The California Institute

CONTENTS OF THIS ISSUE:
Rep. Fazio Addresses Institute’s Advisory Board
Team California Meets in Sacramento
Herger And Matsui Circulating Dear Colleague on R&D Tax Credit
Salton Sea Restoration Bill Introduced
Dear Colleague Letter Seeks Fusion Funding
Clinton Visits Bay Area;  31 Counties Declared Federal Disaster Areas
Child Support Collection Bill Advances to House Floor
ISTEA II Moves to Senate Floor; Caltrans Conducts Briefing
Senate Holds Hearing on Uniform Standards for Securities Litigation
Senate Judiciary Hears Testimony on High Tech Worker Shortage
President Supports Internet Tax Moratorium; NGA Votes Against It over Wilson Dissent
Department of Commerce Issues MTOPS Rules
Alameda Corridor Moving Forward says ACTA Briefing
UC Budget Briefing
Gingrich and House of Representatives File Legal Challenge to Sampling
Congress Completes Override of Clinton Mil-Con Line-Item Vetoes
Collaborative’s Report Shows a Strong Silicon Valley

Team California Meets in Sacramento
 Team California is a bipartisan group of federal and state elected officials formed to follow up on last April’s successful “California Day,” in which Governor Wilson and 47 members of the California Legislature converged on Washington, D.C. and met with the California congressional delegation and others to discuss federal policy issues of mutual concern.
 Team California members met in Sacramento on Thursday, February 19, to discuss a range of topics including ISTEA reauthorization, Bay-Delta funding, allocation of federal dollars by formula, costs associated with illegal immigration, higher education issues, and the response to recent flooding and other winter weather damage.  The Team previously met in Sacramento during September when they discussed many of the same issues, including the transportation of spent nuclear fuel rods through California.  Presentations at the February meeting were made by various representatives of the State government, as well as representatives of the California State Association of Counties (CSAC), the University of California, and the California Institute.
 Attending the February working strategy session were Reps. Gary Condit (Ceres), Buck McKeon (Santa Clarita), and Lucille Roybal-Allard (Los Angeles).  The state legislature was represented by State Senators Jim Costa (Fresno) and Richard Monteith (Modesto) and by Assemblymembers Jim Battin (La Quinta), Dennis Cardoza (Merced), Helen Thomson (Davis), and Carl Washington (Los Angeles).  Staff to most other Team California members was also present.
 Based on discussions last week in Sacramento, there will be further action by both Congressional and State Legislative members of Team California on each of the issues discussed. The next Team California meeting may take place in early March, when the state legislature makes its annual trip to Washington.
 Team California members include Governor Pete Wilson, U.S. Senators Dianne Feinstein and Barbara Boxer, U.S. Reps. Jerry Lewis, Lucille Roybal-Allard, Buck McKeon, Frank Riggs, Gary Condit, Jane Harman, Senate President Pro-Tem John Burton and Minority Leader Rob Hurtt, State Senators Jim Costa, Barbara Lee, Maurice Johannessen and Dick Monteith, Assembly Speaker Antonio Villaraigosa, Assembly Minority Leader Bill Leonard, and Assemblymembers Helen Thomson, Carl Washington, Jim Battin and Lynne Leach.
 Please visit the Institute’s web site at Herger And Matsui Circulating Dear Colleague on R&D Tax Credit
 Reps. Wally Herger (Marysville) and Bob Matsui (Sacramento) are circulating a Dear Colleague to the California congressional delegation urging members to sign a letter to Ways and Means Committee Chair Bill Archer (TX) and Ranking Member Charles Rangel (NY) supporting the Research and Experimentation Tax Credit (known as the R&D tax credit).
 The letter points out that the credit is set to expire on June 30 this year, if legislation is not passed.  The credit is particularly important to California’s high technology and biotechnology communities to help support long-term, high-risk research necessary to keep these industries competitive globally.  Last year a broad, bipartisan group of 39 California members signed a similar letter to Chairman Archer.
 Members wishing to sign on should contact Dave Olander in Rep. Herger’s office at x53076, or Francis Grab in Rep. Matsui’s office at x57163.

