CONTENTS OF THIS ISSUE:
Congress Nearing Adjournment
Commerce-Justice-State Approps includes SCAAP, Meth and Border Patrol Funds
Patent Reform Attached to Omnibus Appropriations Bill
Labor-HHS-Education Funding Includes Public School Choice Provision; Detrimental Hold
             Harmless May Be Extended Further
Five Year Extension Granted for R&D Tax Credit; Graduate Education Assistance is Dropped
U.S. & China Reach Deal on China Accession to WTO
Bill Stiffening Copyright Penalties Passes House
California Delegation Sends Letter Urging Radon Rule Delay
Joe Baca Wins Race to Represent California’s 42^nd Congressional Seat
Medicare “Giveback” Legislation To Benefit California Hospitals
McKeon and Sanchez Introduce Bill to Require Examination of California as Joint Strike Fighter Site
Governor Hosts California Aerospace Summit
Profile of California’s Non-Poor Uninsured Reported by California HealthCare Foundation
California Small Employers Uninformed About Insurance Premiums and Health Plan Purchasing Coalitions
Bipartisan Effort by Doolittle & Feinstein would Improve Lake Tahoe
House Passes Bill to Allocate School Funds For Logging Districts
Eight California Metro Areas Are Among the Nation’s Most Congested During Peak Drive Times

On Thursday, November 18, the House passed, 296-135, the conference report (H.Rept. 106-479) to accompany the omnibus appropriations bill (H.R. 3194) to fund several agencies of the government through fiscal year 2000, which began October 1.

In addition to the District of Columbia funds which it originally included, the omnibus measure also incorporates the funding for those agencies whose appropriations have not been individually enacted: Commerce-Justice-State (H.R.3421); Foreign Operations (H.R. 3422), Interior (H.R. 3423), and Labor-HHS-Education (H.R. 3424). The Senate is slated to take up the bill next, although the final vote may have to wait until Saturday, after cloture is invoked on a threatened filibuster. Having previously passed five continuing resolutions extending FY1999 funding through November 17, Congress this week passed three more such resolutions, House Joint Resolutions 80, 82 and 83, extending funding through November 18, November 23 and December 2, respectively, if needed.

With the omnibus bill finished, the Senate and House will adjourn for the remainder of 1999. The House left Thursday evening and will not return for votes unless Senate changes require it.

The bill contains a 0.38% across the board reduction on discretionary spending. However, rather than cutting each program by that amount, each agency reportedly will be able to choose how to implement the cuts, except that no program may be cut more than 15%. In one example, the Department of Education will reportedly be required to cut $112 million from its levels in the Labor-HHS-Education bill (H.R.3424).
 

Commerce-Justice-State Approps includes SCAAP, Meth and Border Patrol Funds

The omnibus appropriations bill contains $585 million in FY2000 funding for the State Criminal Alien Assistance Program (SCAAP). The program, funded at the same level as last year, partially reimburses states and counties for the costs of incarcerating illegal criminal aliens. Last year, California received about 42.5 percent, or $244.4 million, of the funds; so far this year, the state has received $177 million from the 1999 funding.

Funding is included for 1,000 new border patrol agents under the Immigration and Naturalization Service.

The Commerce-Justice-State portion of the bill includes $18.2 million to continue a California program to shut down methamphetamine labs.

A unified, bipartisan California Congressional delegation worked throughout the year to ensure these funds would be made available in the bill.
 

Patent Reform Attached to Omnibus Appropriations Bill

The text of S. 1798 (which is nearly identical to H.R. 1907), a bill to reform U.S. patent laws, has been included in the conference report on H.R. 1554, the satellite television bill, which in turn has been attached to the omnibus appropriations measure. For further details, see Bulletin, Vol.6, Nos.26 (8/5/99) & 36 (11/4/99).
 

Labor-HHS-Education Funding Includes Public School Choice Provision; Detrimental Hold Harmless May Be Extended Further

Reports indicate that the omnibus appropriations measure may give the $8 billion Title I education program for disadvantaged students an increase of more than $200 million over FY1999 levels. In theory, any increase above the prior year’s funding level would help remedy a funding shortfall facing California. Unfortunately, a recently-added provision may threaten part of that boost.

