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California Capitol Hill Bulletin

Volume 5, Bulletin 9 -- March 12, 1998

CONTENTS OF THIS ISSUE:
 Congressional Members Meet with State Legislators
 League of California Cities Visits Washington
 Senate Approves ISTEA II
 ISTEA Task Force Preparing Letter
 38 Signers of R&D Tax Credit Letter
 McKeon, Gallegly, Brown Circulating ERAST Program Letter
 Lois Capps wins 22nd District Special Election
 Immigration Panel Reports Out Farm Workers Visa Pilot Program
 Business Leaders Seek Increase in Private Activity Bond Cap
 Water and Power Subcommittee Holds Hearing On Salton Sea
 Senate Judiciary To Consider Encryption Issue
 Pentagon Official Threatens to Attempt "BRAC-Less" Base Closures
 Justice Department Objecting to Lockheed-Northrop Merger
 Mexico's Trade Switches from Surplus to Deficit



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.

Congressional Members Meet with State Legislators, City Officials
     As they have for a number of years, members of the California State Legislature visited Washington this week to meet with Members of Congress, U.S. Senators, and Administration officials.  A bipartisan group of members from the Assembly and Senate visited with Congressional Delegation members at a dinner Tuesday evening honoring State Senate President Pro Tempore John Burton, who had served in the House of Representatives in the 1970s and 1980s.
     During the same days, city officials from across California were also in Washington, focused on many similar issues.  (For more detail on the cities' visit, see below article.
 On Monday, the legislators met with a range of Clinton Administration officials, including Vice President Al Gore, White House staffers Mickey Ibarra and Karen Skelton, FEMA Director James Lee Witt, Education Secretary Richard Riley, drug czar General Barry McCaffery, and SBA Administrator Aida Alvarez.  On Tuesday, the state legislators also met with Members of Congress and outside experts in small roundtable sessions regarding transportation, water, trade, education, and health care. The sessions were organized by the California Foundation on the Environment and the Economy.  Details of these sessions are as follows:
     Trade:  Reps. David Dreier, Sam Farr, Bob Matsui, and Nancy Pelosi sat in on the Trade Roundtable held Tuesday afternoon.  Cliff Jernigan, Director of Worldwide Government Affairs for AMD (Advanced Micro Devices) and a member of the California Institute's Board, led the discussion on high technology issues, including anti-dumping law and the Foreign Sales Corporation tax.  During a discussion on encryption controls, Rep. Pelosi suggested that a bipartisan delegation letter be drafted urging Congress to not impose domestic controls on encryption and to ease export controls.  Rich Rominger, Deputy Secretary of the U.S. Department of Agriculture, was also on the panel and discussed the importance of free trade to California's substantial agriculture industry.
     Water:  Five members of the congressional delegation (Reps. Ken Calvert, Cal Dooley, John Doolittle, Vic Fazio, and George Miller) joined eight members of the State Senate and Assembly, as well as non-elected participants, in the Water Roundtable.  Rep. Vic Fazio (West Sacramento) led the discussion on two issues:  flood control and the CALFED Bay-Delta restoration.  These discussions were followed by an update on the Colorado River.  During the discussion on the Bay-Delta restoration project several of the members of the delegation present stressed that all Californians must continue to work together once the interim report was released, otherwise, the entire Bay-Delta agreement might fall apart, severely diminishing efforts to resolve the problem.
     Transportation:  While the Senate debated their proposal to reauthorize the nation's transportation laws this week, Reps. Bob Filner, Steve Horn, Juanita Millender-McDonald, Ron Packard, Ellen Tauscher, and staff from Senator Boxer's office met with State Senators Betty Karnette, Quentin Kopp, Tom Hayden, Adam Schiff and Assemblymembers Bill Leonard and Kevin Murray, among others, to discuss the ISTEA reauthorization.  There was general agreement that the state should continue to try and increase its percentage share of highway formula funds allocated under the proposed House and Senate bills.  Both bills would only return about 9.1% of the highway formula funds, down from the 9.3% allocation California received under the ISTEA law.  While California is scheduled to receive slightly less in highway formula funds, it appears that overall it will receive an increase in total transportation dollars.  In addition to highway formula funding, lawmakers also discussed:  the chances of having a California member on the ISTEA House-Senate conference committee; other funds in the House and Senate bills that may go California; innovative finance techniques; and air quality funding and standards.  Members in attendance committed to continuing the fight to ensure California receives its fair share of transportation funds.
     Education:  Reps. Gary Condit, Buck McKeon, George Miller, and Lynn Woolsey exchanged views about priority K-12 and higher education issues with state legislators Patrick Johnston, Adam Schiff, Tom Hayden, Diane Watson, Teresa Hughes, Dick Ackerman, Kerry Mazzoni, and Virginia Strom-Martin.  The assembled group discussed such K-12 issues as national standardized testing, school facilities funding, and the implementation of class size reduction in California, as well as school-to-career and higher education issues.
     Health Care Briefing:  Members of the congressional delegation also joined members of the State legislature to discuss federal health care issues affecting the state.  Key issues addressed were the ongoing debate on managed care reform, tobacco settlement legislation, and potential Medicare age-eligibility modifications.  Implementation of the state children's health insurance program, "Healthy Families," was also discussed.  State Assemblywoman Dion Aroner (Berkeley) and Senator Diane Watson (Los Angeles) expressed concern over the ten percent administrative cost cap for implementation of the federal children's health insurance plan and the need for increased dialogue with the congressional delegation to fully understand its impact on the state.  Reps. Henry Waxman (Los Angeles) and Pete Stark (Hayward) focused on the need for meaningful and fair managed care reforms and the potential state allocations of tobacco settlement funds.

