CONTENTS OF THIS ISSUE:
Y2K Liability Compromise Passes House & Senate; President to Sign
Cunningham, Woolsey Circulating Title I Letter; Feinstein, Boxer Send Senate Letter
49 Californians Sign R&D Tax Credit Letter
California Delegation Urges No-Cost Transfer of Surplus Bases
Delegation Chairs Lewis and Farr Testify on No-Cost EDCs at Hearing
Former Rep. Vic Fazio Appointed to Institute Board of Directors
Ways and Means Supports NTR Extension for China
Opposition to Transit Cap Continues To Grow
CALFed Releases Draft Programmatic EIR/EIS on Bay-Delta
House Armed Services Takes Up Encryption Bill
Cox Addresses Golden State Roundtable Luncheon
Horn, Brown Circulating Manufacturing Extension Program Letter
First Steps in ESEA Reauthorization Taken
Agreement Reached on Battle Creek Salmon and Steelhead
Senate Committee Marks Up Endangered Species Act
New Study On Economic Effects Of Internet
House Subcommittee Holds Hearing On NITRDA of 1999
Hearing Held on Section 8 Housing
Senate Considers Electricity Deregulation

After a flurry of last minute negotiations, the White House and Congress reached an agreement on limiting liability for companies caught up in the possible Year 2000 computer glitch. The compromise contained in the conference report on H.R. 775 was approved by the House Thursday, July 1, by a vote of 404-24, and by the Senate, 81-18, later in the day. It narrows the scope of the liability limits in the bill but is still strongly supported by the information technology industry.

Under the agreement, the 90-day cooling off period before suit can be filed is retained, and caps on punitive damages continue to be limited to small businesses. See, Bulletin, Vol. 6, Nos. 14 (4/29/99), 15 (5/6/99), 16 (5/13/99), 17 (5/20/99), 19 (6/10/99) & 20 (6/17/99). The degree of proportional liability was changed, however, and defendants may have to pay more than their share of the damages, if another defendant is insolvent or cannot be found. Also, willful failure to fix a Y2K problem subjects a defendant to treble damages. The compromise will allow most class action suits to continue to be filed in state court, only suits involving over 100 plaintiffs or $10 million in damages must be filed in federal court.
 

Cunningham, Woolsey Circulating Title I Letter; Feinstein, Boxer Send Senate Letter

Unfairness in the allocation of federal education funding is the topic of a bipartisan letter being circulated for signature of California delegation members by Reps. Randy “Duke” Cunningham (San Diego) and Lynn Woolsey (Petaluma).

It is also the topic of letters spearheaded by Senator Dianne Feinstein and Connie Mack (FL) and which includes Senator Barbara Boxer among the 23 signers. The Senate letters, to the Chair and Ranking Member of the Labor-HHS-Education panel, state that “using the most recent child poverty data available for calculating funding under Title I is fair and consistent with the underlying purpose of the program, to help every eligible disadvantage child. A hold harmless provision violates this principle.”

The House letter now being circulated will be sent to House and Senate Labor-HHS-Education Appropriators urging them to “resist efforts to include a ‘hold harmless’ provision for the Elementary and Secondary Education Act (ESEA) Title I funding” in the FY2000 spending measure. It notes that “although close to 15 percent of the nation’s poor children live in California, our state receives only 11 percent of the funds distributed under Title I.” The letter concludes, “Do not jeopardize the passage of [the bill] by including a ‘hold harmless’ provision in Title I of ESEA.”

Offices of Members wishing to sign the House letter should contact Frank Purcell with Rep. Cunningham at x5-7612 (email [email protected]), or Lynda Theil with Rep. Woolsey at x5-5161, email ([email protected]) to sign on.
 

49 Californians Sign R&D Tax Credit Letter

The letter supporting a permanent extension of the Research and Development (also known as Research and Experimentation) Tax Credit garnered the signatures of 49 members of the California Congressional Delegation. The letter was sent June 28 to Chairman Bill Archer (TX) and Ranking Member Charles Rangel (NY) of the House Ways and Means Committee. Lead proponents were Reps. Wally Herger (Marysville) and Bob Matsui (Sacramento), as well as delegation chairs Jerry Lewis (Redlands) and Sam Farr (Carmel). Urging permanent extension of the credit, along with a modest one percent increase in the Alternative Incremental Credit, the letter cites the growth in research spending in California’s pharmaceutical and electronics industries. Since the credit was first enacted in 1981, those industries have increased their research spending by over $50 billion, from $10.5 billion to more than $64.2 billion.

