CONTENTS OF THIS ISSUE:
Senate Restores Immigrant Food Stamps
Senate Passes Copyright Legislation
Senate DOD Authorization: Base Closures Unlikely, Procurement Cuts Proposed
Letter Seeks Pacific Crest Trail Funds
Vintners Speak At Roundtable Lunch
House Subcommittee Holds Oversight Hearing on California Water Needs
Senate Passes Securities Litigation Legislation
Senate Hearing on Base Cleanup
Wilson Issues May Revision of State Budget
L.A. Delegation and Governor Urge Funding of LA County Flood Control Project
House Commerce Reports Modified Internet Tax Moratorium
ISTEA Deal in Works
Senate Appropriators Set Discretionary Spending Allocation Levels
HCFA Ruling Draws California Response
MPAA Issues Entertainment Industry Report
Agriculture Sciences Exhibition on Tuesday
SENATE PASSES COPYRIGHT LEGISLATION
On Thursday, by a vote of 99-0, the Senate passed S. 2037, the Digital Millennium Copyright Act of 1998. The final bill reflects a compromise worked out between on-line service providers and copyright owners. The bill will bring U.S. copyright law into compliance with the WIPO Copyright Treaty and WIPO Performances and Phonograms Treaty agreed to in Geneva, Switzerland on December 20, 1996. It also will give providers of access to the Internet some protection against copyright litigation when a user of the on-line service infringes on the copyright of another party. The bill clarifies that although the manufacturing and trafficking in technology primarily designed to circumvent copyright protections is prohibited, the prohibition does not extend to technology which has a legitimate use.
The bill contains two provisions calling for studies to address the concerns of schools and libraries. The first will examine the compatibility of copyright law and what is called "long-distance learning", which is were students "attend" classes conducted over the Internet or by live video. The second study will investigate whether schools and libraries need some protection from copyright infringement allegations where students, using Internet access provided by the institution, violate a copyright.
SENATE DEBATING DOD AUTHORIZATION, FURTHER BASE
CLOSURES UNLIKELY FOR NOW, PROCUREMENT CUTS PROPOSED
On Thursday, the Senate debated the FY 1999 DOD authorization bill and discussion was expected to continue into next week. The Senate was expected to consider, and then reject, an amendment by Sen. John McCain to proposing one or more additional rounds of military base closures. Last week, the Senate Armed Services Committee narrowly rejected such a proposal, following similar action by the House National Security Committee. Coupled with widespread opposition to further closures on both the House and Senate floors, the Clinton Administration's desire for two more rounds of base shutterings -- proposed for 2001 and 2005 -- is effectively denied for the remainder of the year.
California was inordinately impacted by the first four base closure rounds -- in 1988, 1991, 1993 and 1995 -- shouldering 60% of the net personnel cuts despite housing just 15% of military personnel when the process began. Nevertheless, the Los Angeles Times recently estimated that California is home to 56 of the nation's remaining 259 major military installations, and would remain vulnerable to more cuts should further base closures be authorized.
The markup by the Senate Armed Services was closed to the public, making it difficult to accurately assess legislative proposals. The Senate bill reportedly would make cuts in a number of procurement programs, including cancellation of the "DarkStar" Unmanned Aerial Vehicle (UAV) program and would make a $97 million cut in the Airborne Laser (ABL) program. The DarkStar UAV program (also known as the Low Observable High Altitude Endurance UAV) is a Lockheed-Martin Skunk Works program. Cancellation of the program is a concern because the retirement of the SR-71 leaves a significant gap in high-altitude reconnaissance capability. The ABL, built by a team which includes Boeing, Lockheed Martin and TRW, would demonstrate long range laser weaponry on a modified 747-400F platform.
LETTER TO INTERIOR APPROPRIATORS SEEKS PACIFIC
CREST TRAIL FUNDS
Led by Rep. Buck McKeon, members representing portions of the Pacific Crest Trail (and any others interested in signing) are gathering signatures for a letter to House Interior Appropriations Chairman Ralph Regula and his Senate counterpart Slade Gorton seeking $5 million to fund the completion of the remainder of the Pacific Crest Trail. Specifically, the letter requests $2.5 million to realign a dangerous section of the trail in Agua Dulce and another $2.5 million for additional purchasing needs elsewhere on the trail.