League of California Cities Visits Washington
     Joining other city officials from around the nation, representatives from California's cities came to Washington earlier this week to lobby and discuss the League of California Cities' priority federal issues.  Tuesday morning, members of the bipartisan California congressional delegation addressed representatives from California cities over breakfast.  Delegation Chairs Rep. Jerry Lewis  (Redlands) and Lucille Roybal-Allard (Los Angeles) thanked the city officials for their hard work and discussed the bipartisan California legislative agenda and the role of the cities in that agenda.  In addition, Rep. Bob Filner (San Diego) discussed ISTEA revisions, Rep. Bob Matsui (Sacramento) covered economic development and tax issues, and Rep. Buck McKeon (Santa Clarita) spoke about workforce reform, as well as his efforts on behalf of the League and the California State Association of Counties on disaster assistance.  Rep. Chris Cox (Newport Beach) also dropped by the breakfast meeting to discuss his bill to impose a moratorium on the taxation of commercial Internet transactions pending a study on the issue.
     Later that day, Senators Barbara Boxer and Dianne Feinstein also addressed the city officials.  Senator Boxer highlighted her recent efforts in support of the ISTEA legislation and her strong opposition to the property takings measure, H.R. 1534.  Senator Feinstein, who voted against that bill last week as a member of the Senate Judiciary Committee, warned that defeating the bill would be a tough battle.  Feinstein also covered major legislation she is working on, such as economic development, crime reduction, and disaster assistance.

