CONTENTS OF THIS ISSUE:

House Resources Subcommittee Discusses CALFED Proposal

Judiciary Subcommittee Examines Internet Tax Issue

House Passes Commerce, Justice, State Appropriations

Film Industry Undergoes Change: LAEDC Profile

House Hears Calvert Bill on Archaeological Center; Modifies Golden Gate National Park Boundaries

California Declared an Agricultural Emergency: $22.3 million for Pierce’s Disease

Napa Valley May Ban Ornamental Plants from Ten Counties Infected With Pierce’s Disease

Eleventh Hour Deal Struck Between Los Angeles County and Federal Government on Health Care Funding

Institute Reviews State Impact of Energy and Water Appropriations; Posted on Website

Former California Rep. Norm Mineta to be Commerce Secretary

Pentagon Confirms that JSF will be Single Contract Program

House Resources Subcommittee Discusses CALFED Proposal

The Water and Power Subcommittee of the House Resources Committee held a hearing on Thursday, June 29 on the CALFED program to develop long-term plans to address chronic water supply and environmental problems in the San Francisco Bay-Sacramento-San Joaquin River Delta.

The Subcommittee heard from the following witnesses: David Hayes, Dep. Sec. of Interior; Mary Nichols, California Sec. for Resources; Felicia Marcus, Region 9 Administrator, Environmental Protection Agency; Steven Stockton, Dir. of Programs Mgmt., South Pacific Division, Corps of Engineers; and Kay Bryan, Chair of the Water Committee, Regional Council of Rural Counties, Sacramento.

In his opening remarks, Chairman John Doolittle (Rocklin) raised several concerns with the recently released Bay-Delta framework. He stressed that in the past the regulatory process has gone awry with priority placed on fish species above all other water uses, whether for agriculture or human use. Nevertheless, the Administration has not proposed any new rules or regulations this year to restore the balance between these competing interests. He also questioned the frameworks reliance on water storage, without recognizing that it will not increase water yield, and stressed that greater water yield will be necessary.

The Chairman also indicated that the Subcommittee will draft legislation to reauthorize the Bay-Delta program and hopes to mark that bill up in about two weeks. The 1996 authorization legislation lapsed this year, and further federal funding for the project has been delayed until it is reauthorized. See, Bulletin, Vol. 7, No. 20 (6/15/00).

Secretary Nichols reiterated the Governor’s commitment to the CALFED Program and the commitment of hundreds of millions of state dollars that will be provided for the project. She also stressed the importance of reauthorizing the federal legislation, and providing $60 million in funding for FY01.

Ms. Bryan testified that the Regional Council of Rural Counties had voted to oppose the CALFED framework. The most important reason for their opposition is based on RCRC’s belief that the framework will undermine the counties’ authority to regulate ground water, and lead toward federalization of state water laws.

In addition to Chairman Doolittle, and other Subcommittee members – Ranking Member Calvin Dooley (Visalia), Reps. Ken Calvert (Corona), George Radanovich (Mariposa), and Grace Napolitano (Norwalk) – Reps. Wally Herger (Marysville), Doug Ose (Sacramento) and Richard Pombo (Tracy) also joined the subcommittee at the hearing.

The testimony of all the witnesses can be obtained through the Committee’s website at: http://www.house.gov/resources.

Judiciary Subcommittee Examines Internet Tax Issue

The House Judiciary Subcommittee on Commercial and Administrative Law held a hearing on Thursday, June 29 to discuss taxing sales transacted over the Internet. The subcommittee heard from 18 witnesses, including: California State Senator Ray Haynes, Katrina Doerfler, Sr. Mgr. Of Planning and External Affairs, Cisco Systems, Inc. on behalf of the American Electronics Association (AEA), and Peter Lowy, Co-President, Westfield America, Inc., Los Angeles.

Senator Haynes testified against imposing any sales tax regime on Internet transactions. He argued that state and local governments are not facing an impending crisis of lost revenue because of the growth of e-commerce but are, in fact, experiencing dramatic growth in revenue collection and unprecedented state budget surpluses.

