California Capitol Hill Bulletin

Transcription

1 Page 1 THE CALIFORNIA INSTITUTE FOR FEDERAL POLICY RESEARCH 419 New Jersey Avenue, Southeast, Washington, D.C Voice: Fax: ransdell@calinst.org Volume 3, Bulletin July 11, 1996 To expand communications between Washington and California, the California Institute provides periodic faxed bulletins regarding current activity on Capitol Hill which directly impacts our state. Bulletins are published weekly during sessions of Congress, and occasionally during other periods. The edition is made possible in part by a computer server donation from Sun Microsystems. SENATE PASSES SMALL BUSINESS TAX BILL; INCLUDES ONE- YEAR R&E EXTENSION THAT WOULD NOT BE RETROACTIVE The Senate on Tuesday passed H.R. 3448, the Small business Job Protection Act, which includes several tax provisions, as well as a raise in the minimum wage. The bill extends the expired Research and Experimentation (R&E/R&D) tax credit for one year beginning July 1, However, the credit expired July 1, 1995, and the bill does not make the credit retroactive to cover the past year. The one-year lapse in the credit compounds the unpredictability and uncertainty that the R&D community must deal with because the credit has only been available on a one-year-at-a-time basis. In addition to extending the credit for one year, the bill modifies the credit to allow its use by more companies. It expands the definition of "start-up firms" to include any firm whose first taxable year with both gross receipts and qualified research expenses began after The language also allows taxpayers to elect an alternative incremental research credit

2 Page 2 regime, the computation of which is spelled out in the provision. Finally, the provision would provide a special rule for payments made to certain nonprofit research consortia. The R&E tax credit, as well as several other provisions, were not contained in the House version of the bill, so the proponents of the credit will be working during the House- Senate conference on the bill to expand it to apply to the period from July 1, 1995 to June 30, $500 MILLION FOR REIMBURSEMENT OF ILLEGAL ALIEN INCARCERATION COSTS IN FY97 COMMERCE, JUSTICE, STATE APPROPRIATIONS BILL On Thursday, the House Appropriations Committee approved a $29.5 billion bill funding the Departments of Commerce, Justice, and State for Fiscal Year The bill includes $500 million to reimburse the states for the costs associated with incarcerating illegal criminal aliens. $330 million of the funds comes under the State Criminal Alien Assistance Program, and the remaining $170 million will come from the State Prison Grant Program. The funding level is the same as that provided in FY96. The Immigration and Naturalization Service also will get additional money to enhance border control. The bill appropriates $165.5 million to INS for border control, including money for 1,000 new border patrol agents, 136 support personnel, and 150 new land border inspectors. The bill also contains $110.5 million in funding for the Advanced Technology Program (ATP). This represents a 50 percent cut from last year's funding. The Committee report points out that major corporations have received 51 percent of the ATP awards made to date, and states that in light of efforts to balance the budget, the Committee cannot justify spending "scarce federal resources to provide grants to supplement the R&D budgets of major corporations..." The bill may come to the House floor as early as next week. REP. FILNER ADDRESSES INSTITUTE ADVISORY BOARD On Thursday, Rep. Bob Filner (San Diego) addressed the California Institute's Advisory Board as a guest at its monthly breakfast. Rep. Filner, who represents a district on the San Diego-Mexico border, began his remarks by commenting on the need to effectively implement the North American Free Trade Agreement. Specifically, the federal government should be investing in border infrastructure which will enhance the economic and social relationships between California/United States and Mexico. As an example of such a project, Mr. Filner pointed to his work in refurbishing a now defunct rail line between San Diego and Arizona. Fifty miles of the track dips below the border into Mexico. If this line were revitalized, Rep. Filner said, San Diego would have the rail links necessary to transform the Port of San Diego from military to commercial uses and to create international trade opportunities in the region. Opponents of the rail line argue that it would increase illegal immigration and drug traffic from Mexico. Mr. Filner also stressed the importance of Mexican economic development in improved relations with the United States. In response to questions from members of the advisory board, Rep. Filner discussed the importance of an effective reauthorization of ISTEA to California, the impact felt by San