Senate Approves ISTEA II
     After nine days of floor debate, countless amendments, and two last-minute financing deals for highways and mass transit, the Senate approved by 96-4, its reauthorization proposal for the nation's expired transportation laws.  On Wednesday, the Senate had voted to limit further debate on ISTEA II (S.1173) by a similar 96-3 vote.
     Working to beat the May 1st expiration of the short-term extension passed last fall, the Senate boosted the nation's spending on transportation and transit beyond spending limits set by the balanced budget agreement Congress reached last year.  Senate Budget Committee Chairman Pete Domenici (NM) said the estimated $214 billion measure exceeds budget caps by about $1.8 billion in the first fiscal year, but it is unclear where the extra money will come from or what other programs will be targeted to offset the increases or if the spending can be sustained in the future.
     The final measure passed by the Senate contains about $173 billion for roads and roughly $41 billion for mass transit.  Preliminary estimates show that the state will get about $800 million more annually over the original ISTEA law or a 38% increase over six years under the Senate's proposal.  California is expected to receive at least $2.4 billion of the funds distributed by the highway formula under ISTEA II, or about 9.14% of the total highway formula funds distributed.  Under the original 1991 law, California received about 9.33% of the formula funds.  Governor Wilson today said although he is pleased California will receive a greater share of the overall money, "I am extremely disappointed that California's share of this federal program is declining.  As the state contributes the most to the Highway Trust Fund, has the fastest growing population, and is the nation's international trade leader, California's motorists deserve to end up with at least the share the State now receives.  Absent changes, it will mean that more of the federal fuel taxes paid by Californians will be going to meet transportation needs outside the state."
     As part of the last minute highway funding deal, approximately $8 billion will be distributed among four discretionary programs:  approximately $1.9 billion to the Appalachian Regional Commission (ARC) and roughly $450 million for border crossings and trade corridors; about $850 million for roads on public lands; roughly $1.8 billion to nine states that have large metropolitan areas, California included; and $2 billion to ensure that every state receives a 91% return of the federal gas tax dollars each pays into the Highway Trust Fund.  Under ISTEA II before these latest funding agreements, California would have received back about 90.7% of its federal gas tax dollars.  The highway funding agreement provides flexibility for states in the use of these additional funds.  The Senate also approved an amendment put forth by Senators Barbara Boxer and Dianne Feinstein that grants local planning authority or metropolitan planning organization (MPO) status for the Lake Tahoe basin.
     Under the Senate's ISTEA II, California may also continue to receive a large share of the transit funds which the bill would continue to distribute according to a formula similar to the one used under the original ISTEA, and a large share of discretionary grants based on need.  Senator Alfonse D'Amato (NY) has led the fight to increase funding for transit programs.  The $5 billion increase in transit funding, among other things, will be split among new starts for light-rail and bus projects, as wells as increases for rural transit and an additional $100 million for welfare-to-work transportation services.
     The House still has not sent an ISTEA reauthorization measure to the House Floor.  Chairman Bud Shuster's (PA) H.R. 2400 or BESTEA, is still in the House Committee on Transportation and Infrastructure awaiting final consideration, which is expected to occur later this month.  Congress is anxious to complete work on both measures and send a final bill to the White House before the May 1st expiration date.  However, it is unclear whether it can meet its own deadline.

ISTEA Task Force Preparing Letter To Shuster
     Members of California's ISTEA Task Force this week drafted a letter to House Transportation and Infrastructure Committee Chairman Bud Shuster (PA) asking his assistance in making BESTEA (H.R. 2400) "fairer" to California in terms of highway funding.  The bipartisan letter highlights the fact that California's share of the highway formula funds (excluding demonstration projects and discretionary programs) would decrease from 9.33% to 9.18% under BESTEA, resulting in a net reduction of the state's share of highway funds from under the original ISTEA law.  California has been a donor state under the original ISTEA law; the state pays about 10.2% of total payments into the highway trust fund account but has received only about 9.3% of the funds in return.  Several suggestions are made by the Task Force in the letter to help California get more money, including funding for special projects and changes in program language that would help the state better compete for highway money under H.R. 2400 without negatively impacting other states' shares.  The California ISTEA Task Force is co-chaired by Reps. Jay Kim (Diamond Bar) and Juanita Millender-McDonald (Los Angeles), and House Transportation and Infrastructure Committee members Reps. Bob Filner (San Diego), Steve Horn (Long Beach), Frank Riggs (Windsor), and Ellen Tauscher (Pleasanton) also serve on the ISTEA Task Force.  The letter is expected to be sent out shortly.

