The California Institute For Federal Policy Research California Capitol Hill Bulletin Volume 4, Bulletin 30 -- September 11, 1997 http://www.calinst.org DELEGATION LETTER/GOVERNOR URGE FURTHER STUDY OF 9TH CIRCUIT The California Congressional Delegation is currently circulating a letter to Subcommittee on Commerce, Justice, State and Judiciary Appropriations Chairman Harold Rogers (KY), urging him to reject a Senate rider that would split the Ninth Circuit Court of Appeals. In addition, Governor Pete Wilson has followed his July letter (see Bulletin Vol. 4., No. 25, 7/17/97) urging Senate Judiciary Chairman Orrin Hatch (UT) to reject the rider, with a September 5 letter to Rep. Rogers expressing the Governor's "strong opposition" to it. In July, during consideration of the FY98 Commerce, Justice, State Appropriations bill, the Senate Appropriations Committee adopted an amendment that would split up the U.S. Circuit Court of Appeals for the Ninth Circuit. California and the territorial islands (Guam, American Samoa, and the Marianas) would remain in the 9th Circuit, but Alaska, Arizona, Idaho, Montana, Oregon and Washington would become a new 12th Circuit. Nevada and Hawaii, now currently in the 9th Circuit, would be allowed to choose which circuit to join. The amendment to the $31.6 billion appropriations bill was offered by Sen. Judd Gregg (NH) and adopted by voice vote. Both the delegation letter and the Governor are urging support of the House's unanimously adopted H.R. 908 which establishes a bipartisan commission to study the issue. The delegation letter states that: The only sure and effective way to guarantee that any division is practicable, efficient and fair to the litigants served by the courts, is to allow the independent commission established by H.R. 908 to inquire into the myriad of questions and issues that realigning any of the federal circuits may entail. In addition to the Governor's opposition, both California Senators, the California Bar Association, and the Chief Judge for the Ninth Circuit, Proctor Hug, Jr., have all denounced the rider. Offices of members wishing to sign the letter should contact the offices of Rep. Chris Cox, Rep. Jane Harman, Rep. Roybal-Allard, or Rep. Jerry Lewis as soon as possible. DELEGATION LETTER ADDRESSES FEMA; LOCAL GOVERNMENTS VOICE CONCERNS The offices of Rep. Buck McKeon (Santa Clarita) and Rep. Lucille Roybal-Allard (Los Angeles) are circulating a delegation letter on behalf of California's state and local governments urging Federal Emergency Management Agency (FEMA) Director James Lee Witt to consider the significant role that the state and local governments fulfill when disasters strike California. Specifically, the letter recommends that in order for FEMA to best meet the needs of local governments, the agency: invoke due process prior to adoption of any new or modified policies; ensure that compliance with environmental regulations does not lead to delays in local disaster response and recovery efforts; delegate decision-making of FEMA's Public Assistance Program eligibility to informed individuals closest to the source of damage; and expand on-line reporting availability to allow applicants to have a "read-only" access to the status of their appeals. Members interested in learning greater detail or in co-signing the letter should contact Bob Cochran in Rep. Mckeon's office (225-1956) or Stacey Leavandosky in Rep. Roybal-Allard's office (225-1766) by September 25. In a related subject, on Wednesday, the League of California Cities, representing California's 471 cities, and the California State Association of Counties, representing the state's 58 counties, sent VA-HUD and Independent Agencies Appropriations Subcommittee Chairman Jerry Lewis (Redlands) a letter urging him to consider the two organization's concerns regarding certain provisions of H.R. 2158, the 1998 VA-HUD and Independent Agencies Appropriations bill. The provisions of concern to the local government representatives deal with Senate provisions regarding FEMA that would eliminate federal disaster relief funding for certain key state and local government properties. Under the Senate's version, FEMA would be prohibited from reimbursing state and local governments for damages to trees and other natural features, as well as parks, recreational areas, stadiums or other similar facilities that generate any portion of their operational revenues through user fees, rents, admission charges or other similar fees. SENATE CONSIDERING FDA BILL; COMPROMISE ON ONE STUMBLING BLOCK The Senate began consideration of S. 830, the FDA reform and Prescription Drug User Fee Act (PDUFA) reauthorization this week, and on Thursday Sen. Jim Jeffords (VT), Chairman of the Labor and Human Resources Committee, and Sen. Edward Kennedy (MA) announced that they had reached a compromise on at least one major stumbling block to continued consideration of the bill. Sen. Kennedy opposes several provisions in the bill and was blocking consideration because of language establishing national standards for labeling cosmetics, which might preempt tougher state standards (see Bulletin Vol. 4, No. 29, 9/4/97). The compromise will allow states to continue to apply warning labels to cosmetics and prevent sales of non-complying products, as long as the FDA has not issued specific regulations covering the same products. Despite this agreement, Sen. Kennedy and others still oppose other provisions, such as allowing third party review of new medical device applications. To ensure that opponents of the bill do