Corrections and Courts. The portion of the District budget spent on corrections and courts exceeds by a factor of 3-4 times that found in large cities throughout the U.S. Most of this added burden is due to the large District expense associated with financing post-adjudication correctional centers, particularly the Lorton Complex, which are normally operated by state governments elsewhere in the country. No local municipality, not even New York City, carries the full burden of providing post-adjudication services for persons convicted of serious crimes.

As a result of the Court Reform Act of 1970, and subsequent Federal action, the District government operates a unitary court system, having jurisdiction over the full range of court cases and services. From an administrative standpoint, experts consider it sound approach to systematize state, county and municipal judicial processing. From a financial perspective, it is unreasonable to expect the first level in the system the municipal court to carry the full cost for the entire system. Throughout the country, municipal court functions are a small fraction of the total court operation, having jurisdiction limited largely to traffic tickets, landlord-tenant problems, and misdemeanors. The bulk of the work handled by the District's court system deals with felonies, other serious crimes, and appeals from

the lower courts. Elsewhere, however, these functions are carried and financed at the state level where costs may be widely distributed.

Another sharp contrast between the District and most other states is the fact that the power of judicial appointment in District courts still rests for the most part with the President of the United States and the Senate. Practices governing judicial appointments vary from state to state, but in the main, judges are elected or appointed by a Governor. Even under new procedures in the Home Rule Charter for filling judicial vacancies or renewing a previous appointment, the role of the Mayor and City Council is minimal and the electorate has no direct role.

Regional and Special District Functions. The most common regional and special district functions are (1) providing sewerage services, and (2) supporting housing and urban development. The portion of the District budget spent on these functions is slightly below the national average for large cities, but in line with that of cities in the District's population class.

1 Welfare Programs in the Washington Area" Research Report No. 11July 1978. The District of Columbia Municipal Research Bureau, Inc.

Municipal Functions

Because such a large portion of the District budget is used to finance nonmunicipal functions, a comparatively small share is earmarked for the usual services that large cities provide.

Municipal expenditures on Police and Fire protection have been singled out since they represent from 20-25% of most cities expenditures. In the District, however, police and fire protection represents only 15%, which is considerably below the national average. The category "other functions" contains several areas, including expenditures on streets and highways. sanitation (other than sewerage), parks and recreation, libraries, financial administration, and the maintenance and provision of general public buildings. The emphasis on these services varies widely across cities, depending on such factors as the degree of intergovernmental assistance received, the extent of private vs. public provision of services, and the strength of the public demand for each of the services. Again, in relation to the total, the District's budget allocation for these services is about half the portion found in other major cities in the country.

V. Intercity Revenue Comparisons

A 1916 Congressional report concluded that the citizens of the District should carry tax burdens comparable to those of other taxpayers in the country, and the Federal payment should simply provide whatever additional resources were necessary to finance an adequate level of services in the city. The proliferation of dometic assistance grants over the years has made it necessary to broaden this 1916 concept to take comparative grant-in-aid funds into account in establishing the Federal payment. These two interrelated components of a jurisdiction's revenue base-tax burdens and grant receipts-were incorporated into the Home Rule Act which calls for intercity revenue comparisons in justifying the Federal payment request.

Before comparing District tax and grant revenues with those of other jurisdictions, some basic facts about the District's revenue structure must first be understood. The District has a comprehensive revenue structure that is unique among public jurisdictions in the United States. For example, the District has most of the revenue sources typically found at the local level such as property taxes, water and sewer charges, traffic fines, and a variety of other taxes and user fees. In addition, this city has a tax structure comparable to that found at the state level including progressive income taxes, sales and excise taxes, motor vehicle registraton fees, and taxes on gas consumption. About two-thirds of the District's own-source revenues come from taxes and fees which are normally collected by states.

It is important to recognize that although the District has the features of a complete state-local revenue structure, it does not have the economic characteristics of a typical state or city revenue base. Business and industry, mainstays in the economies of most major cities and states, represent a comparatively small sector in the District's economic-and taxing-base, largely because of the significant governmental sector in the District. Only 5% of the jobs located in the District are classified as manufacturing, for example,

far below the 12-38% range found in other major cities normally used in comparisons with the District. The income distribution of District residents is skewed toward the lower income brackets, thereby further limiting potential revenue yields from District tax sources. Census Bureau estimates, for example, show the percentage of District families with incomes less than $6,000 was nearly a third higher than the national average and more than double the average for the outlying Washington metropolitan area.