For further information or to add a signature to the letter, call Greg Campbell in Rep. McKeon's office at x5-1956.
VINTNERS HOSTED AT GOLDEN STATE ROUNDTABLE
The California State Society's Golden State Roundtable lunch this week featured members of the California Wine Institute. Bobby Cook and John DeLuca of the Wine Institute addressed the group. Mr. Cook pointed out that California's wines account for $12 billion annually in retail sales, and that three out of every four bottles of wine purchased in the United States comes from California.
Mr. Cook stated that one of the Institute's key issues is to ensure that any trade agreements entered into by the United States contain parity between tariffs on U.S. exports of wine and U.S. imports. Currently, under the GATT, although tariffs on wine imports into the U.S. have fallen 36 percent, tariffs on U.S. exports have only fallen 10 percent. On a national level, the Wine Institute is working to ensure that its small vintners can ship directly to customers in all 50 states. Several states, such as Florida, have acted to prevent direct shipments of wine to consumers, a practice which impedes the ability of the smaller vineyards to market their wines.
HOUSE SUBCOMMITTEE HOLDS OVERSIGHT HEARING ON
CALIFORNIA WATER NEEDS
As it did last year, the House Resources Subcommittee on Water and Power held an oversight hearing on California's future water needs under the CALFED process. The subcommittee heard from three panels on the financing of the CALFED Bay-Delta restoration process, the monitoring and performance standards of CALFED, and the participation of the public in CALFED. Among the witnesses were Bill Pauli, representing the California Farm Bureau, Steve Hall of the Association of California Water Agencies, Tim Quinn with the Metropolitan Water District of Southern California, and Lester Snow of the CALFED Bay-Delta Program.
Mr. Hall pointed out that as California's water needs continue to grow, no single solution will be sufficient to address the water shortfall and attendant reliability concerns that will be faced by all Californians. Therefore, ACWA strongly supports the CALFED process which calls for a comprehensive package of measures, including additional water storage, improved Delta conveyance, water conservation measures, reclamation transfers, and environmental restoration.
Mr. Pauli stated that, although the Farm Bureau continues to be an active member of the CALFED process, it desires assurances that the final plan will contain adequate water storage measures, minimize the fallowing of agricultural lands, and strengthen water rights.
Mr. Quinn made three points in his testimony: (1) the CALFED financing plan must be founded on a solution that produces widespread value for all of the stakeholders in the process; (2) it must provide the maximum benefits at the lowest possible cost; and (3) the costs of the CALFED solution must be paid for by its beneficiaries in a fair and equitable manner.
Testimony from the hearing can be obtained by calling the Subcommittee at 202-225-8331.
SENATE PASSES SECURITIES LITIGATION LEGISLATION
The Senate on Wednesday, by a vote of 79-21, passed S. 1260, a bill to close a loophole in the 1995 Private Securities Litigation Act. S. 1260, the Securities Litigation Uniform Standards Act of 1997, requires that all class-action securities litigation cases of nationally traded stocks must be brought in federal court. Since the enactment of the 1995 Act, plaintiffs' lawyers began end running the new law by bringing suit in state courts, which generally have looser pleading standards and discovery rules. The companion bill in the House, H.R. 1689, is scheduled for a hearing before the House Commerce Committee's Finance and Hazardous Materials Subcommittee on May 19. Reps. Anna Eshoo (Atherton) and Rick White (WA) are the authors of the House version.
Both bills are strongly supported by California's information technology industry, which has been hard hit in the past by frivolous securities lawsuits.
