Clinton May Throw Federal Lifeline to D.C.

While official Washington buffs and preens for the presidential inaugural, another city - the living, working, everyday place called the District of Columbia - sits in the shadows like a poor stepchild.

The District's woes have been well-documented, even overseas: crumbling schools, rising crime, fleeing middle class, ambulances idled for lack of spare parts, racial tensions stoked by a defensive mayor, junk-bond status on Wall Street.

Four years after taking up residency here, President Clinton is now preparing to step up to the plate and address the District's problems - born, in part, of the federal government's unique relationship to the nation's capital. A task force at the federal Office of Management and Budget is working on a legislative package for D.C. restructuring, which Mr. Clinton will discuss in his State of the Union address and possibly sooner.

The question for longtime District observers and activists is whether Clinton, and Congress, will be willing to take the dramatic steps needed to turn the District around. Will, for example, the federal government take over the $1 billion-plus in expenses D.C. incurs that in any other city would be paid by the state?

If so, the change would represent the most profound restructuring of District-federal relations since D.C. was granted limited self-government 22 years ago.

If not, the District will continue to sink under an exponentially mounting pile of debt, hindering the economic growth of Washington's metropolitan area and staining the country's image around the world.

"There's a national interest in the viability of the nation's capital that is both a fiscal responsibility and a management responsibility," says Jim Gibson, head of the D.C. Agenda Project, a private-sector effort to help with D.C. restructuring.

"Failure to reform this relationship [District-federal] is to condemn District citizens to perpetual second-class status," said Stephen Harlan of the six-member federally appointed control board overseeing District affairs, in a December statement.

The District has been lurching from crisis to crisis for years. One by one, badly run city departments, such as housing and foster care, have been placed under partial or full federal receivership. In April 1995, Congress voted for, and Clinton signed, the bill establishing the control board.

Last month, the board issued a strategic plan for the District's revitalization. Later this month, it will release more detailed analyses and recommendations.

But on the large, structural questions, all the control board can do is recommend. The ultimate power lies in the federal government - both at the White House and the Capitol - to make major change. Four years ago, Clinton promised to help D.C. as he took a celebrated Inauguration Day walk up Georgia Avenue, a major African-American commercial strip. But his efforts have been piecemeal. "We have not done as much as we can," Clinton admitted at a Dec. 13 press conference.

In his speech to Congress Tuesday, reelected House Speaker Newt Gingrich spoke of the federal obligation to D.C. as one of a state to a city, and promised to help D.C. But politics could get in the way. Both Clinton and Congress are committed to balancing the budget, and may balk at any solution that involves a large federal expenditure. In addition, the continued presence of ex-convict Mayor Marion Barry on the political stage, with two years left in his term, hurts D.C.'s case in Congress.

"In order to recover, D.C. has to enter the post-Barry era," says Stephen Fuller, a professor of public policy at George Mason University in Fairfax, Va.

From Clinton's perspective, there's probably not much to be gained politically by pushing hard to help the District. But, says Professor Fuller, "it doesn't have to be politically motivated. You can say, 'This is the nation's capital, it should be the showcase to the world for the United States, and we're going to do something about it.' "

At the heart of D.C.'s crisis lie two key elements: a failure of leadership and a flawed Home Rule Act, the 1974 law granting D.C. limited self-rule. Not only has Mayor Barry hurt the city internationally with his personal problems, including the drug use that landed him in prison, but he has also failed to modernize district government, leaving in place a bloated bureaucracy and antiquated accounting practices, observers say.

But the Home Rule Act shares a large part of the blame. In it, D.C. was saddled with financial obligations it could not fulfill from local revenues, especially in a city with so many tax-exempt institutions, including the federal government. Congress appropriates an annual "federal payment" to compensate D.C. for its lost revenue, but it is inadequate.

One burden D.C. bears is a massive unfunded pension liability, currently valued at almost $5 billion (annual cost, $380 million and rising fast). D.C. taxpayers also pay about $400 million a year for Medicaid in what Mr. Harlan calls "state-type costs." Other state-type costs: $200 million a year for prisons, $120 million a year for mental health services, and physical infrastructure.

The good news is that its main employer - the federal government - is a permanent fixture. Economically, D.C. appears to have bottomed out, says Fuller. And if D.C. can be put on the right track financially and managerially, its future could be bright.