Feds to Go Local in D.C.

THE DAILY FED

Feds to Go Local in D.C.

Citing the severe budget windfalls and declining services the city government faces, Clinton called for indefinite federal takeover of some services in return for eliminating the $660 million annual federal payment to the District. That payment is intended to compensate the city for the property taxes it doesn't get because of the large federal presence in the city.

According to a report in The Washington Post, a senior Clinton Administration official said the plan would provide $773 million in additional funds to the District over five years and increase the federal budget deficit by $339 million. The U.S. would assume responsibility for the District's burgeoning pension plan for retired city workers, cover a larger portion of the city's high Medicaid bills, spend over $1 billion for street repairs, finance the $500 million budget deficit the city faces, and assume the costs of running the D.C. prison system.

The Internal Revenue Service will collect the city's taxes and the Justice Department will run the city's prisons. Other agencies will manage road repairs.

What will happen to the city employees who now perform those services has not yet been determined.

Congress must approve Clinton's plan for it to take effect.