California Capitol Hill Bulletin

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1 California Institute Capitol Hill Bulletin, 7/29/97 Page 1 THE CALIFORNIA INSTITUTE FOR FEDERAL POLICY RESEARCH 419 New Jersey Avenue, SE, Washington, D.C fax: ransdell@calinst.org California Capitol Hill Bulletin Volume 4, Bulletin July, 24, 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. HOUSE INTERNATIONAL RELATIONS REPORTS OUT ENCRYPTION BILL On Tuesday, the House International Relations Committee favorably reported by voice vote H.R. 695, Security and Freedom Through Encryption (SAFE) Act, after defeating an amendment opposed by the high technology industry. The bill allows the export of high-level encryption products manufactured by U.S. companies, as long as comparable items are available from foreign manufacturers. It also affirms the right of U.S. citizens to use software and devices containing the highest levels of encryption ability to ensure the security of financial and other transactions conducted electronically (See Bulletin Vol. 4, No. 17, 5/15/97, and No. 22, 6/26/97). The defeated amendment, offered by Chairman Ben Gilman (NY), would have allowed the President to halt the export, or require licenses for the export of, encryption devices on a finding that their export would adversely affect national security. "National security" was defined to include instances where law enforcement efforts to combat criminal acts and terrorism were hampered. The amendment was defeated During consideration of the amendment, Reps. Robert Goodlatte (VA) and Zoe Lofgren (San Jose), principle sponsors of the bill, were allowed to oppose the amendment, although they are not members of the Committee. Representatives from the Department of Commerce, FBI, National Security Agency, and Drug Enforcement Administration were permitted to speak for the amendment.

2 California Institute Capitol Hill Bulletin, 7/29/97 Page 2 The bill, already reported out by the House Judiciary Committee, now goes to the National Security and Intelligence Committees for further consideration. UNANIMOUS CALIFORNIA DELEGATION FIGHTS FLORIDA WINE LAW For the second time this month, all 52 Members of Congress from California have joined together in signing a bipartisan delegation letter. In this instance, the delegation asked Florida s governor to seek repeal of a law restricting the sale of out-of-state wines delivered by common carrier. The letter, sent on Monday, was circulated by Reps. Walter Capps (Santa Barbara) and Frank Riggs (Windsor) and joined by delegation chairs Jerry Lewis (Redlands) and Lucille Roybal- Allard (Los Angeles). The wine industry employs 110,000 Californians, plus 40,000 to 50,000 more during fall harvest. (See Bulletin, Volume 4, No. 25, 7/17/97.) EU, BOEING COME TO TERMS ON MERGER; DELEGATION EXERTS INFLUENCE Avoiding what surely would have been a bruising trade war between the U.S. and the European Union (EU), the EU approved Boeing s acquisition of McDonell Douglas after a strong lobbying effort by President Clinton, himself supported in his actions by a unified California Congressional Delegation. The EU approved 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 (see Bulletin Vol.4, No. 25, 7/17/97). 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. or with their relationships with the three airlines in question. On Tuesday, July 22 nd, 50 members of the California Congressional Delegation wrote to President Clinton sharing with him the delegation s deep concern over the EU s course of action and urging the President to continue his eleventh hour lobbying on behalf of the merger. The delegation letter, which President Clinton noted publicly, stated that there is widespread, bi-partisan support in California for market place forces and we [the delegation] encourage policies that lead to healthy international competition. In the wake of the announcement that the California-important merger had been approved, Rep. Lucille Roybal-Allard (Los Angeles) stated that the delegation unanimity proved that when it comes to protecting California jobs, our congressional delegation is prepared to go the extra mile to communicate our concern. Rep. Jerry Lewis (Redlands), likewise, made note of the fact that While we [the California delegation] may have our differences in other areas, Democrats and Republicans stand united in fighting for California s aerospace infrastructure. BART-TO-SFO FUNDING APPROVED IN HOUSE On Wednesday, July 23 rd, Rep. Ellen Tauscher (Contra Costa) announced that the House approved $54.8 million in Fiscal Year 1998 funding for the BART rail extension project into the San Francisco International Airport (SFO). The funding is part of the FY 98 Transportation Appropriations bill which was approved For months the funding appeared in doubt as BART, Airline officials and state, local, and federal government leaders failed to come to agreement on the financial burden that each should bear. It wasn t until months of on-again/off-again negotiations that all parties came to mutually agreeable terms in March, paving the way for Congressional action. The total multi-year federal request for the rail extension is $750 million. HOUSE APPROPRIATIONS RETAINS RESTRICTED CENSUS LANGUAGE; MAINTAINS $600 MILLION SCAAP FUNDING

