California Capitol Hill Bulletin

Transcription

1 THE CALIFORNIA INSTITUTE FOR FEDERAL POLICY RESEARCH 419 New Jersey Avenue, SE, Washington, D.C fax: California Capitol Hill Bulletin Volume 4, Bulletin July 31, 1997 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. CONGRESS SENDS WHITE HOUSE SPENDING AND TAX RECONCILIATION BILLS The House overwhelmingly approved the budget reconciliation spending measure (H.R. 2015) by a vote of on Wednesday and followed on Thursday with a vote for the reconciliation tax package (H.R. 2014). The Senate followed suit on Thursday with its own lopsided vote of on the spending bill, and 92-8 on the tax bill. H.R will reduce federal spending by $140 billion over five years, and H.R will cut taxes by $94 billion over the same five years. Together the bills are expected to balance the federal budget by the year The health care industry will bear a significant portion of the financial burden of the bills, as will smokers who will pay increased tobacco taxes. (California has the second-lowest smoking rate among states; while nearly 25% of U.S. adults smoke, just 15.5% of adult Californians do.) As well as the big-ticket items, such as the capital gains tax cut, the $500 per child tax credit, and $24 billion for children's health care, the two bills contain numerous provisions of specific importance to California. Without purporting to be an exclusive list, following are some of the provisions particularly affecting California: TANF Grant - The spending bill creates a $3 billion formula grant to states to assist welfare recipients transition into the workplace. California would receive nearly 18% of the funds distributed under a formula shepherded by Rep. Buck McKeon (Santa Clarita). The state will receive $196 million in FY98 and $183 million in FY99. (For a state-by-state TANF grant allocation table, contact the Institute.) Medicaid DSH - California s reductions in Medicaid disproportionate share hospital (DSH) payments, which support hospitals with a high indigent and uninsured caseload, will

2 be roughly proportionate to those in most other states. California DSH payments will fall from $1.1 billion in FY98 to $877 million in FY02, after which it could rise in line the CPI. The bill includes DSH targeting language, but some consider the provisions weak. DSH OBRA 93 Waiver: The bill includes language expressly allowing California to spend public hospital DSH funds at which had been previously capped -- a provision fought for by Reps. Brian Bilbray (San Diego) and Henry Waxman (Los Angeles), in conjunction with Reps. Chris Cox (Newport Beach), Anna Eshoo (Atherton), and James Rogan (Glendale). SSI Payments to Immigrants - Last year's welfare reform law is amended to allow all legal immigrants receiving SSI benefits as of last August 26 to continue to receive those benefits in the future. These immigrants are also guaranteed Medicaid eligibility. In addition, any immigrant who was legally in the United States as of last August 26 and who became or becomes disabled after that date will be eligible to receive SSI disability payments. These provisions are expected to cost $11.4 billion over five years.

3 College Tuition Waivers - The value of tuition expenses waived by higher education institutions for undergraduate and graduate students would not be taxed as income to those students, as had been proposed in the House version of the tax bill. Employer Assisted Education - The Section 127 employer assisted education exemption has been extended for three years but only for undergraduate students. Undergraduates who receive tuition assistance from employers can deduct from their income up to $5,250 for those payments. California's technology community had hoped the extension would include graduate students, as its cutting-edge technologies often require continuing graduate education for its employees. R&D Tax Credit - The R&D (or R&E) tax credit is extended for one year to June 30, The provisions on calculating the credit remain the same as those passed last year. One caveat, however: as required by the now effective line-item veto law, the Joint Tax Committee drew up a list of 79 potential targets that could be struck by the President because each has 100 or fewer beneficiaries, and the R&D tax credit is on that list. Earlier this year, Reps. Bob Matsui (Sacramento) and Wally Herger (Marysville) initiated a bipartisan delegation letter to the Ways & Means Committee seeking a permanent extension of the credit. The Orphan Drug Tax Credit - The bill permanently extends this provision, which provides a credit equal to 50 percent of qualified expenditures for human clinical trials on therapies that have been designated as orphan drugs by the FDA. This provision is also on the Joint Tax Committee's list of possible line-item veto cancellations. Tax Exempt Bond Cap - The cap of $150 million on tax exempt construction bonds is repealed. Retention of this provision might have adversely affected California State University's ability to expand its facilities, as well as various private universities. Reps. Steve Horn (Long Beach) and Gary Condit (Ceres) spearheaded a bipartisan delegation letter to the Ways and Means Committee supporting repeal of the cap. Computer Donations - A provision sought by Rep. Duke Cunningham (San Diego) increases deductions for companies who donate computer equipment to K-12 schools. NATIONAL SECURITY COMMITTEE CONSIDERS ENCRYPTION BILL The House National Security Committee held a hearing on H.R. 695, the Security and Freedom Through Encryption Act, on Wednesday. The bill has already been favorably reported from the House Judiciary and International Relations Committee. See Vol. 4, Bulletin Nos. 17 (5/15/97), 22 (6/26/97) & 26 (7/24/97). Several committee members, including Rep. Curt Weldon (PA), the Chair of the Military R&D Subcommittee who presided at Wednesday's hearing, expressed concerns that the bill goes too far in relaxing export controls on encryption products and software. Rep. Weldon stated that he does not agree with the Administration's current policy on encryption exports either and he intends to formulate a middle-ground approach for consideration by the Committee and the full House, if necessary. The Committee heard from William Reinsch, Undersecretary of Commerce for Export Administration; William Crowell, Deputy Director of the National Security Agency; Thomas Parenty, Director, Data and Communications Security, Sybase, Inc., on behalf of the Business Software Alliance; and Stephen T. Walker, President and CEO, Trusted Information and Systems, Inc. The National Security Committee has until mid-september to act on the bill. The House Select Intelligence Committee also has sequential referral of the bill, but postponed a closed-door briefing originally scheduled for July 31.

