Budget & Appropriations

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1 Highlights National Association of Sciences (NAS) Study The long-awaited first step in CSA reform, the FAST Act-mandated NAS study, was publicly released on Wednesday, June 28 th. Ultimately, the report affirms what NSTA has long advocated for- -the need for sweeping changes in the CSA/SMS scoring system. FMCSA plans to implement a corrective action plan in the next four months. Diesel Emissions Reduction Act (DERA) The House and Senate introduced legislation to advance the DERA program, which would provide an additional six-year reauthorization of the program Prior Approval Reform Act (H.R. 2101) Along with Rep. Mark Amodei s (R-NV) free-standing bill to eliminate the prior approval requirements and repeal the provision altogether, the House Appropriations Committee included Rep. Amodei s amendment in the base text for the House s draft Financial Services and General Government (FSGG) appropriations bill for FY 18. The Better Care Reconciliation Act (BCRA) Leader McConnell s initial repeal and replace legislative text has been made public, but not without concern from numerous Republican Senators. The CBO score of the initial released bill is out but CBO is working to score the impacts of the bill s latest modifications. Budget & Appropriations The official FY 18 budget was sent to Congress the week of May 22. Within the Department of Transportation s budget, overall funding faced a 13% decrease from FY 17 levels. The programs that experienced the most drastic cuts were as follows: FTA New Starts limits funding only to those with existing full funding grants agreements, resulting in a proposed funding of $1.2 billion (approximately a 50% cut from FY 17) FAA Essential Air Service experienced a cut of $175 million, containing verbiage about reforming the program to eliminate discretionary component and focus remaining resources on remote communities most in need of help. (FY 17 Omnibus funded EAS at $150 million. The FY 17 CR funded it at $175 million, which is what the proposed budget compares against). Amtrak eliminates $630 million in funding for long distance service in favor of focus on the Northeast Corridor (FY 17 Omnibus funded Amtrak at $1.8 billion) TIGER Grants eliminates $499 for TIGER discretionary grant program in favor of focus on Nationally Significant Freight and Highway Projects grant program from FAST Act, funded at $900 million per year. (FY 2017 Omnibus funded TIGER program at $500 million)

2 The Environmental Protection Agency experienced a 31% decrease in the FY 18 budget. While we anticipated a possible elimination of DERA altogether, DERA still maintained a budget request of $10 million in funding, which represents a ~$50 million decrease from FY 17 levels. The delivery of the budget to Congress starts the process for congressional action on the FY18 funding bills, expected to begin in July. President Trump s Infrastructure Plan The Trump Administration s Fiscal Year (FY) 2018 budget request to Congress contained a six-page fact sheet on the president s infrastructure plan, offering the most detail we have seen thus far on one of the President s top three initiatives. The budget proposal raises significant questions about the administration s commitment to the Federal role in American infrastructure. While the infrastructure plan states the commitment to $200 billion direct Federal investment, pieced out in increments over 10 years, funded from cuts to current federal programs, the plan fails to indicate how the funding would be allocated amongst specific programs. The FY 18 budget also proposes to slash some key infrastructure programs, the most alarming of which is perhaps the treatment of the Highway Trust Fund, which is projected to be in the red beginning in FY 2021 and will no longer be able to support current levels of funding for highway and transit programs without additional new revenue. The reception of the infrastructure plan by congressional Republicans has been muted. While praising the proposal to shift air traffic control to a non-profit, non-governmental private entity, House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA) said: The Committee will continue to review the details, but the president s budget also reflects the reality of long-term infrastructure funding in America. The country s leaders in Congress and the White House need to have a real and honest conversation about how to address this fundamental issue and continuing the clear constitutional federal role in infrastructure. All solutions need to be on the table, because simply continuing with the status quo will not produce the infrastructure improvements our Nation needs. This appears to be an opening salvo that some Hill leaders are prepared to fight the administration on its devolution and divestiture philosophy. On the Democratic side, the reception has been hostile. The plan was called a sham by Congressman Pete DeFazio (D-OR), the Ranking Member of the House Transportation and Infrastructure Committee. There remains many more details to reveal about where the president s thinking is on infrastructure as well as much more dialogue between the Administration and Congress before we will see a plan enacted. NSTA will continue to monitor these developments as they emerge. Action to Halt Implementation of Safety Fitness Determination Rule NSTA s hard-fought efforts over the past 16 months, working with Congress and the Administration to stop the implementation of the Safety Fitness Determination rule, have finally paid off! On March 23 rd, Secretary Chao withdrew the SFD NPRM. The 9-page document indicates that the new Administration has heard NSTA s voice. The February industry coalition letter sent to Secretary Chao was even cited as one of the reasons for withdrawal, in addition to the comments filed on the NPRM. NSTA is thankful for all the leaders in Congress on this effort, particularly Reps. Barletta and Gibbs, who have been stalwart for many years on reforming CSA in the FAST Act.