The credit on June 30 again expired for this year. Although at least another extension is expected to be included in any tax bill this year, and be retroactive to July 1, it is more difficult to gauge whether a permanent extension will be enacted.
 

California Delegation Urges No-Cost Transfer of Surplus Bases

In a bipartisan delegation letter delivered today to the Chair and Ranking Member of the House Armed Services Subcommittee on Military Installations and Facilities, half of the California Congressional delegation urged support for extending no-cost economic development conveyances (EDCs) to all base closure communities. Specifically, the Californians urged that, during an upcoming conference, the House agree to a provision in the Senate version of the Department of Defense authorization bill that would allow DoD to transfer unused base properties to qualified local reuse authorities without cost, thereby streamlining the base closure process and moving surplus property more rapidly into productive use.

The letter notes that “California was saddled with a greatly disproportionate share of the nation’s base closures during the 1988, 1991, 1993 and 1995 base closure rounds, yet current law leaves those shuttered facilities, and the closure-scarred communities that surround them, largely ineligible for no-cost conveyance” which is presently reserved primarily for rural areas.  California is the second most urban state in the nation and is thus limited in its ability to employ the method. The letter adds that “No-cost conveyance would in no means be a federal giveaway … The unused taxpayer-owned federal property would be transferred to the taxpayer-owned local reuse authorities (LRAs) which have been most affected by prior uses.” Rep. Gary Condit (Ceres) sent a similar letter on the subject in late May.
 

Delegation Chairs Lewis and Farr Testify on No-Cost EDCs at Hearing

The base closure letter noted above was delivered at a hearing on the topic held Thursday by the Military Installations and Facilities Subcommittee. Reps. Jerry Lewis (Redlands) and Sam Farr (Carmel), chairs, respectively, of the California Republican and Democratic House delegations and chief sponsors of the letter, testified in favor of extending no-cost EDCs at the hearing.

Rep. Lewis noted the extremely negative impact of the closure of both Norton and George Air Force Bases and other facilities in and around his district. Ten years after the announcement of Norton’s closure, Lewis said, there still remains 450 acres yet to be acquired, “a major reason why the conversion and private development of the base has been disappointingly slow. A ‘no cost’ transfer of the entire base would have relieved the community of a huge financial burden and promoted a much faster redevelopment program.” He added that, 10 years later, the local reuse authority in the area “is still operating under a lease from the Air Force and has not received title to any of the existing property.” Rep. Lewis described a similar situation at the George Air Force Base site, noting that estimated costs to bring infrastructure into compliant condition is $110 million, and lead and asbestos disposal and abatement costs another $17 million.

Rep. Farr represents Fort Ord, the largest military base closed in all the BRAC rounds, which covered 17,000 acres and supported 20,000 troops. Testifying in support of no-cost EDCs, Farr commented that “the American taxpayer has already paid for those bases. They paid for them once in forfeiting the land and its potential for development so the base could be sited there. They paid for them again to develop the infrastructure within the base (infrastructure which would later turn out to be useless because it never is built to local building codes). They pay for them a third time when they pick up the cost of toxic and hazardous waste cleanup, water decontamination and unexploded ordinance removal. Then, after all that, the military asks the taxpayer to pay for this land again just so they can have it back and use their own money to redevelop it.”

In response to a question about whether DOD should not try to squeeze revenue from the value of base properties, Rep. Farr suggested that DOD might retain an equity interest in the property via provisions of a conveyance agreement. For example, Farr suggested, if the property becomes or houses a money-making venture in the future, the federal government could reap a percentage of the profit.