4 CLINTON UNVEILS PLAN FOR SALVAGING TAHOE, AUGMENTING STATE FUNDS On Saturday, President Clinton announced the long-awaited details of a plan to forge community-based solutions to salvage the ailing Tahoe National Forest and the increasingly opaque Lake Tahoe. At the heart of the proposal is federal spending of approximately $50 million over the next two years, ($26.6 million more than in previous years, but less than many had hoped for), the creation of the Tahoe Federal Interagency Partnership to oversee restoration efforts, and a reconfigured environmental restoration and maintenance effort in the region that will result in an increase in controlled burns and biomass logging. See Volume 4, Bulletin 26 (7/24/97). In addition, Clinton announced that he was ceding more than 300 acres of U.S. lakefront property to the Washoe Indian tribe. The Tahoe Regional Planning Agency -- a joint California-Nevada organization -- has estimated the cost of a sufficient clean-up to be between $700 and $900 million. Governor Wilson has previously pledged upwards of $275 million over the next ten years to assist in the revitalization of Lake Tahoe and the surrounding forest, and Nevada Governor Bob Miller has pledged an additional $85 million to the effort. The remainder of the funding is expected to be picked up by private sources who have a stake in the Tahoe area. HOUSE JUDICIARY SUBCOMMITTEE CONSIDERS EPA AIR QUALITY STANDARDS On Tuesday, the House Judiciary Subcommittee on Commercial and Administrative Law held an oversight hearing on the EPA's new air quality standards. In his opening statement, Rep. George Gekas (PA) expressed concern that the EPA violated the Small Business Regulatory Enforcement Fairness Act and the Regulatory Flexibility Act, which require agencies to analyze, inform, and work with small businesses on new regulatory action. The hearing also explored the possibility that the EPA violated the Unfunded Mandates Act by not considering the effects of its rulings on state and local governments. EPA Deputy Administrator Fred Hansen testified that in formulating the new rulings, his agency consulted state and local government representatives, industry coalitions, and environmental groups. He added that EPA addressed meetings organized by the National Governors' Association, the U.S. Conference of Mayors, and the Council of State Governments to ensure that the agency was in compliance with the Unfunded Mandates Act. Mr. Hansen claimed that the EPA regulations are exempt from the two small business laws since the implementation plan is primarily the responsibility of the states, and not the federal government. Also testifying at the hearing, Reps. Fred Upton (MI) and Rick Boucher (VA) attacked the scientific evidence used to determine the new regulations. Upton, Boucher and Rep. Ron Klink (PA) are sponsoring a bill to enact a four-year moratorium on the new pollution standards. The Clean Air Act, passed by Congress and signed by President Nixon in 1970, requires the EPA to follow certain guidelines to ensure public health: review public health standards for six major air pollutants every five years; update standards "to protect public health with an adequate margin of safety," based on the latest, best available science; and consider only the public health, and not the costs of compliance, when setting air quality standards -- and save cost considerations for the implementation phase. The EPA's new plan would raise the standards for particulate matter (often referred to as soot) from 10 ppm (parts per million) to 2.5 ppm. The system for monitoring ozone would also change from a current system based on a 1-hour monitoring period to a new system based on an 8-hour window. EPA Administrator Carol Browner says that the