3 California Institute Capitol Hill Bulletin, 7/29/97 Page 3 The House Appropriations Committee on Tuesday defeated an amendment that would have struck from the Commerce, Justice, State Appropriations bill the provisions prohibiting the Census Bureau from spending any funds on sampling procedures and withholding nearly threequarters of the FY98 funds for the 2000 census activities until Congress passes subsequent language mandating how the census will be administered. The amendment, offered by Rep. Alan Mollohan (WV) would have substituted the language that is currently in the Senate Commerce, Justice, State Appropriations bill that prohibits the Bureau from making any "irreversible" decisions on the use of sampling. (See Bulletin Vol. 4, No. 25, 7/17/97). The Appropriations Committee also followed the Commerce, Justice, State Subcommittee's lead and retained the $600 million level funded for the State Criminal Alien Assistance Program (SCAAP) by the Subcommittee (see Bulletin Vol. 4, No. 24, 7/10/97). The House is expected to take up the Commerce, Justice, State funding next week. BILBRAY AND WAXMAN HOST BIPARTISAN DELEGATION SESSION WITH EPA S BROWNER REGARDING AIR QUALITY STANDARDS On Wednesday, a bipartisan group of California Congressional delegation members met with EPA Administrator Carol Browner regarding the Administration s proposed tightening of air quality rules. The meeting was hosted by Reps. Brian Bilbray (San Diego) and Henry Waxman (Los Angeles) and included delegation chairs Lucille Roybal-Allard (Los Angeles) and Jerry Lewis (Redlands) and Reps. Ken Calvert (Corona), Anna Eshoo (Atherton), Marty Martinez (Monterey Park), Buck McKeon (Santa Clarita), and Dana Rohrabacher (Fountain Valley), as well as staff from about half the California delegation. Browner sought to explain and defend her agency s plan to tighten standards for particulate matter and ozone. Specifically, the plan would raise the standard for particulate matter (often dust/soil, salt, etc.) from 10 ppm (parts per million) to 2.5 ppm, and would create a new monitoring system for such matter. Regarding ozone, the EPA plans to replace the current system based on a 1-hour monitoring period with a new system based on an 8-hour window. California has been at the forefront of air cleanup, and many fear that a significant change in measurement and threshold levels could undo or complicate the progress already made. Browner argued that the new regulations have a lengthy phase-in period, especially in areas already designated as in non-attainment, which put off the new standards until after The EPA distributed a list of California counties which are not now below clean air standards but which would be added to the non-attainment rolls under the new rules. For the ozone standard, these new counties would be Amador, Calaveras, El Dorado, Kings, Mariposa, Nevada, San Joaquin, Tehama and Tuolomne. New counties not attaining the new particulate matter standard would be Fresno, Imperial, Inyo, Kern, Kings, Los Angeles, Madera, Merced, Orange, Riverside, San Bernardino, San Joaquin, and Tulare. (These listings are based on air quality data final designations would be based on the most recent three-year period.) Browner commented that current clean air laws direct the EPA to consider only the health effects of its clean air standards, without regard to the costs of implementation. The lack of costbenefit consideration has been a contentious issue. However, Browner sought to reassure lawmakers that her agency s rules would be implemented in a common sense, cost-effective manner. Reps. Waxman, Bilbray and Rohrabacher all urged that the initial focus should be on those approaches which are easiest to implement, with more difficult approaches generally put off until a later time, and Bilbray commented that the low lying fruit should be picked first. Responding to Rep. Calvert s concerns that particulate matter standards would be burdensome to agricultural areas which produce dust from tillage, Browner cited EPA research showing that only 12% of soot nationwide is agriculturally-related. She added that the figure in the San Joaquin Valley was 7%.

