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California Capitol Hill Bulletin

Volume 9, Bulletin 29 — October 17, 2002    [or see pdf version]  [or jump to the previous bulletin]


November 22 CR Passes; House Expected Back November 12

Congress Approves Defense Funding

Court Imposes Cooling-Off Period on Ports

House And Senate Pass New Visa Program For Student Commuters

Differences Over Highway Funding

California Water Agencies Reach Colorado River Agreement

Fannie Mae Housing Conference Panelist Lauds LA’s Actions

State’s Health Care Market Improving

Analysis of Defense Appropriations Conference Report

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.

November 22 CR Passes; House Expected Back November 12

The House and Senate passed another Continuing Resolution on Wednesday, October 16, extending funding for federal agencies through November 22. After the vote, the House adjourned and members left for their districts to campaign for the November 5th elections. The House expects to reconvene November 12 for a lame-duck session, and the chamber is subject to being called back to Washington before then on 48 hours notice, if the Senate has acted on Homeland Security or other legislation that requires House action. The House vote on the CR was 228-17.

The Senate passed the CR by voice vote, but remained in session on Thursday debating the Homeland Security bill.


Congress Approves Defense Funding

By a vote of 93 to 1 on Wednesday, October 16, the Senate passed the FY 2003 defense appropriations conference report. The House had passed the report on October 10 by a vote of 409 to 14.

The bill provides $355.1 billion for Defense Department activities: $71.6 billion for procurement (including $24 billion for aircraft), $58.6 billion for Research, Development, Testing, and Evaluation, $93.6 billion for personnel, and $114.8 billion for operation and maintenance. The measure fully funds 15 C-17 aircraft purchases, 3 Global Hawk unmanned aerial vehicles, and 46 F/A-18 E/F fighters, and it provides $7.4 billion for ballistic missile defense. It also funds some environmental cleanup at military bases and creates a commercial space loan guarantee.

The California Institute has prepared an analysis of the conference report, which is available on the Institute’s website at and is also attached below.


Court Imposes Cooling-Off Period on Ports

Judge William H. Alsup, of the U.S. District Court in San Francisco, entered a permanent injunction ordering West Coast ports to remain open while the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) continue to negotiate a contract settlement. The order continues the 80-day cooling-off period the Court imposed last week at the request of the Bush Administration, under the Taft-Hartley Act. Prior to last week’s injunction, the ports were shut for 11 days after the PMA locked out the dock workers. See, Bulletin, Vol. 9, No. 28 (10/10/02). A federal mediator will referee the negotiations during the remaining 72 days of the cooling-off period.

Since the 29 ports were re-opened last week, the PMA contends that cargo containers are moving through the ports 20 percent more slowly than normal, and evidences a slowdown on the part of the dockworkers. The ILWU, however, argues that clearing out the congestion caused by the 11-day shutdown has caused severe infrastructure and logistical problems, especially with regard to train and truck movements.

Federal mediator Peter Hurtgen may meet with the ILWU this week, and then with the PMA next week, after touring the ports. Hopes are that the two sides can go back to the bargaining table by the middle of next week.


House And Senate Pass New Visa Program For Student Commuters

By voice vote on Tuesday, October 15, the House passed H.R. 4967 to establish two new visa categories for students commuting from Mexico and Canada to study. The Senate followed suit on Wednesday, October 16 and passed the bill by unanimous consent.

Under the bill, two new visa categories, F-3 and M-3, are created for Canadian and Mexican students who study in the United States part time, while continuing to live in their home country.

Prior to September 11, 2001, students entering the U.S. for part-time study were considered visitors and did not require student visas, which were only required at that time for full-time students. Security precautions after September 11th prohibited these students from continuing to cross the border to study. In August, the INS announced rules to allow these students to enter under the visa categories for full-time students. The legislation passed this week establishes the two new visa categories in order to ensure that INS has the statutory authority to allow part-time Mexican and Canadian students to continue to enter the U.S.


Differences Over Highway Funding

A provision in the October 16 continuing resolution concerning highway programs is causing controversy about the level of next year’s transportation spending. The provision would continue to fund state highway programs at the FY 2002 level of $31.8 billion per year for part of the year, although it caps spending obligations for FY 2003 for highway programs at the minimum baseline level of $27.7 billion. By some readings, this means that funds for the entire year could not exceed $27.7 billion while the resolution remains in effect or until the a Transportation Appropriations bill is enacted.

Transportation Committee Chairman Don Young, (AK), contends that the CR’s highway funding level will remain at $31.8 billion. He said that this is confirmed by a letter he received from the Office of Management and Budget that finds no threat of highway funding decreases.