Ms. Doerfler laid out the e-commerce tax principles supported by AEA as Congress examines whether and how to tax Internet sales. They are: 1) impose no greater tax burden on e-commerce than on other traditional means of commerce; 2) support simplicity in administration; 3) retain and clarify nexus standards; 4) avoid new taxes on the Internet; and 5) consider tax issues in a global context. Ms. Doerfler also urged the National conference on Commissioners on Uniform State Laws (NCCUSL), with advice from public and private stakeholders, to adopt a uniform sales and use tax system that would be adopted by all the States. AEA opposes Congress granting prior approval for an expanded duty to collect on business prior to simplification.

Testimony of all the witnesses can be obtained through the Judiciary Committee’s website at: http://www.house.gov/judiciary.

Mr. Lowy testified on behalf of the e-Fairness Coalition, which represents brick-and-mortar and online retailers, realtors, and shopping centers. He argued that currently brick-and-mortar retailers are forced to operate on an unfair playing field, collecting sales taxes, while their on-line counterparts are exempted from collection responsibility. The e-Fairness Coalition supports H.R. 4462, introduced by Rep. Spencer Bachus (AL), which would provide a framework for simplifying the collection of sales taxes, including ones for on-line transactions, and allow states to require collection when the simplification process is complete.

House Passes Commerce, Justice, State Appropriations

On Monday, June 26, the House passed, by a vote of 214-195, the FY01 Appropriations for the Departments of Commerce, Justice, State, and Related Agencies. The $37.4 billion bill provides about $2.2 billion less than the current level and $13.5 billion less than requested by President Clinton. The Administration has indicated it may veto the bill, if it is sent to the President in its current form. The bill contains $585 million for the State Criminal Alien Assistance Program (SCAAP) to partially reimburse the states for the costs of incarcerating illegal criminal aliens. Increased funding is also provided to hire additional border agents, and improve border control and enhancement. During floor consideration, the House adopted by voice vote an amendment offered by Rep. Brian Bilbray (Imperial Beach). The amendment provides $500,000 to the International Boundary and water Commission Construction account to begin a study on the construction of a renegade sewage diversion plan in the Tijuana River Valley to divert raw sewage runoff from Mexico before it reaches the United States.

The Institute has prepared a report on the impact of the bill on California interests. That report is available on our website in html text format at http://www.calinst.org/pubs/cjsapp01.htm or in Adobe Acrobat ("pdf") format at http://www.calinst.org/pubs/cjs01.pdf

Film Industry Undergoes Change: LAEDC Profile

According to the Los Angeles County Economic Development Corporation (LAEDC), the film industry in California is undergoing substantial changes. In the late 1990s, feature film production was cut back because of a lack of profits. Additionally, more and more"run-away" productions, mostly in Canada, are taking place because of tax incentives, the strong U.S. dollar and a talent pool in Canada. Partially as a result of these changes, Governor Davis has proposed a $50 million program for partial reimbursement and increased access to technology by producers. Furthermore, the global economy and technology itself have created a demand for more localized products (Europe) and the means to stream previously small market video over the Internet.

Other trends have hurt the film industry. According to the report, a strike by the Screen Actors Guild will ultimately hurt Southern California, depending on how much of the commercial production will return to the area. The expansion of theaters, popularity of cheaply produced game shows and "real life" shows, as well as piracy over the Internet all continue to pose challenges for the film industry.

Despite these challenges, domestic box office receipts have increased by 8.9 percent in the first part of 2000. Television advertising has also gotten off to a strong start, due to the Olympics and national elections. Employment numbers are hard to pin down, however, due to the large segment of independent contractors. Firm size there tends to be small, with 81 percent of firms having 1-4 people.

The film industry plays an important role in California’s economy. According to the report "motion picture production ranks fifth among Los Angeles County’s export industries." Furthermore, the Academy Awards directly impacts the area, bringing in $60.5 million to the local economy. Housing expansion, like Walt Disney’s Glendale project, also adds to the economy of areas in which films are produced.

For more information, contact the LAEDC at 1-888-4LAEDC-1 or at http://www.laedc.org .