not try to block its consideration again, Senate Majority Leader Trent Lott (MS) filed a cloture motion for a vote on Tuesday, September 16. The Senate earlier invoked cloture -- thus, allowing consideration of the bill to move forward -- on September 5, by a vote of 89-5. California's biomedical industry strongly supports passage of S. 830. ISTEA REWRITE ADVANCES IN SUBCOMMITTEE WITHOUT MAJOR CHANGES The House Surface Transportation Subcommittee on Wednesday forwarded its reauthorization of the Intermodal Surface Transportation Efficiency Act (ISTEA) to the full Transportation Committee with only a few minor changes contained in a manager's amendment. The committee leaders' bill, H.R. 2400, is entitled "BESTEA" (Building Efficient Surface Transportation and Equity Act). The manager's amendment did change the provisions governing the Congestion Mitigation/Air Quality (CMAQ) program to limit the use of such funds for highway widening. (For further details regarding the BESTEA proposal, refer to Volume 4, Bulletin 29, 9/4/97.) Chairman Bud Shuster (PA) this week took exception to a whip notice prepared by Majority Leader Dick Armey (TX) which said that any Republican member who voted for the BESTEA bill would violate this summer's bipartisan budget agreement. Shuster argued that the bill does not technically violate the agreement. Some critics express concern that passage of the Shuster bill would ultimately cut into funds for other discretionary programs. On Friday, staff to the members of the California Congressional Task Force on ISTEA Reauthorization -- which is chaired by Rep. Jay Kim (Diamond Bar), Bob Filner (San Diego) and Juanita Millender-McDonald (Compton) -- met with House Transportation Committee staffer Roger Nober to discuss the BESTEA proposal and its potential impact on California. While several billion dollars in demonstration project funds will not be allocated until full committee markup next Wednesday and while transit formula shares have not been specifically announced, the Committee estimates that California would receive 9.16% of U.S. highway funds under the proposal. This would represent little if any change from that under the current ISTEA proposal, and a share below that expected to be derived from several other ISTEA proposals previously circulated. According to a press report, California's share of the existing ISTEA scheme is 9.33%, compared to 9.56% under the Administration's NEXTEA proposal, 9.72% under the STEP21 proposal, and 10.19% under Senator Moynihan's (NY) proposal known as ISTEA Works. (Note that there may have been some discrepancies in the calculation of these figures.) ENCRYPTION BILL HITS ROUGH SEAS IN HOUSE H.R. 695, intended to ease restrictions on the export of encryption software and products, was substantially altered this week by the House National Security Committee and the House Intelligence Committee and then put on hold for two weeks by the House Commerce Committee. The National Security Committee reported the bill on Tuesday after amending it to give the Secretary of Defense substantial power to limit the export of encryption. The amendment, offered by Reps. Curt Weldon (PA) and Ron Dellums (Oakland), the Committee's ranking member, puts the Defense Department on an equal footing with the Department of Commerce in controlling encryption exports and requires the President to notify Congress annually of the maximum level of encryption strength that can be exported "without harm to the national security of the United States." Only products at or below that encryption strength would be eligible for export under a license exception after a one-time administrative review. The Administration currently allows exports of encryption strength level products only up to 56-bit DES and where the exporter has planned a system to ensure mandatory key recovery. (See Bulletin, Vol. 4, Nos. 17 (5/15/97), 22 (6/26/97), 26 (7/24/97), 27 (7/31/97) & 29 (9/4/97)). During debate on the Weldon/Dellums amendment, which passed by a vote of 45-1, committee members expressed concern that without the amendment, U. S. national security would be weakened. The House Intelligence Committee on Thursday approved by voice vote a 40-page substitute amendment to the bill. The substitute, among other major changes, requires manufacturers to include key recovery features in all exported encryption products, and by January 31, 2000 to include a key recovery system in all products to be sold or used in the United States. Current law does not restrict the domestic use of encryption at any strength level. Also on Thursday, the House Commerce Committee had scheduled its markup of H.R. 695, and was expected to also amend it, probably to include a key recovery system. Instead however, at the last minute, the House granted the committee a two week extension to its deadline for action on the bill. Committee Chairman Thomas Bliley (VA) indicated that the committee will use the time to work with the National Security Committee to fashion a compromise version. The computer hardware and software industry strongly supports H.R. 695 as it was reported by the House Judiciary and International Relations Committees and opposes the changes made by the National Security and Intelligence Committees. SWEEPING CHANGES TO K-12 EDUCATION PROGRAMS MADE BY SENATE In a surprising turn of events during consideration of the Labor-HHS-Education spending bill on Thursday morning, the Senate accepted an amendment by Sen. Slade Gorton (Washington) which overhauled myriad federal K-12 education programs. While