As reported previously, the appropriations bill cuts California’s Title I share by imposing a so-called “100% hold harmless,” which takes funds from California and other states with rapid growth in poor children and shifts it to states with slow or no growth — thus controverting the intent of the authorizing law. Senators from slow-growth states have ensured that they get all the money they received the prior year regardless of the burgeoning needs in states which actually have poor child growth. Only after the FY1999 funding level has been reached for all states do additional funds flow to California and 16 or 17 other high-growth states. As a result, California would be expected to receive more than 20% of any funds above the FY1999 level.

That boost may be in jeopardy, however. A last-minute earmark has been applied to the Title I program, specifying that $134 million in Title I funds shall be used for “program improvement” activities at underachieving Title I schools. According to press reports, the public school choice provision, crafted by Congressional Republicans and the Clinton Administration, would require school districts to transfer children from a failing school to another public school in the district.

There is considerable concern that these funds would be skimmed from the increase in Title I dollars and be subjected to the 100% hold harmless, thus squelching as much as two-thirds of California’s potential accelerated increase in Title I funds.

Unfortunately, the House and Senate chair and ranking minority members of the Labor-HHS-Education appropriations panels all represent slow growth states: Illinois (Rep. John Porter), Wisconsin (Rep. David Obey) Pennsylvania (Sen. Arlen Specter), and Iowa (Sen. Tom Harkin).
 

Five Year Extension Granted for R&D Tax Credit; Graduate Education Assistance is Dropped

On Thursday, November 18, the House overwhelmingly passed, 418-2, a negotiated package to extend various tax credits that either have expired or will soon expire. Included in the package is a five year extension of the popular research and experimentation (R&D) tax credit. Retroactive to its expiration on June 30, 1999, the credit will now run until June 30, 2004. A one percent increase in the alternative incremental credit rate (AICR) is also included. The five-year extension is the longest period for which the credit has been authorized and represents a significant victory for the California congressional delegation and the state’s high technology companies, which have long fought for a permanent extension of the credit.

The tax package also includes two and a half year extension for the welfare-to-work and work opportunity credits. They will now run from June 30, 1999 to December 31, 2001. On the downside, the section 127 education assistance exemption was again only extended for undergraduate study. Section 127 exempts employees from including as income up to $5,250 received in undergraduate tuition assistance from employers. California’s high technology companies strongly support including graduate level tuition payments in the exemption.

The measure also extends through FY2000 the Trade Adjustment Assistance program, which provides aid to workers and companies injured by imports, and extends the provisions for tax-free construction bonds for public schools for two years.

The tax package was attached to the conference report on H.R. 1180, which protects the federal health benefits of disabled workers. The conference report is expected to be passed by the Senate soon and sent to the President.
 

U.S. & China Reach Deal on China Accession to WTO

On Monday, November 15, the Administration announced that it had reached an historic agreement with the People’s Republic of China, which paves its way to full membership in the World Trade Organization. The agreement, if fully implemented and enforced by China, will open up its markets to a broad range of American business sectors, including entertainment, Internet services, telecommunications, agriculture, finance, and manufacturing.

Under the agreement, China will reduce import tariffs from an average of 22 percent to 17 percent. It will double its import of U.S. films to 40 annually, increasing to 50 by the third year. Additionally, film and music companies will be allowed to share in the distribution revenues for half of the films. Beginning with China’s membership in the WTO, telecommunications and Internet service companies will be able to purchase up to 49 percent of Chinese businesses in these sectors, increasing to 50 percent after two years. Agriculture interests will be able to sell substantially larger amounts of agricultural commodities, such as rice and corn, to China, and make the sales to individually owned companies, rather than just state-run entities.

U.S. financial institutions and insurance companies will also have greater access to China’s markets. Banks will be able to make commercial loans in the local currency within two years of China’s membership in the WTO, and to individuals within five years. Insurance companies will be able to offer property and casualty insurance coverage to Chinese entities and individuals.

China is California’s 12th largest trading partner, accounting for $2.5 billion in exports in 1998,the last year for which figures are available.

Before the deal is fully set in motion, Congress will have to pass implementing legislation, including permanent normal trade relations (NTR) status for China. In the past, the annual extensions of NTR (formerly most-favored nation) status, have stirred contentious debate in Congress, especially on the House side. Because of this, the consideration of the implementing bill may play a major role in next year’s legislative agenda.
 

