through 1999.
Total, Mix, and Proportion
The total number of kids in America continues to increase, albeit more slowly, and now exceeds 70 million--6.5 million more than in 1980. As a share of the total population, they are declining (from 28% to 26%), primarily because of the growing number of people over 65. Hence kids now represent only 67% of the 'dependent population', down from 71% 20 years ago. However, the 'productive population' (19-64) share is barely holding constant, and government attention is more evenly split between young and old.
The mix is changing too. While Black kids (non-Hispanic=nh) hold steady at fifteen percent of the total, White(nh) kids have dropped from 74% to 64%, and Hispanics have risen 9% to 16%, and "others" doubled, from 3% to 6%. This means that Blacks have dropped from 56% of all minority kids to 42% in one generation, and will continue to decline.
Parental and Poverty Status
The share of kids born to unwed moms is growing fast: Among 18-19 yr-old teenagers giving birth, those married have dropped from 60% to 26%, and amongst 20-24 yr-olds, from 81% to 52%. Among all families, 16% of White (nh) kids now live with single moms, up from 14% in 1980. Hispanic kids with no father at home have risen from 20% to 27%, while Blacks (nh) have risen from 44% to 51%--in a class by themselves. Customary 2-parent families have dropped from 77% to 68% of the total in a generation.
The fraction of total kids living in families with high or 'very high' income has increased from 17% to 27% in 20 short years, while the number in poverty has remained about 18%--lowering the 'middle income group' and exaggerating the gap between rich and poor. Among single-mom families those below the 100% poverty line include 35% of White (nh) kids, down from perhaps 38%, while for Blacks the fraction has dropped only from 65% to 55%, and for Hispanics even less from 65% to 60%. Poverty remains clearly linked to family status, but is diminished as more single moms find full-time employment. Full-time working White (nh) moms have risen from 39% to 52%, Blacks (nh), 28% to 39%, and Hispanics 22% to 36%.
Health, Birth Rates and Mortality Rates
Infant mortality is dropping across the board: for Whites (nh) the rate (per 1000 live births) has dropped from 9 to 6, and for Hispanics from 10 to 6. Blacks (nh) fare worse however, 19 to 13--primarily because twice as many black births (13%) are very low weight, compared to Whites (nh) and Hispanics (6%). Adolescent (10-14) birth rates have dropped 25% to 0.3 per thousand for White (nh) moms and to 3.0 for Black moms, but risen 25% for Hispanics to 2.1. Teenage (15-19) birth rates are of course much higher: down from 41 to 35 for Whites (nh) and down from 105 to 88 for Blacks (nh), but up from 82 to 94 for Hispanics. In essence, almost half of minority girls will have a kid while still a kid.
Teenage male mortality rates (per 100,000) are declining for Whites (nh) (105 to 90) and Hispanics (121 to 107), but rising for Blacks (nh) from 121 to 170. Deaths associated with automobile accidents seem to be converging for all: down to 37 for Whites (nh) and 28 for Hispanics--and up to 30 for Blacks (nh). But deaths due to firearms are increasing for all: Whites (nh) rising from 3.7 to 4.3, for Hispanics from 31 to 45, and for Blacks (nh) from 39 to 81. Bullets kill by far more male minority teenagers than cars! This is despite the fact that the numbers of 'idle youths' (no school, no work) has dropped from 10% to 6% for Whites (nh), from 19% to 13% for Blacks (nh) and from 18% to 14% for Hispanics.
Trends in substance abuse among 12th Graders are somewhat surprising. For Whites (nh) cigarette smoking is still high and increasing (24%-27%), drinking is high but decreasing (44%-36%), as is drug use (39%-27%). Blacks (nh) seem to have lower predilections here: smoking is down from 17% to 8%, drinking from 18% to 12% and drugs from 29% to 20%. Compared to Blacks (nh), Hispanic youth smoke more (13%-14%), drink more (33%-29%) and use drugs more (33% to 24%), but not as much as white (nh) teens.
