CONTENTS OF THIS ISSUE:
U.S. , China to Hold Preliminary WTO Talks
Rep. Farr Appoints Doris Matsui to California Institute’s Board
California to Host Some X-34 Test Flights
California Meets Federal Welfare to Work Requirements
Export Decline Ends, Mexico Passes Japan as #1 California Market
National Avocado Promotion Legislation to be Introduced
Colorado River Talks Reportedly Successful
CCSCE Releases Study On Economic Conditions in California
Decrease in Legal Immigration Reported
New Report Studies Latinos in the Job Market
California Delegation Co-Chairs Comment on FEMA Requirements

On Thursday, U.S. Trade Ambassador Richard Fisher announced that the United States and China will hold World Trade Organization talks next week in Beijing and Auckland, New Zealand. The discussions are intended to lay groundwork for more formal negotiations on China’s bid to join the 134-member trade organization. Fisher said that China had requested a meeting of trade experts to review the status of the negotiations between the two nations. China had suspended the talks after the May NATO bombing of its embassy in Belgrade. A Chinese agency reported that an 80-member delegation will leave Sunday for meetings in several U.S. and Canadian cities, including Los Angeles.
 

Rep. Farr Appoints Doris Matsui to California Institute’s Board

Pursuant to his appointing authority in the California Institute’s bylaws, House Democratic delegation Chair Sam Farr (Carmel) during August appointed Doris Matsui to the Institute’s Board of Directors. Ms. Matsui has recently joined the Washington D.C. firm of Collier, Shannon, Rill & Scott as Senior Advisor and Director of Government Relations and Public Policy.

Ms. Matsui served from 1993 through this year as Deputy Assistant to the President and Deputy Director of Public Liaison for the White House, after serving on President Clinton’s transition team. In those capacities, her focus areas included budget and economic issues, as well as international trade and development. She also served as the White House’s lead point of contact with the nonprofit sector.

The Board and staff of the Institute look forward to working with Ms. Matsui to help continue to fulfill the Institute’s bipartisan mission.
 

California to Host Some X-34 Test Flights

In a reversal of a prior decision, an experimental NASA flight demonstrator now will be tested in part at the Dryden Flight Research Center at Edwards Air Force Base.

The decision marks a victory for the California Congressional delegation, led by Rep. Buck McKeon (Santa Clarita), as well as for other California advocates who had pushed for the flights. In April, California members of Congress sent a letter to NASA Administrator Dan Goldin supporting plans to conduct flight testing in California for the X-34, which is designed to demonstrate Reusable Launch Vehicle technologies.

The Air Force had raised concerns about the testing environment in New Mexico, where test flights were originally expected, and had sought to conduct the flights at Dryden. With the recent decision, some flights will take place in both California and Florida. The plane was originally budgeted for just two flights, but NASA has moved that number up to 25. In their April letter, the Californians noted “the long history of experimental aircraft testing and hypersonics research at Edwards and NASA-Dryden is the optimal environment for the X-34.”

According to NASA, following a series of tow tests on the ground at Dryden, the first vehicle (A-1A) will be used to conduct unpowered test flights from a carrier aircraft at the White Sands Missile Range, NM. At the same time, the contractor for X-34, will complete assembly of the second X-34, designated A-2. Its engine will be test fired on the ground at Holloman Air Force Base, NM. After these firings, the first series of powered flight tests of the X-34 will take place at Dryden. The A-2 vehicle will then be shipped to NASA’s Kennedy Space Center, FL, for a second series of flight tests. These flights, which will reach speeds of up to approximately Mach 4.5, will demonstrate rapid turnaround flight operations. Dryden and Orbital will complete the remainder of the test program, which involves the third X-34, designated A-3. These test flights will expand the maximum capability of speeds up to Mach 8 and altitudes up to 250,000 feet, while also testing additional reusable launch vehicle technologies as carry-on experiments.
 

