$1.15-Trillion Omnibus Spending Package Lands in Congress, Lawmakers Eye Quick Action

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1 State Association Weekly Washington Report $1.15-Trillion Omnibus Spending Package Lands in Congress, Lawmakers Eye Quick Action The massive $1.15-trillion FY2016 omnibus spending package complete with an array of policy riders was unveiled by congressional leadership late on the evening of December 15. The cost is parsed over 10 years. The House quickly announced it will vote on a related federal tax extenders package Thursday, December 17, then move to the omnibus spending bill on Friday, December 18. It will merge the two bills into a single legislative package and send it to the Senate for a single, final vote in hopes of getting out of town by their agreed-to recess date. President Obama signaled he ll sign both the omnibus package and the related tax extenders bill. His statement of administration policy said The Administration appreciates the bipartisan effort to provide full-year appropriations legislation for [fiscal] 2016 largely free of new unrelated ideological riders. Politically, the tax extenders package (see story below) will have an easier time on the floor of the House than the omnibus spending bill. While conservative GOPers see the tax package as pro-business and pro-jobs, they re disgruntled over policy riders that failed to make the cut in spending negotiations, particularly a demand that Syrian and Iraqi refugee resettlement to the U.S. be suspended until vetting procedures are worked out. The spending package carries all 12 department/agency spending bills for the remainder of FY2016 through midnight, September 30 and several were reworked from earlier approved version because the FY2016 budget resolution allocated an additional $80 billion in discretionary spending for both domestic and military programs. Because House rules require 72 hours between bill introduction and floor action, the House and Senate had to approve a third short-term continuing resolution (CR) keeping the federal government open through December 22. A House summary of the bill can be found by going to Spending The agriculture, rural development, FDA and related agencies bill carries a $141-billion price tag, $26 billion less than President Obama wanted and $6.4 billion less than FY2015. Of the total, $21.75 billion is discretionary spending, $1.1 billion more than last fiscal year. FDA gets $2.7 billion in discretionary spending, $132 million more than last year, and when all FDA funding is added, the agency s total budget hits nearly $4.7 billion, $238 more than FY2015. FDA got all it asked for in the food safety arena a $104.5-million increase most of it dedicated to implementation of the Food Safety Modernization Act (FSMA). EPA s budget was flat, held to last year s spending authority of $8.1 billion, $451 million less than what President Obama had requested, but higher than either House or Senate appropriations committee previously approved. Likewise, the Commodity Futures Trading Commission (CFTC) receives $250 million, equal to FY2015 funding. At USDA, the Food Safety & Inspection Service (FSIS) gets $1.015 billion, a $4-million increase, but may not spend any money to inspect horses moving to federally inspected slaughter facilities. The

2 Agricultural Research Service (ARS) received $2.47 billion to support USDA research, as well as research at land grant and non-land grant universities, and the extension service received $476 million of that total. The Animal & Plant Health Inspection Service (APHIS) is funded at $886 million, $30 million more than the President s request and $15 million more than last year. Most of the increase goes to fighting avian influenza and other plant and animal disease prevention and mitigation. The Natural Resources Conservation Service (NRCS) gets $851 million, nearly $5 million more than a year ago, rejecting President Obama s request to reduce conservation technical assistance. The Farm Service Agency (FSA) gets $1.51 billion to fund its various programs, with language included prohibiting USDA from closing any FSA county offices, while funding implementation of the 2014 Farm Bill. The bill provides $345 million -- $43 million more than last year for construction, operation and maintenance of flood control, navigation and ecosystem restoration projects along the Mississippi River and tributaries from Cairo, IL, to the mouth of the river. Also included in the bill is $100 million for western drought response, instructing the Interior Department to spend it on efforts to raise water levels as quickly as possible. Policy Riders Up to the last minute, it was a political guessing game as to which of over 100 policy riders made it into the omnibus spending package. Agriculture scored some wins and some losses. In the EPA section of the omnibus, language to force a rewrite of EPA s waters of the U.S. (WOTUS) rule failed to make the final package. The full House has approved language requiring the agency to withdraw the rule and start over with greater stakeholder input. The WOTUS language was a major sticking point in the final days of negotiations between Congress and the White House, not just on spending, but also on the tax extenders bill. Supporters of the language thought they d won given federal courts have blocked implementation of the WOTUS rule. Language blocking EPA from instituting $139 million in new program spending the lowest level since 2008 did make the cut. Also in this section is language requiring the President to report to Congress on his climate change spending. There s language in the omnibus prohibiting FDA from enforcing provisions of FSMA involving regulating the distribution and sale of dried, spent grain byproducts left over from distilling. Distillers fear they won t be able to sell or give away distillers byproducts as animal feed without incurring new costs of compliance under the new food safety law. Also included in the final package is language repealing country-of-origin labeling (COOL) for meat and chicken, a law held anti-competitive three separate times by the World Trade Organization (WTO). The House approved a repeal bill earlier this year, but a showdown between Senate Republicans and Democrats over full repeal versus voluntary COOL stymied progress in the chamber. Sen. Pat Roberts (R, KS), chair of the Agriculture Committee, prevailed and saw his full repeal strategy included in the spending bill, avoiding a trade war with Canada and Mexico which were set to slap $1 billion in retaliatory tariffs on a variety of U.S. exports. House Agriculture Committee Chair Mike Conaway (R, TX) praised the language, commended Roberts, and said, By including the language, we are back in compliance with our WTO obligations, avoid more than $1 billion in retaliation and prevent damage to our relationships with two of our top trading partners.