Crime rates for all kids are down from 35 to 26 per 1000, and the rate of kids who fall victim to crimes is likewise down from 38 to 25. This assumes of course, that absent and dead-beat fathers are not criminals and that unwed mothers are not victims.
Education appears to have made some slow but steady progress over the past 15 years (1982-1996) and with a rather surprising twist (at least to NARPAC). Focusing on 17-year olds' achievements, Whites' math scores have risen from 304 to 313, while Blacks have risen from 272 to 286, and Hispanics from 277 to 292. In reading achievement, White 17-yr olds' scores have risen a bit from 293 to 294, and Hispanics' a bit from 261 to 265, Blacks' are up from 243 to 265. From this perspective, Whites retain a substantial, if slightly declining, advantage over the minorities.
However, interesting data are presented on the 15-year trends in student performance based not on race but on the parent(s)' education level. From this perspective, math achievements for 17-yr-old kids rose only from 262 to 267 for those with parents short of a High School degree, from 293 to 297 for High School graduate parents, from 304 to 307 for those with some college education, and from 312 to 317 for those with a college degree. On the reading side, results were more mixed. Scores rose a bit for kids whose parents did not finish High School (262 to 267), but fell for those with High School degrees (278 to 273), and for those with some college (299 to 297). The inescapable inference is that improvements in students' performance may be driven--directly or indirectly--more by the rising education level of their parent(s) than by their own accomplishments.
And overall education levels are on the rise. The fraction of kids having their BS degrees by the age of 29 has risen over 20 years for Whites (nh) from 28% to 36%, for blacks from 15% to 17%, and for Hispanics from 13 to 14%. But more important are the rising statistics for those successfully finishing High School (diploma or equivalent). Whites (nh) have risen a bit from 88% to 90%, while blacks (nh) have risen from 75% to 81% and Hispanics from 57% to 65%. Since this is tantamount to improved education for young parents, it should continue to show up in the achievements of their kids.
There are glimmers of hope for improving the lot of most of America's kids. But the 20% stuck in poverty are not measurably better off. The troubling rise in one-parent families, coupled with the continued high teenage birth rates, makes it clear that the counterproductive cycle of kids having kids--and raising them alone--has not been broken over the past 20 years. This is reinforced by the latest annual report about DC's kids, many of whom are stuck on the bottom rung (see below).
For seven years now, the DC Children's Trust Fund has published up-to-date data on the status of DC's kids--a local and more complete version of the National Report on America's Kids summarized in the previous section. Unfortunately, this fact book might still be entitled DC Kids Don't Count for Much. Though their conditions are generally improving, the fact remains that their vital statistics stay well below American norms, and rank competitively only with some other US inner cites. The table below provides all the primary data by each of DC's eight wards, showing how inequitable the distribution of kids' well-being remains in the nation's capital city.
from the 7th annual report (2000): "Every Kd Counts in DC"
This report also provides a number of trend lines over the past ten years, which are summarized in the table below. It is of some interest to note that the number of young kids is declining much faster than the population as a whole, or of the older kids. Although several categories of crime are down, indicators of poverty show a growing number of kids on welfae and/or food stamps. Family stress levels are also up very substantially. Birth and death rates are going down, but perhaps most tragically, so is the share of kids graduating from high school.
from the 7th annual report (2000): "Every Kd Counts in DC"
The complete report should be available at http://www.dckidscount.org.
In December, 2001, the Brookings Institution released its "Reform Watch Brief #4" dealing with "Government's Greatest Priorities of the Next Half Century" as derived from a poll of academic experts. Some 2000 academics "who specialize in either modern American history, American government, social policy, or public policy" were culled from the membership of the American Historical Association (15,000), The American Political Science Association (13,500); the American Sociological Association (13,000); and the American Economic Association (22,000). Among the 550 respondents were 115 historians; 160 political scientists; 115 sociologists, and 160 economists whom Brookings acknowledges "are not remotely representative of the American public as a whole". Nevertheless, it is an interesting cross section of highly educated, involved individuals.