3 Page 3 Diego after the departure of General Dynamics, and the importance of using accurate poverty statistics in federal formula allocation. CALIF. CHOSEN TO TEST TRANSPORTATION STATE INFRASTRUCTURE BANK Transportation Secretary Federico Peña recently announced that California and Missouri will join eight other states in testing the use of State Infrastructure Banks (SIBs) as a method for financing transportation projects which would otherwise be without necessary funds. The SIBs, enacted as part of the National Highway System Designation Act, are designed to support bond financed programs and to leverage state, local and private sources of capital to increase investment in the nation s surface transportation infrastructure. The SIBs will be created with federal seed money and will offer a selection of loan and credit enhancement assistance, including loan guarantees similar to the one which was approved for the Alameda Corridor, to provide additional support of financing projects. The SIBs will use the repaid funds to make new loans or guarantees for other transportation projects. The following eight states were selected, in addition to California and Missouri, to participate in the pilot program under a provision of the National Highway System legislation: Arizona, Ohio, Oklahoma, Oregon, Texas, Florida, South Carolina and Virginia. HOUSE PANEL HOLDS HEARING ON ISTEA FUNDING FORMULAS On Thursday, the House Surface Transportation Subcommittee held another in a series of hearings on the reauthorization of the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA). The stated purpose of the hearings was to examine federal funding distribution formulas in the context of maintaining an adequate national infrastructure. The subcommittee heard testimony from ten panels of witnesses including Members of Congress and state transportation officials. The first panel, consisting of Reps. Gary Condit (Ceres) and Tom DeLay (Texas), discussed their proposal for altering federal transportation distribution formulas. A primary feature of the plan, called A Streamlined Transportation Efficiency Program for the 21st Century (STEP 21), would insure that all states receive at least a 95% return on their contributions to the federal highway trust fund. Currently 29 states, including California, contribute significantly more to the highway trust fund than they receive back in transportation allocations. Members of the STEP 21 Coalition include primarily these donor states. The STEP 21 proposal would also provide states more flexibility in managing their federal highway funds. On Wednesday, Reps. Condit and DeLay introduced legislation containing the elements of their proposal. According to the bill s authors, in 1997 California would receive a 5.6 percent increase ($99.4 million) under the STEP plan as compared to current ISTEA formulas. For a detailed copy of the plan, contact the Institute at (202) The second panel of witnesses, which included Rep. Mark Sanford (S. C.), Rep. Steve Largent (Okla.) and subcommittee member Rep. Bill Brewster (Okla.), discussed legislation they introduced which would tie the distribution formula to the amount of contributions made by states to the highway trust fund. Under their plan, each state would receive 100% of the money they contributed to the trust fund. The next six panels consisted of delegations of Representatives from the donor states of Arkansas, Florida, Indiana, Minnesota, South Carolina and Kentucky. The Congressmembers voiced strong opposition to the current formula for the distribution of

4 Page 4 transportation funds and expressed support for the types of reforms discussed by the first two panels. Finally, the subcommittee heard from two panels of state transportation officials from the states of California, New York, Arizona, Michigan and Georgia. With the exception of the New York representative, all these witnesses argued that the federal funding formulas need significant alteration if state equity is to be achieved. They also spoke to the need for states to have increased flexibility in the usage and management of their transportation allocations. The text of the witnesses testimony will eventually be available on the Subcommittee s web site: ( The Subcommittee will continue reauthorization hearings on July 25 with a hearing entitled Surface Transportation Programs. Members wishing to co-sponsor the Condit-DeLay Step 21 bill should contact Emma Gray in Rep. Condit's office at x HEARING HELD ON NON-INDIGENOUS INVASIVE SPECIES BILL The Resources Committee's Fisheries, Wildlife, and Oceans Subcommittee held a hearing Thursday on H.R. 3579, the National Invasive Species Act of The bill is aimed at dealing with the problem of unintentional discharges of non-indigenous species, or "biological pollution," in U.S. waters. The subcommittee heard from four panels of witnesses representing the federal government and university marine science programs. The bill requires the Secretary of Transportation to develop voluntary guidelines to prevent the introduction and spread of invasive marine species in U.S. waters. The introduction of this marine life primarily comes from ships that enter a port area in ballast and discharge the "imported" ballast water before loading cargo. The result is often the introduction of crabs, clams, worms, and other marine life, into the ecosystem. These species can become established in their new home and destroy the natural marine life that makes up the food chain. In addition, some of these species, such as the zebra mussel and wood-boring clams, can damage wharves and piers and foul water intake pipes used by a city's water system. These problems have been of particular concern for California, especially in the San Francisco Bay/Delta Estuary. California now spends $400,000 annually to control nonindigenous plants in the Bay/Delta, and has spent $1 million to keep a single exotic fish from reaching the Delta. H.R currently has 36 co-sponsors, including seven Californians. A similar bill, S. 1660, has been introduced in the Senate by Sen. John Glenn and has 15 co-sponsors. California's water districts and agencies are strongly supporting both bills. Members interested in co-sponsoring the legislation should contact Rep. Steve LaTourette's office, , or Sen. Glenn's office, CALIFORNIA HEALTH CARE INSTITUTE RELEASES REPORT ON IMPACT OF FDA REFORM ON CALIFORNIA S BIOMEDICAL INDUSTRY The California Health Care Institute recently released its report entitled Exporting an Industry: The Impact of FDA Regulation on California s Biomedical Industry. According to the report, one-third of America s bio-technology and medical device companies are situated

