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California Capitol Hill Bulletin

                Volume 8, Bulletin 34 — November 15, 2001    [or see pdf version]


Congressional Wine Caucus Circulating Letter Regarding High Foreign Tariffs

Senate Agriculture Would Expand Legal Immigrants’ Food Stamp Eligibility

House and Senate Clear Commerce-Justice-State Appropriations

WTO Reaches Agreement On Trade Negotiation Agenda

PPIC Survey Finds Economy and Security are State Resident’s Priorities; Californians’ Outlook Still Positive

Ashcroft Intends to Restructure INS

California Projected To Lose Significant Medicaid Funding As New Income and Population Data Recalculate Grants

California Incomes Rose Rapidly from 1999 to 2000

To expand communications between Washington and California, the California Institute provides periodic faxed bulletins regarding current activity on Capitol Hill which directly impacts our state. Bulletins are published weekly during sessions of Congress, and occasionally during other periods. The e-mail edition is made possible in part by in kind donations from Sun Microsystems and IBM Corp.

Congressional Wine Caucus Circulating Letter Regarding High Foreign Tariffs

In the midst of the trade discussions this week at the fourth World Trade Organization Ministerial Conference (see article below), the joint-Chairs of the Congressional Wine Caucus, Reps. Mike Thompson (St. Helena) and George Radanovich (Mariposa), are seeking signatures for a wine tariff letter addressed to President Bush. The letter requests preservation of the current $0.063/liter US tariff on foreign wine imports, noting that the current duty in effect is already the lowest of any major wine-producing country. The authors go on to express concern for the delay in implementation of reduced wine tariffs by US world trading partners, stating that American wine, 90% of which is produced in California, has not fared well under existing free trade agreements or in multilateral rounds.

The 60 member Congressional Wine Caucus was formed to examine and support issues affecting the American wine industry. Offices of members who wish to sign the letter should immediately contact Tricia Geringer with Rep. Radanovich at 5-4540 or Tom LaFaille with Rep. Thompson at 6-7370 in order to sign the letter. The authors hope to send the letter on Friday, November 16.


Senate Agriculture Would Expand Legal Immigrants’ Food Stamp Eligibility

As part of a sweeping farm and nutrition bill, the Senate Agriculture Committee, on Thursday, November 15, expanded the food stamp eligibility of legal immigrants. The provision reduces from ten to four the number of years that an immigrant family must be in the United States before receiving food stamps. Food stamps would also be provided to immigrant children regardless of their parents’ status, and procedures for obtaining food stamps would be simplified to encourage more use. Eligibility for all participants will be expanded by allowing rent or mortgage payments to be counted as shelter expenses, rather than as income. The provisions are part of the $6.2 billion authorized in the bill for nutrition programs. The Committee approved the nutrition section by voice vote on Wednesday, November 14.

Food stamp eligibility for immigrants was greatly reduced in the immigration reform act passed in 1996. A recently released study by America’s Second Harvest showed that the demand for private charity food banks has risen as federal funding has declined.

The Agriculture, Conservation and Rural Enhancement Act (S. 1628) was approved by the Committee by voice vote on Thursday, November 15. The House passed its version of the bill, H.R. 2646 on October 5. It does not include provisions expanding food stamp eligibility.


House and Senate Clear Commerce-Justice-State Appropriations

The House voted 411-15 on Wednesday, November 14 to approve the conference report to the FY02 Commerce, Justice, State Appropriations bill (H.R. 2500). The Senate quickly followed on Thursday, approving the bill by a vote of 98-1.

The $46.1 billion bill funds the Justice Department at $21.6 billion, $500 million more than the President’s request. It also provides about $350 million more for the Commerce Department – about $5.5 billion – than the Administration request. The State Department, on the other hand, will get $7.8 billion – $200 million below the President’s request, but $800 million over the FY01 funding.