Also testifying at the hearing was Deputy Undersecretary of Defense for Installations Randall Yim, who expressed the Administration’s strong support for the no-cost EDC provision and noted that base closure process resulted in $3 billion in savings for 1998 alone and will save $5.7 billion annually, greatly overshadowing the revenues generated through sale and leases of military property, approximately $244 million in receipts so far and a similar amount (in net present value) to be paid over the next 40 years. David Warren and Barry Holman of the General Accounting Office testified that DOD would lose revenues, and some previously negotiated agreements could be re-opened. They estimated a maximum of $218 million would be foregone between 2000 and 2043, though they noted that various cost savings would be realized as well, thereby counterbalancing losses.

Michael Houlemard, Jr., Executive Officer of the Fort Ord Reuse Authority, testified that “the cost and investment required to redevelop the Fort Ord Military Installation substantially outweighed (or at least reduced) the perceived underlying value of the property … We estimate that it will cost approximately $500 million just to redevelop the infrastructure of the Installation.”

All testimony from the hearing is available on the HASC website at http://www.house.gov/hasc/schedule.htm .
 

Former Rep. Vic Fazio Appointed to Institute Board of Directors

Pursuant to his appointing authority in the California Institute’s bylaws, House Democratic delegation Chair Sam Farr (Carmel) last week appointed former Rep. Vic Fazio to the Institute’s Board of Directors.

Now a partner with the D.C. firm of Clark and Weinstock, Fazio served 10 terms in Congress representing the Sacramento area before retiring at the end of last year. He served most recently as Ranking Member of the Appropriations Subcommittee on Energy and Water, as well as Chair of the House Democratic Caucus, and was widely admired and respected by Capitol Hill colleagues from both sides of the aisle.

The Board and staff of the Institute look forward to working with Rep. Fazio to help us continue to fulfill our bipartisan mission in Washington.
 

Ways and Means Supports NTR Extension for China

On Thursday, July 1, the House Ways and Means Committee reported to the House adversely H.J.Res. 57, which would disapprove the President’s decision to extend normal trade relations (NTR) to the People’s Republic of China for another year. NTR (formerly known as most-favored nation) status grants China the same trade and tariff rules that apply to the United States allies and most other countries.

During the markup, an amendment offered by Rep. Charles Rangel (NY) was defeated 11-24. The amendment attempted to extend NTR to Cuba, although it would have had no practical effect because the language of H.J.Res. 57 is refers only to the China extension. The United States exports $14 billion in goods and $4 billion in services to China each year. In 1998, California exports to China hit $2.47 billion.

Approval of the motion to report adversely was by voice vote. Under the expedited procedures for the resolution, Congress has 90 days from June 3 to disapprove of the NTR extension or it goes into effect.
 

Opposition to Transit Cap Continues To Grow

The Senate Transportation Appropriations bill includes a provision, so-called “transit equity,” which would cap transit funding for every state at 12.5%, effectively hurting only California and New York. The entire California Congressional delegation wrote opposing the provision several weeks ago. See Bulletin, Vol 6, No. 19 (6/17/99). The number of opponents to the measure is growing rapidly, as evidenced by an increasing number of letters expressing concern over the provision. The California and New York Appropriators wrote June 16 to House Transportation Appropriations Chairman Rep. Frank Wolf and Ranking Democrat Martin Sabo.

Now, new letters from national organizations have broadened the opposition. Letters to Phil Gramm and Paul Sarbanes, Chair and Ranking Member of the Senate Committee on Banking, Housing and Urban Affairs, were sent from a number of national organizations, including The Surface Transportation Policy Project, National League of Cities, National Association of Counties, and United States Conference of Mayors. Further, letters to key U.S. Senators were sent by California State legislative leaders, including State Senate President pro Tempore John Burton, Assembly Speaker Antonio Villaraigosa, State Senate Transportation Committee Chair Betty Karnette, and State Assembly Transportation Committee Chair Tom Torlakson.
 

CALFed Releases Draft Programmatic EIR/EIS on Bay-Delta

The CALFed state and federal agencies assigned to develop a restoration plan for the San Francisco Bay-San Joaquin Delta Estuary released their Draft Programmatic Environmental Impact Statement/Environmental Impact Report on June 25. The report analyzes the environmental impacts of a Preferred Program Alternative identified by CALFed and compares that to each of three other alternatives to dealing with the restoration project. The Preferred Alternative, as well as each of the other alternatives, includes core programs to address issues of ecosystem restoration, water use efficiency, water quality, Delta levee and channel integrity, water transfers, and watershed management coordination, as well as a range of storage and conveyance options. The Preferred Alternative opts for water conveyance solely through the Delta, rather than a dual system, with one conveyance moving water around the Delta and another moving it through the Delta.