details remain sketchy at this point, the amendment appears to alter the $7 billion Title One program for disadvantaged youth by basing the formula on the number of title one eligible children (apparently eliminating the per-pupil expenditure factor so troublesome to California) and would direct many future funds directly to school districts rather than having it be distributed by federal and state education agencies. The amendment apparently also would consolidate several other major education programs -- including drug-free schools, immigrant education, bilingual education, Eisenhower professional development, Title VI, indian education, magnet schools and charter schools -- into a block grant based largely on child counts (adjusted by state per capita income). Further details will be provided when available. RIGGS AMENDMENT ON EDUCATING CONVICTS WILL RESOLVE DISPUTE When the House finally concludes consideration of the Labor-HHS-Education spending bill next Tuesday, the final measure is expected to include an amendment to resolve a longstanding dispute between the State of California and the U.S. Department of Education. Offered by Rep. Frank Riggs (Windsor), who chairs the House subcommittee that oversees K-12 education programs, the amendment will prohibit the federal government from withholding all disabled education funds from states which do not provide disabled education services to eligible inmates in state prisons. Despite language in this year's reauthorization of the Individuals with Disabilities Education Act (IDEA) that limited the penalties which could be imposed by the U.S. Department of Education to the withholding of those specific funds targeted to incarcerated felons, the Deparment has persisted in its efforts to withhold California's entire $306 million IDEA allocation for FY1997. The Riggs amendment, which has the support of both the Republican and Democratic leadership, is expected to be included by unanimous consent. HOUSE JUDICIARY SUBCOMMITTEE HOLDS HEARING ON COPYRIGHT PIRACY The Judiciary Committee's Subcommittee on Courts and Intellectual Property held a hearing Thursday on H.R. 2265, the No Electronic Theft (NET) Act. The bill is intended to counter a federal court case that held an intentional infringer of copyrighted material, who posted that material on the Internet, was not criminally liable for infringement because he realized no financial gain. H.R. 2265 would impose criminal copyright infringement liability on anyone who infringes for commercial advantage or private financial gain, including the receipt of other copyrighted works. Marybeth Peters, U.S. Register of Copyrights, and Kevin Di Gregory, Deputy Assistant Attorney General (Criminal Division), U.S. Department of Justice testified for the Administration in support of the legislation, although they recommended certain changes in the language of the bill. The subcommittee also heard from a panel representing the Business Software Alliance and the Software Publishers Association, both of which support the bill. Representatives from the Motion Picture Association of America and the Recording Industry Association of America also testified in support of H.R. 2265. Prof. David Nimmer testified on behalf of the U.S. Telephone Association. While supporting the bill's intent, he expressed concern that its language could expose Internet service providers (ISPs), who merely provide access to the Internet, to criminal liability, and suggested alternative language to eliminate any ambiguity. Copies of the witnesses' testimony can be obtained from the Subcommittee at 202-225-5741. WAYS & MEANS TRADE SUBCOMMITTEE EXAMINES NAFTA EFFECTIVENESS On Thursday, the Ways & Means Subcommittee on Trade held a hearing reviewing the effectiveness of the North American Free Trade Agreement. The subcommittee, which includes California Reps. William Thomas (Bakersfield), Wally Herger (Marysville) and Robert Matsui of Sacramento (the panel's ranking Democrat), heard from more than two dozen witnesses, beginning with Rep. David Dreier (San Dimas) and including Deputy U.S. Trade Representative Jeffrey Lang. The hearing followed the Administration's recent issuance of its 140-page study on the operation and effectiveness of NAFTA. Rep. Dreier noted that the benefits of foreign trade for the nation's economy are broader than typically reported -- while job creation associated with increased exports are widely lauded, there are also significant domestic economic benefits realized both from imports and from foreign investment within U.S. borders. Some of the advantages he highlighted were increased efficiency and competition, access to low-cost components, increased cross- border flow of information and technology, and the counter-inflationary effects of lower domestic prices. Dreier noted that nearly 20% of California's manufacturing exports are destined for NAFTA partners, and that the state's exports to Mexico under NAFTA have increased by $2.7 billion, to $9.1 billion per year. Rep. Matsui highlighted recently-reported findings which showed NAFTA responsible for an increase of between 90,000 and 160,000 net additional jobs nationwide, and perhaps as many as 200,000. He cited Mexico as a large market for American products, noting that 72% of Mexico's 80 million citizens want to purchase U.S. goods, and he added that Mexico's young population means that that the market would likely grow in the future. Rep. Herger commented that specialty crops in his Northeastern California district are particularly dependent on trade