The conferees approved $565 million in funding for the State Criminal Alien Assistance Program – the same level as last year. California was awarded almost $226 million of the funds for FY01. See, Bulletin, Vol. 8, No. 33 (11/8/01). The bill includes $400 million for the Local Law Enforcement Block Grant program, which is $122 million less than the House version. The Edward Byrne Memorial State and Local Law Enforcement Assistance program is funded at almost $595 million – $500 million for formula grants, and $95 million for discretionary grants. Over $70.4 million is also included for the enforcement and clean-up of methamphetamine, including funding for the California Methamphetamine Strategy (CALMS) and Methamphetamine/Drug Hot Spots.

Census Bureau funding is set at $375 million for periodic censuses and programs, and completion of the 2000 decennial census. Both the House and Senate bills contained about the same level.

The Institute will prepare a detailed analysis of the conference report and its implications for California in the near future.


WTO Reaches Agreement On Trade Negotiation Agenda

After a six-day meeting in Doha, Qatar, the 142 member World Trade Organization agreed to the framework which will govern global trade talk negotiations over the next several years. The organization also voted in China and Taiwan as its 143rd and 144th members, thus, encompassing all major countries with the exception of Russia.

Among the major agreements reached is one which aims to phase out agricultural subsidies and tariffs. U. S. agriculture has fought hard to get agriculture supports on the negotiating table, because countries like Japan and France use tariffs and non-tariff trade barriers to protect their markets from U.S. exports. Likewise, the ability to negotiate more liberal rules for the operation of major companies in foreign countries, including financial and environmental services corporations, was hailed as a victory.

The steel and semiconductor industries, on the other hand, suffered a loss when the United States agreed to negotiate the use of anti-dumping and countervailing duty laws, which help to prevent less expensive imports from entering the United States. Organized labor also lost its battle to include workers’ rights in future trade negotiations. The United States also retreated from its earlier position when it agreed not to let U.S. patent laws prevent developing countries from obtaining generic drugs necessary to fight public health problems, such as AIDS.

The agreement reached in Qatar is the framework that WTO members will follow in future trade agreement negotiations that will be conducted over the next several years. The full declaration and further details on the agreement can be found on the U.S. Trade Representatives’ website at: .


PPIC Survey Finds Economy and Security are State Resident’s Priorities; Californians’ Outlook Still Positive

The Public Policy Institute of California (PPIC) has released a special edition of the PPIC Statewide Survey that features a slowing economy and growing personal security fears as the top priorities facing the state. According to the survey, Californians currently rate the economy as the most important California issue (18%), followed by terrorism and security issues (14%), the electricity crisis (13%) and education (12%). A similar study held in July, 2001, recorded only 5 percent of respondents rating the economy as the most pressing problem, while electricity received 56 percent and education 9 percent. In spite of these concerns, a Californian’s overall outlook about the state is likely to be more positive than it was three months ago, with 60 percent of respondents claiming that the state is headed in the right direction, compared to only 44 percent in July.

Confidence in state and national government is also on the rise, according to survey figures, with a boost in job performance approval ratings registered for Governor Gray Davis (54% from 44% in July), and a surge of public approval recorded in President George W. Bush’s favor (80% from 47% in July). A copy of the report may be obtained from PPIC’s website at: .


Ashcroft Intends to Restructure INS

At a news conference, US Attorney General John Ashcroft has unveiled an Immigration and Naturalization Services (INS) Restructuring Plan that seeks to split the agency into two separate bureaus to effect better coordination and accountability. Under the Department of Justice plan, two separate chains of command would be established to match appropriate expertise with the function being managed: the Bureau of Immigration Services would focus on immigration service delivery, while a separate Bureau of Immigration Enforcement would be responsible for combating illegal immigration and other enforcement related activities.

The plan makes a number of other changes intended to improve the overall operations of an agency that has come under heavy criticism for mismanagement of funds, border protection failure, and long petition backlogs while its budget has increased four-fold.

A similar legislative initiative, cosponsored by Reps. James Sensenbrenner (WI), Chair of the House Judiciary Committee and Rep. George Gekas (PA), Chair of its Immigration and Claims Subcommittee, is pending a hearing in the House Immigration Subcommittee.


