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California Capitol Hill Bulletin

                Volume 9, Bulletin 19 — June 27, 2002    [or see pdf version] [or jump to the previous bulletin]

CONTENTS OF THIS ISSUE

Delegation Circulating Ethanol Letters

House Passes Rule Governing Conference on Trade Bills

State Awards $59.8 Million in Ecosystem Projects For CALFED

Senate Appropriations Reports FY03 Interior Bill

House Approves Defense, MilCon Appropriations Measures

Senate Finance Committee Approves Welfare Bill After Voting To Restore Legal Immigrant Benefits

Delegation Deans Dreier and Farr Address Californians

Environment A Paramount Concern Among Californians, PPIC Finds

AMTRAK Deal Keeps Passenger Rail Moving

Senate Committees Examine Cross-Border Trucking Issue

Senate Banking’s Transportation Subcommittee Examines TEA-21

Treasury And IRS Extend Moratorium On Stock Option Taxes

PPIC Report Scrutinizes State’s Class Size Reduction Efforts

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.

Delegation Circulating Ethanol Letters

The bipartisan California Congressional Delegation is circulating for signatures two identical letters on the ethanol mandate contained in the Senate Energy bill. One letter is addressed to Senate Environment and Public Works Committee Chairman and Ranking Member James Jeffords (VT) and Bob Smith (NH), respectively. The other is to House Energy and Commerce Committee Chair Billy Tauzin (LA) and Ranking Member John Dingell (MI).

The letters acknowledge the important step in the Senate bill of phasing-out MTBE and eliminating the Clean Air Act’s oxygenate requirement. However, they express concern that the ethanol mandate contained in the bill will have "mixed environmental results while significantly reducing federal revenues to the Highway Trust Fund. Moreover, rather than a carefully balanced legislative package, this mandate appears to be simply a political triumph of the Midwest over both coasts." The letter goes on to note that an ethanol mandate in perpetuity may in fact impede refiners from developing cleaner and less expensive ways to reformulate gasoline. Because of these concerns, the letters call on these Energy conference leaders to "carefully reconsider" the ethanol mandate during conference.

Members wishing to sign the letters should contact either Pam Barry in Rep. Farr’s office (x52861) or Dan Skopec with Rep. Doug Ose’s Energy Policy Subcommittee office (x54407).

House Passes Rule Governing Conference on Trade Bills

On Wednesday, June 2, the House narrowly passed by a vote of 216-215 the Rule (H.Res. 450) governing the conference committee on trade legislation. The Rule is atypical in that it not only wraps together several pieces of House-passed legislation but lays out the House position on several key issues. The Rule provides for including in the House-Senate Conference the Andean Trade Preference bill (H.R. 3009), the Trade Promotion Authority ("fast-track") bill (H.R. 3005), and Trade Adjustment Assistance (TAA/H.R. 3008), as well as provisions of the supplemental appropriations bill (H.R. 4775) dealing with textile imports, the Customs Border Security Act (H.R. 3129), and the extension of the Generalized System of Preferences (H.R. 3010).

The unusual Rule was necessitated in part because the Senate combined the Andean trade bill, the Trade Promotion Authority bill, and Trade Adjustment Assistance in H.R. 3009 during Senate consideration. In the Rule, the House also lays out its position on expanded eligibility and health insurance under the TAA, which were not included in the House-passed bill. The Rule calls for expanding TAA to cover certain displaced employees of suppliers, and for a 60 percent tax credit for health insurance premiums paid by displaced workers, and extending benefits to workers in the airline and steel industries. The Senate-passed bill includes a 70 percent tax credit. The House Rule also includes provisions concerning the duty-free treatment of textiles under the African and Caribbean trade bill passed in 2000.

The Senate is expected to appoint conferees now that the House has acted.

After House passage of the Rule, Rep. Anna Eshoo (Atherton), joined by 13 other members, including four Californians, wrote a letter to the President urging him to support the "bipartisan compromise" on the TAA worked out between the Senate and the Administration prior to Senate passage of H.R. 3009. The other Californians on the letter were: Reps. Ellen Tauscher (Alamo), Cal Dooley (Visalia), Jane Harman (Rolling Hills), and Susan Davis (San Diego). The letter stated that "we support expanding international trade and believe that granting the President expedited trade negotiating authority, including TPA, can be an effective way to do so."