Brookings prepared a list of the fifty areas in which the US Federal Government had invested the
most public funds, and asked the respondents to rank them four different ways:
NARPAC cannot resist the temptation to highlight a baker's dozen areas that it believes belong on the "Do More" List. Five make that list (health care for the poor, the old, and the infrastructure itself; improving secondary education; and assisting the working poor); two fell in the Middle category (college access,and mass transportation); and six appeared on the "Do Less" List (highway system improvement, renewing blighted communities, increasing low income housing, increasing job training and placement, lowering welfare dependency, and lowest of all increasing home ownership).
In NARPAC's view, if these 550 respondents turn out to represent the will of Congress over the next 50 years, America's inner cities, including DC, will fester and increasingly infect their surrounding metro areas with the blight of socioeconomic inequities.
In late September, 2001, the National Low Income Housing Coalition released their annual US housing affordability study entitled "Out of Reach 2000: The Growing Gap Between housing Costs and Income of Poor People in the US". It essentially summarizes their longer report (available on their web site) entitled the "Low Income Housing Profile". This, in turn, is based on the much broader based national American Housing Survey generated by the US Census and running to thousands of pages (but also available on the net), and summarized by NARPAC elsewhere.
There is probably no other indicator of overall socioeconomic status in the US more pertinent than our national living conditions, and no better indication of the plight of the poor than their living conditions. This summary tries to capture this overview by cribbing liberally from the Low Income Housing Profile report, with particular emphasis on one surprising condition: that many Americans for one reason or another live well below their means, just as many other Americans appear to live well above their means (for some part of their lives).
Throughout the report the standard indicator of household income is the "Area Mean Income" (AMI) which essentially normalizes living conditions to the wealth of area in which they live. The four low income categories are pegged to percents of this AMI: extremely low at less than 30% of AMI (with a median at $6000); "very low" at 30-50% of AMI with a median at $15,000; and "low" at 50-80% of AMI but a median of $25,000. Even in the (unnamed) category of 80-120% of AMI the median is only $37,500. The median for all households above 120% of AMI jumps to $75,000. Here are some of the basic numbers:
o There were just under 103 million households (and therefore occupied housing units) in the US altogether. The most basic distinction between them is that some 69 million owned their units, and were motivated to increase their values, and 34 million renters, generally interested in keeping their rental costs down. The owners had a median income of over $45,000 while the renters were below $25,000. Interestingly, however, monthly housing costs were $617 for homeowners but a close $560 for renters. The American dream has always been home ownership (after car ownership), though lifestyles, fewer families, increased mobility, and longer lives may all be gradually eroding that goal.
o 27 million housing units were occupied by single individuals, 38 million had kids in them, though 13 million had only single parents at home, and another 38 million were couples or "other" combinations without kids. 26 million households were minorities, and 14 million of those were renters.
o At the bottom of the scale, 13.4 million American households had extremely low income (near $6000 per year), and 7.5 million were renters. 4 million of those renters were minorities, but only 1.4 million minorities owned their modest abodes. 3 million extremely low income renters had kids, but less than 1 million had two parents, while only 1.1 million homeowners had kids, half with two parents at home. Only 1 million of the renters and less than 1 million of the home owners were without 'moderate' or 'severe' housing-related problems, either with costs or physical conditions.
As shown on the two charts below, as (low) income bracket increases, there are relatively more owners than renters; the minority proportion decreases; families without kids increase for renters, but owner families have more kids and more kids have two parents; and the problems both affording and maintaining the housing unitys declines.
Of possibly greater interest, however, is the fact that half of available low income rental units are occupied by people with greater means. The tacit assumption that tenants seek the best housing they can afford is simply not supported by the facts. Rent controls may have some influence on this, but most jurisdictions do not still have rent controls. Another, and apparently stronger, possibility is that the housing market has failed to keep up with the ability of households to move up with improving income. Finally, it may be that renters are more prone to seek bargains, while owners seek larger investments.
The chart below points out these discrepancies and warrants some detailed explanation. Each bar pair represents essentially demand and supply (households and units in each income category). Where demand exceeds supply, the missing units are noted in deep red. Where there are more households needing affordable housing than have it, the shortfall is in lighter pink. Units occupied by households that could afford to spend more are shown in blue.