3 The legislative provision which prevented FMCSA from moving forward before CSA reforms were completed was dropped from the FY 17 Omnibus Appropriations bill because Secretary Chao had already withdrawn the rule. Additionally, on April 4 th, Congressmen Barletta and Gibbs submitted a request to House Appropriations leaders to have the legislative language included in the FY 18 DOT Appropriations bill, as extra insurance against any administration moving ahead with any proposal before CSA reforms are completed. The provision is also included in the BUSREGS-21 bill. Action to Withdraw Insurance Rule On Monday June 5th, the Federal Motor Carrier Safety Administration (FMCSA) withdrew the November 2014 Advanced Notice of Proposed Rulemaking that was seeking information on whether the agency should increase minimum insurance limits for commercial motor vehicle operators. The agency cited the reason for the withdrawal as lack of sufficient data or information to support further rulemaking and insufficient cost or benefit data to perform a systematic cost-benefit analysis. This is a great victory for NSTA, who advocated for over two years against the former administration's effort to quadruple minimum insurance limits for truck and bus operators. Legislation that prevented the rulemaking process from going forward without further comprehensive study was included in the FAST Act, which passed in 2015, but this rulemaking was still pending. NSTA commends Transportation Secretary Chao for withdrawing the proposal, and thanks House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA) and Congressman Scott Perry (R-PA) for leading the legislative efforts on this issue. The withdrawal also fulfills a provision in HR 2120, BUSREGS-21, which statutorily directs recession of this rulemaking. BUSREGS-21 For months, NSTA has been working alongside NSTA champion Congressman Scott Perry (R-PA) on a bill that is aimed at going on the offensive against burdensome regulations that affect the bus, school bus and motorcoach industries. On April 25th, Congressman Perry introduced the Buses United For Safety, Regulatory Reform and Enhanced Growth for the 21st Century (BUSREGS-21). The bill number is HR The legislation is a comprehensive bill designed to bring about essential regulatory reform for the passenger carrier industry which will result in improved safety, expanded investments and job creation. The legislation would: Evaluate whether existing regulations applicable to buses are achieving their projected goals; Modernize and streamline federal motor carrier safety and vehicle safety regulations for the bus industry, including rescission of some unnecessary regulations that do not improve safety; Provide additional due process protections for bus operators cited for federal violations; Speed up the approval process for new bus operators desiring to enter the industry; Ensure that regulations written to apply to both trucks and buses are fully evaluated for their appropriateness to bus operations; Provide stronger accountability for federally-funded public transit agencies to ensure they are meeting existing requirements to encourage the participation of the private sector; and Create an incentive program for public transit agencies that partner with the private sector. NSTA is hopeful that some or all of the provisions in the bill can be included in an infrastructure package Congress is expected to take up later this year. NSTA is currently looking for cosponsor support on the House-side, and a Senate champion to spearhead a similar bill. NSTA has been meeting with key Committee staff throughout May and in June and has begun a dynamic cam-