State Awards $59.8 Million in Ecosystem Projects For CALFED

Governor Gray Davis announced on June 26 the award of $59.8 million for 50 ecosystem restoration projects as part of the CALFED Bay-Delta restoration program. The projects include developing wildlife-friendly agricultural practices, scientific research in the Bay-Delta estuary and the construction of fish screens.

The 50 projects were selected from 260 proposals submitted, and an additional nine projects are expected to receive funding of $3.4 million from the federal Central Valley Project Improvement Act.

The projects include:

– $22.4 million for the protection and restoration of salmon and steelhead habitats and riverside woodlands on the Tuolumne, Stanislaus, Mokulmne, Cosumnes, American, Yuba, and Sacramento Rivers, as well as Mill and Deer Creeks;

– $7.5 million for protection, restoration, and management of marshes and other wetlands in San Francisco Bay, Suisun Marsh, the Delta, and Jepson Prairie; and

– $10.6 million to research threats to water quality in the Bay-Delta system, and water cleanup technologies.

Senate Appropriations Reports FY03 Interior Bill

The Senate Appropriations Committee, on Thursday, June 27, approved its FY03 Appropriations for the Department of the Interior. The bill includes $24 million for projects in Lake Tahoe and $5 million for projects in the California desert. It also provides $26 million to fund the Quincy Library Group Project, and $25.5 million for additional land acquisition and construction projects in the State.

In addition, the Senate bill includes: $5 million for Research and Control of Sudden Oak Death; $5.01 million for the restoration of the California Thayer; $998,000 for the Salton Sea Recovery Plan; and $200,000 for the Central and Southern California Conservation Plans.

Land Acquisition Projects under the bill include:

– San Diego National Wildlife Preserve – $2 million;

– Otay Mountain Wilderness Area – $2 million ;

– Santa Rosa Mountains – $2 million;

– Big Sur Ecosystem – $3 million;

– North Fork American River, Tahoe – $2 million;

– Sacramento Wildlife Refuge – $1.1 million;

– Cosumnes River Watershed – $2.5 million;

– Kings Range National Conservation – $2 million;

– San Joaquin River – $900,000; and

– East Sacramento Oak Woodlands – $2.6 million.

Additional Construction Projects include:

– Golden Gate National Recreation Area – $3.1 million;

– Klamath Basin Water Supply Facility – $1 million;

– Salton Sea Wildlife Refuge Seismic Rehabilitation – $200,000;

– Elk Hills Settlement – $36 million; and

– Presidio Trust – $21.327 million.

House Approves Defense, MilCon Appropriations Measures

By a 413-18 vote on Thursday, June 27, 2002, the House of Representatives passed the FY 2003 defense appropriations bill (HR 5010). The Appropriations Committee had approved the measure by voice vote on Monday, June 24. The bill, shepherded by Defense Appropriations Subcommittee Chairman Jerry Lewis (Redlands), provides $355 billion for defense procurement, operations, and military and civilian personnel.

For aircraft procurement, a key area for California’s defense industry, the bill provides $2.2 billion for Army aircraft, $8.7 billion for Navy aircraft, and $12.5 billion for Air Force aircraft. Procurement accounts for missiles include $1.1 billion for the Army, and $3.2 billion for the Air Force — the Navy account for missiles, torpedoes and other weapons was set at $2.4 billion.

California also competes strongly in the RDT&E (research, development, testing and evaluation) function. For RDT&E, the House bill provides $7.4 billion for the Army, $13.6 billion for the Navy, $18.6 billion for the Air Force, and an additional $17.9 billion for defense-wide programs.

The bill provides the Army $212 million for environmental cleanup efforts at closed Army bases. For environmental restoration at military facilities which are still active, the bill provides $396 million for the Army, $257 million for the Navy, $390 million for the Air Force, and $24 million defense-wide.