Interested parties have 90 days to comment on the EIR/EIS, and CALFed plans to hold 15 public hearings throughout the state in August and September. The final EIS/EIR is expected to be released in April 2000, with the final decision on the plan following in June 2000. Implementation of the plan to restore the Bay-Delta is expected to take many years at the cost of billions of dollars.
 

House Armed Services Takes Up Encryption Bill

On Thursday, July 1, the House Armed Services Committee held a hearing on H.R. 850, which would ease export controls on strong encryption products. See, Bulletin, Vol. 6, No. 20 (6/17/99). The Committee heard from Deputy Secretary of Defense John Hamre, and Barbara A. McNamara, Deputy Director, National Security Agency. As expected, the Administration continues to oppose the bill because of national security and law enforcement concerns. Secretary Hamre testified that the bill’s provision prohibiting DOD or any other federal agency from requiring a key recovery system in encryption products it purchased from U.S. companies was highly onerous, because it would deny DOD the ability to investigate any employees suspected of spying.

During his opening remarks Chairman Floyd Spence noted his continuing opposition to the bill, which was echoed by several other members of the committee. The bill is slated for markup the week of July 19.

When the Committee last considered the bill in 1997 it made several changes, giving the Secretary of Defense substantial power to limit the export of encryption. It also required the President to report annually on the encryption strength that could be exported without harming national security and limited general export licenses to products at or below that level.
 

Cox Addresses Golden State Roundtable Luncheon

Representative Chris Cox (Newport Beach) was the featured speaker at the California State Society’s Golden State Roundtable Luncheon series on Tuesday. In his remarks, he discussed the prominent role Californians have played in the Internet Tax Freedom Act, the importance of passing the encryption export legislation, and frustration with the Administration’s reluctance to accept the House and Senate passed Y2K legislation. He also addressed the H1-B visa issue, financial services legislation (HR10), the unfair 10% cap on California in Clean Air Act grants and legislation he is introducing with Reps. Lewis and Calvert to address the issue. Finally among his prepared remarks he discussed the importance of Meth Lab clean-up costs as an environmental issue.

In response to questions from the audience, he argued in favor of increasing domestic space launches as a safety measure, and said that while he is in favor of continuing to trade with China, our current arrangement is focused too much on trade to the exclusion of other aspects of our relationship, and that our Asia trade policy is too China-centric without enough emphasis on Japan and India.
 

Horn, Brown Circulating Manufacturing Extension Program Letter

A letter is being circulated among California members by Rep. Steve Horn and Rep. George Brown to urge support for the Manufacturing Extension Partnership (MEP) program at the National Institute of Standards and Technology (NIST). The letter is addressed to Chairman Rogers of the Appropriations Subcommittee on Commerce, Justice, State, and Judiciary.

The letter, requesting that the MEP program be funded at the current level plus an inflation adjustment, states that, “The NIST MEP program has become a cost-effective, federal-state, public-private partnership that helps small and mid-sized American manufacturers modernize to compete in the demanding global marketplace.” It adds that California’s three MEP centers serve thousands of small and mid-sized manufacturers each year. California’s three centers include one in Southern California (with regional centers in Los Angeles, the Inland Empire, Orange County, the Ventura/Santa Barbara area, the San Fernando/San Gabriel Valley area, the San Joaquin Valley, and the Greater Sacramento area); one in the Bay area (with offices in Silicon Valley/San Jose, Oakland, San Francisco, Fremont, and San Mateo); and one serving the San Diego region.

For further information, or to sign the letter, contact either Dave Bartel in Rep. Horn’s office (at 5-6676) or Bill Grady in Rep. Brown’s office (at 5-6161).
 