California Projected To Lose Significant Medicaid Funding As New Income and Population Data Recalculate Grants

According to recent examinations, the recalculation of federal Medicaid rates for 2003 will reduce California’s share of federal Medicaid dollars by roughly $400 million – the highest loss in the nation. Federal Medicaid Assistance Percentages (FMAP) are recalculated annually to determine the federal share of Medicaid costs allocated to each state. FMAP figures are defined by the relationship between a state’s and the national average per capita personal income over three calendar years.

California’s funding loss is largely attributable to strong income increases. From 1999 to 2000, California’s per capita income grew by 8.1%, the second fastest rate in the nation. See below article.

However, as Californians’ incomes rise, the state rate for Medicaid matching funds from the federal government declines. If census population had been adjusted to compensate for estimates of undercounting, California’s losses would have been lessened. Because the 2000 Census apparently undercounted California by more than the national average, an adjustment would have shown California to have a relatively larger population (or "capita") against which to juxtapose total income.

Ironically, the per capita income factor in the formula for Medicaid was intended in part to approximate poverty (though it is also intended to gauge a state’s capacity to pay for services from its own coffers.) Medicaid grew from the Kerr-Mills Act of 1960, and it thus pre-dates the official federal definition of poverty line. The original drafters incorrectly presumed that states with high incomes would have low poverty, and vice versa. With income inequality levels well above the national average, California has both high income and high poverty.

Of all federal formula grant programs, Medicaid is the largest. In 2000, it provided $118 billion in federal funds for health care coverage for low-income families and individuals who lack health insurance. California’s Medicaid program, Medi-Cal, serves five million Americans every year and is the second-largest source of health care coverage in the state.

According to Federal Funds Information for States, a Washington-based group which advises state officials, there are 17 states which will have lowered FMAPs in FY 2003. FFIS estimates that those states will lose approximately $600 million, and most of that loss is expected to come in California and Michigan. It estimates that California will shoulder roughly two thirds of that burden.

Because HHS bases Medicaid funding percentages on a three-year average of per capita income, California’s reduction in Medicaid receipts due to this new data will linger for several years.

On the bright side, however, the state’s plummeting funds may be a one-time event. The FMAP formula is designed with a 50% floor, meaning that no state receives less than a dollar-for-dollar match of federal money against whatever money it lays out, and California will soon take advantage of that floor. During the state’s deep and prolonged recession during the last decade, falling incomes sent the California FMAP rising slightly above the 50% mark (it was 51.7% last year) for the first time. If its recently surging economy and rising incomes do cause California’s FMAP for 2003 to drop back to that 50% floor, the state should suffer that matching share decline only once.


California Incomes Rose Rapidly from 1999 to 2000

According to the Bureau of Economic Analysis, California had the third fastest growth in overall personal income (9.8%) from 1999 to 2000, and it saw more than an 8% increase in per capita personal income during the same period, the nation’s second fastest highest growth, after Massachusetts. While the state houses 12% of the nation’s population, the state enjoyed 18% of the nation’s income growth.

California crossed the trillion dollar threshold in 2000, according to the BEA, with the state’s total income pegged at $1,094,770,000,000.

Personal income per capita in California leapt from $29,818 in 1999 to $32,225 in 2000. The corresponding levels for the nation as a whole were $27,859 and $29,451 respectively. Thus, California’s per capita income was 9.4% higher than the national average in 2000.

California’s income levels per capita have been rising steadily compared to the national average — the state’s rate exceeded the national rate by 5.1% in 1998, by 7.0% in 1999, and now by 9.4% in 2000.

While higher income is clearly good news for the state, it will likely result in significant reductions in federal formula grant funding. Federal Medicaid funds (see above article) are based in large part on per capita income levels, and higher incomes mean lower reimbursements to states. In addition, other federal grant and entitlement programs either use the Medicaid formula or employ per capita income as a factor.

The income data is available at at . A table showing state-by-state income and per capita income data is attached, and is available on the California Institute website, at . A printer-friendly version in Adobe Acrobat (pdf) format is available at .

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