38 Signatures on R&D Tax Credit Letter So Far
 The letter to Ways and Means Chair Bill Archer (TX) and Ranking Member Charles Rangel (NY) being circulated by Reps. Wally Herger (Marysville) and Bob Matsui (Sacramento) on the R&D Tax Credit has so far garnered the signatures of 38 of California's congressional delegation (20 Republicans and 18 Democrats).  The letter supports the permanent extension of the credit (formally known as the Research and Experimentation Tax Credit), which is set to expire this June 30.
 California's high technology and biotechnology industries strongly support permanently extending the credit to encourage their continued investment in R&D.  Last year's letter from the delegation was signed by 39 members representing a broad-based bipartisan group.  Reps. Herger and Matsui hope to gather several more signatures this year.
 The deadline for signing this year's letter is Friday, March 20.  Members wishing to sign should contact Dave Olander in Rep. Herger's office (x53076), or Francis Grab in Rep. Matsui's office (x57163).

McKeon, Gallegly, Brown Circulating ERAST Program Letter
     Several California Members of Congress have begun circulating a letter to the California Congressional delegation supporting NASA's Environmental Research Aircraft and Sensor Technology (ERAST) program, which conducts joint sponsored research pertaining to unmanned aerial vehicles.  The letter, being circulated by Reps. Buck McKeon (Santa Clarita), Elton Gallegly (Simi Valley), and George Brown (Colton) to NASA Administrator Dan Goldin, asks for his "continued support so that the program's developing technologies can produce results that will lead to operational breakthroughs in the near future that will benefit government and industry."  Program participants from the private sector include AeroVironment Inc. of Simi Valley, Scale Composites of Mojave, General Atomics of La Jolla, Thermal Mechanical Systems of Canoga Park, and Menlo Park-based Amtech, a nonprofit organization.  Participating from the government sector are NASA's Dryden Flight Research Center at Edwards Air Force Base, and the NASA-Ames Research Center in Sunnyvale.
     Offices of members wishing to sign the letter should contact Greg Campbell with Rep. McKeon (5-1956), Don Gilchrest with Rep. Gallegly (5-5811), or Skip Stiles with Rep. Brown (5-8483).

Lois Capps wins 22nd District Special Election
     Voters in the 22nd District went to the polls on Tuesday for a special election to fill the seat left vacant by the death last fall of Rep. Walter Capps.  According to preliminary results, Democrat Lois Capps, a school teacher and college instructor from Santa Barbara and widow of the late congressman, took 53% of the vote.  Republican Tom Bordonaro, a state Assemblyman from Paso Robles, earned 45%.  Capps is scheduled to be sworn in next week and will become the 53rd woman to serve in the second session of the 105th Congress.  Ms. Capps is the mother of three children, and earned her BS degree from Pacific Lutheran University.  She has since earned two Masters Degrees from Yale University and the University of California at Santa Barbara.
     Two more special elections will be held in California on April 7th to fill the seats left vacant by the late Rep. Sonny Bono (44th District), and by former Rep. Ron Dellums (9th District) who retired from the House of Representatives in February.  The primary for California's general election is scheduled for June 2, 1998.

Immigration Panel Reports Out Farm Workers Visa Pilot Program
     The Immigration and Claims Subcommittee of the House Judiciary Committee favorably reported the "Temporary Agriculture Workers Act of 1998" on Thursday by voice vote.  Although there were no amendments offered to the bill, there was considerable discussion on its merits.  The bill, introduced by Rep. Bob Smith (OR), Chairman of the Agriculture Committee, would establish a two year pilot program to allow up to 20,000 visas per year to temporary agricultural workers.  The workers would only be allowed to work for ten months, and 25 percent of their wages would be withheld until they returned to their native country.  In the second year of the program, the visas allowed under other unskilled worker programs would be decreased by 10,000 to partially offset the increase in immigration to the United States.
     Rep. Howard Berman (Valley Village) strongly opposed the bill, pointing out several specific provisions that he opposed.  Citing recent General Accounting Office and Commission on Immigration Reform reports concluding that there is no shortage of U.S. agriculture workers, Mr. Berman especially targeted the bill's provision eliminating the requirement under the current H-2A visa program that the Department of Labor determine there is a worker shortage before approving an employer's request for visa admissions.  Rep. Berman stated that he would offer several amendments to the bill when it reached the full Judiciary Committee.
     Rep. Elton Gallegly (Simi Valley), on the other hand, questioned the findings of those recent reports and supported the bill as a necessary remedy to the current H-2A visa program.  He pointed out that the bill will require tamper-proof documentation for all workers to prevent the employment of undocumented immigrants and escrow 25 percent of the temporary workers' pay to ensure they do not remain illegally in the United States.

