CONTENTS OF THIS ISSUE:
Funding Continues Through November 10
Senate Judiciary Reports Patent Reform Bill
Senate Passes Tax Extender Bill; Hopes Boosted for Approval Before Adjournment
Californians Express Concern About Expiring Medicaid/Welfare Outreach Funds
House Defeats E-Signature Bill, But Second Vote May Come Soon
Rep. Packard Decides Against Re-Election
House Commerce Takes up Preparations for 1999 World Trade Organization Conference
House Committee Approves Welfare To Work Amendments
Census Bureau Releases 1996 Poverty Statistics: More Californians Were in Poverty,
             Yet Incomes Remained Above Average
Report Examines State’s Infrastructure Financing
Governor Seeks Federal Disaster Declaration in West Coast Fishery
Californians’ Seat Belt Usage Wins State 29% of U.S. Grants

By a 417 to 6 vote on Thursday afternoon, the House approved the fourth continuing resolution since the September 30th end of fiscal year 1999. The Senate subsequently passed the measure by unanimous consent. H.J. Res. 75 carries forward funding for the federal government until midnight on Wednesday, November 10. The following day, November 11, is Veterans Day. Momentum appears to be building for adjournment late on November 10.
 

Senate Judiciary Reports Patent Reform Bill

By a unanimous vote of 18-0 on Tuesday, November 2, the Senate Judiciary Committee reported the “American Inventors Protection Act of 1999”. To give as much flexibility for floor action on the legislation, the Committee reported both S. 1798, its version, and H.R.1907, the House version substituted with the language of S. 1798. See, Bulletin, Vol. 6, No. 26 (8/5/99).

Although the Senate bill differs from the version passed by the House in August, the major intent of the bill remains the same: to bring U.S. patent laws in line with those of other countries. The bill guarantees a patent term of 17 years from issuance, by tolling the time period during any delays in the application process. The bill also requires publishing of the patent application within 18 months of the file date in cases where the patent is also filed abroad, but insures that the published material will not disclose more information than the foreign application, and will not disclose information subject to secrecy orders or national security rules. It also requires that royalties be paid by anyone using or selling the invention until the patent is issued.

The bill also establishes a “first inventor defense” to a legal action for patent infringement for someone who has used a business practice for at least one year before the filing date of the patent. This provision is intended to protect institutions from patent infringement suits generated by the recent court decision in State Street Bank v. Signature Financial.

Some concerns still exist over the bill’s provisions, including the efficacy of the first inventor defense. Because Congress will be adjourning soon, House and Senate negotiators will probably have to obtain unanimous consent on a final version of the bill without a conference committee, in order to enact it this year.
 

Senate Passes Tax Extender Bill; Hopes Boosted for Approval Before Adjournment

The Senate, by unanimous consent, agreed to S. 1792 on Friday, October 29. The bill, introduced by Finance Chairman William Roth (DE) extends several important tax credits, although for shorter periods than the House Ways and Means Committee bill. The research and experimentation (R&D) credit would be extended for 18 months through December 31, 2000. The bill would also extend for 18 months Section 127 (tax-free treatment of employer-provided educational assistance for both graduate and undergraduate study), the work opportunity tax credit, and the welfare-to-work tax credit.

The House has not taken up the Ways and Means Committee bill, which provides for a five-year R&D tax credit, and 30 month extensions for the welfare-to-work and work-opportunity credits. Negotiations between the two bodies are underway, and it is likely that a final compromise will be included in whatever omnibus appropriations bill moves in the final days of the session.
 

Californians Express Concern About Expiring Medicaid/Welfare Outreach Funds

California Members of Congress and a State official are urging an extension of soon-to-expire federal funding which helps California’s former welfare recipients retain their Medicaid benefits as they transition from welfare to work.