As a result, the city's revenue-raising capacity is severely constrained in relation to that of many states, counties and cities which enjoy a broader geographic and economic base than is available to the District. Tax rates in the District must generally be set higher than those in other communities to make up for such tax base limitations. This disparity is compounded by Federal tax exemptions which affect significant portions of the District's property, sales, and income tax base. A full discussion of tax losses which stem from Federal exemptions can be found in the "Taxes Foregone" section of this report.

With this introduction to the District's economic base and revenue structure we can begin the comparison of District revenue sources and tax burdens with those in other jurisdictions. In comparing revenue sources of major cities, however, several important methodological issues must be kept in mind. First, in addition to local taxes and charges, cities generally receive funds from their respective state treasuries, direct Federal grants, as well as Federal grants that cannot be separately identified because they pass through the state government and become commingled with state aid. The District, of course, does not receive any state assistance. Therefore, it is important to make revenue comparisons on the basis of total intergovermental aid, not Federal grants alone.

Second, cities with commuter taxing authority could be expected to show a higher percentage of "own source" revenues because a substantial portion of the

suburban tax base is included in the city revenue total. The District does not have that authority.

Next, the District receives Federal grant programs that are provided exclusively or predominantly for state and county governments instead of central cities. That would tend to overstate the District's Federal

grant total in comparison with other cities, despite the fact that such grants are awarded as a result of state, county and special service district functions that other cities generally do not perform.

Finally, the Federal payment itself poses a problem in comparing District revenues with revenues in other cities. Since it is really a unique payment rather than a grant program, it is misleading to show Federal payment amounts as intergovernmental aid. Some studies include Federal payment receipts among "own source" revenues because it is usually considered to be part user charge and part payment in lieu of taxes. To avoid biasing the results in either direction, Federal payment amounts are not included in the revenue data shown later in this section. Thus, valid comparisons can be made on a true basis of actual own source revenues and grant receipts.

Similarly, difficult technical issues are faced in comparing tax burdens across communities that have different taxation powers at each level of government, different tax rates, and different economic bases upon which taxes are levied. To overcome such methodological obstacles, tax burden studies performed by the District attempt to indicate the full state and local tax liability of identical families living in each jurisdiction being compared. Using a hypothetical profile of families in varying income brackets, it is possible to compare the taxes a family would pay in each community in the major tax categories (e.g., property, income, sales, etc.).

The following charts examine District revenues in relation to other jurisdictions. The first series of charts focus on city revenue sources, looking at the portion of revenues raised locally compared with intergovernmental grants. Tax burden comparisons for jurisdictions in the Washington metropolitan area conclude this section.

Intergovernmental Sources

Exhibit 20 shows that the Federal grant portion of total general revenues is more than double the percentage found in other U.S. cities. As indicated earlier, this uneven distribution can largely be explained in two ways: (1) The District receives Federal grants that go almost exclusively to state and county governments and thus do not normally appear in city revenue totals, and (2) cities indirectly receive Federal funds that are passed through from states and counties and thus are not reported as Federal grants.

With no higher level of government to turn to, the District does not receive revenue from state sources as do all other cities. On the average, one-fourth of the revenues available to cities in the District's population class come from the state treasury, a higher rate than the national city average of 20% from state sources. The portion of District revenues from other local governments is in line with comparable percentages in other cities across the country..

Own Sources

Exhibit 21 shows the distribution of own source revenues between taxes and non-tax collections. The District obtains a significantly higher percentage of general revenues from taxes than other cities collect from their tax sources. Taxes represent well over half of the District's general revenues compared with a national average of about 45%. Accordingly, charges and other non-tax sources constitute a relatively small fraction of total general revenues in the District. In percentage terms, the District's non-tax revenues make up about a third of the national average for this portion of the own Source revenue base.

EXHIBIT 21