CONTENTS OF THIS ISSUE:

Appropriations Passes Commerce, Justice, State Bill; SCAAP Funding Stagnant at $585 Million

House Energy & Water Bill Funds Fusion, NIF

Bay-Delta Zero-Funded In Energy-Water Appropriations

Labor-HHS-Education Appropriations Bill Passes House

Electronic Signatures Conference Report Approved

House Judiciary Examines Webcasting of Copyrighted Material

House Immigration Subcommittee Discusses Foreign Worker Program

PPIC Shares Insight into State’s Infrastructure Decision Making

Gov. Davis Invites Defense Secretary to Discuss JSF Siting

Proposal Would Shift Adjustment Decision to Census Bureau

RAND Studies Federal R&D Spending; California Receives Lion’s Share

CBP Examines California’s Housing Crisis

HUD Reports on a California Paradox: High Tech Boom For Some and High Poverty Rates For Others

NGA Reports Examines Quality of Life Issues in the New Economy

Senate Passes FY01Transportation Appropriations Measure; Institute Updates State Impacts Report on Website

Appropriations Passes Commerce, Justice, State Bill; SCAAP Funding Stagnant at $585 Million

On Wednesday, June 14, the House Appropriations Committee reported its FY01 Appropriations for the Departments of Commerce, Justice, and State. Although the bill was reported by voice vote, the markup took six hours with 13 roll call votes on 19 amendments. All attempts to increase funding for programs were defeated, although often by a narrow margin. For instance, the Committee defeated, 26-27, an amendment offered by Rep. Julian Dixon (Los Angeles) that would have increased funding for international peacekeeping missions by $241 million.

The bill includes $585 million in funding for the State Criminal Alien Assistance Program (SCAAP), which partially reimburses the states for the costs of incarcerating illegal criminal immigrants. See, Bulletin, Vol. 7, No. 19 (6/8/00). The figure is the same as that appropriated in both FY99 and FY00. In FY98-99, California received about $244 million from SCAAP.

The bill also includes $2.5 billion for Enforcement and Border Affairs, including the following increases:

– $52 million for 430 positions and 215 full time equivalent (FTE) positions for new border patrol agents. However, the committee report chastises the Immigration and Naturalization Service for only filling 2,630 new agent positions, despite congressional funding for 4,430 new agents.

– $6.7 million funding for inspectors at land border Ports of Entry for 72 new positions and 36 FTE positions;

– $11 million for 100 positions and 50 FTE for 23 additional Quick Response Teams to work with state and local law enforcement officers to take into custody and remove deportable aliens; and

– an additional $5 million for 46 positions and 23 FTE to expand the ongoing criminal Alien Apprehension Program (CAAP) to identify and deport criminal aliens in local and county jails.

A number of INS construction projects are also funded under the bill, including the following:

Border Patrol Stations:

– $4 million for El Centro;

– $5.4 million for Temecula;

– $5 million for Campo;

– $3.3 million for San Diego; and

– $307,000 for El Cajon.

Detention and Deportation Projects:

– $800,000 for San Pedro; and

– $300,000 for El Centro.

A more detailed analysis of the bill from a California perspective will be available shortly on the Institute’s website: http://www.calinst.org .

House Energy & Water Bill Funds Fusion, NIF

On Monday, June 12, the House Subcommittee on Energy and Water Development Appropriations marked up its FY01 funding bill, providing $21.74 billion in total discretionary funding. For fusion energy sciences, the Subcommittee’s bill reportedly provides $250 million, a small increase over the $244 million that was appropriated in FY00 and the Administration FY01 budget request of $247.3 million. In addition to this amount, the bill also includes $25 million from defense funds for high average power lasers under the inertial confinement fusion (ICF) account, a boost of $15 million over the FY00 level. The proposed levels, while still an increase, are substantially below historical levels. If funding were adjusted for inflation, the FY 95 fusion energy sciences budget was $400 million. California wins a large share of federal fusion spending, which supports roughly 1,400 direct jobs in the state at companies such as General Atomics and SAIC, universities (including U.C. campuses at Berkeley, Davis, Irvine, Los Angeles, San Diego and Santa Barbara, and others), and national laboratories at Livermore, Berkeley, and Sandia-Livermore.

The bill reportedly provides overall funding for ICF programs (including NIF) of $365 million as compared to the Administration’s requested level of $340 million. For the National Ignition Facility, the bill provides the Administration’s requested level of 74.1 million, with additional dollars postponed due to a lack of Administration budget specifics.