Some Democrats have expressed concern that the language creates confusion and will ultimately not guarantee full funding to the states. If the $27.7 billion level in the CR were a to be a cap, it would reduce highway funding by $4.1 billion from last year’s level, and an analysis from the Congressional Budget Office reportedly confirms this assertion.

The House Transportation Appropriations bill (H.R. 5559) was voted out of committee earlier this month. It restores roughly half (or $4.4 billion) of an $8.6 billion shortfall in highway funding caused by negative fluctuations in the Revenue Aligned Budget Authority (RABA) formula, a mechanism that ties gas tax receipts and tire excise taxes to the level of highway funds. The Senate bill (S. 2808) funds highway programs at $31.8 billion.

According to CalTRANS, California received roughly $2.6 billion in core highway funding dollars in FY2002 and it would lose the most highway dollars from a shortfall; the Golden state would receive $2,099,255,000 in the House spending bill, compared to $2,436,992,000 in the Senate version (a difference of $337,767,000), according to the Federal Highway Administration. If funding is not maintained at the levels specified in the CR, the American Road and Transportation Builders Association predicts that it would result in a loss of 12,069 jobs in California.


California Water Agencies Reach Colorado River Agreement

California’s four southern water agencies have agreed on how to allocate Colorado River water in order to comply with the December 31 deadline imposed by the U.S. Department of the Interior. The agreement was reached by the San Diego County Water Authority, the Imperial Valley Irrigation District, the Coachella Valley Water District, and the Metropolitan Water District of Southern California. Each agency will have to submit the plan to its board for final approval.

Under the plan, Imperial Valley will transfer up to one million acre-feet (maf) of water to San Diego County by using more efficient irrigation and by fallowing land. In return for retiring the land, Imperial Valley will receive $258 per acre-foot, $200 for the valley’s farmers and the remainder for environmental and economic mitigation. Coachella will also receive up to 100,000 maf per year from Imperial Valley.

The agreement transfers less water during the first years of the 75-year agreement in order to protect the Salton Sea from becoming inhabitable to fish and wildlife. In addition, Imperial Valley’s potential liability for damage to the Sea is limited to $30 million.

California has been taking about 5.1 maf of Colorado River water for several decades. Now that other Colorado River states, such as Arizona and Nevada, are demanding their full allotment, California must limit its take to 4.4 million acre-feet. The agreement, if approved by the agencies’ boards, will establish the framework for achieving that figure.


Fannie Mae Housing Conference Panelist Lauds LA’s Actions

This year’s Fannie Mae Foundation Annual Housing Conference, held on October 9th, 2002 was entitled "Raising Housing on the Nation’s Agenda." The conference featured a program of experts, academicians, community leaders, and finance specialists as speakers and panelists. They discussed and debated the current US housing situation, its current position on the policy agenda, and strategies for raising housing issues as a higher priority in all levels of government.

The conference panel discussions explored and furthered the findings of a recently released report of the Millennial Housing Commission, established by Congress in 2001 to investigate the increasing importance of housing to the nation’s infrastructure, methods to leverage private sector involvement in providing affordable housing, and how government programs can provide better housing opportunities for families, neighborhoods, and communities. On the same day, the full House Appropriations Committee reported a $90.9 billion VA-HUD spending bill out of committee. The bill funds the Department of Housing and Urban Development at $36.1 billion for FY2003, a $1.8 billion dollar increase from last year’s levels.

Panelists discussed topics ranging from the barriers and opportunities of home ownership, the implications of rental housing, housing as an interrelated aspect of community life, and effective ways to elevate housing issues on the same level as other core issues. Participants recommended expanding vouchers and housing subsidies such as the Low Income Housing Tax Credit for low-income renters; creating more Housing Trust Funds, whereby local funding can be dedicated to affordable housing finance and private development; and linking the housing agenda to larger issues through economic integration, regional concentration and balanced growth housing policies.

Dr. Peter Dreier, director of the Urban and Environmental Policy Program at Occidental College, Los Angeles, touted the City of Los Angeles’ 2001 creation of a $100 million municipal housing trust fund as a housing advocate’s success story. According to Dr. Dreier, the fund formed a broad political coalition by involving business, community and faith-based groups; arranged slum housing tours for elected officials; and aggressive lobbied the news media. He noted that six of the ten least affordable places to live are in California. Dr. Dreier suggested a survey of housing problems by Congressional district, a region-by region assessment of the relationship between housing and retail business centers, a content analysis of local media, and comparisons of policies in other countries.

The Fannie Mae Foundation creates affordable homeownership and housing opportunities through innovative partnerships and initiatives that build healthy, vibrant communities across the United States. The Foundation is specially committed to improving the quality of life for the people of its hometown, Washington, DC, and to enhancing the livability of the city’s neighborhoods. For more information on the conference visit .