3 The Senate language on COOL repeal doesn t go as far as the House-approved bill, and Roberts pledged further action in the Senate to fully repeal the COOL law. While Canadian ag and trade officials this week were optimistic the action would lead to an end to the trade dispute, Laurence MacAulay, ag minister, said he was cautiously optimistic and said Canada will not relent on retaliation actions until President Obama signs the spending package. An broad industry coalition pushing for federal preemption of state and local laws mandating labeling of foods containing genetically engineered (GE) ingredients failed to get scaled-back language calling for a two-year preemption into the bill. The coalition had sought the protection given Vermont s mandatory labeling law goes into effect in July, 2016, and companies must start to make distribution and labeling decisions in January. Said the coalition, after warning of increased foods due to a patchwork of state labeling laws, While the House worked in bipartisan fashion to pass the Safe & Accurate Food Labeling Act in July with the support of 45 Democrats, action stalled in the U.S. Senate. The Coalition calls on members of Congress to work to find agreement and pass legislation to address this issue immediately when they return in January. The group s biggest adversary, the Environmental Working Group, quickly claimed credit for rejection of the preemption language. Also included is language running counter to the labeling coalition efforts in that it instructs FDA to spend up to $150,000 to develop a labeling guideline for the recently approved GE Atlantic salmon, even though the agency has already said it sees no reason to label the fish, an opinion shared by the Center for Science in the Public Interest (CSPI). The language doesn t mandate labeling, but that the agency develop a guideline before the fish can be commercialized, a development not expected for two years. The language was brought by Sen. Lisa Murkowski (R, AK), whose fishing industry fears product competition, even though Alaskan wild caught Pacific salmon is sold as a premium product and the GE salmon is of the Atlantic variety. The U.S. currently imports 94% of the Atlantic salmon bought by Americans, primarily from Scotland, Norway, Chile and Canada. Both the Department of Health & Human Services (HHS) and USDA were warned they need to issue final dietary guidelines that are based on science and not on sustainability or other non-nutrition issues. The bill withholds any money to release the guidelines if the departments can t show they used a science-based system for finalizing the document. Further, USDA and HHS must contract with the National Academy of Medicine (NAM) to conduct a review study of the process by which the guidelines advisory committee is named, as well as the process the committee goes through in making its recommendations. The American Seed Trade Assn. (ASTA) was successful in getting language blocking a second extension of patent protection for Marshall rye grass, and cotton producers saw a successful resurrection of marketing loan commodity certificates, despite strong opposition by Sen. Charles Grassley (R, IA) who says the certificates are just a way around new payment limitations included in the 2014 Farm Bill. Policy riders which did not make the final cut included an effort to restrict resettlement of Syrian and Iraqi refugees in the U.S., penalties for so-called sanctuary cities which ignore federal immigration law, and deferring to language in a separately approved visa waiver bill on vetting of refugees coming into the U.S. and attempts to change National Labor Relations Board (NLRB) rules on union elections and joint employer status. Monster Tax Extenders Package Clears House