NARPAC concludes from this that the public sector has failed to provide needed affordable housing for the very poor, but the private sector appears to have failed to entice wealthier renters to move up in the world to fancier accommodations. Unfortunately, similar data was not presented for home owners.
In March of 2002, the Federal City Council released a report by the highly respected management consulting firm of McKinsey Co. which gives additional weight to the growing chorus that DC needs some kind of very sizable annual payments from the Federal Government to keep its fiscal head above water. NARPAC provides here a highly edited, abridged version of that report hopefully retaining the tenor of the far longer original.
At the end NARPAC offers its own commentary on what appears to be a superficial substantiating analysis for a forgone conclusion: that DC should be permanently bailed out by the Federal Government for its endemic inefficiency and lack of creative management.
A Report to the Federal City Council by McKinsey & Company, Inc.
March 14, 2002
As the books closed on fiscal year 2001, the District of Columbia had much to celebrate: its fifth consecutive operating surplus, the end of the Control Board, successful efforts to stem resident flight, a substantial decrease in debt per capita, and an enhanced credit rating. With these accomplishments and others, the city's leadership has earned the type of credibility that has long eluded the DC government.
Despite five consecutive years with an operating surplus, the city continues to face significant challenges from the negative effects of an economic downturn, the difficult task of controlling Medicaid costs, the continuous struggle to improve the public schools, and now, the terrifying events of September 11th and the anthrax incidents. Hence, the Federal City Council asked McKinsey & Company to assess the District of Columbia's financial situation. Building on previous studies, we conducted for the Federal City Council and DC Agenda, we conducted a 2-month assessment of the city's financial position and prospects.
We have concluded that despite the economic successes of the last several years, DC is on a path that will lead to a budget deficit of at $500-$700 million by 2005, due to:
o. A substantial decrease in the rate of revenue growth in 2002, which in turn leads to reduced revenue expectations for 2003 through 2005: ($150M by 2005);
o unbudgeted spending increases in several key areas, including the public schools ($180M), Medicaid ($90M), and the Washington Metro Area Transit Authority (WMATA) ($85M);
o unbudgeted expenditures resulting from expected increases in population and labor costs, cost increases at the Child and Family Services Agency, and a number of other smaller items not accounted for in DC's budget (roughly $150M);
o unforeseen events, such as a slow economic recovery ($80-130M) , a cap on the city's debt level ($180-220M); or another major security event, could increase the number significantly ($20M)
We believe that DC can and must take steps to address the situation. Failure to do so risks either the return of a control board or, more likely, substantial cuts in city services. Action is needed on three fronts.
First, DC must aggressively improve management efficiency. While the city has made real strides in the way it manages itself, our work points to an additional annual cost reduction opportunity of $110 million to $160 million by 2005.
Second, the city should explore the potential trade-off between deferring planned tax cuts for several years and achieving the desired growth in the city's population:
o deferring the planned cuts in individual tax rates for 2002 through 2004 would add $150 million to 2005 revenue assuming that the deferral of these cuts does not lead to significant resident flight;.
o deferring planned cuts in corporate income tax rates (or otherwise increasing tax liability for DC corporations) probably does not merit consideration at this time;
o Generally, total individual tax liability for DC residents remains above individual tax liability levels in Maryland and Virginia. Full implementation of the tax cuts provided for under the Tax Parity Act of 1999 over the next several years would make tax liability in DC roughly comparable to that in Maryland and Virginia for most classes of residents;
o DC tax liability for key classes of businesses will exceed that in Maryland and Virginia by a significant margin, even assuming full implementation of the cuts in corporate income tax provided for under the Tax Parity Act;.