5 Page 5 in California, allowing the state to benefit from one of the fastest growing industries. For this reason, California has a unique interest in the success of biomedical R&D companies and the FDA approval process is an important factor in this success. In its report, the CHCI used representative surveys of biotech and medical device CEO s to evaluate the FDA s economic impact on companies in the state. The study drew three primary conclusions. (1) California CEO s prefer to operate within the state, but in order to compete in international markets they are shifting clinical trials and manufacturing abroad. Consequently, California medical device companies have directly exported between 4,840-6,455 jobs and $ million in annual salaries. (2) CEO s cited the inconsistency and unpredictability of the FDA as major obstacles to management and market success which greatly increase their cost of capital. (3) To cope with FDA s inconsistent and bureaucratic regulatory approach, companies adapt by creating inefficiencies of their own. For more information on the study, contact the California Health Care Institute at The report can be obtained directly from the CHCI for a shipping fee. ADMINISTRATION PROPOSES $5 BILLION SCHOOL CONSTRUCTION FINANCING INITIATIVE FUNDED BY AUCTIONING BROADCAST SPECTRUM On Thursday afternoon at the White House, President Clinton proposed that the federal government spend $5 billion over the next four years to spur school construction and renovation. The "one-time" initiative would be paid for by auctioning portions of the broadcast spectrum between channels 60 and 69. The Administration proposes to use the funds to subsidize up to 50% of interest payments for state and local tax-exempt bonds used to repair or replace K-12 schools or to accomodate increased enrollments. The 100 largest school districts (measured by number of pupils in poverty) and a few others would apply directly to the U.S. Dept. of Education for funds; other districts would apply through their state. Supporting documents state that funds would be based on need, and on "evidence that the funding will support construction or renovation which would otherwise not have occurred." A table accompanying the proposal claims that California is likely to receive a substantial portion of the funding because of greater needs. While 33% of U.S. schools have at least one building in need of extensive repair, according to the documents, that percentage is 43% in California. Likewise, California's share of other "needs" tests exceed national averages: schools with at least one environmental problem (US=58%, CA=77%); share of schools that must spend more than the national average to bring facilities up to good condition (US=21%, CA=26%); and share of schools that lack phone lines for modems (US=56%, CA=68%). The proposal would auction portions of the channel spectrum which are not currently being used for UHF television. The FCC has concluded that new digital wireless technologies can allow use of portions of spectrum space around existing TV stations with little impact on the stations' ability to broadcast. However, several organizations have expressed concern that the broadcast spectrum is limited, and that continuing to auction off portions may result in scarcity problems in the future. Spectrum auctions have become a popular revenue-raising device since they were permitted in The Administration and the Congress FY97 budgets both proposed raising $19 billion via the auction of the non-broadcast spectrum, and the President's budget