House Hears Calvert Bill on Archaeological Center; Modifies Golden Gate National Park Boundaries

On Tuesday, June 27, the House Resource’s National Parks and Public Lands Subcommittee held a hearing on H.R. 4187, introduced by Rep. Ken Calvert (Corona) to establish the Western Center for Archaeology near Diamond Valley Lake. The proposal would showcase the plethora of prehistoric sites and fossil findings that were unearthed during the construction of the man-made lake. The museum would be under the jurisdiction of the Metropolitan Water District of Southern California.

According to Rep. Calvert, the excavation revealed the largest accumulation of ice-age fossils in California, including the giant long-horned bison and the Masdon skeleton. He testified that the proposal would be a direct benefit to the federal government because of its joint state-federal funding partnership. According to the discussion, the federal government would only be involved in the initial capital investment of the center, and would not support the maintenance of the project.

The Department of the Interior, testified in opposition to H.R. 4187 due to the lack of federal connection to the area and because it would reduce funding for other programs in the President’s budget.

Glen Peterson of the Metropolitan Water District of Southern California and Howard B. Rosenthal of the Western Center Community Foundation testified in support of the project because of its educational and historical value.

Also at the hearing, an amendment to H.R.3632, introduced by Rep. Tom Lantos (San Mateo), was approved by voice vote. The bill would add 24 parcels of land to the Golden Gate National Recreation Area. The amendment would limit the expansion to those people who want their land within the recreation area. Rep. Lantos testified that the land addition would prove beneficial to San Francisco visitors.

On Thursday, June 29, S.2051, the Senate counterpart of H.R. 3632, was heard before the Senate Energy and Natural Resources Committee. Several witnesses testified before the committee on the bill, which was introduced by Sen. Dianne Feinstein: Jacqueline Lowey, Deputy Director, National Park Service; Bill Meadows, President, Wilderness League; and Katherine Aderton, Executive Director, Save the Redwoods, Marin County. Senator Boxer is an original co-sponsor of the bill.

Full testimony of the witnesses can be accessed through both committees at (202)224-4971 or (202) 226-7736, respectively, or at their web sites: http://www.house.gov/resources/parks/ or http://www.senate.gov/~energy .

California Declared an Agricultural Emergency: $22.3 million for Pierce’s Disease

On Friday, June 23, United States Department of Agriculture (USDA) Secretary Dan Glickman announced that California has been declared an agricultural emergency due to the effects of the Glassy Winged Sharpshooter. The joint federal-state effort will total $36.3 million — a 55/45 percent respective share — to combat Pierce’s Disease, which has threatened the state’s agricultural industry. The federal $22.3 million will be allocated as follows: $5 million for research and $17 million for surveys of the pest, response efforts for control, and inspections. State and private funds will support further control of the disease and research. According to a USDA spokesperson, federal funds should become available to state accounts as soon as July 1, 2000.

Last month, in the Crop Insurance legislation conference report, $7.14 million was secured from USDA to fight the disease, but the funds will not be available until October. See Bulletin, Vol. 7 No. 19 (6/8/00). Pierce’s Disease has now spread to ten counties and is carried through a number of hosts including grape vines, strawberry trees, and almonds.

As reported previously, California’s bipartisan Congressional delegation, Governor Gray Davis, and other state leaders had requested the designation. For more information on Pierce’s Disease, including daily updates on its effects and spread, visit http://plant.cdfa.ca.gov/gwss/ .

Napa Valley May Ban Ornamental Plants from Ten Counties Infected With Pierce’s Disease

In a move that could potentially save a share of California’s $33 billion wine industry, Napa Valley is considering a ban on all ornamental plants originating in areas affected by the Glassy Winged Sharpshooter. The plan would further prohibit wine grapes from those ten counties from being shipped into Napa and would mandate that all grapes be crushed and then shipped north. Counties affected by the disease include: San Diego, Riverside, Orange, San Bernardino, Los Angeles, Ventura, Santa Barbara, Kern, Tulare, and Fresno. Detections of the pest have also occurred at nurseries in Alameda and San Joaquin as well.