Salton Sea Restoration Bill Introduced
 At a press conference Wednesday attended by Speaker Newt Gingrich, the Salton Sea Task Force announced the introduction of the “Sonny Bono Memorial Salton Sea Restoration Act,” H.R. 3267.  Reps. Duncan Hunter (Alpine), Jerry Lewis (Redlands), George Brown (San Bernardino), and Ken Calvert (Corona) are the Task Force members and the prime sponsors of the legislation.  Reps. Hunter and Lewis serve as co-chairs.
 The Salton Sea, California’s largest inland body of water located 100 miles east of San Diego, has salinity levels 25% higher than the Pacific Ocean, and is at risk of dying if restoration efforts are not undertaken.  The Sea is the major Pacific migratory bird flyway stopover annually for more than one million migratory birds and also supports California’s agricultural industry as a destination for runoff.  Over the last two years, millions of fish and over 200,000 birds have been killed because of the Sea’s excessive salinity, including 10% of California’s Brown Pelican, an endangered species.
 The bill would authorize a total of $327.5 million.  Initially, $22.5 million would be allocated to feasibility studies, and $5 million to biological and toxicological studies.  The bulk of the authorization, $300 million, would be used to select and implement a plan to reduce the excessive salinity, high water levels, and wildlife die-offs threatening the Salton Sea.
 Members wishing to cosponsor H.R. 3267 should contact Matt Simmons of Rep. Hunter’s staff (x55672) or Jeff Shockey of Rep. Lewis’s staff (x55861).

Dear Colleague Letter Seeks Fusion Funding
 A bipartisan cross-section of Members of Congress is circulating a Dear Colleague letter to Energy and Water Development Appropriations Chairman Joseph McDade (PA).  The letter asks for a funding level of $250 million for the Fusion Energy Sciences program in FY99, a level that is aimed at partially compensating for the funding shortfalls in the program and also on the recommendations of two independent scientific review panels.
 Among the letter’s principal authors are several Californians, including Reps. Ken Calvert (Corona), Duke Cunningham (San Diego), Bob Filner (San Diego), and Ellen Tauscher (Pleasanton).  California is among the nation’s primary fusion research centers and would likely win a substantial share of any additional funds.  A similar letter sent last year garnered the signatures of half of California’s congressional delegation, as well as those from many other states’.
 Over the past three years, the fusion energy program has received three high level reviews: two from the President’s Council of Advisors on Science and Technology (PCAST), and one from the Department of Energy’s Fusion Energy Sciences Advisory Committee (FESAC).  Each review strongly highlighted the value and promise of the U.S. fusion program and each recommended that no less than $250 million be spent annually on the U.S. program.  A 1995 PCAST report urged no less than $320 million be spent per year.
 Staff for Members wishing to sign onto the letters should contact either Tom Jones with Rep. Roscoe Bartlett (x5-2721) or John St. Croix with Rep. Tim Roemer (x5-3915).