In a letter to their California colleagues, Reps. Robert Matsui (Sacramento) and Henry Waxman (Los Angeles) state that “without swift Congressional action, on December 31, 1999, our state will lose access to more than $40 million in federal funds intended for Medicaid outreach due to a sunset provision.” The 1996 welfare reform legislation created a $500 million fund, of which California was allocated $83.7 million, or about one-sixth the national total. California has used roughly half those funds, but the pending sunset would prevent the state from receiving its unused share. A separate letter from Grantland Johnson, Secretary of the State’s Health and Human Services Agency, commented, “Our need to reach those who move into the workplace and off welfare regarding this health coverage will not cease on December 31, 1999.”

The welfare reform law provided that a state may use its funds for 12 quarters after their TANF (Temporary Assistance for Needy Families) programs are implemented. Sixteen states have already seen their funds expire, while another 16 (California included) will expire next month. The remaining states will lose funds next year. Under this special program, 75 to 90 percent of a state’s expenditures for Medicaid outreach activities are reimbursed by the federal government, compared to the 50% reimbursement rate associated with most other Medicaid funds.

The letter from Reps. Matsui and Waxman notes that the Senate’s version (S.1788) of a bill to adjust the Medicare, Medicaid, and state children’s health insurance programs (SCHIP) includes a provision to lift the sunset requirement. A House version (H.R.3146), introduced last week by Commerce Committee Chair Tom Bliley does not presently include such language.
 

House Defeats E-Signature Bill, But Second Vote May Come Soon

On Monday, November 1, the House failed under suspension of the rules to pass H.R. 1714 to give electronic signatures the same legal effect as written ones. See, Bulletin, Vol. 6, Nos. 32, (10/07/99) & 33 (10/14/99). The vote, 122-234, was mostly along party lines and fell four votes short of the two-thirds vote needed under the expedited procedure. Opponents of the bill are concerned that it does not establish sufficient safeguards to protect consumers from fraud.

However, the bill may not be dead yet. The House leadership is considering bringing the bill back to the floor under a closed rule, where only a majority vote will be needed for passage. Under a closed rule, opponents would still be prohibited from offering amendments.

Even if the House passes the bill, final action in the Senate in the waning days of the session may prove problematic.
 

Rep. Packard Decides Against Re-Election

Rep. Ron Packard (Oceanside), a veteran of thirty-six years in elective office, announced Wednesday that he will not seek re-election in 2000. Packard has represented the 48th district, which covers the south end of Orange County and much of northern San Diego County, since winning a write-in campaign in 1982.

Gaining a slot on the coveted Appropriations Committee, he rose to the chairmanship of the Military Construction Subcommittee in the 105th Congress, and is now chair of the key Energy and Water Development Subcommittee, which he will retain through the remainder of the 106th Congress. Chairman Packard is retiring to spend more time with his family, including his wife of 47 years and his 34 grandchildren.
 

House Commerce Takes up Preparations for 1999 World Trade Organization Conference

On Thursday, November 4, the Telecommunications, Trade and Consumer Protection Subcommittee of the House Commerce Committee discussed the trade issues that will take priority at the upcoming World Trade Organization (WTO) Ministerial Conference in Seattle. See Bulletin, Vol. 6, No. 34 (10/21/99). In November, the 134 WTO member countries will focus on steps to maintain an open and transparent trade environment in the services industries.

In attendance at the hearing, Joseph Papovich, Assistant US Trade Representative for Services, Investment and Intellectual Property testified on the importance of services industries, which provide over 75% of America’s private-sector economic production and contribute 2.1% of GDP in the form of construction. Service sector industries include finance, construction, telecommunications, distribution, health, education, travel, tourism, law and engineering. Papovich commented that services trade remains highly restricted in many areas, severely inhibiting American exports. He suggested that the US will lead the WTO talks to liberalize service sectors by establishing sectoral agreements, examining cross-sectoral or horizontal methods of service liberalization, and requesting talks with certain trading partners to liberalize services in the economies of those particular countries. Lastly, Papovich opposed the discrimination against electronic commerce.