Napa’s "zero tolerance" move is supported by the Napa Farm Bureau, Napa Valley Grape Growers and the Napa Chapter of the Sierra Club as a way to prevent the pest from entering the northern California wine country and devastating its vineyards. Southern California nurseries oppose the ban because of the economic impact that a ban would have on their industry. Furthermore, because nurseries and large retailers in Northern California rely on Southern California for ornamental plants, a shortage of plants could be far reaching.

Sonoma County Grape Growers Association is also contemplating the same ban, as it too is considering whether or not current proposed ordinances would be effective enough to keep Pierce’s Disease out. Sonoma has recently discovered GWSS eggs on plants shipped from Southern California, but caught the eggs before they hatched.

Current proposed regulations would require a certification that plants shipped to Northern California do not contain the pest. Ornamental plants shipped to northern counties would need to be sprayed with pesticide before shipment – a proposal that is fiercely debated among growers.

For daily updates on areas affected by Pierce’s Disease, see http://plant.cdfa.ca.gov/gwss/ .

Eleventh Hour Deal Struck Between Los Angeles County and Federal Government on Health Care Funding

After months of debate and negotiations, on Wednesday, June 28, the federal government agreed to give $1.2 billion to the Los Angeles County health care system. The agreement grants a section 1115 waiver to the county so that it will be reimbursed for clinic care, in addition to reimbursement for hospital care. Without the agreement, the county stood to loose service covering three million residents in the county. See Bulletin Vol. 7 No. 9 (6/8/00).

In exchange for the waiver, the county will have to make extensive reforms, including increasing outpatient visits by 3 million annually and moving towards a more preventative system. If reforms are not met, the county will be penalized with fees.

The compromise came after a meeting between Supervisor Zen Yaroslav and President Clinton, initiated at a fund raiser for Senator Feinstein. Out of the total $1.2 billion, the state of California will pay $300 million, the federal government $900 million, and Los Angeles county will need to contribute $400 million – most of which will come from tobacco industry lawsuit settlements.

Institute Reviews State Impact of Energy and Water Appropriations; Posted on Website

This week, the California Institute reviewed the House version of the FY 2001 Appropriations Bill for Energy and Water development. The House bill appropriates $21.6 billion total, which is $546 million above the amount appropriated in 2000 and $951.8 million more than the President’s budget. The bill does not provide funds to re-authorize the Bay-Delta ecosystem restoration program. It does, however, provide $38 million for the Central Valley Project – $3 million less than appropriated in FY 2000. The bill, H.R. 4733, was passed by the House on June 27, by a vote of 407-19. The report number is H.Rpt.106-693. The Institute report is available on our website at http://www.calinst.org

Former California Rep. Norm Mineta to be Commerce Secretary

On Thursday, June 29, President Clinton nominated former California Congressman Norman Y. Mineta to be Secretary of Commerce for the remainder of this Administration. If confirmed by the Senate, Mineta will be the first Asian American to serve as a Cabinet secretary. The current Secretary, William Daley, will leave July 15 to run Vice President Gore’s presidential campaign.

After serving as Mayor of San Jose, Mineta was elected to Congress in 1974 and served 21 years in the House, chairing the Public Works and Transportation Committee in 1993-94. He resigned from Congress in 1995 to accept a position with Lockheed Martin Corporation.

Pentagon Confirms that JSF will be Single Contract Program

On July 22, Pentagon procurement chief Jacques Gansler reaffirmed that the huge contract for the Joint Strike Fighter (JSF) will boil down to one vendor, and will not be divided between the two competitors. Two teams, one led by Boeing and another by Lockheed Martin, are competing for the right to produce the fighter, which will be the first to be used jointly by the Air Force, Navy and Marine Corps. According to Pentagon estimates, the winner of the contract will build $200 billion to $400 billion worth of planes, though some have estimated the potential value of the program at as much as twice those figures.

On Thursday, Gansler was quoted as stating, "The strategy is to be a winner-take-all program." For more information about the JSF, see Bulletin, Vol. 7, Nos. 7 (3/3/00), 16 (5/11/00), and 20 (7/15/00).

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