Clinton Visits Bay Area;  31 Counties Declared Federal Disaster Areas
 President Clinton visited the San Francisco Bay Area on Thursday to survey damage caused in recent weeks by record rainfalls, flooding, mudslides and general havoc statewide.  Last week, Vice President Gore toured the Northern California town of Rio Nido with FEMA director James Lee Witt.  According to press reports, federal disaster officials will spend at least $250 million to help California recover from the winter storm damage.  On Wednesday, Vice President Gore promised a $20 million grant in emergency relief funds to rebuild roadways in the Los Angeles area.  Today, President Clinton was scheduled to tour a FEMA pilot program in Oakland designed to help prepare for natural disasters.  During the last week, the counties of Amador, Fresno, Los Angeles, Orange, Sacramento, Solano, Stanislaus, and Trinity were added to the list of counties already covered by the presidential declaration, bringing the total so far to 31 counties.
 According to the Governor’s Office of Emergency Services (OES), preliminary damage estimates are over $475 million dollars, with the loss of 16 lives and an estimated 667 state residents in shelters.  For more information on disaster assistance efforts by state agencies, up-to-date California weather forecasts, and current disaster figures, please visit OES’s web site at Child Support Collection Bill Advances to House Floor
 A bill, H.R. 3130, that creates incentives for states to improve their systems of child support collection was approved by voice vote by the House Ways and Means Committee on Wednesday, sending it to the floor.  Of great interest to California and 15 other states, which did not meet a federal deadline to establish a statewide automated child support collection system, are provisions that would reduce the current law’s penalties for these non-complying states.
 Before reporting the bill, “The Child Support Performance and Incentive Act of 1998,” the Committee approved by voice vote a Shaw/Levin substitute amendment that made several changes.  Proposed by Subcommittee Chair Clay Shaw (FL) and Ranking Member Sander Levin (MI), in addition to technical corrections, the substitute amendment clarified that a state which submits a corrective compliance plan  to the Secretary of Health and Human Services must specify how, when, and at what cost it will meet the federal requirements in order for that state to qualify for the proposed lower penalties.  The substitute amendment also conformed the law requiring state collection of social security numbers on applications for state licenses for child support tracking purposes from January 1, 1998 to October 1, 2000, the date set in the Balanced Budget Act for collecting social security numbers for the purposes of checking the identity of immigrants.
 At the hearing, Committee Member Robert Matsui (Sacramento) said that he hopes California can meet the new targets, but is very concerned that the state get a suitable operating system soon, or it will deserve the scaled-down penalties H.R.3130 contains.  California has the lowest compliance rate in the nation, only collecting about one in every seven dollars sought in child support.  The House floor is expected to take up H.R. 3130 sometime next week.

ISTEA II Moves to Senate Floor; Caltrans Conducts Briefing
 The Senate Leadership brought ISTEA II (S. 1173), to reauthorize the nation’s highway and transit laws, to the Senate floor on Thursday afternoon.  The Senate, however, still has not come to an agreement on the level of transportation funding to be provided under the bill and continuing debate is also expected to focus on amendments to the non-financing portions of the $180 billion bill.  The Senate will be in session on Friday to continue consideration of ISTEA II, and will possibly vote on amendments then.
 In the hopes of reaching a compromise before floor debate began, Senate leadership and Senators favoring increases in transportation funding met Wednesday and Thursday morning to work on a deal.  Senate Budget Committee Chairman Pete Domenici (NM) has proposed increasing the highways budget by $18 billion over the next five years, but Senate Majority Leader Trent Lott said disagreement continues over where the increased funds should come from and how to offset, if necessary, the increased spending.  Transit advocates are also concerned that funding increases will go only to highway programs, leaving transit programs without a similar boast.  Congress’ six-month extension will expire on May 1.
 Caltrans, California’s Department of Transportation, was also on Capitol Hill this week and, on Thursday, briefed congressional delegation staff on its priorities in the ISTEA reauthorization.  Caltrans has identified California’s principal challenges as: preserving ISTEA’s program structure; increasing budget resources for transportation; increasing the state’s share of highway formula funds; not applying minimum allocation to transit; and supporting streamlining of NEPA to coordinate better with state air quality standards. Because a Californian may not sit on the ISTEA reauthorization conference committee, Caltrans believes the state should ensure that whatever legislative proposals go into conference are as favorable to the state as possible in order to protect California’s transportation interests.  Under the 1991 federal transportation law, California received 9.33% of the formula funds, but under the House bill it stands to receive only 9.18% of the formula funds, and under the Senate bill only 9.14%.