By voice vote on the House floor, the House approved an amendment to transfer $30 million to a Bush Administration-backed airborne laser program, with funds drawn from space-based interceptor research. The also House rejected down several amendments on missile defense.

In bill text, the appropriations measure continues to provide that funds for the F/A-18E/F Super Hornet fighter aircraft may continue to flow on a multi-year basis. It also requires certain certifications and a formal risk assessment before funds may be spent for additional F-22 fighters.

Also on June 27, The Senate passed an FY 2003 defense authorization bill. A key conference difference between the House and Senate versions of defense authorization is missile defense. While the House cut $100 million from the President’s request, the Senate allows the full request for missile defense, but recommends spending $814 million of the funds on programs to combat terrorism.

Also on June 27, the House passed its version of the FY 2003 military construction appropriations bill (HR 5011) on by 426-1 vote. The bill’s funding level bill is $500 million below the FY 2002 bill had passed the Appropriations by voice on Monday, June 24. Also on June 27, the Senate Appropriations Committee approved a $10.6 billion version of the bill by voice vote. The Senate version includes $1 billion more than the president´s request and $17.6 million more than fiscal 2002 appropriations. The Senate bill is shepherded by Subcommittee Chair Dianne Feinstein, who noted that it includes $100 million to speed up environmental cleanups related to closing bases. Senate floor passage is expected in July.

Senate Finance Committee Approves Welfare Bill After Voting To Restore Legal Immigrant Benefits

On June 26, 2002, the Senate Committee on Finance marked up and approved legislation to reauthorize federal welfare policies through 2007. The bill known as the Work, Opportunity and Responsibility for Kids (WORK) Act of 2002 passed by a 13 to 8 vote; it contrasts in significant ways with the House-passed bill of last month. Compared to HR 4747, the Senate measure provides federal aid to certain legal immigrants, increases funding for child care services, requires people on welfare to work fewer hours (30 per week compared to 40 per week in the House bill) while expanding qualifications the list of activities qualifying as work to include more training options, and funds teen pregnancy reduction through contraceptive instruction as well as abstinence first programs. It would also alter the existing caseload reduction credit system and increase the supplemental grant program.

The WORK Act remained consistent with some of President Bush’s proposals that are featured in the House version. For instance work participation rates would be increased from 50% currently to 70% by 2007, and weekly base work requirements would be 24 hours per week for cash recipients up from 20 hours.

Much Committee debate centered around an amendment submitted by Sen. Bob Graham (FL) that would end the federal ban on welfare payments to legal non-citizens initiated in the original welfare overhaul bill passed in 1996 (PL 104-193). The amendment would cost an additional $2.4 billion over five years according to the Congressional Budget Office (CBO), though Sen. Graham estimated the cost at $660 million over the first five years and $2.25 billion over 10 years. California’s Department of Social Services estimates it would save the state of California $54 million per year — the amount the state pays to provide welfare and related costs to its non-citizens. Graham’s amendment would also, at a state’s discretion, allow pregnant women and children who are legal immigrants to acquire health insurance coverage under Medicaid and the State Children’s Health Insurance Program (SCHIP). The amendment, according to Graham, would help bring health care to 176,000 more women and children. The Graham amendment passed by a vote of 12 to 9 after considerable debate regarding the source of offsetting spending reductions.

The issue of mandatory federal child care subsidies was another major issue and one that in which there are differences with the House. The Finance Committee eventually voted to increase child care funds to $5.5 billion over five years after an amendment by Sen. Bingaman (NM) to increase it to $7 billion was reluctantly withdrawn.

Another topic of discussion was the bill’s maintenance of welfare recipients’ work week requirements at 30 hours, rather than boosting them to 40 hours as proposed in the House version. Also, under the Senate bill recipients would be allowed to participate in up to two years of vocational training while receiving cash aid, in contrast to the one year permissible under current law.

It is unclear when the WORK Act will be up for Senate floor debate. For more information, visit the Finance Committee at http://finance.senate.gov/ .