Bill Stiffening Copyright Penalties Passes House

After work was completed on the omnibus spending package on Thursday evening, by unanimous consent the House passed H.R. 3456, which increases the minimum statutory damages for copyright infringement and toughens sentencing guidelines. Weak enforcement provisions have discouraged prosecutors from pursuing infringement cases in the past.

The bill incorporates much of H.R. 1761, the Copyright Damages Improvement Act, introduced by Rep. James Rogan (Glendale) and passed by the House by voice vote on August 2. The bill passed on Thursday is part of an effort to work with the authors of the Senate counterpart bill, S. 1257, and the hope is that the Senate will also pass H.R. 3456 by unanimous consent before adjourning for the year.

Rep. Howard Berman (Valley Village) commented that toughening copyright infringement penalties is an important issue for many Californians. California’s entertainment and software industries and others in research and other creative ventures are injured severely by intellectual property theft.

See also, Bulletin, Vol. 6, No. 18 (5/28/99).
 

California Delegation Sends Letter Urging Radon Rule Delay

On November 14, a bipartisan cross-section of twenty-seven members of the California Congressional Delegation sent a letter to EPA Administrator Carol Browner urging her to extend by 60 days the comment period for EPA’s proposed rule on radon in drinking water. The letter states that because EPA does not currently regulate radon levels, many water agencies are unaware of the levels of radon in their water or of the possibly adverse health effects caused by various treatment options. Moreover, the best treatment for radon removal is aeration, which may create air quality and health problems for individuals near the treatment facilities. For local government entities to address these issues properly, the letter requests an additional 60 days beyond EPA’s current 60-day comment period.
 

Joe Baca Wins Race to Represent California’s 42^nd Congressional Seat

State Senator Joe Baca defeated businessman Elia Pirozzi with 52% of the vote in the special election to replace the late Rep. George E. Brown, Jr. in the state’s 42nd Congressional District, which covers Colton, Fontana, and other parts of western San Bernardino County.

Rep. Baca graduated from Cal State University, Los Angeles in 1971 after serving in the United States Army. A Democrat, he has served in both the California State Assembly (1993-99) and the California State Senate (1999). Rep. Baca is married and has four children.

He was sworn in to the House of Representatives on Thursday, November 18, to finish out the first session of the 106th Congress, and appointed to the House Committees on Agriculture and Science — panels on which the late Rep. Brown had served.
 

Medicare “Giveback” Legislation To Benefit California Hospitals

On Wednesday, November 17, negotiations on a Medicare “giveback” measure (originally H.R. 3075, S.1788) were finalized and added to the fiscal 2000 omnibus spending bill, H.R. 3194. Authored by Rep. Bill Thomas (Bakersfield), the bill aims to relieve health care providers affected by the federal cuts of the 1997 Balanced Budget Act. If enacted, the Medicare “giveback” bill will further change reimbursement rates for hospitals, skilled nursing facilities, and home health care programs, while altering reimbursement disparities among states for teaching-hospitals. In sum, it would restore $12.8 billion over the next five years in payments to hospitals, facilities, and home care programs nationwide.

Under the bill, skilled nursing facilities would see a boost in Medicare reimbursements in the next three years. From April 1-October 1, 2000, facilities would get a 20% increase in Medicare payments for twelve groups of patients in addition to three groups receiving rehabilitative treatment. In the bill, AIDS patients would also receive funds for two years. The legislation further calls for a 4% across-the-board increase in payments for fiscal years 2001 and 2002. Nursing homes would be able to choose whether to implement a new prospective payment system (which began in July 1998) or continue under the current payment system. Wednesday’s compromise came after the House presented their version which would have increased payments by 25% from April 2000 to October 2001 for six groups of patients, and added bonuses to five groups of rehabilitative therapy patients. The Senate version (S.1788) would have increased payments by 10% for 12 groups of patients from April until October 2000.

One key provision, urged by Rep. Thomas, aims at reducing the disparity that exists among Medicare subsidies for teaching hospitals. Currently, California medical schools receive 40% less in Medicare subsidies than similar New York institutions. The bill would help reduce this disparity by increasing the minimum payment for teaching hospitals to 70% of the national average. Hospitals with costs greater than 140% of the national average would receive a freeze for fiscal 2001 and 2002, then a payment increase equal to the Consumer Price Index minus 2 percentage points.