Senate subcommittee and full committee action is expected next week.

Bay-Delta Zero-Funded In Energy-Water Appropriations

The Energy and Water Appropriations Subcommittee reported its FY01 appropriations on Monday with no new funding included for the Bay-Delta restoration project. Rep. Ron Packard (Oceanside), Chair of the Subcommittee, explained that lack of funds compelled the decision. The Subcommittee established three criteria to determine what it could not fund: 1) any construction project not currently underway; 2) any unauthorized projects; and 3) any funds to the Army Corps of Engineers in excess of what it can spend in FY01. The Bay-Delta authorization bill expired this year, and Congress has not reauthorized it, although some members of the California delegation and Bay-Delta stakeholders hope to do so before the session ends.

Labor-HHS-Education Appropriations Bill Passes House

On Wednesday, June 14, the House finished work on the FY01 Appropriations Bill for the Departments of Labor, Health and Human Services and Education, providing a significant boost to the National Institutes of Health and level-funding many education programs. The bill would provide $342 billion in total spending, although just $100 billion is discretionary funding, with the remaining $242 billion in mandatory spending such as Medicaid. There were few changes made during floor action, though there was much debate about the bill. A review of the bill from a California perspective, with a comparison between the House and Senate versions, is available on the California Institute website at http://www.calinst.org/pubs/lheapp01.htm .

Electronic Signatures Conference Report Approved

After months of negotiations between industry and consumer groups, the House gave overwhelming approval to the conference report to accompany S. 761, the Electronic Signatures in Global and National Commerce Act (ESIGN)," on Wednesday, June 14 by a vote of 426-4. All of the California congressional delegation supported the bill. The Act, which the President has indicated he will sign, gives the same validity to contracts executed electronically by so-called "electronic signatures" as to written ones. It is expected to make business-to-business and business-to-consumer transactions easier and more efficient.

The negotiations over the last few months, however, have centered on providing adequate consumer protections. The final language, for instance, requires specific consent from consumers to receive notices electronically and requires that notice of cancellation of utility services, health and life insurance, and mortgages may not be executed electronically. The bill also allows federal and state regulatory agencies to continue to require written filings of records if there is a compelling government interest. In most instances, however, the bill is intended to pre-empt state law and establish national standards for the validity of electronic signatures.

The Senate is expected to pass the bill and send it to the President shortly. The Conference Report can be obtained on the House Commerce Committee’s website at: www.house.gov/commerce.

House Judiciary Examines Webcasting of Copyrighted Material

The House Judiciary Subcommittee on Courts and Intellectual Property held a hearing on Thursday, June 15 to examine the issues surrounding the webcasting of copyrighted material. In his opening statement, Chair Howard Coble (NC) stated the goal of the hearing was to see how programming was being streamed to the public currently, and the impact that is having on copyright laws.

Mr. Jack Valenti, Chairman and Chief Executive Officer, Motion Picture Association of America, testified that individuals and organizations in the sports and entertainment industries have formed "The Copyright Assembly" because of their concerns over the future of creative works "in a digital world where theft is easy, protection hard to come by, and too many people are seemingly unaware that stealing is wrong." Mr. Valenti pointed out that intellectual property comprised 6.5% of the nation’s Gross Domestic Product ($530 Billion) in 1997 and generates about $67 billion annually in international revenues, and produces new jobs at three times the annual rate of the economy as a whole. He urged the Committee to put intellectual property rights at the top of its agenda as it considers public policy issues related to new technological advancements.

Ms. Hilary Rosen, President of the Recording Industry Association of America, also testified. She detailed some of the ways in which the industry is responding to webcasting of sound recordings, such as negotiating licenses with webcasters and working with them to develop more personalized programming for individuals. The challenges continue to remain substantial, however, according to Ms. Rosen, because no industry-wide standards have been developed as yet to guide the process. Nevertheless, she believes that the marketplace is working and the current course of action, negotiating with webcasters, is the correct one.

For the testimony of all the witnesses, click on the Committee’s website at www.house.gov/judiciary.

House Immigration Subcommittee Discusses Foreign Worker Program

On Thursday, June 15, the House Judiciary’s Immigration and Claims Subcommittee held a hearing on H.R. 4548, the "Agriculture Opportunities Act." Introduced by Rep. Richard Pombo (Tracy), the bill would reform the H-2A the program under which legal, non-immigrant, foreign workers can be brought into the United States to perform temporary agricultural work, when domestic workers are unavailable. The proposal would replace the program with a three year pilot project that would set up a computer-based worker registry, with a specific wage rate and housing guarantee to all workers.