Delegation Deans Dreier and Farr Address Californians

At a capacity-crowd luncheon on Tuesday, June 25, 2002, Californians in Washington listened to comments by Reps. David Dreier (Covina) and Sam Farr (Carmel), respectively chairs of the California Republican and Democratic Congressional Delegations. The Golden State Roundtable luncheon, sponsored by the California State Society, was held in a banquet room of the Rayburn House Office Building.

Rep. Farr discussed the diversity and strength of California and its economy, cited examples of its status as the world’s leading design center, and highlighted a number of the states unique aspects. Rep. Dreier described increasing bipartisan cooperation among California Congressional delegation members, and cited the importance of a partnership with the Administration to further the interests of the state and the nation.

A graduate and former employee of Claremont McKenna College, Rep. David Dreier is chair of the House Rules Committee. He represents much of the San Gabriel Valley, including parts of Pasadena, Claremont, Glendora and Upland. Before coming to Congress in 1993, Rep. Sam Farr served two years in the Peace Corps and spent 12 years in the California Assembly. His district includes Monterey and San Benito Counties, as well as southern Santa Cruz County.

Environment A Paramount Concern Among Californians, PPIC Finds

A new Public Policy Institute of California (PPIC) Statewide Survey on Californians and the Environment reveals that Californians, though pessimistic about the government’s past and future capacity to clean the environment, are personally inclined to give up significant aspects of their lifestyle in order to improve the quality of air, water and land.

California air pollution received 34 percent of votes as the most important environmental issue facing the state while growth and development (13%), ocean and beach pollution (12%) and pollution of the water supply (9%) followed distantly, according to the survey. Californians are willing to take action on their own to facilitate environmental improvements with a majority of respondents agreeing to undertake major lifestyle changes and 64% agreeing to environmental regulations even if they result in economic impairment.

Although the environment registered as a policy priority for those surveyed, respondents’ faith in government’s capacity to solve environmental problems was low. According to the survey, President Bush’s environmental approval rating is higher than Gov. Davis’ at 39% while Gov. Davis is given higher marks in how he would handle environmental issues compared to his gubernatorial challenger Bill Simon. Further, while 88% of voters view a candidate’s stance on environmental issues as important, a majority of respondents think that the state is not doing enough to resolve California’s environmental problems.

PPIC is a private, nonprofit organization dedicated to improving public policy through objective, nonpartisan research on the economic, social and political issues that affect California. A copy of the survey can be viewed at: http://www.ppic.org .

AMTRAK Deal Keeps Passenger Rail Moving

On June 27, 2002, America’s reeling passenger rail service, Amtrak, avoided shutdown after an emergency loan deal was struck guaranteeing Bush Administration action to keep the system running temporarily.

Since its creation in 1971, Amtrak has run a deficit every year and is currently over $4 billion in debt, although its ridership has increased to 60,000 customers per day. Last week, Amtrak officials warned Congress that the system’s failure to cover operating costs would necessitate a shut down of all routes by the beginning of July, and an infusion of $200 million from the federal government would be needed to avert the action.

On Thursday, an agreement was reached "in principle" to resolve Amtrak’s immediate woes, according to a joint statement released by US Transportation Secretary Norm Mineta and Amtrak Chairman John Robert Smith. No specific details were disclosed in the joint statement but Secretary Mineta announced on June 26 the administration’s interest in considering a $102 million loan guarantee for Amtrak. Congress would act on the remainder in the future, and meanwhile Amtrak would be expected to improve financial discipline, increase operating performance transparency, and provide Congress with an understanding of long-term fiscal challenges and strengths.

In addition to a shutdown’s direct impact on Amtrak commuters, California’s state-operated intercity rail corridors and three of its major commuter rail operations in San Diego, Los Angeles, and the Bay Area would be in danger of shutting down if Amtrak fails, as each relies on Amtrak infrastructure. Alerted to the threat of a shutdown earlier in the week, Senators Boxer and Feinstein sent a letter to President Bush urging approval of Amtrak’s requested $200 million federal loan guarantee. Further, reiterating California’s long-term commitment to passenger rail, Governor Davis addressed a letter to Secretary Mineta urging him to "do whatever is necessary" to avoid a shutdown.