4 California Institute Capitol Hill Bulletin, 7/29/97 Page 4 Some critics of the proposals support legislation to postpone the effective date of the new regulations by up to four years. HOUSE APPROVES VOCATIONAL EDUCATION BILL On Tuesday, following intense negotiations, the House approved a vocational education reauthorization bill on a vote of The bill would, over several years, phase in changes formula for allocating voc ed funds within states from the current scheme, based 70% on poverty and 30% on population, to a new scheme based 60% on poverty and 40% on population. The formula compromise also reduces the so-called rural reserve portion of the program from 10% to 5%. In 1996, California received $102 million of the $976 million allocated nationwide for the program s basic grant. A Senate bill was introduced this week, but no action is expected soon. CLINTON TO ATTEND TAHOE SUMMIT; FAR REACHING IMPACT Both President Clinton and Vice President Gore are expected to be in attendance this weekend at the third and final installment of the Tahoe Summit, a series of forums designed to create a private-public partnership solution to save the ailing Tahoe National Forest and the increasingly polluted and murky Lake Tahoe. The solutions agreed upon at the forum, however, are expected to have far reaching effects on all future federal land management issues, chiefly forest maintenance and logging (see Bulletin Vol.4, No. 23, 7/1/97). The forum s final report, due Saturday, is expected to call for substantially increased controlled-burn efforts and increased bio-mass logging to help clear out and control the unnaturally dense forests that have overgrown due to fire management efforts which have kept the forest from experiencing its natural life-rejuvenating burns. In addition, President Clinton is expected to call for reduced private automobile traffic in the lake area, increased public transportation and the acquisition of sensitive wetlands. The entire cost for the effort is reported to be between $700 and $900 million. President Clinton is expected to announce that the federal government will pick up the tab for approximately $300 million. Governor Wilson has already applauded the forum s efforts and has pledged $275 million in state matching funds contingent on the expected substantial federal donation. Nevada Governor Bob Miller is expected to announce the contribution of at least $50 million. The remaining amount of money is expected to be paid by private interests that profit from Lake Tahoe In related news, Rep. Wally Herger s (Marysville) H.R. 858, the Quincy Library Group Forest Recovery and Economic Stability Act, which, like the Tahoe Forum recommendations, involves a broad coalition of public and private interests in an effort to better manage the 2.5 million acres of Plumas, Lassen, and Tahoe National forests, passed the House on July 9 with a dramatically lopsided margin (see Bulletin Vol. 4, No. 24, 7/10/97). The legislation, now in the Senate where Senator Dianne Feinstein is touting the proposal, calls for the selective removal of crowded, smaller trees while leaving stand the larger, more fire resistant trees. SENATE BANKING HOLDS HEARING ON SECURITIES LITIGATION ABUSES The Securities Subcommittee of the Senate Banking, Housing, and Urban Affairs Committee held a hearing on Thursday on the impact on securities litigation following the 1995 enactment of the Private Securities Litigation Reform Act (PSLRA). During opening statements, Sen. Barbara Boxer (CA), a member of the full Committee but not the subcommittee, stated her support for federally-enacted standards to control litigation over nationally trade securities. Although a bill has not yet been introduced this year in the Senate, two bills introduced by Californian's are pending in the House: H.R. 1689, introduced by Reps. Rick White (WA) and Anna

5 California Institute Capitol Hill Bulletin, 7/29/97 Page 5 Eshoo (Atherton), and a similar bill, H.R. 1653, introduced by Reps. Tom Campbell (Campbell), Scott Klug (WI), and Cal Dooley (Visalia). Arthur Levitt, Chairman of the Securities and Exchange Commission, reviewed for the subcommittee the findings of an SEC Staff Report on the PSLRA released in April. The Staff Report found three areas where the PSLRA was not yet achieving its intended goals. First, the requirement that a "lead plaintiff" control the litigation and the selection of counsel was meeting resistance from private investor groups because of the potential litigation-related expense and reluctance to reveal proprietary investment strategies in the course of litigation. Second, the safe harbor provisions for forward-looking statements were not resulting in companies providing more information to investors because of a lack of judicial guidance to date interpreting the provisions and the potential for continued liability in state courts. Third, the Staff Report found that the discovery stay under the federal law could be avoided by investors filing a parallel state court action. Recognizing the legitimate concerns of companies over frivolous litigation, Chairman Levitt nevertheless counseled caution in using broad preemption of state actions because it may impair meritorious claims. In conjunction with the SEC's testimony, President Clinton sent a letter on Thursday to Senator Chris Dodd (CT), a leading proponent of securities litigation reform, in which he pledged to work with the Senate on "reasonable reform" addressing the increase in state court actions. Also testifying before the subcommittee was Keith Paul Bishop, California Commissioner of Corporations. Commissioner Bishops supports consistent national standards and called on Congress to give states the authority to enforce federal standards, as well as continue to control the licensing of securities professionals. Robert C. Hinckley, Vice President, Strategic Plans and Programs, Xilinx, Inc., headquartered in San Jose, also testified before the subcommittee on behalf of the American Electronics Association. He gave several examples of recent state cases in California that point out the continued problem with securities litigation and called on Congress to enact uniform national standards. Other witnesses included: Prof. Joseph a. Grundfest, Stanford Law School; Leonard Simon, Milberg Weiss Bershad Hynes and Lerach on behalf of the National Association of Securities and Commercial Law Attorneys; and Joseph Polizzotto, Managing Director, Office of General Counsel, Lehman Brothers, on behalf of the Securities Industry Association. Copies of the testimony can be obtained from the Senate Banking Committee, or from its Internet Home Page at: < SENATE TAX BILL PROVISION WOULD BENEFIT U.S. WINEMAKERS The practice of labeling wines as Chablis, Burgundy, Champagne, or Port is common among U.S. wine producers, despite the fact that they are also the names of regions within France and other European countries. Because of this, these countries want to ban the use of their regional names for wine produced by non-europeans. U.S. wine producers are afraid that such a ban might indeed come to light during current trade talks under the General Agreement on Tariffs and Trade (GATT). Such an agreement would be costly for the U.S. wine industry because of the consumer confusion that would result from renamed wines. As a result of this labeling dispute, the Senate tax reconciliation bill, now in conference with the House version, contains a provision that will ease the fears of U.S. winemakers. The provision, sponsored by Sen. Alfonse D'Amato (NY), will write into U.S. law regulations allowing the continued use of "semigeneric" names for non-european produced wines. This is an important issue for California, home to a large and vibrant wine industry, which includes E&J Gallo Winery Inc., the largest wine producer in the world.

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