Senate Holds Hearing on Uniform Standards for Securities Litigation
 The Senate Banking Committee’s Securities Subcommittee held a hearing on Monday on S. 1260, the Securities Litigation Uniform Standards Act of 1997.  The bill would establish federal uniform standards for securities litigation suits and preempt cases from being brought against nationally traded securities in state courts.
 The Subcommittee heard from a number of witnesses, including:  Michael H. Morris, Vice President, General Counsel, and Secretary of Sun Microsystems, Mountain View, CA; and Boris Feldman of Wilson, Sonsini, Goodrich & Rosati in Palo Alto, CA.
 Mr. Morris pointed out that S. 1260 is needed to resolve the unintended consequences brought about with Congress’ passage of the 1995 Private Securities Litigation Reform Act, which reformed securities litigation law to prevent frivolous “strike suits” from being filed in federal court.  To circumvent that law, however, the plaintiff’s securities bar began filing suit in state courts in 1996 and, according to Mr. Morris, the threat of these state court suits has forced Sun and other companies to act as though the federal 1995 law had never been passed.
 Mr. Feldman testimony reiterated the chilling effect that state suits have had on the Reform Act, and also pointed out another problem.  Pointing to last year’s testimony by Arthur Levitt, Chairman of the Securities and Exchange Committee, and Profess Joseph Grundfest of Stanford University, Mr. Feldman testified that the plaintiff’s bar is filing parallel lawsuits in both federal and state court.  This tactic not only allows frivolous plaintiffs to attempt greater discovery than is available under federal law, but also threatens to subvert the Reform Act’s protections against the filing of frivolous litigation in the first place by requiring heightened pleading standards and an automatic stay of discovery.
 Both the House and Senate held hearings on the legislation last year.  (See Bulletin, Vol. 4, Nos. 36 (10/23/1997) &  37 (10/30/97)) .  The testimony of all witnesses at Monday’s hearing will be available on the Senate Banking Committee’s website: Senate Judiciary Hears Testimony on High Tech Worker Shortage
 The Senate Judiciary Committee held a hearing on Wednesday concerning the need to increase the level of skilled foreign workers given visas to work in the United States, especially in the high technology industry.  These “H-1B workers” are increasingly used by high technology and biotechnology companies to fill employment vacancies in cutting edge jobs.  Currently, the U.S. caps H-1B visas at 65,000 annually.  In 1997, for the first time, the U.S. reached the maximum at the end of August, preventing companies from bringing any new foreign workers in until at least the start of the fiscal year in October.  This year it is expected the 65,000 limit may be reached as early as May or June.
 The Committee heard testimony from two panels of ten witnesses, including:  Kenneth Alvares, V. P. for Human Resources, Sun Microsystems, Inc.; and, Stephen H. Leven, Sr. Vice President, Semiconductor Group, and Director, Worldwide Human Resources, Texas Instruments, on behalf of the American Electronics Association.
 Mr. Alvares testified regarding several specific job positions that have remained vacant for three months to a year within the corporation, and Sun’s efforts to recruit American workers.  Although Sun devotes over $50 million annually to training and education of employees, Mr. Alvares stated that its employment needs far outweigh the number of skilled  candidates available.  He testified that Sun thinks of the H1-B program as the bridge to sustain its growth while Sun, and other high technology companies, engage in outreach, education, and training programs to ensure enough skilled U.S. workers to fill the jobs in the future.
 Mr. Leven’s testimony closely paralleled Mr. Alvares’, pointing out that Texas Instruments invests about $100 million annually in education and training programs, but typically still has more than 500 job vacancies for skilled workers at any one time.  He also pointed out that a 1996 Forbes Magazine survey found that the top 10 semiconductor companies had more than 12,000 open positions, and a 1997 Information Technology Association of America study estimated that about 10% of U.S. technical jobs are vacant.  These statistics, Mr. Leven testified, have to be weighed against a recent U.S. Department of Commerce projection that one million new computer scientists, engineers, systems analysts and programmers will be needed between 1994 and 2005.
 To address this growing problem, both witnesses called for legislation increasing or eliminating the cap on H-1B visas.  Both Sen. Spencer Abraham (MI), chair of the Subcommittee, and Sen. Dianne Feinstein stated at the hearing that they would be drafting legislation to deal with this issue.  Sen. Feinstein indicated she would want to target any increase in the cap to industries that are experiencing a shortage of skilled workers to ensure that other fields without shortages could not circumvent hiring American workers.
 The Judiciary Committee will post the testimony of all witnesses at President Announces Support for Internet Tax Moratorium; National Governors’ Association Votes Against It over Wilson Dissent
 President Clinton today announced that the Administration will support legislation for a five-year moratorium on all sales taxes imposed on Internet sold merchandise.  The bill, H.R. 1054, was introduced in the House by Rep. Chris Cox (Newport Beach), and was reported out of the House Judiciary Subcommittee on Commercial and Administrative Law last year.  The bill would place a moratorium on taxing commercial transactions over the Internet and establish a commission to study the issue.  (See Bulletin, Vol.4, Nos. 34 (10/9/1997) & 37 (10/30/97)).  In announcing his decision to support the moratorium, President Clinton noted that it does not prevent state and local governments from applying existing taxes to Internet transactions, as long as it does not discriminate between an Internet sale and a non-Internet sale.
 Additionally, Governor Pete Wilson, joined by Virginia Governor James Gilmore, voted against a resolution passed Tuesday at the winter meeting of the National Governors’ Association that calls for uniform taxes on all goods sold over the Internet, but prohibits taxes on Internet access.  The NGA, as well as many local governments, fear that an Internet tax moratorium will restrict the their ability to impose sales taxes.  For further information regarding the subject, see  In a related development, the United States formally proposed that all World Trade Organization countries enter into an agreement to keep all goods and services transactions on the Internet duty free.  Currently, no country treats Internet commerce as imports for custom duties purposes, and the U.S. proposal would codify that practice.