Panels I and II, testifying before the Committee, consisted of: Rep. Richard Pombo, John Fraser, Deputy Administrator, Wage and Hour Division, U.S. Department of Labor; and Cindy Fagnoni, Director, Education, Workforce and Income Security Issues, U.S. General Accounting Office (GAO). On panels III and IV, eight representatives from farmworkers’ and employers’ associations testified.

Rep. Pombo testified that the need for his bill is imminent because of labor shortages during harvest time. He said that many employers do not know the status of their employees until the INS raids a farm and employees are removed. Rep. Pombo further cited that 52 percent of today’s farm workers are illegal, and the registry in his bill would be a "win for immigration control."

John Fraser of the Department of Labor testified in opposition to the bill, claiming that H.R. 4548 would "encourage rather than discourage illegal immigration;" reduce work opportunities for U.S. citizens and other legal residents; and depress wage and work standards for American workers. He suggested that Congress raise the minimum wage and simplify the H-2A application process in order to improve the current condition. If the bill should pass Congress, Fraser testified that the Secretary of Labor will recommend that the President veto the bill.

Ms. Fagnoni reported the following 1997 GAO findings and conclusions to the committee: a widespread farm labor shortage is unlikely in the near future, although localized shortages are possible; and there are concerns with lack of enforcement and implementation of the H-2A program by the Immigration and Naturalization Service (INS).

Another witness, Dr. James Holt of the National Council of Agricultural Employers testified in support of the bill, arguing that it will assure that domestic farm workers have first access to agricultural jobs by providing greater access to job availability.

Ms. Cecilia Muñoz, Vice President of the National Council of La Raza testified that a shortage of decent jobs and fair salaries exists, not a complete shortage of farm workers. She further stated that the unacceptable status quo is a result of "a complete lack of enforcement of the few labor standards that actually apply to farm work." Rep. Howard Berman (Valley Village) appeared to concur in an earlier statement that "it is cheaper to bring in H-2A workers from Mexico than Texas" and that fiscal advantage needs to be considered.

For more information, contact the Subcommittee at (202)225-5727 or at its website: www.house.gov/judiciary .

PPIC Shares Insight into State’s Infrastructure Decision Making

In conjunction with the Governor’s Commission on Building for the 21^st Century, the Public Policy Institute of California (PPIC) has released two reports that evaluate the state’s infrastructure demands and current resources. California’s Infrastructure Policy for the 21^st Century: Issues and Opportunities recommends that California move towards infrastructure projects based on demand. See Bulletin Vol. 6, No. 40 (12/9/99). The second report, Building California’s Future: Current Conditions in Infrastructure Planning, Budgeting, and Financing, finds that there are certain general characteristics to the infrastructure decision making process: it is project-orientated, balanced by short-term asset management, and dependent on available budget funds.

As a result of these characteristics, PPIC found that foremost infrastructure needs outweigh current resources, and that the processes surrounding infrastructure projects are complex and constantly changing. Furthermore, there is a lack of big-picture foresight and consideration of the business cycle, according to the report.

For more information, contact PPIC at (415) 291-4400 or at their web site http://www.ppic.org .

On Monday, June 12, Governor Gray Davis wrote to Secretary of Defense William S. Cohen proposing that they meet to discuss and jointly tour the Palmdale facility which California would like to see as the production site for a massive fighter plane project. The letter notes that "California has put together a package of incentives worth at least $2.2 billion in savings for the Joint Strike Fighter – enough to build 55 additional aircraft – if the JSF final assembly is located in California."

Last month, Governor Davis, Senators Feinstein and Boxer, and 50 members of the California Congressional Delegation wrote to Pentagon officials and project contractors asking that they examine the cost-effectiveness of competing sites before selecting a location for production. The House version of the Defense Authorization Act for FY 2001 (H.R. 4205) includes a provision requiring such an examination.

The JSF would be the largest DOD project ever, totaling approximately $750 billion. A recent study found that building the JSF in California would save over $2.2 billion due to the state’s targeted tax credits; state enterprise zone designation; manufacturers’ investment credits; employer recruiting and training incentives; and R&D tax credits. Lockheed Martin and Boeing are competing in the development stage to build the multi-service fighter, which will be used by the Air Force, Navy and Marine Corps.