4 paign and grass roots effort to build support, along with a Dear Colleague letter of support from Rep. Scott Perry (R-PA). A multi-industry letter in support of the bill was also sent to DOT Secretary Chao. Seat Belts on School Buses On April 27 th Congressman Charlie Crist (D-FL) introduced a bill (H.R BUS Act of 2017) that would mandate lap shoulder belts on all new school buses. The effective date is 90 days after enactment. The bill also creates a new DOT safety upgrades grant program to State education agencies and school districts to fund retrofits of school buses with seat belts or make another safety upgrade to a school bus that demonstrably decreases the risk of injury or death to students in the event of an impact or rollover, including an upgrade designed to prevent a rollover. Private sector school bus companies are not listed as being eligible for the grants. The grant program is authorized at $3 billion. The bill has been referred to the Committee on Transportation and Infrastructure, as well as Education and Workforce and Energy and Commerce. NSTA has spoken to Transportation and Infrastructure Committee staff and at this time, they would not support moving the bill forward through the Committee. NSTA has met with the Crist office on the bill and it does not appear at this time that they will push it strenuously. On the Senate side, we expect Senator Duckworth to introduce a seat belt mandate bill soon. Compliance, Safety and Accountability (CSA) Reform The National Academy of Sciences (NAS) held several meetings in 2016 on the Compliance, Safety and Accountability (CSA) program and its Safety Measurement System (SMS) mandated by the FAST Act. NSTA was fully engaged in the NAS process, including Gary Catapano s presentation in August representing the school bus industry. As mandated by the FAST Act, the panel revealed their recommendations to FMCSA and the public on June 28 th. Ultimately, the NAS report affirms what NSTA has long advocated for- -the need for sweeping changes in the CSA/SMS scoring system. Highlights of the report s recommendations include: Tasking DOT with ensuring CSA s Safety Measurement System is more fair and accurate in assessing motor carriers safety risk Recommending FMCSA better collaborate with state partners to collect higher quality data, specifically related to crash reports and to carriers operations FMCSA s execution of SMS was flawed from the ground up, the scoring system had not been sufficiently empirically validated. Charging FMCSA with building a user-friendly version of the Motor Carrier Management Information System, allowing carriers to understand how they re being scored As NSTA continues to digest the finding of the report, NSTA will determine if there are commonalities amongst industry views for communication to the agency and Capitol Hill. Diesel Emissions Reduction Act (DERA) Congress provided $60M for DERA in the fiscal year 2017 Consolidated Appropriations Act, 2017 that passed both Houses of Congress and became law on May 5 th. This represents a 20% increase in funding for the program in a bill that cut funding for EPA overall and a major achievement for NSTA and the coalition working to continue funding for the program. EPA is expected to re-

5 propose the DERA grant solicitation for this year based on the additional funding that was provided in the final appropriations measure. Also, the bill contained an additional $30M for targeted airshed projects in high priority areas with poor air quality (largely Southern California). This additional funding largely goes to DERA-type diesel emission reduction projects which have been shown to be among the most cost effective in addressing certain types of air pollution problems. On May 31, EPA announced changes to the ongoing grant funding solicitation under the Diesel Emission Reduction Act (DERA) to increase the amount of funds available, to expand eligibility for clean alternative fuel conversion projects and to extend the deadline for applications to July 5th. The new amount is based on the fact that Congress provided an extra $10 million in overall DERA funding under the final appropriations bill for fiscal year The expanded eligibility is for projects that will provide up to 40% of the cost of installing certified or otherwise approved dual fuel use conversion kits to convert diesel vehicles to operate also on natural gas or propane fuels. Finally, the announcement extended the deadline to allow applicants additional time to submit applications for the newly approved technologies. During the last week of June, the House and Senate introduced legislation to advance the DERA program. On June 27, the Senate EPW leadership introduced their six-year reauthorization bill of DERA (S. 1447). Mark up of this bill is scheduled for July 12. The House version of the bill was introduced by Reps. Poe (R-TX) and Matsui. Finally, also during the week of June 27, the Senate ENR committee introduced their comprehensive bipartisan energy bill (S. 1460) which includes a six-year reauthorization of DERA. Volkswagen Settlement for Diesel Emission Violations The Volkswagen diesel settlement is moving forward with the appointment of a trustee to administer $3 billion Mitigation Trust Fund (MTF) which will provide funding for diesel emission reductions projects to mitigate for higher emission from vehicles equipped with defeat devices to avoid Clean Air Act standards. On March 15 th the court handling the settlement approved Wilmington Trust to serve as the trustee to administer the Mitigation Fund. The next step is for all states to designate the agencies that will participate in the distribution of settlement funds. Each state s share is based on the number of VW vehicles sold in the states and estimates of the added pollution those vehicles caused. In all, VW has agreed to provide over $23 billion retribution and fines, including billions to buy back the cars sold with such devices, almost $3 billion for the MTF and $2 billion for a Zero Emission Vehicle Investment Commitment (ZEV). The MTF will provide funding for replacement and repowering of older diesel vehicles with newer, lower emitting vehicles and engines. Under the eligibility criteria for the MTF approved by the court, school bus companies under contract to local school districts are treated the same as governmental agencies and are eligible for up to 100% of the cost of a new vehicle or engine for qualifying vehicles. Tax Extenders A large tax package to renew a set of expired tax breaks was signed by the President on December 18, Included in the package is a NSTA priority, extension of bonus depreciation. The package continues 50% bonus depreciation for 2015, 2016 and 2017 and phases it down to 40% in 2018 and 30% in The package extends the alternative fuel vehicle tax credit for 2015 and 2016, also supported by NSTA. The Congress decided not to do an extender package at the end of 2016 because Congress is hoping to pursue comprehensive tax reform later this year.