Third, DC will need to seek additional financial relief from the federal government. Despite the significant help provided by the 1997 DC Revitalization and Self-improvement Act, DC still faces substantial structural constraints and burdens by virtue of its status as the nation's capital. We believe that DC has the basis for justifiable federal relief sufficient to avoid the projected budget shortfall. These structural constraints and burdens include:
o the city's high percentage of federal and other tax-exempt land, The estimated opportunity cost associated with DC's higher-than-average level of federal tax exempt property is about $100 million to $200 million. Over 25 percent of the assessed value of the property in DC is associated with federal property that is exempt from taxes. This compares to an average of 10 percent federal and state tax-exempt property in the seven other cities we examined (which included Baltimore, Boston, Detroit, and Philadelphia).
o Over 40 percent of the assessed value of property in DC is tax-exempt, compared to 15 to 30 percent in most of the other cities we examined. The opportunity cost is estimated at about $100 million if based on the cost of services and about $200 million if based on foregone tax revenue on DC's higher-than-average portion of tax-exempt properties;
o the federal law prohibiting DC from taxing wages that are earned in DC by nonresidents, We estimate that the prohibition on taxing the wages of nonresidents who work in DC has an opportunity cost of $400 million to $450 million per year. Nonresident wage-earners account for over 65 percent of the income earned in DC
(We calculated this opportunity cost by estimating the revenue that DC could collect if it were to tax the adjusted gross income of its nonresident wage earners at 2 percent. Nonresident commuter income tax rates in the ten cities that we reviewed varied from 0.5 percent to 4 percent of income.)
o arguably, the cost of providing certain "state" services for which DC continues to be responsible. We did not attempt to quantify these.
Federal Legislative Options on the Table:
We are encouraged by the fact that there are already many viable federal legislative options on the table:
$400-450M Federal non-resident wage tax credit; OR....
....$400-450M Federal compensation for lack of non-resident tax;
$100-200M Federal payment in lieu of property taxes;
$200M Federal payment equal to sales tax on federal commerce;
$30M Federal guarantee for DC general obligation bonds;
25M "Triple tax examption" for DC general obligation bonds;
Indirect Extension of economic development incentives;
$???? Federal compensation for no representation in Congress;
*** Federal infrastructure fund;
*** Could cover all, or part of, WMATA, other transportation-related expenditures, annual debt service, and other infrastructure costs
Some of these options, individually or in combination, could provide DC with the magnitude of financial relief required to address the projected deficit. We believe that civic, city, and federal leaders should work together to identify the best approach to providing the city with the additional federal relief needed to compensate for its remaining structural constraints and burdens. The annual opportunity cost of these structural challenges is at least $500 million to $650 million.
NARPAC pored over this report in some detail, and the closer we looked, the more skeptical we became of the content for several different reasons:
o There is a mixture of revenue and expenditure trends (such as growing costs of WMATA), which could be "structural", and one-time events (such as another 9/11) which clearly are not;
o It appears to be a "worst-case" analysis, and not a reasoned projection. All the negatives of expenditure increases are added on top of one another, and
o there are no instances where revenues might exceed current projections (though this has been the case in the past) or expenditures are less than expected. There is, in fact, no acknowledgment of the commercial and residential building booms still underway in DC, undeterred by 9/11 or the minor recession, or of the supposed economic boost of a "nation at war";
o Some of the projected needs for increased expenditures (DCPS) are already included in the FY03 budget (which does not project a deficit);
o There seem to be instances where the mathematics of post-recession recovery are incorrectly projected by ignoring "bounce back"in some sectors (tourism, sales taxes);
o There is an implicit assumption that if deficits do loom, the city government would not take steps to control them over the next three fiscal years, explicitly raising the boogeyman of the return of the Control Board;
o The subtleties of some of the current high-expenditure items (such as special ed costs) seem to be ignored (such as DCPS's plan to open more special ed schools); and
o the current surplus capacity of the DC School system (space for 100,000 kids) is not treated, even though enrollment is still dropping (below 66,000 in '03);
o No elaboration or confirmation is given to DC's claims of un-reimbursed expenses in hosting the nations capital, though the report seems to suggest these "standard services" are in the range of $100M (half that claimed by equally uninformative DC assertions). NARPAC doubts they exceed $50M on a normal basis;