California Meets Federal Welfare to Work Requirements

According to a report this week by the State Legislative Analyst Office (LAO), in fiscal year 1998 California for the first time met stiff federal welfare-to-work requirements in all categories. Rules established by Congress in the 1996 welfare reform legislation require states to meet specific work participation rates for all families, as well as a higher rate for two-parent families. In fiscal 1997, California met the overall standard, but failed to reach the higher rate for two-parent families.

The report notes that by meeting federal requirements, any penalties for FY1997 non-compliance for California would be waived. While it is unsure whether the state will meet the standards for FY1999, the LAO notes that FY2000 compliance is likely because of planned program restructuring that will remove two-parent families from federal work participation requirements.

Federal rules required that states have 25% of their overall caseload and 75% of their two-parent welfare families engaged in work in 1997. For 1998, the requirements rose to 30% overall and 75% for two-parent families. In 1999, the thresholds rise to 35% and 90%, and the overall reduction requirements will continue to rise, until 2002, when overall cases must be 50% below baseline. However, these threshold requirements can be softened if overall caseloads decline.

In 1997, California reduced welfare caseloads by 5.5%, meaning that the 25% requirement was reduced to 19.5% for the overall caseload. The state that year achieved a 20.6% participation rate, thereby successfully achieving the overall threshold. However, for two-parent families, the state’s 1997 participation rate of 24.5% was far below the 68% requirement, thus resulting in a $7 million penalty.

In 1998, however, California handily met the overall participation rate requirement: requiring just 17.7% (the 30% level reduced by the state’s 12.3% caseload reduction) in the program, the state achieved a 36.6% participation rate. Moreover, the state also successfully exceeded the stiffer two-parent participation requirement of 32.7% (the 75% level less the state’s major 42.3% caseload reduction), achieving a 36.2% participation rate.

For a copy of the report, visit the LAO website at http://www.lao.ca.gov/ or call (916) 445-2375.
 

Export Decline Ends, Mexico Passes Japan as #1 California Market

According to press reports, recent estimates of exports by state indicate a resurgence in exports from California for the second quarter of 1999. California exports to Asia showed signs of recovery, and, for the first time in history, Mexico overtook Japan to become California’s top export market, according to data released Tuesday by the Massachusetts Institute for Social and Economic Research (MISER).

Still, exports generally were down. Exports from California for the first half of 1999 were $50.2 billion, compared to $52.4 billion for the same period of 1998. Analyses by the Los Angeles Times, which had access to more detailed data, indicated that the drop-off was considerably less than in previous quarters, and attributed the decline largely to continued lags in Japan and a drop in European flows. But, the Times reported, California exports to Mexico rebounded in the April-June period. For all of last year, merchandise shipments were off 4%, and they declined 7% early this year, though economists believe this may have been the bottom of the state’s 1½-year export decline.

The data reportedly shows that California’s exports to Mexico improved after two quarters of sluggish performance, increasing 7% to $3.5 billion, putting Mexico ahead of Japan, where exports totaled $3.3 billion. Analysts reportedly said they expect Mexico sales to continue to bounce back, although they were less hopeful about shipments to other Latin American countries. In all, California exports totaled $25.4 billion in the second quarter, putting it on pace to exceed $100 billion this year.
 

National Avocado Promotion Legislation to be Introduced

Reps. Ken Calvert (Corona) and Gary Condit (Ceres) are introducing National Avocado Promotion legislation on behalf of California’s 6,000 avocado growers. Nearly all of the nation’s domestic avocados are grown in California. The Calvert-Condit bill will create a Hass Avocado Promotion, Research, and Information Program to expand the consumer market for avocados. The national Avocado Promotion Program would be operated at no cost to taxpayers, receiving funding instead from U.S. avocado growers and avocado importers, pending a majority vote.

Domestic growers have suffered in recent years. Increasing imports have been supplying a larger share of the U.S. consumer market for avocados. In addition, domestic growers are currently assessed for avocado promotion, while importers are exempted from the program. Thus, importers receive substantial benefits while the domestic growers foot the bill. In response to this dynamic, the legislation’s supporters seek to ensure that the cost of the national promotion program be shared among importers and domestic producers.