State’s Health Care Market Improving

The California Healthcare Foundation’s (CHCF) publication California Managed Care Review 2002 examines the relationships and linkages between the four key players in the California health care marketplace: providers, health plans, purchasers and consumers. It finds that gaps, conflicts and discrepancies still exist among various market players although the relationships have evolved somewhat since 2000 particularly between doctors and health plans.

The report also finds that health plans and hospitals are returning to preferred provider representations and plans based on pricing and tiering of hospitals. Furthermore, enrollment in California HMOs is flat. Fewer employers are choosing HMO enrollment while commercial plans declined in 2001 by 0.7 percent, according to the report. This was offset by a 160,000 person increase in Medical HMO enrollment.

The report outlines research findings; describes the health care players in California and explains how these organizations relate to each other; and analyses health plans in the state as compared to similar markets in Colorado, Florida, Illinois, Michigan, Minnesota, Ohio, and Texas. In addition, the report surveys health plans, provider organizations, and local issues in major regions of the state: the San Francisco Bay Area, Sacramento, the Central Valley, Los Angeles-Orange County, the Inland Empire of Riverside and San Bernardino Counties, and San Diego.

CHCF commissions research and analysis, publishes and disseminates information, convenes stakeholders, and funds development of programs and models aimed at improving the health care delivery and financing systems. A copy of this report may be viewed at .


Post Script

… And, in other news, the victories of the California Angels and the San Francisco Giants in Major League Baseball’s two league championship series this week set up the first all-California world series in 13 years. In 1989, the Giants met the Oakland Athletics, and in 1998, the A’s met the Los Angeles Dodgers.


Analysis of Defense Appropriations Conference Report

By a vote of 93 to 1 on October 16, 2002, the Senate passed the conference report to accompany H.R. 5010, the Defense Appropriations bill for Fiscal Year 2003. The House of Representatives had passed the conference report on October 10 by a vote of 409 to 14. The conference report is numbered H.Rpt. 107-732.

The bill provides a total of $355.1 billion in new Defense Department spending authority, an increase of $37.5 billion over Fiscal Year 2002 levels (not including supplemental expenditures passed within the past year). It also represents a reduction of $1.6 billion from the President’s budget request (not including the $10 billion reserve). Earlier in the year, the House had approved a bill calling for $354.7 million for the bill, and the Senate had approved a $355.4 measure.

For overall DOD procurement, the Defense Appropriations conference report provides $71.6 billion (an increase of $10.7 billion from FY 2002), and for Research, Development, Testing, and Evaluation (or RDTE), the measure provides $58.6 billion ($9.9 billion above the level for fiscal 2002). For military personnel, the bill provides $93.6 billion ($11.5 billion more than in FY 2002), supporting 1.4 million active duty and 864,558 guard and reserve personnel and fully funding a pay raise of 4.1%. The report provides $114.8 billion ($9.7 billion above the 2002 level) for operation and maintenance.

In funding under DOD’s aircraft procurement accounts, for which California firms typically compete strongly, the conference report provides $13.1 billion for Air Force aircraft purchases, $8.8 billion for Naval aircraft procurement, and $2.3 billion for Army aircraft.

The conference report approves $3.3 billion for 15 C-17 transport aircraft, an addition of $586 million to the budget to fully fund the fiscal year 2003 acquisition costs, rather than providing incremental funding increases as had been proposed by the Air Force. The C-17 is built by Boeing in its Long Beach facility. (The bill also includes approves the President’s multiyear request for future procurement of 40 C-130Js for the Air Force and 24 KC-130Js for the Marine Corps.)

The C-17 language states, "In the Department of Defense’s fiscal year 2003 budget submission, the Air Force did not request a sufficient amount to fully fund the purchase of 15 C-17 cargo aircraft per year. Instead, it requested only the amount of funds it expected to obligate each year to start production of 15 aircraft, and financed the remaining costs in later years. This financing scheme runs counter to the ‘full funding’ principles which guide Federal government procurement practice, and thereby creates a future liability for the Air Force and Congress. For this reason, the conferees disapprove the Air Force’s C-17 financing proposal. As such, the conference agreement includes an increase of $585,900,000 over the budget request to fully fund the purchase of 15 C-17 aircraft in fiscal year 2003. Additionally, the conferees agree to retain House language which directs that funds made available within the ‘Aircraft Procurement, Air Force’ account be used for advance procurement of 15 aircraft." The Air Force funding also includes $11.3 million for a C-17 maintenance trainer.