SENATE PANEL HEARS FROM PENTAGON OFFICIALS REGARDING BASE CLEANUP
On Tuesday, the Senate Appropriations Subcommittee on Military Construction heard testimony from officials of the Navy, Army and Air Force regarding FY1999 funding for environmental programs related to Base Realignment and Closure (BRAC). Most of the bases closed or closing pursuant to the four BRAC rounds conducted in 1988, 1991, 1993 and 1995 require some environmental remediation work to render them suitable for alternative uses. The Tuesday hearing featured testimony from Assistant Navy Secretary Robert D. Pirie, Army Deputy Assistant Secretary Paul Johnson, and Air Force Deputy Assistant Secretary Jimmy G. Dishner. All three officials predicted that the portion of BRAC funds spent on cleanup activities would continue to rise in the future.
The Navy's Robert Pirie testified that environmental remediation expenses have amounted to roughly 20% or $1.4 billion of the $7 billion the branch has spent on base conversion so far, and that the cleanup share would rise because that would become the last remaining task preceding transfer. He urged maintenance of BRAC funding to avoid disruption in base transition and a lack of trust between the military and the state and local governments or private entities which might take over the facilities in the future.
The Army's spokesman indicated that $5.2 billion has been spent on base closures so far, but that the service began breaking even on the process in 1997. He noted that the service is closing 112 installations and realigning 27, and that cleanup would be the majority of the base closure budget from this point forward.
Dishner reported that the Air Force has spent $1.5 billion to date and expects to spend $1.3 billion more after 2000. The environmental budget for FY1999 is $152 million, though Dishner added that he expects the environmental share of the budget to rise. With these funds, he testified that the service would have all funds necessary to install cleanup systems at 20 of their 28 closing bases. He noted that the Air Force expects to have remedies in place at all BRAC installations by 2002, with the exception of McClellan AFB in Sacramento.
In related news, increases in the budget cap on defense spending were proposed yesterday both by Senate Appropriations Chair (and Defense subcommittee chair) Ted Stevens (AK) and by Budget Committee Chair Pete Domenici (NM).
GOVERNOR WILSON ISSUES MAY REVISION OF STATE BUDGET
Flushed by a $4 billion surplus in state revenues, this week Governor Wilson presented his suggestions to the state Legislature on ways to spend the extra cash, as part of the annual revision to the Governor's January budget proposal. Overall, he forecasts that 800,000 new jobs will be created in California in 1998 and 1999, with strong export growth to Mexico offsetting negative effects of the Asian financial crisis. The state's fiscal year begins July 1st.
Headlining the Governor's revisions to his January budget proposal for 1998-1999 is a 75% reduction in the state's Vehicle License Fee (VLF) over the next three years. The VLF is the annual fee on registered vehicles, assessed at 2% of the vehicle's market value. Wilson's proposal would reduce the VLF to 1% beginning January 1, 1999, and further reduce it to ½ % in 2002. An estimated $2 billion annual tax break for vehicle owners, the tax cut is expected to cost $3.6 billion annually when fully implemented. The Governor also proposed a tax credit for the donation of computer equipment and software to public or private K-12 schools.
For K-12 education, Governor Wilson's plan boasts funding at $500 million above Proposition 98 mandated levels. The new funds would be directed towards after-school programs, teacher training and retention, remedial math and reading programs, and instructional materials like textbooks. Wilson's proposal would increase per pupil dollar funding by $92 over his January proposal to $5,728 in 1998-99, an overall 11.8% increase over 1996-97 levels. The University of California and California State University are also slated to share in almost $200 million of the surplus funds for deferred maintenance and other one-time costs.
The state's $130 million share of the public purchase of the Headwaters Forest is also included in the Governor's proposal. In addition, Governor Wilson would like the state to bolster his original proposal to capitalize the State Infrastructure Bank by $100 million, provide local governments $172 million for flood control projects, and reserve about $1.6 billion of the surplus for the future. Under the Governor's revised estimates, K-12 education, health and welfare, higher education, and youth and adult corrections comprise the majority of the proposed 1998-99 state general fund expenditures.
For a copy of the Governor's May Revision and other state budget documents, please visit the web site at: http://www.dof.ca.gov/html/budgt8-9/mayrv8-9.pdf.