6 Comprehensive Tax Reform After initially unsuccessful, on May 4 th House Republicans finally achieved a legislative victory in passing the American Health Care Act (AHCA) by a margin of Following this crucial win for House leadership and the administration, Speaker Paul Ryan (R-WI) has already begun zeroing in on his next agenda item: tax reform. During the House recess week of May 8 th, Speaker Ryan held roundtable discussions in Ohio, meeting with manufacturing companies and local business leaders to make the sales pitch on tax reform. Plans are afoot for tax reform hearings to begin in the Ways and Means Committee during the last two weeks of May. One of these hearings is tentatively scheduled to be on the controversial border adjustable tax provision (BAT). The BAT was originally proposed by the House Ways & Means Republican leadership and reportedly attracting the interest of the Trump Administration. The tax would change how imports and exports are taxed and could significantly increase the cost of imported goods or goods made using imported materials. One area that could be heavily affected is fuel which still relies on a significantly high percentage of imported crude oil. The refining industry is arguing that the BAT could increase the cost of fuel by 25-30% and potentially much higher in areas that rely heavily on imported refined products, like the Northeast. Though controversial, the tax could help promote domestic industries at the expense of industries that depend on imports and is a major source of revenue that allows Republicans to lower overall corporate tax rates. The House is planning to work from the blueprint released last year and Senate will develop its own bill. The NSTA comprehensive tax reform Task Force has identified three major messaging points for NSTA s members as this major issue is considered in Congress: 1) Support comprehensive tax reform to address both individual and corporate tax rates and policies 2) Support fairness in tax treatment of pass through s such as LLC s, Partnerships and S corporations 3) Support continuance of the current exemption from the federal diesel fuel tax for school bus transportation Eliminating Prior Approval Requirement to Solicit for PAC Contributions Several business industry trade associations, including NSTA, came together last year to form the Prior Approval Reform Coalition (PARC), which has recently added two more members (NSSF and HARDI), to seek legislation to undo the prior approval requirement to obtain permission from member companies before soliciting eligible company employees for PAC contributions. The Act requires that trade association PACs obtain separate and specific approval in writing from member corporations before soliciting their executive or administrative staff. Furthermore, the requirement states that a corporate member may approve solicitations by only one trade association per year. The requirement discriminates against these associations by making their PACs the only political committees that must first obtain exclusive permission from member companies before soliciting eligible company employees for support. A policy rider to prohibit FEC from enforcing the prior approval requirement was included in the House FY 17 Financial Services and General Government Appropriations bill. That rider, however, was dropped over objections from Democrats.

7 However, during the last week of June, the House Appropriations Committee released a draft bill for the FY 18 Financial Services and General Government (FSGG) appropriations bill that included Rep. Mark Amodei s (R-NV) amendment. Rep. Amodei s free-standing bill to address this issue has also gained additional traction: Prior Approval Reform Act (H.R. 2101) o On April 17 th Rep. Mark Amodei (R-NV) introduced a free-standing bill, the Prior Approval Reform Act (H.R. 2101), to eliminate the prior approval requirements and repeal the provision altogether. He is also seeking a provision in the FY 18 Financial Services Appropriations bill. H.R recent added two more cosponsors, Reps. Steve Womack (R-AR) and Rep. Glenn Grothman (R-WI). NSTA has signed on to a multi-industry letter currently circulating to support Congressman Amodei s bill. Surface Transportation and Maritime Security Bill In March, the bipartisan leadership of the Senate Commerce, Science and Transportation Committee re-introduced a bill originally introduced last fall, S, 732 the Surface Transportation and Maritime Security Act. The bill contains a variety of provisions aimed at providing more focus and resources to be directed towards highway, transit, over the road bus, rail, maritime and port security rather than aviation. The bill creates a new TSA Advisory Committee for Surface Transportation and Maritime Security with membership by all surface and maritime sectors. NSTA advocated last fall with both sides of the Committee to ensure the school bus industry is represented on the Advisory Committee. In the April 5th Senate Commerce Committee markup of this bill, the Managers amendment added "school bus industry" to list of stakeholders to be represented on the proposed TSA Surface Transportation and Maritime Security Advisory Committee. Fixing Obamacare: Definition of Full Time Employee and Other Attempts On May 4 th, the AHCA passed the House by a narrow margin of and is now being reviewed in the United States Senate. The legislative text of the Better Care Reconciliation Act (BCRA), the Senate s draft of the repeal and replace legislation, was officially made public on June 22. Instantly, concerns were raised by several Senate Republicans such as Senators Heller (R-NV) and Collins (R-ME) over the impact of the Medicaid provisions will have on their states. Other Republican Senators have proceeded to defect, making BCRA s passage in the Senate less certain. While designed to be merely be a first draft, McConnell s BCRA has since been tweaked in order to build broader support from Senate conservatives like Ted Cruz (R-TX) and Mike Lee (R-UT), including recent language that would create parallel health insurance markets in states. The Congressional Budget Office (CBO) is still in the process of assessing the impact of the legislation s latest modifications. LABOR: Overtime Regulations The Department of Labor s Office of Wage and Hour finalized a rulemaking on overtime regulations on May 18, Highlights of the rulemaking include: Increases the salary threshold indicating eligibility from $455 per week to $913 per week, which equates to $47,476 per year.