First Steps in ESEA Reauthorization Taken

The first of a series of legislative actions toward the reauthorization of the Elementary and Secondary Education Act occurred Wednesday when the House Education and the Workforce Committee met to mark-up The Teacher Empowerment Act (H.R. 1995). This legislation would combine the funding of the current Eisenhower Professional Development Title II program, Goals 2000, and class size reduction monies to provide a teacher training and classroom reduction block grant totaling $10 billion over the next five years. Subcommittee on Postsecondary Education, Training and Life-Long Learning Chairman Buck McKeon (Santa Clarita) said the Act was developed around three principles: teacher excellence, smaller classes, and local choices. Unlike the President’s proposal to hire 100,000 new teachers in the next seven years, H.R. 1995 does not set a dollar amount required for the hiring of new teachers; instead, it allows States, local school districts and schools flexibility balancing resources for increasing student achievement and teacher development. The bill prohibits national certification of teachers. California was cited as an example of implementation of class size reduction without regard to teacher quality.

Rep. Matthew Martinez (Monterey Park) proposed a Democratic substitute “Smart Classrooms Act” which would have established separate funding streams for monies to reduce class size from that to develop teacher skills. The amendment was defeated 21-23. Opponents of the bill argued that it reneges on a Congressional promise to support Clinton’s new teachers program, doesn’t appropriately target funding to neediest areas, and doesn’t significantly differentiate between certified and qualified teachers. Rep. George Miller (Martinez) argued strongly for the need to require teachers to have either a college major in the subject they are teaching or pass a rigorous State exam in that subject area.

Chairman Goodling (PA) authored an amendment in the nature of a substitute which was approved 27-19. As a result of the amendment, States would continue to receive the same amount of funding as they received in FY99 under the Eisenhower, Goals 2000 and Class Size reduction programs combined. New money over and above those FY99 Appropriations figures will be allocated to States based on a formula weighted 50% on populations of individuals aged 5-17, and 50% based on poverty among children 5-17 in that State. Within the grants to each State, 95% of the money must be passed on to local educational entities (LEAs). Eighty percent of the amount given in subgrants to LEAs would be allocated by formula: 50% based on enrollment, and 50% based on poverty. The remaining 20% would be distributed through a competitive grant process.

The measure is expected to come to the floor after the Fourth of July recess. The Administration has outlined a number of specific elements it wants included, and is threatening a veto if they are not.
 

Agreement Reached on Battle Creek Salmon and Steelhead

An agreement has been reached concerning the Battle Creek Salmon and Steelhead Restoration Project. Pacific Gas and Electric Company, National Marine Fisheries Service, U.S. Fish and Wildlife Service, U.S. Bureau of Reclamation, and California Department of Fish and Game have signed a memorandum of understanding that focuses on restoring the chinook salmon and steelhead to the Battle Creek stream, an important spawning stream for chinook salmon in the Sacramento Valley.

The cost of the restoration project totals $50.7 million, which will be split as follows: CalFed, $27.2 million (54%), PG&E, $20.5 million (40%) and private foundations, $3 million (6%). Since all parties have now signed the memorandum of understanding, work will begin on acquiring the necessary permits and regulatory approvals. Actual construction of the project could begin as early as the year 2000.

The report and supporting appendices are available on CALFed’s website at: http://calfed.ca.gov .
 

Senate Committee Marks Up Endangered Species Act

On June 29, the Senate Committee on Environment and Public Works approved S. 1100, revising the process followed under the Endangered Species Act (ESA) in “critical habitat” designation. Senator Chafee (RI) authored the measure which allows federal agencies to research and develop plans of recovery before actually having to designate an area as a “critical habitat.” The measure was designed to reduce law suits filed against the Department of Interior for not declaring “critical habitats.”

Senator Chafee offered a substitute amendment, approved by voice vote, that would increase the time allowed for a recovery team to be appointed from 60 days to 120 days. The amendment also decreased the time allotted, from 36 months to 30 months, for a final recovery plan. Under the amendment a priority ranking system would be established in case of insufficient funds. Included was an authorization of $253 million to the Interior Department, and $150 million to the Commerce Department for fiscal years 2000 through 2004.

A separate amendment, introduced by Senator Kay Bailey Hutchinson (TX) would require Interior to invite a private land owner, who would be affected by the “critical habitat”, to be a member of the recovery team. The amendment was also accepted by voice vote. Several Senators mentioned other amendments they would like to see incorporated in other sections of ESA, but agreed not to offer them in the hope that small, incremental changes to the Act would have a better chance of being enacted.
 