o The automatic acceptance of DC's remaining "state functions" seems dubious at best. It would be more appropriate to see which ones can be shed or combined with neighboring jurisdictions;
o Only a temporary roll-back of the planned income tax cuts is recommended for a couple of years, and the roll-back of the corporate tax breaks is rejected out of hand;
o There is no challenge to claims about DC tax reductions needed to achieve "parity" with surrounding jurisdictions. A recent study from the DC Fiscal Policy Institute suggests these disparities are "mythical";
o There is also a clear suggestion that total tax parity with the suburbs is required to keep residents and businesses from fleeing the city. This is probably wrong on two counts: first, there can be a clear premium expected for living and working with a Washington DC address; and second, the city cannot afford to attract small-time residents or businesses for whom a small tax differential is unacceptable. DC sorely needs more high-end income residents and businesses to balance its high proportion of low-end residents;
o There is no recognition of the extraordinary socioeconomic benefits to the city of having the nation's capital here: Surely if all federal properties (and parks) were attached to Montgomery of Fairfax Counties, they would not be whining about lack of compensation for the federal presence;
. o There is no mention whatsoever of the metropolitan area as a political or financial entity or the possibilities of more creative burden sharing between the "inner city" and its richer suburbs (better sharing of WMATA costs; affordable housing; special ed costs, etc.);
o There seems to be an implicit assumption that no actions are currently in train (such as civil service regulation revisions now being implemented) which can improve economies of government in the future. Hence it is assumed that any efficiency measures will take five years to implement;
o Potential savings due to government management improvements (based on "benchmarking" with other cities) seem to be woefully understated. The report notes that "DC's expenditures in health, human services, public safety and transportation are 30 to 100 percent higher than peer city per resident costs, including state costs". This amounts to an annual inefficiency of $600M-$900M compared to Baltimore, Boston, Chicago, Detroit, New York, Philadelphia, and others. But McKinsey then estimates that only 18% of the overage could be realized in three years (30% in five years). More generous assumptions would completely eliminate the need for federal payments;
o There is no challenge to the multiple tax expenditures currently in vogue to induce (bribe?) new residents and businesses to re-locate in the city, so far seemingly unsuccessfully. Such bargains tend to draw marginal net revenue producers;
o There is no mention whatsoever of DC's real "structural problem": a disproportionate share of tax consumers compared to the taxpayers wealthy enough to pay their bills, and the unwillingness of poor neighborhoods to convert squalid tax-consuming properties into net revenue-producing assets;
o Alternative sources of revenue other than federal payments are not suggested (returning some federal acreage for productive DC use (see below); billing for specific services to federal agencies; broader business taxes; relaxing building height restrictions near DC's boundaries, and 'edge cities'; adding a capital city donation check-box on IRS 1040 forms; etc.);
o There is no challenge to the immutability of the 17,000 tax-exempt acres that comprise 55% of DC's total useful land. NARPAC believes that at least 3000 very desirable acres could be ceded to DC by the Federal Government specifically for generating high revenues ($1M-$4M/acre). This could gradually provide DC with independent means to support its inner city expenditure patterns;
Altogether, NARPAC finds it particularly difficult to believe that McKinsey & Co**. "conducted a 2-month assessment of the city's financial position and prospects (building on previous studies of the city's financial and structural challenges we had conducted). DC's CFO provided us with access to key financial data and experts, and we interviewed over 25 DC government leaders and financial experts. We also benefitted from the input of Federal City Council members and key thought leaders on DC's economic, structural, and management challenges." It appears to be a weak re-warming of the same old gruel without a whit of creative seasoning.
NARPAC treats this subject in more detail under a separate assessment of DC's "structural imbalance" in its chapter on the DC budget.
**McKinsey & Co. is a management consulting company that "helps its clients tackle their most challenging and complex management issues", seeking always "to have significant impact on their client's performace." With its Washington offices "one block from the White House and at the center of DC's political power core, its practice serves clients in telecommunications, banking, health care, professional services, energy, government and non-profit sector."
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