Home health agencies would receive an extra $1.3 billion over five years. The legislation delays for one year a 15% cut in payments that was previously scheduled to take place starting Oct. 1, 2000. Additionally, $1500 caps on physical, speech, and occupational therapy would be lifted for two years.

A “risk adjustment” calculation was also negotiated into the bill, which would pay plans less for healthier patients and more for sick ones. Further, it would pay more for plans in counties without a Medicare+Choice plan.

The bill also clarifies that the 5.7% cut for hospital outpatient plans that resulted from the 1997 Balanced Budget Act was a drafting error in the conference report and therefore unintentional.

These provisions are only part of the estimated $16.4 billion measure. Because this measure has been included in the omnibus spending bill, it should be signed by the President sometime next week.
 

McKeon and Sanchez Introduce Bill to Require Examination of California as Joint Strike Fighter Assembly Site

On Tuesday, November 16, Reps. Buck McKeon (Santa Clarita) and Loretta Sanchez (Anaheim) introduced H.R. 3396, a bill to require the Secretary of Defense to submit to Congress a report on production alternatives for the Joint Strike Fighter program. It is hoped that the study will conclude that California is the best site for production of the aircraft. An independent study completed in July estimated that $2.2 billion could be saved if the aircraft were built at the proposed Palmdale site.

The JSF is the first fighter which will be used jointly by the Air Force, Navy and Marine Corps. When the first JSF jets are operational in 2008, DOD is expected to purchase 3,000 planes over a 20-year period. A unanimous letter by the California Congressional delegation last fall highlighted the state’s advantages in terms of location, economies of scale, supplier networks and a skilled workforce. Boeing and Lockheed Martin are competing for the contract, with the winning company to be selected in 2001. In addition to the California site, the contractors are considering producing the planes in Fort Worth, Texas, or St. Louis, Missouri.

For more details on the Joint Strike Fighter, see Bulletin, Vol. 6, No 26 (8/5/99).
 

Governor Hosts California Aerospace Summit

On Sunday and Monday in Los Angeles, Governor Gray Davis hosted the Governor’s Aerospace Summit, entitled Preparing California for the Next Millennium, attended by several hundred participants and featuring presentations by thirty speakers.

Governor Davis addressed the group as the luncheon keynote speaker, noting that the industry remains a vital component of the state’s economy. He urged support for public-private partnerships, tax credits and tax exemptions for commercial space activities, and touted California’s strengths as a potential site for work on the Venture Star reusable launch vehicle and the Joint Strike Fighter project. The Governor praised the California Congressional delegation for its recent unity in fighting for defense and aerospace projects, and he cited the importance of educating a future workforce for the industry by raising standards for K-12 education generally and placing a particular focus on math and science education.

The Governor’s office plans to write up the recommendations from the proceedings in the near future.

Financial support for the event was provided by Allied Signal, Boeing, the California Manufacturers Association, the California Space Technology Alliance, the California Trade and Commerce Agency, Hughes, the International Associations of Machinists and Aerospace Workers, Lockheed Martin, Northrop Grumman, Raytheon, Space Systems/Loral, and TRW.
 

Profile of California’s Non-Poor Uninsured Reported by California HealthCare Foundation

In To Buy or Not To Buy, the California HealthCare Foundation (CHCF) profiles the non-poor uninsured in California and explores strategies to encourage segments of that population to buy health insurance. In 1997, seven million Californians were uninsured — nearly one-quarter of the entire state population. Eighty-five percent of those uninsured are workers, but most do not have access to health coverage through their employers. The non-poor uninsured tend to be single (69%), white (62%), below the age of 40 (62%), and have household incomes of less than 200% of the Federal Poverty Level ($33,000 for a family of four) (36%) .

The CHCF study further reveals the attitudes toward health coverage among the non-poor uninsured. While approximately half of the respondents reported that they were not worried or worried little about being insured, nearly the same amount worried some or a lot. Women felt more burdened by a lack of coverage than men. Apparently, concern over a lack of health care coverage did not appear enough of a reason to buy health insurance.

The study reveals that 75% cited affordibility as a reason for their lack of coverage. Ironically, however, respondents believed health care insurance cost about twice as much as they said they are willing to pay; many of the non-poor uninsured responded that they would be more likely to buy health coverage when informed of the actual price.