New Study On Economic Effects Of Internet

Cisco Systems Inc. of San Jose, California, recently funded a study to estimate the effects of the Internet on the nation’s economy, which was done by the Center for Research on Electronic Commerce at the University of Texas. The study shows that the Internet was responsible for over $301 billion in revenue for the previous year and accounts for close to 1.2 million jobs. These revenue figures have been doubling annually for the past three years, and will continue to increase well into the future, according to the report. The study also shows that nearly one percent of the nation’s GDP, $102 billion, was created by worldwide Internet purchases from U.S. companies. The results of the study will be updated quarterly. For more information concerning this topic contact the Center for Research on Electronic Commerce at the University of Texas via their web site: http://cism.bus.utexas.edu/ .
 

House Subcommittee Holds Hearing On NITRDA of 1999

The Technology Subcommittee of the Committee on Science held a hearing on July 1 to discuss the Networking and Information Technology Research and Development Act of 1999 (NITRDA), H.R. 2086. The committee heard testimony focusing on three areas addressed in the bill: the incentives for college students to do internships with IT companies which will benefit both the student and the company; the Research and Development Tax Credit extension; and encryption technologies. The Research and Development Tax Credit extension drew considerable concern due to the fact that the credit expired on June 30, 1999. Several members cited their support for extending the tax credit permanently in order to stabilize it and induce companies to invest in more substantial and long term research and development projects. For further information, contact the committee via their web site, http://www.house.gov/science/welcome.htm .
 

Hearing Held on Section 8 Housing

The Housing and Transportation Subcommittee of the Senate Banking, Housing and Urban Affairs Committee held a hearing on the Section 8 subsidized housing program and heard testimony from several members of Congress, as well as William Apgar, Assistant Secretary of Housing and Urban Development and Federal Housing Commissioner. Testimony focused on how best to address the decreasing stock of Section 8 housing caused by prepayment of subsidized mortgages and section 8 opt-outs, when section 8 rental subsidy contracts expire and property owners decide not to renew those contracts. Considerable discussion focused on the 1997 “Mark-to-Market” legislation, which allowed HUD to both reduce section 8 properties with above market rents down to market levels, and to raise rents on properties with below market rents in order to prevent property owners from “opting out” of the rental market. The discussion focused on how well HUD has done this.

The hearing also served as an announcement forum for new legislation entitled the “Jeffords-Kerry Housing Opportunities Preservation and Promotion Act of 1999.” The bill is intended to provide federal matching grants to the states for preservation of HUD-assisted affordable housing. The Secretary of HUD would determine each state’s share of the funding based on the problems of that state with respect to loss of affordable housing. States would then qualify for money up to their share based on the ability to raise matching funds, and then would fund projects. California faces a disproportionately large affordable housing problem. For more background, see Bulletin, Vol. 6, No. 15 (6/6/99).
 

Senate Considers Electricity Deregulation

On Tuesday, the Senate Energy and Natural Resources Committee met for the first of two hearings to discuss federal legislative proposals to restructure the electricity industry. The Committee heard from witnesses including Senator Charles Schumer (NY) and Energy Secretary Bill Richardson. Chairman Frank Murkowski (AK) indicated that federal legislation should make energy cheaper and more reliable, deregulate as broadly as possible so more retail competition will occur, and advocated the elimination of PUHCA and PURPA. Many committee members were concerned that federal legislation not raise electricity costs in low cost regions, and Senator Schumer argued for the need to bring competition into New York’s high cost regions where electricity can be three times as expensive as in other states.

Secretary Richardson said federal legislation was needed to motivate competition and to enable states that have already enacted deregulation to reach their potential by ensuring the reliability of the interstate power grid, amending federal New Deal-era statutes that impede competition, and providing competition in regions served by federal utilities. He said the Administration’s proposal, the Comprehensive Electricity Competition Act, would accomplish these objectives, save consumers in the 48 continental states at least $20 billion per year and reduce greenhouse gas emissions significantly.

The California Congressional delegation previously expressed concern that the forward progress created by the state’s landmark utility deregulation plan from 1996 (AB 1890) not be undone by federal intervention.

The second day of hearings is scheduled for Thursday, July 15.
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