L.A. DELEGATION AND GOVERNOR WILSON URGE FUNDING
OF LA COUNTY FLOOD CONTROL PROJECT
Nine members of the California Congressional delegation from the Los Angeles County area wrote Chairman Joseph McDade of the Energy and Water Development Appropriations Subcommittee urging him to increase funding to $60 million for the Los Angeles Country Drainage Area (LACDA) flood control project. The project is aimed at restoring the existing flood system of the Rio Hondo Channel and the Los Angeles River to an adequate level of protection. The bipartisan letter was signed by Reps. Esteban Torres, Lucille Roybal-Allard, Steve Horn, Xavier Becerra, Maxine Waters, Matthew Martinez, Juanita Millender-McDonald, David Dreier, and Jane Harman. The letter argues that without the planned improvements, a major flood would inundate approximately 82 square miles, impacting 500,000 residents in 11 cities.
Governor Pete Wilson also wrote Chairman McDade earlier in the month, urging him to support $60 million in funding, versus the $11 million that is called for in the budget. The Governor's letter points out that reducing funding to only $11 million would significantly delay and the project and pose unacceptable public safety risks.
HOUSE COMMERCE REPORTS MODIFIED INTERNET TAX
The House Commerce Committee on Thursday, by a vote of 41-0, reported out H.R. 3849, which imposes a three-year moratorium on taxation of Internet access and on-line services. The bill significantly changes H.R. 1054, which was reported last year by the House Judiciary Subcommittee on Commercial and Administration Law. The changes, including reducing the moratorium from the original six years to three years, reflect a negotiated compromise worked out by Rep. Chris Cox (Newport Beach) to address concerns expressed by state and local governments and private parties. Under the bill, taxes currently being imposed on Internet access and on-line services can be grandfathered in, if the state imposing the tax passes a law within one year of H.R. 3849's enactment reaffirming the tax. The bill also establishes a 29 member commission to develop recommendations for legislation that would require companies to collect taxes on sales made through catalogs or over the Internet from customers in states where the company does not have a physical presence.
The House Judiciary Committee and Ways and Means Committee also have jurisdiction over some or all of the bill.
ISTEA DEAL IN WORKS; STILL HAMMERING OUT DETAILS
Congressional leaders appear to be moving closer to a deal on the overall funding levels for transportation over the next six-years. The Senate and House leadership continue to meet behind closed doors this week to hammer out spending levels and off-sets for an approximately $200 billion transportation reauthorization measure. Key components of the fledgling agreement include setting annual highway spending equal to the prior year's level of gas tax revenues and an overall spending level of $167 billion for highways over six-years.
However, other details are said to be still a part of negotiations that will ultimately determine California's share of the transportation funds. Under the original ISTEA law, California received about an 86% return on its payments into the Highway Trust Fund (HTF). Both the Senate and House measures propose a minimum 90% return on each state's contributions to the HTF.
According to the Los Angeles Times, potential off-sets identified to fund the expansion of the transportation bill include about $15 billion from veterans programs through a reduction in health benefits for tobacco-related illness, an offset previously identified in the Administration's FY99 budget proposal. Other identified offsets include a $3 billion reduction in the social services block grant, $4.5 billion from Freddie Mac, and $1.5 billion from the Federal Housing Administration. These preliminary offsets total $23.4 billion.
The Administration issued its strongest opposition this week to the transportation funding bills under consideration by the conference committee, threatening a presidential veto if the predicted budget surplus is used to finance the proposed increases for transportation funding or "unacceptable" offsets are used to increase spending. The Administration has also objected to the 1,500 projects earmarked under the House bill. Recently, the Administration suggested spending $218.9 billion for transportation, but extending the authorization period over seven-years to reduce the needed offsets. The Administration indicated that it will consider the latest funding proposal reached by the congressional leadership late this week. Vice-President Gore, on Wednesday, also called for the inclusion of a Senate bill provision to establish a nationwide standard of .08 blood alcohol level for drunk-driving.