6 Page 6 proposes an additional $20 billion from auction of the analog spectrum and other spectrum auction means. For a copy of the Administration proposal, please contact the Institute. CALIFORNIA ASSEMBLY PASSES EARTHQUAKE INSURANCE AGENCY BILL The California State Assembly on Wednesday passed a bill to create a the California Earthquake Authority. The vote was 55-17, one vote more than the two-thirds majority needed to pass the bill. The CEA would be a state-run and privately-financed program to supply earthquake insurance to California homeowners. The plan would raise $10.5 billion to help cover homeowner losses from earthquakes. That amount includes $3.35 billion from taxable state bonds, and $6 billion from insurance and reinsurance companies. Initially, the authority would sell insurance policies with a 15 percent deductible, $5,000 coverage for household contents, and $1,500 coverage for living expenses. Rep. Jerry Lewis (Redlands) was instrumental on the federal level in successfully ensuring that the CEA will receive tax-exempt status from the Internal Revenue Service. U.S. AND JAPAN TO MEET ON SEMICONDUCTOR CHIP AGREEMENT Negotiators from the United States and Japan are scheduled to meet July in New Zealand to try and work out a renewal of the five-year old semiconductor trade agreement that is set to expire July 31. U.S. Trade Representative Charlene Barshefsky and Japanese Trade Minister Shunpei Tsukahara are scheduled to hold bilateral discussions during the meeting of the Asia-Pacific Economic Cooperation forum. In order to get renewal of the bilateral agreement, Washington has indicated that it is willing to drop the market share targets set in the old agreement, although it still wants the two governments to continue monitoring Japan's market. Japan has been resisting re-negotiating the agreement, arguing that the foreign share of Japan's chip market reached about 30 percent this year, compared to 15 percent when the first agreement was negotiated. SENATE PANEL WOULD RESTRICT "FRESH" LABELS ON FROZEN CHICKEN The Senate Appropriations Committee, in an attempt to resolve a longstanding dispute, is seeking to prohibit the the use of the term "fresh" on labels for chicken which has been chilled to as low as 0 degrees Fahrenheit. Despite the fact that chicken becomes hard to the touch at 26 degrees, the Senate last fall allowed these frozen chickens to bear the "fresh" label. On Wednesday, the Senate Appropriations Subcommittee on Agriculture approved the labeling prohibition as part of its FY 1997 agriculture appropriations bill. The full Appropriations Committee began work on the bill Thursday afternoon. Under the subcommittee's approach, chicken cooled to below 0 degrees would bear the label "frozen", and chicken cooled to between 0 and 26 degrees would need no frozen label but could not be called "fresh." Last year, the U.S. Department of Agriculture had proposed a regulation, supported by the California poultry industry and California lawmakers, which would have required chicken cooled to between 0 and 26 degrees to bear the label "hard chilled" or "deeply chilled." It was this proposal that the Senate rejected last September on a

7 Page 7 vote of The Agriculture Department's overturned regulation had been strongly opposed by large poultry producers from southern states, whose birds must travel long distances to reach California and which thus must be kept very cold in transit. California's senators argued that a "fresh" label on chicken cooled to 0 degrees amounted to fraudulent labeling. SENATE AUTHORIZATION BILL WOULD BOOST DEFENSE FUNDS On Wednesday, on a vote, the Senate passed a $265.5 billion defense authorization bill for FY The funding level exceeds the President's request by $11 billion, eliciting threats of a veto. The bill would authorize the Navy to purchase additional F/A-18C/D fighters, a substantial portion of which are built at a Northrop Grumman plant in El Segundo under subcontract to McDonnell Douglas, the prime contractor. In addition, the Senate is considering the defense appropriations bill and will move to a cloture vote when it reconvenes next week. LITTON WINS NAVY AIRCRAFT NAVIGATION CONTRACT The U.S. Navy recently awarded Litton s Guidance & Control Systems division, located in Woodland Hills, California, a $41.3 million contract to provide repair and logistics support for aircraft navigation systems used on carrier based F-14 fighters, S-3 antisubmarine and E-2C surveillance aircraft. Included in the two year contract is an option for three more years which would more than double the total value of the deal. At least a portion of the work on the project will be performed at the company s facility in San Diego. GOOD NEWS IN CALIFORNIA UNEMPLOYMENT FIGURES California unemployment continued its slow decline in May, dipping slightly to 7.2 percent. California remains the state with the second highest rate following the District of Columbia, which registered an 8.9 percent unemployment rate in May. Nationally, the unemployment rate returned to its March level of 4.6 percent. More recently, in the week ended July 6 California had 3,848 fewer new filings for state unemployment benefits. The reduction contrasted the national trend where first-time claims reached the highest point since mid-april. CMTC PROPOSES THREE MANUFACTURING OUTREACH CENTERS IN SO CAL Earlier this month, the California Manufacturing Technology Center (CMTC) submitted a proposal to the National Institute of Standards of Technology to establish three manufacturing outreach centers (MOCs). The CMTC assists small and medium sized California manufacturers to improve their operational efficiency and global competitiveness. The proposal would allow CMTC to provide many more manufacturers in the Los Angeles Basin with improved access to their services, helping them become more competitive and profitable. If funded, the MOCs will be situated in Orange County, Ventura County, and the Inland Empire. The proposal is seeking $12.2 million: $6.1 million from NIST, $2.75 million from the State of California, and $3.35 million in in-kind contributions.