Business Asks Delegation to Support Increase in Private Activity Bond Cap
     Recently, the California Chamber of Commerce, California Business Roundtable, and the California Manufacturers Association joined Governor Wilson in supporting a bipartisan effort to increase the private activity bond cap.  Last fall, Governor Wilson requested the California congressional delegation's support of legislation that would increase the private activity bond cap (PAB) from $50 to $75 per capita in each state. (see Bulletin, Vol. 4, No.35 -- (10/16/97)).  At present,  35 California delegation members and Senator Boxer are co-sponsors of that legislation, H.R. 979 in the House and S.1251 in the Senate.
     In 1986, Congress reduced the limit on the dollar amount of tax-exempt private activity bonds that may be issued in each state, from $75 to $50 per capita.  Congress authorizes states to sell tax-exempt bonds and use the proceeds for low-interest-rate loans to private entities or individuals for projects with defined public benefits.  California created the California Housing Finance Agency (CHFA) to administer the bond program (for more information on CHFA, see http://www.chfa.ca.gov).  According to the CHFA, in 1996 California's $1.57 billion of private activity bond authority created over 19,400 jobs in the state.  Bonds were used, among other things, to finance home mortgages, student loans, and pollution control projects throughout the state.
     According to the Chamber, Roundtable, and CMA's letter, the long-term cost to the federal government to raise the PAB limit would be offset by the economic activity generated by the bond authority.  The authors cite a recent study by the state Department of Finance that concluded that at least 90 percent of the revenue lost from the federal treasury in tax-exempt interest income would be offset.  The revenue forecasting model was developed by Finance in collaboration with the University of California at Berkeley in response to a 1995 state mandate to provide dynamic analysis of revenue bills.  The letter is co-signed by Allan Zaremberg, President of the California Chamber of Commerce; William Hauck, President of the California Business Roundtable; and Jack Stewart, Executive Vice President of the California Manufacturers Association.
     Members wishing to co-sponsor H.R. 979 should contact Pat Kerry with Congresswoman Kennelly (x52265) or David Pearce in Congressman Houghton's office (x52265).

Water and Power Subcommittee Holds Hearing On Salton Sea
     Stakeholders and lawmakers gathered Thursday before the Subcommittee on Water and Power of the House Resources Committee to discuss H.R.3267, legislation to restore the Salton Sea.  Senator Barbara Boxer and Reps. George Brown (Colton) and Duncan Hunter (El Cajon), testified before subcommittee Chairman John Doolittle (Roseville) and the panel members, including Reps. Ken Calvert (Riverside), Calvin Dooley (Visalia), and George Miller (Martinez) on the "Sonny Bono Memorial Salton Sea Reclamation Act."  Rep. Jerry Lewis (Redlands), a member of the Salton Sea Task Force with Reps. Calvert, Brown, and Hunter, submitted testimony for the record supporting H.R. 3267.
     All parties agreed on the need to address the problem of the salinized sea, but details on the best way to do that must be worked out (see, Bulletin Vol. 5, Nos. 7 & 8 (2/26/98 & 3/5/98)).  Senator Boxer testified that the main difference between the bill she and Sen. Dianne Feinstein introduced and the House proposal is that her bill allows an additional 6 months (for a total of 18 months), for completion of the federal environmental review process.  The Senator urged the committee not to rush enactment of the legislation, but to move carefully to ensure that the best bill possible is developed.  Rep. Miller, stating that he supported efforts to restore the sea, also cautioned that Congress should not act in haste in selecting the appropriate restoration method.   Rep. Hunter emphasized the Salton Sea's potential as a recreation destination and for economic development, saying at least 6% of the country's population is within driving distance of the sea.  Rep. Brown asserted the Task Force's desire to respect the "law of the river," the body of law that governs allocation of Colorado River water, in response to concerns raised by Reps. John Shadegg (AZ) and John Ensign (NV) that California intended to use more than its share of the water in order to restore the Salton Sea.
     H.R. 3267 provides $300 million for construction of the chosen remedy at the completion of a 12-month environmental review process.  David Hayes, Counselor to the Secretary of the Interior, testified that 18 months is a more realistic time period for the completion of a large, complex environmental review.  The Administration also objected to limits which the bill places on the judicial review available during the environmental review process.
     The subcommittee also heard testimony from two other panels comprised of public and private witnesses.  All of the testimony can be obtained on the House Resources Committee website at http://www.house.gov/resources.  The Subcommittee is expected to mark up H.R. 2367 later this month.