Another witness, Mark C. Brickell, Managing Director of J.P. Morgan and Company, also stressed the importance of free trade and capital mobility. Brickell testified that financial relationships should be governed by the principle that “when two parties agree to a contract, each party should be able to rely on the performance of the other.” This principle, Brickell says, maintains sanctity of contract and the rule of law, which in itself is “a cornerstone of free trade.” Brickell highlighted this principle to point out that as trade partners, WTO countries need consistent trade standards that neither favor domestic competitors, nor exclude foreign goods and services. He concluded his testimony by supporting a ban on tariffs on the Internet.

For a more detailed account of the WTO hearing, contact the House Committee on Commerce’s Telecommunications, Trade and Consumer Protection Subcommittee at 202-225-2927 or at their web site: http://www.house.gov/commerce .

House Committee Approves Welfare To Work Amendments

On Wednesday, the House Education and Workforce Committee passed H.R. 3172 by voice vote. The bill seeks to provide more flexibility to states and local communities in administering the welfare-to-work program. The program was established as part of the 1997 balanced budget law in order to move hard-to-employ welfare recipients into the workforce. Because of strict eligibility guidelines, only $283 million of the $3 billion allocated for the program has been spent.

H.R. 3172 would make long-term recipients of welfare, or those whose benefits end within a year, eligible for the program. It would amend provisions focused on these hard-to-employ recipients by allowing that just one criterion (rather than multiple criteria, as in current law) needs to be met to make an individual eligible. The bill adds additional eligibility criteria, including homelessness, disability, being a victim of domestic violence, and having below-8th-grade skills, to the existing eligibility criteria, which include a poor work history, substance abuse treatment, and the lack of a high school diploma or GED.

The measure would add up to six months of vocational educational job training to the program, and allow no more than 30% of funds from the bill to be used to assist welfare recipients who meet the guidelines under current law or who are children about to leave foster care. The committee defeated an amendment offered by Rep. Lynn Woolsey (Santa Rosa) which would have extended vocational educational job training from six to twenty-four months. During the markup, she argued that six months training is inadequate to obtain the skills necessary to maintain a liveable wage. The six month threshold attempts to strike a balance between current law, which provides no vocational training at all, with the potential benefits of vocational educational job training.

The bill also reduces from $100 million to $35 million the amount of funding set aside for performance bonuses to states which are successful in transitioning welfare recipients into the workforce.

California is home to more than 21% of the nation’s welfare recipients.

For a more detailed account of the hearing, contact the House Education and Workforce Committee at 202-225-4527 or at their web site: http://www.house.gov/eeo .
 

Census Bureau Releases 1996 Poverty Statistics: More Californians Were in Poverty, Yet Incomes Remained Above Average

The U.S. Census Bureau released the 1996 counts of Americans living in poverty as well as the most recent median household income statistics. The estimated median household income for California in 1996 was $38,664 compared with the lower United States estimate of $35,492.

In 1996, the US had an estimated 36.5 million or 13.7% people in poverty when considering all age groups; 1996 estimates for California stood at 5.3 million persons or 16.6% of the total state population. Specifically, the report estimates that California had 2.3 million or 25.2% of persons under age 18 living in poverty, compared with the US figure of 14.5 million or 20.5 %. The Bureau reported that California again exceeded the US estimates of percentages of related children aged 5 to 17 in poor families in 1996: California estimates stood at 1.5 million or 23.7%, whereas US estimates were at 9.3 million or 18.6%.

The poverty rate for the US declined from 13.7% in 1996 to 12.7% in 1998. The number of poor children and their poverty rate decreased as well: 13.5 million people under age 18 were poor in 1998, down from 14.5 million in 1996. The Census Bureau has not yet released the more recent 1998 estimates of poverty for California on line.

For more information, or 1995 county specific data for California, visit the Census Bureau web site: http://www.census.gov .
 