Offices of members interested in cosponsoring this legislation should contact Jolyn Murphy with Mr. Calvert at 5-1986 or Lisa Richards with Mr. Condit at 5-6131.
 

Colorado River Talks Reportedly Successful

In August, the Department of the Interior announced that negotiations over water supplies in the Colorado River have been successful. Negotiations have taken place between the Metropolitan Water District of Southern California, Coachella Valley Water District and Imperial Irrigation District (IID). A report states that, after a nearly year-long effort, a consensus was reached on core elements of a framework agreement. “The agreement will resolve long-standing water qualification and use disputes that date back to the 1930’s, and which have blocked progress in distributing and utilizing an essential California water supply-the Colorado River,” states the report.

The key aspects of the agreement include: establishment of a dateline for measuring the amount of water available for transfers, thereby opening the way for the proposed transfer of water from the IID to San Diego; and establishment of the basis for requesting the Secretary of the Interior to issue surplus guidelines that will assist California through a transition period of reducing the State’s reliance on the Colorado River.

As stated by the director of the California Department of Water Resources, Thomas Hannigan, “(this agreement) is a key step in implementing the California 4.4 Plan, under which the state of California is endeavoring to reduce its use of Colorado River water to match the state’s apportionment of 4.4 million acre-feet per year.”

The framework agreement is expected to be submitted for approval and implementation to the water agency boards in September.
 

CCSCE Releases Study On Economic Conditions in California

The Center for Continuing Study of the California Economy (CCSCE) released a new report on key market variables for counties in California. The report, California County Projections, authored by Stephen Levy, predicts that California will add close to 7 million residents over the next 11 years. It also predicts that California will add 2.3 million new households over the next 6 years due to two factors: the rise of real income and the change of California’s population into older age groups that tend to have a higher rate of formation of households. These are only a few of the predictions that are made by the CCSCE. For more information on this topic, or a copy of the study, contact CCSCE via its web site at http://www.ccsce.com or call 650-321-8550.
 

Decrease in Legal Immigration Reported

Legal immigration for fiscal year 1998 hit a 10-year low, with the United States granting permanent residency to only 660,477 foreigners. California led the way allowing 170,126 (25.8% of the nation’s total) to enter the state. The INS claims that if it had been able to keep up with its caseload, an estimated 140,000 additional foreigners would have obtained legal permanent residency. The backlog stands at 890,000 people, a 736% increase from fiscal year 1994.

Before a mid-1990s decision by Congress, illegal immigrants eligible for residency had to leave the country to apply for permanent residency. Currently, they can pay a fine and file their paperwork at INS offices without leaving the U.S. Mark Krikorian, executive director of the Center for Immigration Studies, stated that, “Congress placed an enormous burden on the INS at the same time as citizenship applications increase dramatically.” He adds, “Some people are going to point to this as another sign of the INS’s dysfunction but in fact this is really a consequence of Congress’s decision, not INS’s.”
 

New Report Studies Latinos in the Job Market

The California Research Bureau released a report focusing on the Latino economic gap titled, Latinos and Economic Development in California. More than one-fourth of California’s labor force is comprised of Latino workers. Latino workers are trailing behind all other ethnic groups in educational achievement and wages earned. It is estimated that if Latinos were to increase educational attainment to the overall average of the population, thereby increasing their wages, state tax revenues would increase by $1.7 billion. The report urges the state to set goals in order to increase the number of Latino graduates from high school and college and to help those who dropped out to return to school. If you would like more information on this subject, the full report is available at http://www.library.ca.gov/crb/99/08/99008.pdf.
 

California Delegation Co-Chairs Comment on FEMA Requirements

The following is an article by Reps. Jerry Lewis (Redlands) and Sam Farr (Carmel) explaining the California delegation’s concern about FEMA’s proposal to require all public entities to obtain insurance policies in order to be eligible for federal disaster aid.