Negotiations are expected to continue throughout the weekend, in an attempt to meet an informal deadline to send a completed package to President Clinton before the week-long Memorial Day recess. The short-term, temporary reauthorization for transportation expired on May 1st.
SENATE APPROPRIATORS SET DISCRETIONARY SPENDING
On Thursday, the Senate Appropriations Committee adopted interim 302(b) allocations -- a process by which the committee sets discretionary spending amounts for use by each of its 13 subcommittees during the coming appropriations process. These allocation levels may be changed if a budget resolution is completed at a later date.
Pursuant to Congressional rules, the appropriations panels are unable to act in the absence of a budget resolution. That restriction is lifted on May 15, but spending may not exceed maximum spending levels set in prior budget action. Today's action allows the subcommittees to proceed.
A committee press release quoted Chairman Ted Stevens (AK) saying the numbers "pose tough limits on each subcommittee," and implying that there may be some flexibility: "As we proceed through the markups next month, we will make such adjustments after consultation with the impacted subcommittees as circumstances permit."
A very preliminary review of the numbers suggests an increase of $18 billion in budget authority (BA) and $14 billion in outlays above the Senate Appropriations Committee's allocation levels for the prior year. Major changes would be in the VA/HUD/Independent Agencies allocation level, with gains of nearly $10 billion in BA and $4.4 billion in outlays; the Labor/HHS/Education subcommittee, which would rise $3 billion in BA and $4.4 billion in outlays; Defense, increasing $3.6 billion in BA and $767 million in outlays; Commerce/Justice/State, which would grow $1.2 billion in BA and $1.6 billion in outlays; and Transportation, climbing $1 billion in BA and $2.6 in outlays.
The following are the interim 302(b) discretionary appropriations (in $ millions) made Thursday, May 14, as reported by the Senate Appropriations Committee:
Agriculture: 13,675 (BA), 14,075 (O)
Commerce: 32,159 (BA), 30,839 (O)
Defense: 250,246 (BA), 245,026 (O)
District of Columbia: 482 (BA), 468 (O)
Energy and Water Development: 21,147 (BA), 20,672 (O)
Foreign Operations: 12,600 (BA), 12,400 (O)
Interior: 13,300 (BA), 13,800(O)
Labor, HHS, Education: 82,319(BA), 80,236(O)
Legislative Branch: 2,400 (BA), 2,300 (O)
Military Construction: 8,484 (BA), 9,110 (O)
Transporation: 13,065 (BA), 39,500 (O)
Treasury and General Government: 12,957 (BA), 11,929 (O)
VA-HUD: 69,986 (BA), 80,780 (O)
Emergency Y2K Reserve: 2,250 (BA), 2,250 (O)
Total: 535,070 (BA), 563,385 (O)
Budget Resolution: 532,820 (BA), 561,135 (O)
(Note that BA represents Budget Authority and O represents Outlays.)
The committee's allocation levels are also available via their press release on the web at http://www.senate.gov/~appropriations/302b.htm. If you are interested in comparing these figures with last year's comparable levels, see the Senate 302(b) allocations for FY 1998 at ftp://ftp.loc.gov/pub/thomas/cp105/sr031.txt.
While the House Appropriations Committee has not made its 1999 allocations, the Committee's 302(b) allocations for 1998 are available at http://www.house.gov/appropriations/fy98602b.htm.
HCFA RULING DRAWS CALIFORNIA RESPONSE
Earlier this year, the Health Care Financing Administration (HCFA) ruled that children in states that chose to expand coverage for uninsured kids through privately administered health insurance providers are ineligible for free immunizations under the federal Vaccines for Children program. Under the federal State Children Health Insurance Program (S-CHIP) enacted last year, a state can choose to expand its Medicaid program, set up a privately administered program, or use a combination of both approaches to reach its uninsured children. California's Children's Health Insurance Program, Healthy Families, was approved by HCFA in March. California chose to expand its Medi-Cal program and create the Healthy Families program to cover children in families with income above Medi-Cal eligibility standards but below 200% of the poverty line. Healthy Families plans to reach 580,000 low-income, uninsured children.