5 tightened standards will prevent approximately 15,000 premature deaths, 350,000 aggravated asthma cases, and 1 million cases of breathing difficulty in children. A clarification regarding last week s article on the California delegation meeting with Browner: During the meeting, Rep. Brian Bilbray emphasized that it is unrealistic to simply point to industry or utilities, for achievement of additional substantial reductions, at least in California. These so-called stationary sources have been largely cleaned up in the state, Bilbray noted, and additional reductions may be considerably more difficult to obtain. EU FORMALLY APPROVES BOEING MERGER; FTC CHAIR PROMISES CLOSE SCRUTINY OF FURTHER DEFENSE MERGERS On Wednesday, the European Union formally approved the Boeing-McDonell Douglas merger that was strongly supported by the California Congressional Delegation. Last week the bipartisan delegation sent to the President a letter signed by nearly every delegation members urging him to act in his full capacity on behalf of the merger, which has significant California implications. See Bulletin Vol. 4, No. 26 (7/24/97). The EU agreed to the merger after Boeing agreed to relinquish its exclusive contracts to furnish aircraft to Delta, Continental, and American Airlines, as well as operating the 11,500 person Douglas Aircraft Co. in Long Beach as a separate entity. Though Boeing made some cosmetic concessions, the fundamental structure of the merger as it was first proposed remains intact. Indeed, Boeing officials noted that they do not foresee any change in operations either at the Douglas Aircraft Co. facilities or in Boeing s relationships with the three airlines in question. On a related note, the Chairman of the Federal Trade Commission, Robert Pitofsky, recently stated in testimony before the Senate Judiciary antitrust subcommittee that any additional defense industry mergers will have to be examined very closely, because of the "considerable concentration" of the industry in the market. The focus of Pitofsky s comments was likely the planned joining of Lockheed Martin with Northrop Grumman, a merger which would create an entity with roughly the same employment presence as the new Boeing now has in California. Each company will employ roughly 40,000 Californians. STATE WELFARE REFORM ACCORD REACHED/BUDGET LIKELY TO FOLLOW On Monday, Governor Pete Wilson and key members of the Legislature reached an agreement on the groundbreaking welfare legislation that has been a major obstacle to passage of a state budget. The compromise welfare plan could go to the Assembly and Senate floors as early as today, and, assuming quick ratification of the welfare legislation, a budget could follow shortly. The following is an overview of the major components of the agreement. Our thanks to the bipartisan Senate Office of Research for their assistance in compiling this list. Another useful resource is a California Budget Project fact sheet, available at < Immunizations School Assistance SIP s Applicants: 30 days from determination of eligibility for Medi-Cal. Recipients: 45 days from annual redetermination. Not a condition of eligibility. Require children s school attendance as part of the welfareto-work plan. Sanction parent if child under 16 fails to attend classes. If 16 or 17, make those not attending school participate in work activities, or experience sanctions. Allows those enrolled in programs not designated as leading to employment only to continue until the next semester break. Conforms time in SIP s to alternative time limits.

6 County Fiscal Incentives Grant Structure Parents With Infants Time Limits Within the 60 Month Frame Hours of Participation Grant Levels Safety Net Drug Felons General Assistance Earn Your Check Community Service Activity Paternity Food Stamps: ABAWDS Contracting Out of Services Counties are scheduled to keep 100% of savings. 75% stays within each county and 25% will be allocated on a statewide basis. Three measures: Diversion, exits to employment, and increased earnings. Penalties: 50/50, include sunset of 2 years. $ % disregard. Disregard unearned income money for money with the exception of disability based income. Maintain the $50 child support disregard. 1 st child: 6 months with county discretion (can be extended for an additional 6 mos. By the county) and 24 months for current recipients. 2 nd or subsequent children: 12 weeks with county option to extend to 6 months. After 18 months for new applicants (can be extended for an additional 6 mos by the county) and 24 months for current recipients, if recipient has not been employed, the county would certify that no job was available and person would enter community service. Begin with federal minimum, extend to reach 32 hours per week after two years. Continue grant cuts one additional year, suspend COLA for one additional year. After five years on aid children will be provided child-only grants. Counties will have option to provide employment or other services and may require workfare for recipient of services. Include explicit prohibition on receipt of aid for those convicted of a drug felony to be carried in separate legislation. Current law with prohibition of receipt of GA while children are receiving aid. Sanction adult portion of the grant for failure to participate. Work off grant pursuant to federal law. Not wages. Sanction family 25% for non-cooperation. Co-locate DA staff with welfare staff to increase paternity and support order establishment. Governor s discretion to continue waiver. No change to current law.