The report speculates that information about the cost of insurance and risks associated with being uninsured will not motivate this group to purchase health care coverage. However, according to the report, because people perceive that health insurance costs more than it actually does, an increase in awareness of lower premiums may convince some of the non-poor uninsured to purchase a plan.

For more information, contact the California HealthCare Foundation at 510-238-1040 or their web site: http://www.chcf.org .
 

California Small Employers Uninformed About Tax Deductibles on Insurance Premiums and Health Plan Purchasing Coalitions

Another recent study commissioned by the California HealthCare Foundation (CHCF) and conducted last year by William M. Mercer, Inc., sheds light on the more than half of California small employers who do not provide health insurance for their workers. While 8 out of every 10 uninsured Californians belong to families headed by a working member, only 48% of their employers offer health coverage. California trails the 53% national average of small businesses offering health care coverage.

While health insurance coverage for small firms in California costs an average of $2,865 to $3,321 less than the national average, 60% of small employers not offering insurance cited cost as one of their top two reasons for not doing so. The study found that 42% of California small businesses not offering health coverage were unaware that their contribution to premiums would be tax deductible. Furthermore, 75% were unfamiliar with laws that prevent insurers from refusing to sell coverage to employers or charging them significantly more than their standard rates. The majority of non-sponsors have also never heard of the Health Insurance Plan of California (now Pacific Health Advantage) or California Choice. The 40% of small businesses that did not cite cost as their primary factor in their decision claimed that their employees “get coverage elsewhere,” and “employee turnover is too high.”

On the other hand, those small businesses sponsoring health care coverage do so primarily to “keep workers healthy” (61%), because they believe it is an “employer’s responsibility” (51%), and to attract and retain employees (44%). More than half of sponsors also say that their competitors offer coverage, compared to only 9% of non-sponsors. On average, sponsors have more than twice as many full-time employees, pay their employees $13,000 more, are better informed about health plan purchasing coalitions and maintain a turnover rate which is 11% less than non-sponsors.

Mercer’s national small business survey was administered over the telephone to all U.S. employers, public and private with 10-49 employees. California was segmented into four geographic areas: Los Angeles, San Francisco area (including Oakland and San Jose), Northern California (excluding San Francisco), and Southern California (excluding Los Angeles).

For more information please contact Charles Stewart at 510-238-1040 ext. 157 or go to the CHCF web site: http://www.chcf.org/uninsured/mercer.cfm .
 

Bipartisan Effort by Doolittle & Feinstein would Improve Lake Tahoe

A bipartisan effort is underway to improve Lake Tahoe’s water quality and protect its forests. Rep. John Doolittle (Roseville) and Sen. Dianne Feinstein introduced H.R.3388 and S.1925 which would require the U.S. Forest Service to develop a priority list of environmental restoration projects each year. The companion bills would further authorize $200 million over ten years to implement these priority list restoration projects on federal lands. Under both measures, local governments would receive $100 million for erosion control activities. The Tahoe Regional Planning Agency and local utility districts would be provided with $1 million to clean up wells and water contaminated by MTBE. The Federal government would additionally cover two-thirds of relocation costs that may burden local governments which clean up the basin. The companion bills retain the name Lake Tahoe Basin Management Unit.

In recent years, Lake Tahoe has deteriorated and has garnered needed attention from legislators. Sen. Feinstein recently remarked that “Lake Tahoe is in a state of environmental emergency. . . The combination of pollution and sedimentation has reduced the lake’s clarity by thirty feet in the last twenty-seven years.” The lake’s decline has inspired the establishment of the Lake Tahoe Transportation and Water Quality Coalition, comprised of eighteen environmental and business groups committed to cleaning and preserving the region.

For more information, contact Howard Gantman in Sen. Feinstein’s office 202-224-9629 or Peter Evich in Rep. Doolittle’s office 202-225-2511.
 

House Passes Bill to Allocate School Funds For Logging Districts

On November 3, the House approved by a 274-153 vote, H.R. 2389 which would aid counties with large areas of national forest lands in light of a recent decline in the logging industry. Since 1908, logging areas have received 25% of local federal timber sale receipts for their school and road budgets to compensate for reduced tax income from federal land. However, timber sales have declined over the past several years, as well as the federal funds logging-counties rely on — some counties’ payments have dropped as much as 90%. California contains 39 counties with national forest land currently receiving funds for their timber receipts. While the Omnibus Budget Reconciliation Act of 1993 provided temporary relief to 72 counties in Oregon, Washington and Northern California, it is expiring and does not account for counties across the United States with similar losses.