Report Examines State’s Infrastructure Financing

In California’s Public Investment Gap, Financing Infrastructure: Issues and Implications (September 1999), the California Budget Project examines plans to develop California’s infrastructure and suggests what it believes to be the most efficient way to make use of those plans. The report points to the establishment of the Commission on Building for the 21^st Century, a study issued by the State Treasurer, and similar reports written by the California Business Roundtable as evidence of the gap between available resources and amounts needed to maintain the state’s public infrastructure.

The report outlines the major sources of federal and state funds used in financing state infrastructure. General Obligation bonds (GO) are repaid from the General Fund and have constitutional priority over other expenditures in the event of a shortfall. Another source of capital outlay is lease payment bonds, which bond holders repay out of their rent payments over the life of the facility. Federal funds and pay-as-you-go financing represent two other methods of financing state infrastructure. The gas tax, which funds the Public Transportation Account, may also be used towards transportation infrastructure. Local jurisdictions may also apply to the California Infrastructure and Economic Development Bank for matched assistance with infrastructure projects. Taken together, the Department of Finance estimates that $33.1 billion will be available for infrastructure over the next ten years plus $2.5 billion in previously authorized GO bonds that were unissued as of September 1, 1998.

Local government uses essentially the same funding sources as the state, with sixty percent of the state’s 1998-99 debt service payments going towards local facilities. According to the report, local governments can also impose sales tax rates to fund highway or transit programs, but must be approved by a two-thirds vote. “Over the next fifteen years, nineteen dedicated local sales tax rates will sunset and must be reauthorized by local voters,” the report notes. Thirteen of those expiring rates generated $779 million for transportation in 1997-98.

A $2.1 billion GO bond for parks, recreation, cultural, historical, fish, wildlife, and coastal resources is has been signed by Governor Davis. Other proposals include requiring the Governor to submit a capital outlay and infrastructure plan of some sort, or other bond proposals ranging from financing safe drinking water to repairing the current transportation infrastructure.

In addition to highlighting current legislative proposals, the California Budget Project’s report makes recommendations of its own. Because a number of different departments have made various projections of California’s infrastructure needs, the report calls for a comprehensive approach that would allow for comparing and prioritizing infrastructure needs. Infrastructure goals need to be clearly defined, with local needs identified and integrated. The report further suggests that the current two-thirds vote requirements hamper infrastructure financing and that certain taxes (sales and gas) unfairly impose a greater burden on low-income households. The report adds that certain funding sources may impose greater consequences than others.

For more information, contact the California Budget Project at 916-444-0500 or see the report on their website, at http://www.cbp.org/brief/bb990901.html .
 

Governor Seeks Federal Disaster Declaration in West Coast Fishery

On October 28, Governor Gray Davis sent a letter to U.S. Commerce Department Secretary William Daley, requesting financial relief for families involved in the fishing and fish processing industries in the West Coast Groundfish Fishery. Due to impending fishery management regulations, businesses and fishermen are expected to suffer economic consequences estimated in the millions.

The letter states that the continuing adverse environment occupied by West Coast groundfish stocks since the 1970s justifies federal action under both the Magnuson-Stevens and Interjurisdictional Fisheries acts. Both of these acts provide federal funds in times of disaster relief.
 

Californians’ Seat Belt Usage Wins State 29% of U.S. Grants

California will receive $15.7 million from a total national pot of $54.6 million under the U.S. Department of Transportation’s incentive grants program for increasing seat belt usage. California’s seat belt usage is well above the national average rate of 70%. The formula amount to each state is based on estimated medical cost savings to the federal government due to increased seat belt use. The next largest grant went to Texas, at $5.3 million. In a statement lauding the grant, Governor Gray Davis indicated that the funds would be allocated to the California Office of Traffic Safety, and may be used for safety education, seat belt use enforcement, or other projects to improve road and highway safety.
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