See also Bulletin Vol. 7, Nos. 7 (3/3/00) and 16 (5/11/00).

In one of his last acts at the Commerce Department before moving to the Gore campaign, Secretary William Daley on Wednesday, June 14, proposed that the Census Bureau have the final say over whether or not to update 2000 Census figures to adjust for undercounting. If accepted, his proposal would leave the decision over the use of statistical adjustment techniques entirely up to technicians at the Census Bureau and would not be open to review by any non-scientific decision-makers elsewhere within the government.

In effect, the move would greatly increase the likelihood that sampled data will be used, as the Census Bureau has long advocated the use of sampling methods to adjust headcounted data. It was Census Bureau officials who advocated adjustment of 1990 census figures following the discovery of a significant undercount, a plan rejected by Robert Mosbacher, Commerce Secretary under then-President George Bush. In 1990, California was undercounted by a larger percentage than the nation as a whole.

The proposed regulation unveiled by the Commerce Department will be published in the Federal Register, and, following a public comment period, could become a final regulation by this fall. The decision regarding whether or not to use sampled data would be made after that, though court action is likely regardless of the Administration outcome.

In addition, during a June 14 briefing, Census Bureau Director Kenneth Prewitt noted that the Los Angeles census data collection center is among those producing the strongest response rates nationwide, and the current phase of data gathering for the Los Angeles center is expected to be complete within the next few days.

RAND Studies Federal R&D Spending; California Receives Lion’s Share

On Thursday, June 15, Santa Monica-based RAND released a 360-page report detailing federal research and development expenditures in the 50 states. The report, prepared for the White House Office of Science and Technology Policy (OSTP), found that California receives $14.4 billion in federal R&D funding in FY 1998, or roughly 18 percent of the more than $80 billion spent nationwide.

California’s $14.4 billion total is ahead of number two Maryland, which received $8 billion. The next largest recipients included Virginia, Georgia and Texas, each of which received between $4 billion and $4.6 billion.

While California was first in total dollars, the state ranked ninth among states (plus DC and Puerto Rico) in federal R&D dollars per capita, receiving $441 for each person in the state. Leaders in per capita receipts were DC ($5,139), Maryland ($1,573), and New Mexico ($1,328).

The report estimated that nearly one in five of the federal dollars which are spent in California are used for R&D purposes. To derive state figures, RAND averaged each states federal R&D receipts over the six years from 1993 to 1998, comparing that share with national totals.

In a chapter specifically focused on California, RAND briefly examined 67 federal research units located in the state, and also detailed federal grants to California universities and industry firms, and others. Major university recipients of federal R&D grant dollars included the University of California ($8.1 billion), Stanford ($1.3 billion), the University of Southern California ($674 million), Caltech ($609 million), the California State University system ($436 million).

The report noted major industry recipients of contract and cooperative agreement funding including TRW ($647 million), Boeing ($565 million), SAIC ($339 million) and McDonnell Douglas (now Boeing, $298 million) — amounts in addition to R&D grant totals.

A link for the complete report are available on the RAND website, at http://www.rand.org/publications/MR/MR1194/ . The 32-page chapter which focuses specifically on federal research spending in California is available at http://www.rand.org/publications/MR/MR1194/MR1194.chap5.pdf .

CBP Examines California’s Housing Crisis

In Locked Out! California’s Affordable Housing Crisis the California Budget Project (CBP) looks at the "mismatch between high employment growth areas and affordable housing."

The report attributes California’s lack of affordable rental rates, declining home ownership, and overcrowding to three factors. First, a 69 percent decrease in multifamily housing has occurred between1980 and 1990. Second, job growth has exceeded housing construction – 3.9 jobs per each one unit of housing. And third, Proposition 13 has created a system that favors sales tax generating retail development over residential construction.

The report further points to a trend of declining state and federal funds. "California received fewer federal housing assistance dollars in 1999 for each individual living below the federal poverty level than all but one of the ten largest states. While the federal government spent on average $286 on housing assistance for each person in poverty, California received only $171 per person." At the state level, in absolute numbers of dollars allocated to housing and related programs, funding has dropped more than 50 percent in the last decade.

In the report, CBP additionally evaluates the unique housing problems in different areas of the state: Los Angeles, Orange County, the Inland Empire, San Diego, the Bay Area, Sacramento, and the Central Valley. Orange County renters exceed the low cost rental units available by a ratio of 4.6-to-1 because of the number of low wage workers and the extreme housing shortage. The Central Valley, however, faces other challenges: recent steep increases in median home prices — a 7.6 percent jump from 1998 to 1999.