4 The full House voted overwhelmingly to extend for two years a $680-billion package of federal tax breaks that expired at the end of 2014, along with a passel of new breaks tacked on in the extension process.. The good news: The extension means benefits of the tax breaks will be retroactive to January 1, 2015, and extend through The bad news: The cost of the bill is not offset by cuts in other programs. The House approved the tax extenders package on a vote, and now it will wait to be combined with FY2016 omnibus spending bill to be voted on December 18, and a single package will be sent to the Senate for a final vote. A copy of the House Ways & Means Committee section-by-section analysis is found here: SUMMARY-OF-THE-PROPOSED-PATH-ACT.pdf. The House Ways & Means Committee and the Senate Finance Committee had wrangled for weeks over the extenders package, which the Senate approved as a two-year package last summer. Complicating the tax talks was the fact they overlapped and were linked to the overall spending negotiations. Ultimately, both committees announced they had hammered out a $650-billion package. However, the Joint Committee on Taxation reported the package actually costs $680 billion when tax provisions tucked into the omnibus spending package are figured into the overall tax total. The extenders package, while giving a two-year lease on life to about most federal tax breaks, also makes some tax benefits permanent, while extending others through Chief among the newly permanent tax breaks for agriculture is Sec. 179 increased expensing. This section permanently extends the small business expensing limitation for equipment investment and the phase-out amount in effect from at $500,000 and $2 million, respectively. Currently limits are $25,000 and $200,000. Both the expensing limit and the phase-out amount are indexed for inflation beginning in The expensing limitation is also modified for qualified real property by eliminating the $250,000 cap in Extended through 2019 is the so-called 50% bonus depreciation for investments in equipment and property placed into service 2015 through The 50% bonus applies to investment in 2015, 2016 and 2017, and then phases down to 40% in 2018 and 30% in The provision is modified from previous years to include certain trees, vines and plants bearing nuts and fruits to be eligible when planted or grafted, rather than when placed in service. Included in the two-year extensions are several bioenergy related tax breaks, including the $1-per-gallon blenders tax credit for biodiesel and renewable diesel. Biodiesel makers had pushed for inclusion of Senate language shifting the blenders credit now paid to gasoline makers to a domestic producers credit, but that effort failed. Also extended for two years is a small biodiesel producer credit of 10 cents per gallon, and a $1-per-gallon tax credit for diesel fuel refined from biomass, along with an extension of a fuel excise tax credit for biodiesel mixtures. While the American Soybean Assn. (ASA), the National Renderers Assn. (NRA) and the National Biodiesel Board (NBB) praised the extension of the various biodiesel tax breaks, NBB said, Unfortunately the impact will be muted because this proposal would continue allowing foreign biodiesel to qualify for the tax incentive. This not only costs the taxpayer more money, but it paves the way for foreign fuels that already receive incentives in their home countries to undercut U.S. production.

5 Also made permanent are the enhanced child tax credit, the earned income tax credit, the deduction for state and local general sales taxes, the corporate research and development (R&D) tax credit, and a provision allowing for pass-through of interest-related dividends and short-term capital gains from regulated investment companies to foreign investors. EPA WOTUS Actions Violated Federal Rules; Raises Questions on Other Rulemakings While opponents failed to kill the EPA waters of the U.S. (WOTUS) rule in the FY2016 omnibus spending package and federal courts continue to block its implementation, now comes word from the Government Accountability Office (GAO) that EPA violated federal law by taking to social media to urge public support for the rule. The investigative arm of Congress called the agency s actions covert propaganda. The chairs of both the House and Senate committees overseeing EPA said GAO s pronouncement brings into questions other controversial rulemakings at the agency, including the new ozone regulations, and the carbon capture/c02 rules for new and existing power plants, both deemed part of President Obama s Climate Action Plan, Said GAO of EPA s actions on WOTUS: The use of appropriated funds associated with implementing EPA s Thunderclap (social media) campaign and establishing hyperlinks to the NRDC (Natural Resources Defense Council) and Surfrider Foundation webpages violated prohibition against publicity or propaganda and grassroots lobbying contained in the appropriations acts of FYs 2014 and Because EPA obligated and expended appropriated funds in violation of specific prohibitions, we also conclude EPA violated the Antideficiency Act as the agency s appropriations were not available for these prohibited purposes. GAO also said EPA needs to report the violations to the President, Congress and to the Comptroller General and detail the costs of the violations. EPA told the New York Times, which first broke the story, that it provided all stakeholders whether for or against the rulemaking the same link to the general agency webpage and various educational materials. We use social media tools just like all organizations to stay connected and inform people across the country about activities. At no point did the EPA encourage the public to contact Congress or any state legislature. The White House did not comment. Agriculture groups immediately said the GAO report confirms the underlying rulemaking is flawed. The American Farm Bureau Federation (AFBF) said, It s clear from this report that EPA orchestrated this matter in a biased fashion. Now it s up to Congress to clean up this mess. The GAO inquiry was requested by Sen. James Inhofe (R, OK), chair of the Senate Environment & Public Works Committee and a long-standing opponent of the WOTUS rulemaking. GAO s finding confirms what I have long suspected, that EPA will go to extreme lengths and even violate the law to promote its activist environmental agenda, Inhofe said. Courts have already raised questions about the legality of the Waters of the U.S. rule and have temporarily halted it from going into effect. EPA officials act as if the law does not apply to them, but this GAO opinion should serve as another reminder that EPA officials are not above the law. GAO s determination that EPA violated the ban on covert propaganda and grassroots lobbying is especially troubling, Inhofe added. EPA s illegal attempts to manufacture public support for its