Amtrak requested FY 2003 appropriations of $1.2 billion earlier this year to maintain current operations. President Bush’s budget proposes $521 million for Amtrak, a placeholder until Congress acts on a long-term Amtrak strategy. Congress is poised to assist Amtrak by including $205 million as part of the supplemental spending bill, H.R. 4775, that is currently awaiting conference committee action. A separate long-term measure in the Senate sponsored by Senator Ernest Hollings (SC) would significantly increase Amtrak funding by authorizing $4.6 billion for Amtrak services from FY03-FY07.

Over the past thirty years the federal government has spent approximately $750 billion on highway and aviation improvements compared to an investment of $11 billion in passenger rail.

Senate Committees Examine Cross-Border Trucking Issue

The Senate Commerce Committee’s Surface Transportation and Merchant Marine Subcommittee held a joint hearing with the Senate Transportation Appropriations Subcommittee on the issue of cross-border trucking.

Allowing Mexican trucks to operate in the United States is required under the North American Free Trade Agreement. Under a compromise included in the FY02 Transportation Appropriations late in 2001, Mexican trucks will be allowed to operate beyond the 20-mile House limit. However, safety inspections will be required of 50 percent of all trucking companies and 50 percent of all truck traffic. Also, electronic driver’s license verification will be required of all drivers carrying high risk cargo, and 50 percent of all other drivers’ licenses will be verified at the border. Truck weigh-in motion equipment will be used at the ten busiest U.S. border crossings. Additionally, it will be up to the Department of Transportation to determine whether a Mexican trucking firm meets the safety requirements for operation in the U.S.

Secretary of Transportation Norman Mineta, and DOT Inspector General Kenneth Mead testified at Thursday’s hearing. Before turning to the trucking issue, several Senators questioned Sec. Mineta on the agreement reached in principle to bail-out Amtrak (see separate article).

On the Mexican trucking issue, Secretary Mineta testified that DOT has met the 22 specific requirements laid out in the FY02 Transportation Appropriations and expects its review to be delivered to Congress the first week of July. He stressed that the Administration will not open the border to the operation of Mexican trucks outside the 20-mile commercial zone if there is any safety risk to the United States. He testified that by the end of the summer there will be four times the number of personnel at the border to do inspections, and said 144 border inspectors have been hired and trained already, and 67 safety auditors will be in place by the end of this month.

Inspector General Mead testified that the number of applications from Mexican long-haul carriers was increasing with 40 applications received as of June 25. Twenty-six of those carriers indicated they would operate a combined total of 118 vehicles; the remaining 14 did not provide sufficient information on the number of vehicles they expected to operate. IG Mead expected that "over time, long-haul traffic will build, but we have no basis to forecast how quickly or to what extent that will occur." He also testified that DOT’s evaluation has found that there is a direct correlation between the likelihood of U.S. inspection and the road worthiness of the Mexican trucks. His testimony thoroughly detailed the number of inspectors and auditors hired and trained so far, and the number expected to be in place in the near future.

Testimony of the witnesses can be obtained through the Committee’s website at: http://www.senate.gov/~commerce .

Senate Banking’s Transportation Subcommittee Examines TEA-21

On June 26, 2002, the Senate Subcommittee on Housing and Transportation held an oversight hearing on the impact of the 1998 Transportation and Equity Act (TEA-21) on business and environmental interests. Panel Chair Jack Reed (RI) showed interest in learning about transportation and economic benefits as well as national transportation challenges that cause pollution and contribute to lost economic productivity.

Testifying were Carl Guardino, President and CEO of the Silicon Valley Manufacturing Group; Bob Broadbent, Chairman of the Las Vegas Monorail; Hank Dittmar of the Surface Transportation Policy Project; Michael Replogle, Transportation Director for Environmental Defense; and Herschel Abbott, Vice President of Governmental Affairs for BellSouth.