Department of Commerce Issues MTOPS Rules
 Implementing legislation passed last year, the Department of Commerce issued new rules effective February 3 on the export and re-export of high-speed computers.  Under the new rules, notification to DOC’s Bureau of Export Administration (BXA) will be required for exports and re-exports to “Computer Tier 3 countries” of computers with computing speeds of between 2,000 and 7,000 million theoretical operations per second (MTOPS).  BXA will then pass the notification along to the Departments of Defense, State, and Energy, and the Arms Control and Disarmament Agency, which will have ten days to object to the export proceeding without a license.  If no objection is made within that time, the manufacturer may proceed with the sale and export without going through an individual licensing procedure.
 There are about 50 countries designated as Computer Tier 3 countries, including the People’s Republic of China, Russia, Saudi Arabia, and many Middle East and former Soviet Union countries.
 The legislation also requires DOC to conduct post-shipment verification of exports of over 2,000 MTOPS computers.  To implement this, BXA is requiring exporters to provide detailed end-user information to the Bureau within 30 days of shipment.

Alameda Corridor Moving Forward says ACTA Briefing
 ACTA, the Alameda Corridor Transportation Authority, briefed California congressional delegation staff on the progress of the Alameda Corridor on Tuesday.  The Alameda Corridor will be a 20-mile, fully grade-separated rail link between the ports of Los Angeles and Long Beach and transcontinental rail yards near downtown Los Angeles.  ACTA is a state Joint Powers Authority created in 1989 to oversee the Alameda Corridor projects.  Representatives from the Ports of Long Beach and Los Angeles, the City of Los Angeles, Los Angeles County, and the Metropolitan Transportation Authority (MTA) serve on ACTA’s governing board.  Chairman of the ACTA governing board, Long Beach City Councilman Jeffrey Kellogg, told the delegation the projects are moving forward, on schedule and within budget, toward completion in late 2001.
 Last year, Congress and the Department of Transportation provided ACTA with $400 million in secured loans.  The Corridor is funded by state (3%), local (58%), MTA (17%) and federal funding (22%).   Cargo coming into the Los Angeles and Long Beach ports and through the Alameda Corridor is expected to  double from 5.2 million in 2000 to 10.4 million by 2020; revenues generated from rail use fees and port payments, after the project is completed, will be used by ACTA to repay the federal loans.  The Los Angeles and Long Beach ports are the largest in the nation and third largest in the world.
   For more information on the Alameda Corridor, please call ACTA at (888) 884-ACTA.

UC Budget Briefing
 University of California (UC) Washington office staff and campus representatives gave an overview of the President’s FY99 budget proposal in the Capitol on Monday.  Bruce Darling, Vice President of External Affairs, stated that approximately one-third of UC’s budget comes from federal funding. Overall, the UC receives about 10% of all dollars awarded to colleges and universities for research, and federal student aid programs provide 60% of all financial aid UC students receive.
 Federal funding supports four main functions of the University:  basic research, higher education, health and agriculture.  Several representatives from UC’s Washington office gave brief summaries of the President’s FY99 budget proposals for basic research (NSF, DoD, NIH, NASA, NEH, and DHHS), agriculture, higher education & student aid, and health.  The University of California provided briefing packets containing specific information about the impacts on the university and its budget findings.  For more information, please contact the University of California’s Office of Federal Governmental Relations at (202) 588-0002.