Specifically, H.R. 2389 would require the Secretary of the Treasury to make a payment equal to the average of the three highest timber payments that counties received between 1984 and 1999. Counties would have to meet eligibility criteria requiring each area to have received only 50% payments for one or more of the 15 years between 1984 and 1999. The current proposal, however, does not guarantee continuous aid because Congressional approval would be needed to secure the funds each year. H.R. 2389 would further establish a National Advisory Committee to develop a long-term strategy for compensating logging counties.

Due to time constraints in this session, H.R. 2389 will be taken up in the Senate next year.
 

Eight California Metro Areas Are Among the Nation’s Most Congested During Peak Drive Times; L.A. Ranks First, S.F. Third

In its 1999 Urban Mobility Study, the Texas Transportation Institute (TTI) studied 68 of America’s most congested cities over fifteen years between 1982 and 1997. The study monitored travel conditions in major urban areas in order to raise awareness of traffic’s effects on society: increased travel time, increased fuel consumption in stop-and-go traffic, and lost productivity of people and freight-moving vehicles. Many of America’s most congested cities are located in California: Los Angeles- Orange- Ventura Counties (rank #1), San Francisco-Oakland (rank #3), San Diego (rank #9), San Jose (rank #15), San Bernardino (rank #16), Sacramento (rank #21), Fresno (rank #48), and Bakersfield (rank#61). Commuters in more than one third of the 68 cities featured in the report spend more than one week per year in delayed travel time.

Travelers in the most congested urban area in America, Los Angeles, on average spend 82 hours a year stalled in traffic, wasting 120 gallons of gas in stop-and-go traffic. While traffic congestion has increased by 65% in Los Angeles between 1982 and 1997, delay times increased by only 2%. Drivers in Los Angeles waste over $1,370 per eligible driver on congestion.

San Francisco drivers experience 58 hours a year stuck in traffic and spend $995 on gasoline while idling. San Diego travelers spend 36 hours a year delayed in traffic while wasting 59 gallons of gas. According to the study, they pay an average of $685 in costs associated with inconvenience. San Jose drivers experience 45 hours of delayed traffic per year and spend $765 on extra gas.

While ranked at #15, San Bernardino drivers spend a high $815 per driver in congestion costs per year. Sacramento, ranked #21, experiences 38 hours stalled in traffic per year and traffic time has worsened by 4% in the past five years. Sacramento drivers spend $645 on gas wasted while stalled in traffic. Fresno drivers are stalled in traffic for 19 hours a year, while spending $315 on congestion costs. Drivers in Bakersfield experience 8 hours of traffic delay per year and spend $155 on annual individual congestion costs.

TTI speculates that adding road space, decreasing vehicle numbers, changing vehicle use time, and providing a more efficient operation of a roadway may help to alleviate some of the problems associated with congestion. It concludes, however, that a broader set of multi modal measures is needed to fully evaluate the impact that these possible solutions may have on urban congestion problems.

The TTI study was sponsored by California and eight other state transportation departments. Rankings of cities were dependent on each city’s Travel Rate Index, or amount of extra time it takes to travel during the week.

In one arguably bright spot, cities in other states are getting worse faster than those in California. Among the 68 cities studied, San Jose, San Francisco, Los Angeles, San Diego and San Bernardino have among the slowest rates of growth in the travel rate index from 1992 to 1997. Only Bakersfield, which saw a 67% increase in its travel rate over the period, was above the median for travel time growth. According to the study, San Jose has actually improved 3% since 1992. When compared to 1982, the picture worsens. San Jose is more than 200% worse than in 1982, as is Fresno, while Sacramento and Bakersfield worsened roughly 400% over that 15-year period.

For more information, or to find out specific data on certain cities contact the Texas Transportation Institute at their web site: http://mobility.tamu.edu .
 

Correction

S. 1866, as reported in last week’s Bulletin, would allow the governor of any state to waive the 2% oxygenate content requirement for reformulated or clean-burning gasoline as long as the gasoline meets other requirements in the law for reformulated gasoline.
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