Mr. Guardino of the Silicon Valley Manufacturing Group, a private consortium of Bay Area businesses noted that in an information age economy where mobility is enhanced, traffic relief and affordable housing are two key infrastructure factors that contribute to attracting and sustaining a quality workforce. Mr. Guardino urged members of the committee to continue extending local authorities the flexibility to make transportation decisions and to consider giving New Starts benefits and incentives to local transportation program partners that are willing to contribute higher amounts of local funds toward congestion-relief projects.

For further information visit the Subcommittee’s website at: http://banking.senate.gov .

Treasury And IRS Extend Moratorium On Stock Option Taxes

The Internal Revenue Service and Department of the Treasury announced on Tuesday, June 25 that they would indefinitely extend the moratorium on taxing two types of stock option plans – incentive stock options and employee stock purchase plans. The IRS had announced in November 2001 that beginning January 1^st it would begin collecting Social Security and Medicare taxes on the two plans.

Under the proposed change, the combined 15.3 percent payroll tax would have been shared by the employer and employee. The tax would have been assessed and federal withholding required on the exercise of the option or the disposition of any stock acquired by exercising an option.

In explaining the decision, a Treasury Department official stated: "Given the significant administrative changes that would be required of employers to implement the proposed withholding, it is clear that a delay in the effective date is necessary to provide employers with adequate time to make the required changes. In addition, Treasury and the IRS need additional time to consider the many comments we received on the proposed regulations and to decide on an appropriate course of action. Consequently, employers will not be required to implement the changes until at least two years after the regulations have been issued in final form."

Many high technology companies in California opposed the proposed change because of the importance of stock option plans in recruiting and retaining employees. Although encouraged by Tuesday’s decision, these companies are expected to continue to work for permanent withdrawal of the proposal. After the November announcement, bills were introduced in both houses of Congress to prohibit the change.

PPIC Report Scrutinizes State’s Class Size Reduction Efforts

On Tuesday, June 25, the Public Policy Institute of California (PPIC) released a study which found that class size reduction efforts have impacted California’s six largest school districts differently. While students in the Los Angeles Unified School District (LAUSD) appear to have benefitted little from the smaller classes required by the state’s 1996 class size reduction legislation, test score gains among students in the next five largest districts – Fresno, Long Beach, Oakland, San Diego, and San Francisco – exceed gains in school districts throughout the state as a whole. The study, Class Size Reduction, Teacher Quality, and Academic Achievement in California Public Elementary Schools, found that smaller classes had a greater positive effect on students in low-income schools.

Study authors Christopher Jepsen of PPIC and Steven Rivkin of Amherst College analyzed third grade test scores between 1997-1998 and 1999-2000. In Fresno, Long Beach, Oakland, San Diego, and San Francisco, test scores increased 14% in math and 9% in reading in schools with mostly low-income students, while schools with few low-income students saw less than a one percent increase in math scores and only a 6% increase in reading. The state as a whole followed a similar pattern, although the difference between low-income and other schools was less pronounced. In Los Angeles, however, schools with predominantly low-income students saw slightly lower test scores after class size reduction. Author Jepsen suggested that the discrepancy may be due to a large influx of "inexperienced, uncertified teachers in the most at-risk schools as more senior teachers left to fill new openings in more affluent schools. This problem appears to have been much more severe in L.A.’s high poverty schools than in similar schools in other districts."

The study also finds that unlike the other five largest districts, LAUSD schools with higher percentages of black students did much worse in mathematics following class size reduction. Math scores in mostly black schools in Los Angeles dropped nearly 15 percent after class sizes were reduced, while math scores in the other five districts rose nearly 15 percent in schools with similar racial makeup. The study suggests that the cause could be the state legislation exacerbating the shortage of qualified, experienced teachers in the poorest LAUSD schools.

The PPIC report finds that a 10-student reduction in class size raises by 4% the percentage of students who exceed the national median on mathematics tests; for reading, the boost is 3%. It also finds that teacher experience is a significant factor, with students being taught by a new teacher 3% less likely to exceed national testing means. The authors suggest that a more graduated approach, focusing first on the highest-poverty schools, might have been a less disruptive approach, and they stress the importance of supporting new teachers by helping them adapt to the classroom and making them more productive and effective.

The study and other PPIC products are available at http://www.ppic.org .

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