The bill includes $129 million for procurement of 3 Global Hawk Unmanned Aerial Vehicles (UAVs), and $42 million to accelerate development of a Navy Global Hawk variant (Broad Area Maritime Surveillance). The Global Hawk is largely built in California and Beale Air Force Base in Northern California serves as a primary hub of Global Hawk activity. The bill also includes $131 million for procurement of 22 Predator UAVs, an addition of $26 million over the Administration’s budget request. The total appropriation for all UAV programs is $352.7 million. In report text, the conferees rejected an Administration request for an additional $30 million for the development of a U-2 like defensive system for the Global Hawk UAV and reprogrammed sensor and other funding within the Global Hawk account.

The conference report provides $3.2 billion for 46 Navy F/A-18 E/F fighters, including an additional $120 million above the budget request for 2 additional aircraft. It also provides $4 billion for 23 F-22 fighters, and $3.5 billion for continued development of the Joint Strike Fighter (JSF). Elsewhere, the report prohibits the use of appropriated funds for approving the license or sale of F-22 fighters to any foreign government. Report language states that an additional $29.8 million is included for the JSF Interchangeable Engine Program only to continue the current effort to develop and maintain two, competing, interchangeable engine programs for the aircraft.

The report provides $106 million for the B1B program, including a new $8 million item for wing components, and it provides for an increase of $7.7 million from the budget request in funding for B-1 bomber modifications. It also provides $104.1 million for the B2A bomber program, including an additional $25 million for UHF satellite communications equipment.

The report provides a total of $7.4 billion for ballistic missile defense research and development and related procurement activities, a reduction of $14.4 million from the President’s budget request.

The bill approves an increase of 17% for the Defense Advanced Projects Agency (DARPA) over fiscal year 2002 levels. A sizeable portion of DARPA research funds are expended in California.

In a section devoted to advanced semiconductor devices, the conference report stated "The conferees recommend that the Department of Defense conduct a study to examine the long-term DoD acquisition model for advanced semiconductor devices used in military and intelligence applications. This study should address whether a consolidated U.S. semiconductor foundry could offer the U.S. Government a solution to the impending advanced technology procurement challenge. The Department is encouraged to make this study a high priority so that a preliminary assessment can be available by December 2002." California continues to be a hub of the U.S. semiconductor manufacturing industry.

The conference report places limits on the federal government’s use of federally funded research and development centers (FFRDCs) to accomplish goals. The bill prohibits the use of funds to establish a new DOD FFRDC; limits the Federal compensation to be paid to FFRDC members or consultants; limits certain uses of 2003 FFRDC funds, including staffing totals; and reduces by $91.6 million the total amount appropriated for FFRDCs.

The conference report recommends that $4.5 million of the funds for enhanced secure communications may be used to "increase the availability of current generation NSA-approved secure nationwide digital cell phones to meet urgent service needs." The language directs DOD to "consider accelerating the National Security Agency’s continued development of secure cellular wireless technology and multi-band functionality. To accomplish this the conferees would be supportive of a reprogramming of $10,000,000 to support development of a more robust secure nationwide cellular capability with multi-band functionality." California is a major center of wireless technology research and development. In separate language, the report expresses concern that the Army National Guard lacks a near-term capability or plan to ensure a secure cellular phone capability for use in the event of a domestic emergency, requests a report on plans to achieve that objective, and states that conferees "would be supportive of a reprogramming to increase this capability."

The conference agreement provides $246.1 million for environmental restoration on formerly used defense sites — such as closed and closing military bases — which is up from the $212.1 million proposed by the House but below the $252.1 million proposed by the Senate. In other environmental restoration accounts used for existing bases, the bill provides $395.9 million for Army facilities, $256.9 million for Navy facilities, $389.8 million for Air Force facilities, and $23.5 million for defense-wide facilities.

Increases above the budget request are provided in the operations accounts for now-closed George Air Force Base ($2.1 million) and Norton Air force Base ($2.6 million), and an additional $1.4 million is provided for the Hunters Point Naval Shipyard.

Attached to and passed with the Defense appropriations conference report was a separate bill entitled the Commercial Reusable In-Space Transportation Act of 2002. The bill authorizes DOD to guarantee up to an aggregate total of $1.5 billion in loans made to eligible U.S. commercial providers for purposes of producing commercial reusable in-space transportation services or systems. Criteria for loan eligibility would be determined by the Secretary of Defense. In addition to transportation, such private sector space systems could be used to correct improperly aligned or erroneously orbiting satellites, dispose of unnecessary orbiting equipment, increase the capability and reliability of existing ground-to-space launch vehicles, transfer satellites from low altitude orbits to high altitude orbits and return, and recover, refurbish, and refuel existing and future satellites.

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