Gingrich and House of Representatives File Legal Challenge to Sampling
 Last Friday, the House of Representatives and Speaker Newt Gingrich filed suit in U.S. District Court for D.C. seeking to prevent the Census Bureau from using statistical sampling methods to conduct the 2000 census.  The lawsuit also asks the court to rule that the Bureau’s plans to use sampling are unconstitutional and unlawful under Title 13 of the U.S. Code.  The legal challenge was authorized under the agreement reached last November between the majority leadership in Congress and the Administration, which was included in the Census Bureau’s funding bill for fiscal year 1998.
 The complaint alleges that in the past the Census Bureau has “always established a program designed to count the entire population,” and that because the Bureau does not plan to conduct an actual count, there will be no way to confirm the accuracy of the sampling-derived results or to compare them to a direct headcount.  The plaintiffs allege that the Census Bureau designed this approach to prevent legal challenges or court review.  The suit alleges that the House of Representatives will be harmed because the public will not have confidence in sampling-derived census figures and because census counts could be politically manipulated.  The Los Angeles law firm of Latham & Watkins will represent the House.

Congress Completes Override of Clinton Mil-Con Line-Item Vetoes
 Finally completing a drawn out procedural process, the Senate on Wednesday voted 78 to 20 to override President Clinton’s line-item veto of 38 military construction projects.  The House of Representatives last week voted 347 to 69 to override the vetoes, with Rep. Ron Packard (Oceanside), who chairs the House Appropriations Subcommittee on Military Construction, leading the effort.  Both the House and Senate votes were well in excess of the two-thirds majority required.  Clinton had struck 38 projects worth $287 million from the military construction appropriations bill (see Bulletin, Vol. 4, No. 36, 10/23/97), including $28 million from California.  The process represents the first override of a Presidential line-item veto.  The Supreme Court is expected to rule by July on the constitutionality of the line-item veto.  On February 12, a U.S. District Judge ruled the power unconstitutional.

Collaborative’s Report Shows a Strong Silicon Valley
 A report released last month by Joint Venture: Silicon Valley Network showed the region’s economy and quality of living to be in good standing, though the community faces tough challenges over the next decade.  Joint Venture, a non-profit regional collaborative incorporating members from the business, government and academic communities in the area, tracked 36 indicators measuring Silicon Valley’s economy and quality of life.  Its findings were released in the organization’s fourth annual 1998 Index of Silicon Valley.  Among key findings in the report were the addition of 50,000 new jobs to the area, continuing on the growth of 150,000 new positions since 1992.  Also found was a rise in the area’s venture capital, up 54% to $2.7 billion, and a reduction in commercial vacancy rates, down to a decade-low 4.4%.  Of distinguishable importance, Silicon Valley exports became the highest in the nation and average annual wages in six out of seven of the area’s “cluster” industries surpassed $60,000.  The software industry lead this group, with an average annual wage of $85,300.
 In addition to a strong economy, the Index also reported slight quality of life improvements in the Silicon Valley.  In the area of education, Santa Clara and San Mateo County students scored an average of 5% higher than the state average and 4.4% higher than the national average on the Scholastic Aptitude Test (SAT).  On the environmental front, air quality in the region continued to improve, with zero “bad-air” days being reported as compared to the federal standard.  The number of children receiving immunizations also increased.
 Although the Index found both Silicon Valley’s economy and quality of life to be on solid ground, the study did discover that the community faces some tough challenges in the coming years related to shortages in the labor supply, increased demands for affordable housing and the need for new transportation solutions.  This fall, Joint Venture convened a Vision Leadership Team to address some of these issues and develop goals for improving the community over the coming decade.
 For more information on Joint Venture’s Index, visit their website at:  Click here to return to the California Institute home page.