The report suggests that in order to face the housing challenges in California, there needs to be an increased commitment on the state and federal level as well as a more effective use of existing resources.

For more information, contact the California Budget Project at (916)444-0500 or at their web site http://www.cbp.org .

In The State of the Cities, by the U.S. Department of Housing and Urban Development (HUD), the booming economy and the surge of high tech companies does not necessarily equate to a balance of wealth across California. At least ten California cities have experienced populations surges, high poverty rates, and high unemployment at the same time that other cities saw a surge in high tech job growth.

California cities occupied 10 out of the top 15 "doubly burdened central cities," or cities with unemployment at or above 6.3% in 1999 and either a population loss of five percent or greater (1980-88) or a poverty rate at or above 20 percent (1995). In each of those California cities, population loss was not a factor; in fact an increase in population between 21 and 33 percent occurred. Ranking at #10, Porterville has a nearly 20 percent unemployment rate, 31 percent poverty rate, and witnessed an 80 percent population surge in the 1980s. Chico ranked first out of the California cities on the list, and fifth overall, maintaining a 6.6 percent unemployment rate, 28.4 percent poverty rate, and a 76 percent population jump. California cities included in the top fifteen doubly burdened cities include: Chico, Fresno, Los Angeles, Madera, Merced, Porteville, Salinas, San Bernardino, Stockton, Tulare, and Visalia.

In contrast to the top burdened cities, other areas of the state showed an increase in the percentage of high tech jobs between 1992 and 1997. In that time frame, an increase of 54 percent in high tech jobs occurred in the city of Oakland. The percentage of high tech jobs in selected California metro areas, overall, increased with Orange County rising by 84 percent, Los Angeles-Long Beach by 82 percent, and San Jose by 80 percent. The same was true for California cities:

Ironically, the report showed that while Stockton maintains a 25.8 poverty rate, 69 percent of all new jobs created (1992-1997) were high tech opportunities.

For the full report or a detailed city report, contact the HUD web site at http://www.hud.gov.

In Growing Pains, Quality of Life in the New Economy, the National Governors’ Association (NGA) looks at common problems and challenges facing the nation and its regions in the New Economy and praises case studies that demonstrate state-local-federal cooperation in order to improve quality of life.

The report points to some traditional problems associated with the development of a strong economy: suburbanization, traffic congestion, environmental degradation and a decrease in open spaces. These challenges lead to increasing government costs associated with the need for new housing, more government subsidies and higher property taxes, according to the report. The report expresses concern that economic boom times may paradoxically threaten long-term economic growth by killing "the goose that lays the golden eggs."

In one example, the report argues that economic growth may be stifled by a loss of agriculture. In the Central Valley, "which produces 10 percent of the nation’s farm output on less than 1 percent of its land, residential and commercial sprawl is consuming an estimated 15,000 acres of farmland annually and could affect more than half of the irrigated farmland by 2040."

The Governors recommend five principles to guide states: follow intelligent growth strategies, build specific approaches to specific cases, expect uncertainties, work with local communities, and recognize that smarter growth will retain and attract New Economy companies and workers. Based on case studies around the country, the report also recommends setting statewide goals, revitalizing run down neighborhoods, cleaning up brownfields, preserving contiguous land space, and increasing collaboration with local governments.

For more information, contact the National Governors’ Association at 444 North Capitol St., Washington D.C. 20001-1512 or at their web site http://www.nga.org .

Senate Passes FY01Transportation Appropriations Measure; Institute Updates State Impacts Report on Website

On Wednesday, June 14, the California Institute updated its analysis of the FY01 Appropriations bill for the Department of Transportation. The initial analysis of the House version of the bill has been supplemented with analysis of the Senate version of the bill, passed by the Senate Appropriations Committee on Tuesday, June 13, and passed by the full Senate on Thursday, June 15 on a 99-0 vote. While the House and Senate versions agree on most appropriations measures, differences between the chambers arose over specific projects and programs.

The Institute report is available on our web site at http://www.calinst.org/pubs/tranapp01.htm or in Adobe Acrobat ("pdf") form at http://www.calinst.org/pubs/trap01.pdf .

Other reports available on the website include assessments of recent appropriations activity on Agriculture, Interior and Labor-HHS-Education bills. Analyses of additional spending measures will be posted as the bills and reports are made public and as review is completed.

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