6 Waters of the United States rule and sway congressional opinion have undermined the integrity of the rulemaking process and demonstrated how baseless this unprecedented expansion of EPA regulatory authority really is. Rep. Fred Upton (R, MI), chair of the House Energy & Commerce Committee, said in a statement, EPA getting busted for its illegal propaganda and lobbying on the WOTUS rule raises serious red flags, and we want to know if these shenanigans extended to the climate rules. EPA took an aggressive approach to its climate rules and we want to ensure that EPA did not violate the law promoting these rules. The bottom line is EPA betrayed the public trust. IARC Glyphosate Report Wrong, says Monsanto Expert Panel A panel of 16 experts brought together by Monsanto says a determination by the UN s International Agency for Research on Cancer (IARC) determination that glyphosate a major component of Monsanto s Roundup products probably causes cancer in humans is flawed. The experts findings were released in an abstract presented at a recent Society for Risk Analysis meeting. Monsanto hired Intertek Scientific & Regulatory Consultancy Services (ISRCS) to bring together the experts to review the IARC report. The abstract concluded: None of the results from a very large database, using different methodologies, provides evidence of, or a potential mechanism for, human carcinogenesis. Monsanto said further the IARC animal bioassay and genotoxicity evaluations suffered from significant weaknesses. These weaknesses include selectivity in choice of data reviewed; failure to use all relevant biologic information to evaluate relationships in bioassays, and failure to use weight-of-evidence evaluations using all available data and appropriate weighting. Of the 16 experts used by ISRCS, 12 have some relationship to Monsanto, including two employees who published peer-reviewed data on glyphosate. Four had no relationship to the company. House Members Form Cuba Working Group A bipartisan group of 12 House members this week announced they ve formed the Cuba Working Group. The White House also released its timeline of administration actions as one way of commemorating the first anniversary of President Obama s announcement on normalization of U.S.- Cuba relations. The House working group told both Republican and Democrat leadership its goal is to develop a more pragmatic approach to Cuba. The group said Congress needs to be educated about Cuba and the need for a new diplomatic and economic approach to that island nation. The group s members are also supporters of some or all of the legislation introduced this year to repeal economic restrictions, normalize travel and eliminate the economic embargo on trade with Cuba, put in place in the early 1960s after Fidel Castro took control of the government. The U.S. and Cuba have reopened embassies in their respective capital cities. President Obama has said he would like to travel to Cuba during his last year in office to meet with Castro and his brother Raul, but only if the Cuban government will allow him to also meet with Cuba dissidents. USDA Eliminates Payments to Farm Managers Not Actively Engaged

7 USDA finally implemented this week one of the most controversial requirements of the 2014 Farm Bill it published its final rule eliminating farm payments to operation managers who are not actively engaged in farming. The rule is designed to ensure that farm safety net payments are issued only to active managers at farms that operate as joint ventures or general partnerships as called for the Farm Bill. Family farms are exempt from the restriction, but the rule closes a loophole where individuals not actively engaged in farm management were still receiving payments. To ensure that help (payments) goes to those who genuinely need it, such as America s farm families, the Farm Bill authorized USDA to close a loophole and limit payments from those involved on a daily basis in nonfamily farm management, said Agriculture Secretary Tom Vilsack. Congress couldn t agree on how to limit the payments, so punted the issue of defining actively engaged to USDA. The goal was to ensure general partnerships and joint ventures didn t add managers to farming operations to gain greater payments. The rule requires measureable documented hours and key management activities be reported annually. Changes apply to payments for 2016 and subsequent crop years for Agriculture Risk Coverage (ARC), Price Loss Coverage (PLC), Loan Deficiency Payments (LDP) and Marketing Loan Gains (MLG) under the Marketing Assistance Loan program. Full information on the new rule can be found at GE Wheat Field Trials to Need Permits: USDA Come January 1, 2016, developers of genetically engineered (GE) wheat varieties will need permits from USDA before they conduct field trials, the department announced. USDA said the more stringent permit process developers operate under a notification system now is necessary to provide greater protection that GE wheat won t persist in the environment after field trials are concluded and will remain confined during the trials. The permitting comes on the heels of 2013 and 2014 episodes in Oregon and Montana where a regulated GE wheat variety by Monsanto was found growing in a farmer s field. Oregon was not authorized for field trials, and the Montana trial had ended a decade before. The discovery led to Asian markets cutting off wheat imports for a time, and additional risk measures remain in place with some overseas customers. The permits are designed in part to reassure trading partners, the department said. The Animal & Plant Health Inspection Service (APHIS) which oversee biotech plant permitting and approval, said the new permit program will only affect a small number of regulated activities and about a dozen applicants.