8 Automatically updates the salary threshold every three years, based on wage growth over time. Effective on December 1, 2016 (court has suspended this date see below) The drama over the overtime rule continues. A federal court in the Eastern Division of Texas granted a nationwide injunction late Tuesday, November 22 temporarily blocking the enforcement of the FSLA overtime rule, which was set to go into effect on December 1, In short, employers are no longer required to meet the changes with respect to employee status, salary or overtime pay that were slated to go in effect on December 1. The preliminary injunction is not permanent. The existing overtime rule, last updated in 2004, will be preserved until the court reviews the merits of the case. Until there is further action by the court employers may continue to rely on the current $455 per week salary threshold for exempt status. The former Obama Administration already filed an appeal on the ruling. At this moment, the endgame on this regulation is unclear. The court may lift the injunction or make the current injunction permanent. Rectifying this costly regulation is a top priority of President Trump. Though, because the regulation has been issued as final from the Department of Labor, the Executive Branch is limited in preventing its implementation short of restarting the rulemaking process with issuance Notice of Proposed Rulemaking. Legislation under the Congressional Review Act is also pending to permanently stop this rule. NSTA will continue to participate in the coalition and its activities against this rule. OSHA: Recordkeeping Regulation Last year, The Occupational Safety and Health Administration (OSHA), an agency of the U.S. Department of Labor, finalized a sweeping new rule on recordkeeping standards. The regulation required employers, effective January 18, 2017, to submit workplace illness and injury records to OSHA electronically for posting on its web site. The House Education and Workforce Committee may introduce legislation to reverse this rule. OSHA: Volks Decision At the end of March, Congress passed a Congressional Resolution Act (CRA) Joint Resolution to invalidate the OSHA Final Rule on statute of limitations for injury recordkeeping (known as the Volks rule) and President Trump signed the legislation into law. NSTA joined many other associations and interests to undo this regulation. LABOR: NLRB s Quickie Elections The National Labor Relations Board s Final Rule on Quickie Elections went into effect on April 14, The ruling, which was finalized in December 2014 by the Board, in effect shortens the time for labor organizers to hold elections from 25 days to 13 days; thus leaves employers less time prepare themselves. Last year, the Coalition for a Democratic Workplace, of which NSTA is a member, held a webinar explaining what the new rule means and also the prospects of it becoming overturned through court proceedings. Two court cases (DC and TX) challenging the NLRB s final ruling on the quickie election on the grounds that it conflicts with previous statute, is arbitrary and capricious, and also limits free speech are pending. The DC and Texas cases have been decided and the challenge failed. However, actions have already been made by business groups to appeal the decision. Many observers

9 expect the litigation of this rule may take years of appeals or a decision from the Supreme Court to solve it. Currently, language prohibiting the implementation and enforcement of this rule is pending in the House s FY2017 Labor Health and Human Services Appropriations Bill. However, Congress has passed a continuing resolution running through April 28, 2017 that did not include the favorable language. Legislative action formally stopping quickie/ambush elections is delayed until springtime when the Congress funds the remainder of the government s fiscal year. NSTA will continue to monitor these cases and any further legislation on this issue and encourages members to seek their own labor counsel for their companies. PAC Report The balance of the NSTA PAC as of July 5, 2017 is $. NSTA supported an event for Congressman Lou Barletta (R-PA) on June 7 th contributing $1,000 to Lou Barletta for Congress and $1000 for Senator Orrin Hatch on June 27th. The PAC needs to be built up significantly in order for NSTA to participate meaningfully in the 2018 election cycle.