Senate Judiciary To Consider Encryption Issue
     The Senate Judiciary Committee has scheduled a hearing on "Privacy in the Digital Age:  Encryption and Mandatory Access" for Tuesday, March 17 at 10:00 a.m. in 226 Dirksen Senate Office Building.  The list of expected witnesses is not yet available.  Last year, several House committees and the Senate Commerce Committee  reported out vastly different bills on encryption controls ranging from easing controls on exports of encryption technology to imposing domestic controls on its use for the first time.  The issue is of great importance to high technology companies that manufacture and/or use encryption devices to secure electronic transactions and communications.

Air Force Secretary Threatens to Attempt "BRAC-Less" Base Closures
     Threatening to attempt Congress-evading maneuvers, Air Force Secretary Whitten Peters repeated the Pentagon's request for additional rounds of military base closures.  Congress has thus far expressed little willingness to authorize the requested 2001 and 2005 base closure rounds, but Peters suggested in a recent speech that military branches could elect to cease operations at bases without going through the base closure commission process used four times over the past ten years.  An analysis in the  March 6 Los Angeles Times quoted sources skeptical that the Pentagon would follow through with such a defiant move, in part because of cumbersome procedures and in part because of potential political heat.  Current law would require the Pentagon to submit in the prior year's budget a list of bases intended for closure, conduct studies on environmental and economic impacts, and then submit them to Congress before following through with closures.  Each of the four base closure rounds hit California disproportionately, with the state shouldering 60% of the nation's net personnel cuts  -- quadruple our share of the nation's military personnel.

Justice Department Objecting to Lockheed-Northrop Merger
     Surprising observers, Justice Department officials this week raised major objections to the proposed $11.6 billion merger of Lockheed Martin and Northrop Grumman.  Both companies are major California employers.  According to press reports, Justice Department examiners had raised questions about potential market dominance by the newly formed company in surveillance radar and ground-based systems to detect missile launches.  The move comes at the same time as the Clinton Administration is stiffening its antitrust policies in other areas, specifically with regards to software giant Microsoft.  Lockheed Martin has extended for one month the deadline for closing the acquisition deal beyond the previous March 24 date.

Mexico's Trade Switches from Surplus to Deficit
     According to data from Banco de Mexico, the trade surplus enjoyed by Mexico has recently shifted to a trade deficit.  In January 1998, Mexico registered a trade deficit of $565 million, a shift from a trade surplus of $329 million in January 1997.  While exports out of Mexico expanded by 6.6% to $8.7 billion during that period, imports into Mexico grew 21.1% during the same period, to $9.3 billion.  A January study by Lisa Grobar at CSU Long Beach entitled "Estimates of Export-Related Employment for Southern California" calculated that 53,000 of Southern California's 850,000 export-related jobs are associated with exports to Mexico.

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