Under the federal vaccine program, to be eligible for a free vaccination, a child must be either covered by Medicaid, uninsured, or of American Indian or Alaskan heritage. A child covered by a privately-administered state health insurance program, HCFA ruled, is ineligible for the free vaccination. Instead, the state can purchase the vaccinations from the federal government at a subsidized rate or require providers to provide the service. It is estimated that in 1997 as many as 775,000 California kids received vaccinations under the federal program.
In March, 49 members of the California Legislature signed a bi-partisan letter to Department of Health and Human Services Secretary Donna Shalala urging her to give kids in states with subsidized private sector coverage access to the Vaccines for Children Program. This week, 23 members of the House Democratic delegation also sent a letter to President Clinton, asking his assistance "to clarify that all children covered by S-CHIP continue to be eligible for free vaccines, regardless of the option chosen by states to deliver S-Chip coverage."
Also this week, the California Medical Association sued the federal government challenging HCFA's ruling on the grounds that it violates the Vaccines for Children Program and the constitutional rights of low-income California kids to equal protection under the law. Senator Dianne Feinstein and Representative Jane Harman (Rolling Hills) also have introduced legislation (S.2013/H.R. 3794) to amend federal law to allow children covered by S-CHIP to receive free vaccinations. At least 15 other states may face a similar problem, but California has one of the highest percentages of uninsured children in the country.
Despite disagreement between state, federal, and professional officials over who will pay for the vaccinations, state officials said in an interview that health plans participating in Healthy Families have agreed to pay for the vaccinations as a covered benefit. It is unclear what the total cost to California or private insurers will be to provide the vaccinations, but some estimates place the cost at somewhere between $25 and $60 million.
MPAA ISSUES STATE OF THE INDUSTRY REPORT
Recently the Motion Picture Association of America (MPAA) reported its findings from a 1996 survey on the "State of the Industry: The Economic Impact of the Entertainment Industry on California." In a letter endorsing the report, Governor Wilson states that it "establishes that entertainment production helped lead California out of the recession and remains one of the state's most vital industrial resources." The survey found the entertainment industry had a $27.5 billion impact on California in 1996. In Los Angeles County alone, the entertainment industry had a total economic impact of $25.52 million.
According to the report, the explosion of the entertainment industry is the result of increased capacity through multiplex theaters, more cable channels, and the peak of VCR penetration into households. In addition, the industry report says the fear that entertainment production outside California would grow greater than inside didn't materialize. Overall, better working relationships with state and local government, like streamlined permitting processes, helped keep and attract industry to the state.
Some of the report's other findings include:
• The industry directly employed 226,000 Californians in 1996, a 38% increase over its 1992 employment figure of 164,000. When the industry's estimated indirect employment is included it brings the total closer to 450,000 statewide.
• The average 1996 industry salary was $53,000.
• By 1996, the industry contributed $895 million in income and sales taxes to the state. In 1992, the industry had contributed about $600 million to public revenues.
• According to the California Film Commission, film starts in California rose between 1992-1996 from 319 to 572, while film starts outside the state decreased. Overall, 81% of all motion picture film starts originated in California.
• Of the 7,000 companies that are self-classified as motion picture/video production firms, 91% of the companies have 10 or fewer employees, up from 85% in 1992.
Please contact the MPAA at 202/293-1966 for more information or a copy of the report.
AGRICULTURE SCIENCES EXHIBITION ON TUESDAY IN RAYBURN
Mark you calendar for Tuesday, May 19th, 1998 when nearly 40 colleges and universities, including the University of California, will exhibit their discoveries in the agricultural sciences. University of California's campuses at Riverside, Davis, and Berkeley are sending scientists and researchers to explain their discoveries and information technology in pest management, disease resistant plants, biological imaging, and food safety. The University Science Exhibition will be held in the Rayburn cafeteria from 5:30 pm to 8:00 pm, and all are welcome.
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