with NAFTA partners, and he noted that NAFTA helped to keep the Mexican market open to U.S. producers and exporters during the recent peso devaluation crisis in that country. Some Members from other states expressed reservations about NAFTA's benefits, including Sander Levin (MI) who stated that 20% of the wage differential between skilled and unskilled U.S. jobs were attributable to trade, and Marcy Kaptur (OH) who claimed that real wages have declined by 30% in Mexico since NAFTA's passage and that there are crossborder pollution and sanitary concerns that remain unaddressed. During a question-and-answer session, Rep. Clay Shaw (Florida) noted that there needed to be adequate environmental and phytosanitary standards maintained in other countries, and Rep. Matsui noted that NAFTA creates concrete processes for resolving trade disputes that, absent such an agreement, might result in potentially dangerous and escalatory trade sanctions. USTR's Lang focused his testimony on the benefits of reduced Mexican tariffs under NAFTA. He cited the 10% reduction in Mexican tariffs for transportation equipment which has led to a 19% increase in the U.S. share of their market (rising to 83%), and the 9% reduction in tariffs for electronics equipment which led to a 10% increase in the U.S. share of the Mexican market for such goods (rising to 75%). Lang noted that the Mexican share of the U.S. apparel market rose from 4.4% to 9.6%, but added that the share held by Asian countries fell from 39% to 30% during the same period. He also stated that it is too early to judge the success or failure of NAFTA, in part because it has only been in place for three years, and in part because the peso crisis in Mexico during the period has skewed the gauges. He concluded by noting that the North American Development Bank (NADBank) will be able to leverage its capital into $2-3 billion annually, and that several major projects will be reviewed by NADBank in the coming weeks. STATE ENDANGERED SPECIES ACT SET FOR REVISION Sacramento legislators are prepared to deliver a major two-bill compromise revision of the state's Endangered Species Act to the Governor, who has already signaled his support for the measures, before the Legislature adjourns for fall recess Friday evening. At the heart of Senator Patrick Johnston's (Stockton) legislation regarding land development, which passed out of the Assembly on Tuesday with a lopsided 63-7 margin, is the restoration of the authority of the state Department of Fish and Game to issue "incidental take" permits to developers who kill endangered species or damage protected habitat as a byproduct of development projects. Johnston's legislation enjoys a broad coalition of bipartisan support including the Fish and Game Department, the California Chamber of Commerce, and the Audubon Society. If signed into law, the measure would codify requirements that developers who destroy habitat or kill endangered species must compensate the state for their damages by allotting appropriate habitat or by some other equal means. In addition, S.B. 879 removes the ambiguity that has arisen from a recent court ruling that called into question the Department of Fish and Game's ability to issue future incidental take permits and opens up the permit application hearing process to public review. The second piece of legislation in the package is Senator Jim Costa's (Fresno) S.B. 231 which provides the agriculture industry with many of the same incidental take exemptions as Johnston's land development legislation. Costa's measure also enjoyed strong bipartisan support when it passed the Assembly on Tuesday with a 55-12 margin. At the federal level, U.S. Senators Kempthorne (ID), Baucus (MT), Chafee (RI), and Reid (NV) have reportedly reached an agreement with Interior Secretary Babbitt on a long-awaited reauthorization of the Endangered Species Act. The Senators plan to introduce the bipartisan compromise language early next week. On the House side of the Capitol, Representative George Miller (Martinez) introduced Endangered Species Act reauthorization legislation, H.R. 2351, in July. That legislation was jointly referred to the Ways and Means and Resources committees. Rep. Richard Pombo (Tracy), who chairs the House Resources Committee's Task Force on Endangered Species, is expected to have a substantial role in any legislation dealing with the issue. HUGHES WINS $1 BILLION ARAB SATELLITE CONTRACT On Thursday, El Segundo-based Hughes Space and Communications International signed an agreement with Abu Dhabi-based Thuraya to design, construct and launch a satellite system to cover Arab states and the Indian subcontinent by 2000 at an estimated cost of $1 billion. The system will provide mobile communications to Iran, India, Pakistan, Bangladesh, Turkey, and parts of Europe and central Asia. A significant portion of the $1 billion contract may be spent in California. In addition to the El Segundo satellite operation, which could play a large part in the construction of the two spacecraft, the contract also anticipates hand-held communications devices which could be produced at least in part at Hughes facilities in San Diego. 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 a computer server donation from Sun Microsystems. _____________________________________________________________ _ Tim Ransdell, California Institute for Federal Policy Research 419 New Jersey Ave., SE, Basement Level, Washington, DC 20003 Voice: 202-546-3700 -- Fax: 202-546-2390 -- Cell: 202-288-6598 -- Home: 301-773-4078 -- Website: