Special Message to the Congress on the District of Columbia Budget.

[ Released January 18, 1963. Dated January 16, 1963 ]

To the Congress of the United States:

I present herewith to the Congress the budget for the District of Columbia for the fiscal year 1964, beginning next July 1. Departing from past practice, I am transmitting the District budget with this separate message because the problems of the District have become so critical as to challenge the National Government both the Administration and the Congress--to redouble its understanding of and interest in its Capital city. Because Washington is the Nation's capital, the National Government has, and must continue to have, a special responsibility and a special relationship to the District of Columbia.

In evaluating the District's financial needs, understanding of the unique but changing character of the District is basic. Its government exercises responsibility not unlike those of a State and county as well as those of a city. Yet since its boundaries are, for practical purposes, unchangeable, it has become no more than the central portion of a large metropolitan area, most of which is beyond its limits. Within those boundaries, the character of the population has undergone a change as rapid as the growth of the metropolitan area itself--and the National Capital region has been the most rapidly growing large urban area east of the Mississippi River.

From 1950 to 1960, the total population of the District dropped from 800,830 to 763,956. During that same period, the number of school-age children rose by 30,000, an increase of 23%. Older citizens, over 65, increased by 12,500 or 22%. Thus the age groups requiring heavy public expenditures for such services as education, welfare, health, and recreation continued to increase, while the wage-earning group which requires a minimum of these public services and provides a solid source of tax revenues decreased by 16%. Finally, while the percentage of Negro persons in the whole metropolitan area has remained essentially the same as it was in 1950, and is substantially below what it was at the turn of the century, artificial barriers have required most of the normal increase in Negro population to concentrate in the District. As a result, the Negro population in the District has risen from 35% to 54%. Since the economic and social resources of the Negro population, taken as a whole, remain below those of the white population which has moved beyond the District boundaries, the relative prosperity of the District's taxpayers has suffered at the same time the District's services are in increased demand. While there is reason to hope that these trends can be slowed and ultimately reversed, the indications are that present conditions will continue through the decade of the 1960's.

Because of these changing characteristics in the District's population, there will be a continuing increase in the cost of its government until there is a change in the present trends. On the average, ordinary general fund operating expenses of the District have risen at the rate of 570 annually, while revenues from the District's general fund tax base have risen at the rate of about 3.5%, exclusive of changes in tax rates. When major pay raises occur, as authorized by the last Congress, this gap widens. Hence, because of this condition and the need to continue the public works program, the total appropriations of $320.2 million recommended for the fiscal year 1964 require general fund revenues of approximately $33.r million from new sources. Of the latter amount $28.1 million require legislative authorization before the appropriations can be made.

There is need, however, to look beyond fiscal 1964. Orderly and efficient solutions to problems in the District cannot be achieved by viewing District programs and needs from the perspective of one fiscal year at a time. I am, therefore, proposing that the Congress make the necessary adjustments now in the three basic resources of the District's general fund--local taxes, Federal payment, and borrowing authority. This plan, as outlined in the accompanying table, will permit the Commissioners to carry out long-term commitments within the framework of sound fiscal policy.

Local taxes.--In 1962, of each general fund dollar spent by the District, 87 cents represented revenues from the people of the District. Local taxes have been increased as expenditures rose.

District citizens should continue to bear their proper share of the costs of mounting expenditures. Accordingly, under the above plan increases are proposed in real estate and certain other local taxes in fiscal year 1964, which will produce 19 million additional revenue in fiscal year 1964, and an estimated $11 to $12 million when fully effective in 1965 and 1966. Furthermore, additional adjustments in these tax rates would now appear to be needed by 1968 or 1969. These actions will represent a substantial local contribution, and should for several years relieve the Congress of the need to consider further increases in local taxes.

The formula consists of (a) the amount of real estate taxes the District would obtain if property owned and used by the Federal Government, and property exempted by special act of Congress, were taxable; (b) the amount of personal property taxes the District would obtain if tangible .personal property, exclusive of objects of art, museum pieces, and libraries, owned by the Federal Government were taxable; and (c) an amount equivalent to the business income and related taxes which the District could reasonably expect to collect from the Federal Government if it were a private business, as measured by the relative numbers of Federal employees and employees in private business.

Under this formula, the Federal payment authorized in fiscal year 1964 would be approximately $53 million. It is estimated to increase to $59 million in fiscal year 1966 and to $67 million by fiscal year 1969. These increases reflect the increased ownership and use of property in the District by the Federal Government, the increased level of local tax rates, and an anticipated increase in property values.

Borrowing authority.--The District's existing borrowing authority from the U.S. Treasury for general fund purposes of $75 million has been committed. The District pays an average of about 4% interest on these borrowed funds. As with the Federal payment authorization, a lump sum borrowing authorization bears no direct relationship to either local needs or ability to repay. Therefore, rather than requesting a fixed amount of additional borrowing authority, I will submit to the Congress legislation authorizing the District to borrow for general fund purposes from the U.S. Treasury up to a limit of outstanding indebtedness equal to 6% of the 10-year average of the combined assessed value of real and personal property (including property owned and used by the Federal Government as specified in the Federal payment formula). This will represent a flexible yet prudent debt limit, taking into account local resources and ability to repay, and follows the practice common in most State and local jurisdictions.

Under my proposal, the maximum general fund debt limit will rise from $225 million in fiscal year 1964 to an estimated $275. million in fiscal year 1969. Without additional borrowing authority, the District would be required to finance its general fund capital outlays from current revenues, which would necessarily result in payments "in advance" for facilities whose useful life extends well into the future. Because of the lack of sufficient borrowing authority in the past, a serious backlog of capital outlay needs has developed, which within reasonable limits should be financed by long-term debt.

The adoption of the proposals for revenue increases from local sources and the proposals for the Federal payment authorization and loan authority will produce the following major benefits: The Congress can reasonably expect to have resolved the District's general fund financial problems for some years in the future; the Commissioners will be able to predict financial resources with a greater degree of assurance; there will be a built-in incentive to look for additional revenues from local tax sources--because of the nature of the proposed formula for the Federal payment; the Congress, the executive branch, and the Commissioners will have time to examine long-range needs and resources; and the Commissioners will be able to formulate well-considered proposals for constructive future action. In summary, the critical general government needs of the District can be met on an orderly, planned basis.

Accordingly, the general fund budget for fiscal year 1964 is based on estimated revenues of approximately $243.4 million from currently available sources, $5 million from increased real estate tax rates, and $28.1 million for which legislative authority will be needed. The combined totals will permit limited but nonetheless necessary improvements in services, will provide for an adequate program of capital improvements, and will cover mandatory cost increases under recently enacted legislation.

The essential need for the additional legislative authority to make this budget possible is highlighted by the situation facing the District in certain specific program areas. I should like to mention a few of the more significant ones.

1964 recommended

From

1962 1963 proposed

Programs enacted estimate Total sources

Current authorizations:

Education 54, 206 60, 024 63, 951 (2, 142)

Welfare and health 62, 315 66, 702 71, 052 (3,088)

Public safety 56, 001 59, 774 66, 297 (925)

Highways and traffic 10, 904 11, 527 12, 424 (171)

General operations 15, 529 16, 382 17, 997 (939)

Parks and recreation 8, 136 8, 494 8, 982 (119)

Sanitary engineering 20, 123 20, 877 21, 304 (7)

Potomac interceptor sewer line 51

Repayment of loans and payment

of interest 765 1, 495 4, 990

Payment of judgments, claims and refunds 789

Capital outlay 50, 533 52, 251 53, 130 (23, 205)

Subtotal 279, 301 ¹ 297,526 ¹ 320, 178 (30, 596)

General fund:

Obligations (233, 571) (255, 317) (267, 642) (30, 531)

Change from obligations to new

obligational authority (8, 174)

Other funds (37, 556) (42, 209) (52, 536) (65)

Permanent authorizations 1, 042 1, 029 695

Trust fund operations 42, 277 48, 332 65, 110

Repayment of advances from Federal funds --5, 000 --3, 000

Investments 712

Total authorizations 318, 332 343, 887 385, 983 (30, 596)

Funds required, general fund:

Current authorizations 233, 571 255, 317 267, 642 (30, 531)

Adjusted deferred financing 3, 816 7,675 7, 300 (2, 600)

Supplementals and indefinite appropriations 66 2, 296 1, 584

Total funds required, general fund 237,453 249,938 276, 526 (33,131)

¹These amounts include $7,045 and $13,251 for pay increases in 1963 and 1964, respectively.

By 1970, some 165,000 children will be enrolled in the 'public school system, about 2470 more than the present 133,000. The District must immediately undertake both primary and secondary school construction to catch up with and prepare for this growing school population--to eliminate present part-time sessions, to replace inadequate facilities, and to provide suitable facilities in the years ahead. There should be continuing improvement in the pupil-teacher ratio.

Textbooks, like facilities and instructional staff, are a prime factor in a proper educational environment. New techniques for teaching are developed each year, and substantive matters to be taught undergo constant change. The present level of expenditure for textbooks and workbooks permits them to be replaced only every 6 to 10 years. In the light of the dynamic changes in our society, appropriations should be adequate to permit replacement at least every 5 years.

The Congress, in enacting appropriations for the fiscal year 1963, recognized the need of the District for more special classes (for slow learners, mentally handicapped, and socially maladjusted pupils), continued participation in the Great Cities program, and more physical facilities and teachers. Good progress has been made in solving the academic and behavioral problems resulting from the desegregation of the public school system in 1954. Nevertheless, further increases in funds in fiscal year 1964 are essential.

The Great Cities program deserves special mention. With the help of a Ford Foundation grant, the District is endeavoring to increase the ability of culturally deprived students to speak, read, and write the English language and thereby overcome a handicap that has social, academic, and economic implications. The budget would continue the program for the current year.

Thus, the school budget exemplifies the serious nature of the District's financial problems. Without the additional general fund financing for which legislative authority will be needed, there would be no provision for additional teachers to handle the projected increase in school population, for acceleration of the textbook replacement program, or for a building program adequate to keep pace with increased enrollment.

I am concerned that in the Nation's Capital general education beyond the secondary level is not available at a nominal cost, as it is in many major cities and in the States. I endorse the proposals for the establishment of a junior college program possibly at the D.C. Teachers College and for a study group to examine the desirability of establishing a down-town city college with a department of teacher training.

WELFARE AND HEALTH

The District's welfare needs, and the ministration of the programs designed to meet them, were the subject of grave concern by the previous Congress. As a result, the Commissioners have taken measures to strengthen administration, and have undertaken a complete review of the District's welfare programs. Their review takes into account both the responsibility of public officials to dispense public funds in accordance with laws and regulations, and the problems and needs of underprivileged persons.

The Congress has recognized the need for Federal assistance to the States in strengthening their welfare programs and in accelerating the adoption throughout the Nation of the policy of services, rehabilitation, and training as opposed to support of prolonged dependency. Amendments to the Social Security Act in both 1961 and 1962 enlarged and strengthened this national policy. The District should be a leader in these efforts. The additional general fund financing in fiscal year 1964, for which legislative authority will be needed, will provide the District with the funds necessary to enable it to qualify for and participate in these programs.

The problems of less fortunate children are particularly distressing. Junior Village, the District's institution for neglected children, overflows. Ironically, it is, at once, much the most expensive manner of caring for neglected children, and the least satisfactory. A major effort is needed to reduce reliance on institutional housing for these children to a minimum and to provide each with a home within a family setting. The Commissioners are taking the steps available to them under present laws. The additional general fund financing will permit other major efforts in this direction. Higher payments to foster parents will increase the number of available foster homes. Financial aid to needy children of unemployed parents will diminish the cases in which children must be removed from their own homes. An expanded program for training unemployed mothers and fathers in marketable skills will likewise reduce the number of children who now cannot be supported by their parents, and will, of course, remove the parents from the unemployment rolls.

The District's extensive program of health services arises in large part from the age and income characteristics of its population. The fiscal year 1964 budget continues this program. It also includes funds to complete the financing of the urgently needed reconstruction of D.C. General Hospital. In the field of mental health, a study is being undertaken by the District of Columbia which will produce a long-range program for the District to take advantage of new developments in the care and treatment of the mentally ill. I shall ask the Department of Health, Education, and Welfare to assist the District in this effort. Pending the development of that program, the fiscal year 1964 budget proposes establishment of a per diem rate at which the District will reimburse Saint Elizabeth's Hospital for its residents who are committed there.

PUBLIC SAFETY

Individuals should be able to live and work safely in the Nation's Capital. Flagrant infringements of this right, which occur all too often, make news not only of local, but also of national and international importance. The fiscal year 1964 budget under present and proposed legislation will supply the funds needed to bring the police force up to full strength by providing additional policemen and 25 additional canine teams.

Here, too, the problems of youth are of critical importance. A juvenile delinquency program does not appear as an itemized request in the budget. Juvenile delinquency is far too complex. The battle against delinquency and youth crime is waged on many fronts--in the preventive areas of education, health, welfare, and recreation, and in the correctional and rehabilitative areas of law enforcement and the juvenile court. School dropouts, for example, constitute at the same time an educational, economic, and social problem. The District is participating in the national program, authorized by the Congress in 1961, to develop the most effective attack on juvenile delinquency which the Commissioners, together with community leaders, can devise. The District's efforts, like those in other cities, are being supported initially by Federal funds. As a program is developed, the local communities are expected to assume responsibility for full program costs. While no funds are requested in the fiscal year 1964 budget, the District expects to request later the funds needed to carry out its work in this vital area.

HIGHWAYS AND TRAFFIC

The critical deficiencies in the general fund do not extend to the water and sanitary sewage works funds, which are financed by earmarked revenues. Prospective revenues for these funds are sufficient to meet obligations for the next five years.

The highway fund, which is similarly financed, will face critical deficiencies after 1965. The exact extent of the problem will depend on decisions as to the scope of the highway program. Those decisions will be made promptly. The National Capital Transportation Agency has prepared and transmitted to me a report recommending a system of highway and modern rail transit facilities for the National Capital region. This report is being reviewed by appropriate Federal and local agencies. When that review has been completed I will forward the report of the National Capital Transportation Agency to the Congress with my recommendations. Therefore, I am withholding from the fiscal year 1964 budget those highway projects which do not conform to the highway recommendations of that Agency-the east leg of the Inner Loop Freeway, the Intermediate Loop, the Potomac River Freeway and the Three Sisters Bridge. At the completion of the review, appropriate budget amendments will be submitted with respect to both the mass transit and highway programs of the District. The projects which are not in question in the current review, particularly the center leg of the Inner Loop and its continuation to the north, as well as the modified Interchange C, represent a major and important highway program.

CONCLUSION

The need to establish a sound financial structure for the District, in fiscal year 1964 and thereafter, is of vital importance. There are also other matters concerning the District which the Congress will be called upon to consider.

This administration proposed Home Rule legislation for the District to the last Congress. I again urge that the Congress restore to District residents the basic right to local self-government. Indeed, the urgency of the District's present problems underscores the necessity to place responsibility for dealing with municipal problems in the people of the District themselves, with appropriate provisions to assure continued consideration by the Federal government of the Federal interest.

A study made during the last Congress at the request of the Committee on the District of Columbia of the House of Representatives showed the need for a better organizational framework for developing and executing urban renewal projects in the District. Legislation to provide adequate relocation assistance to persons displaced by public action, and to extend urban renewal powers to nonresidential areas as an aid to the District citizens who have taken the initiative in planning a revitalized downtown area, is of particular importance.

Other items of legislation required for effective accomplishment of local government objectives will be proposed by the Commissioners.

I have said that the decade of the 1960's, will be a time of crises and decisions for our country. And so it will be for the District. Washington, D.C. is the Capital of the United States of America. Let us make it a city of which the Nation may be proud-an example and a showplace for the rest of the world.

JOHN F. KENNEDY