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California Capitol Hill Bulletin



Volume 6, Bulletin 21 -- June 24, 1999

CONTENTS OF THIS ISSUE:
Rep. Cox Addresses Institute's Advisory Board
Methamphetamine Letter Garners 51 Signers
House and Senate Commerce Committees Report Differing Encryption Bills
Governor Davis Urges Senate to Fully Fund SCAAP
House Passes Transportation Spending Measure
Signing Deadline Tomorrow for R&D Letter; Nearly Unanimous
Senate Banking Continues EAA Hearings
Proposal Would Allow for Surplus Base Transfer Without Cost
Ways and Means Hears Testimony on Tax Cuts
House and Senate Address World Trade Org. (WTO) Preparation
Curb on Internet Wine Sales Would Cut Market for Small Vintners
PPIC Releases Study of Immigrant Entrepreneurship
Latino Immigrants Access To Health Care Services
Two Reports on Growth Released
Bay Area Economic Forum Report Highlights Importance of R&D
Upcoming Events: Roundtable Lunch with Rep. Cox on Tuesday
Upcoming Events: California State Society Picnic on Saturday



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 QUALCOMM, Inc.

Rep. Cox Addresses Institute's Advisory Board

Representative Chris Cox (Newport Beach) addressed a group of California Institute supporters at a Tuesday breakfast sponsored by State Farm Insurance Companies. In his remarks, Rep. Cox addressed a variety of issues including the Clean Air Act, Y2K liability, and methamphetamine labs in California. In response to participant questions, he also commented on Natural Disaster Insurance and FEMA regulations. With respect to the accession of China to the WTO, he said that he thought it would be better for China to be in than not, but it will depend on what concessions China is willing to make. On electricity deregulation, he said that he believes that California will be successfully "grandfathered" in the federal legislation, but that it may entail reminding House Commerce Committee Chairman Bliley (VA) that Californians still care strongly about the issue.
 

Methamphetamine Letter Garners 51 Signers

Fifty-one members of the California Congressional delegation, led by Reps. Jerry Lewis (Redlands) and Sam Farr (Carmel), sent a letter on Thursday calling on the Commerce, Justice, State Appropriations Subcommittee to back $18.2 million to allow the State's Bureau of Narcotic Enforcement (BNE) to continue its Methamphetamine Strategy. Noting the disproportionate impact of the drug on the state, the letter shows that BNE seized nearly as many meth labs in California, the federal Drug Enforcement Agency seized nationwide.
 

House and Senate Commerce Committees Report Differing Encryption Bills

On Wednesday, June 23, both the Senate Commerce, Science, and Transportation Committee and the House Commerce Committee reported differing versions of legislation to ease export controls on encryption products.

The Senate Committee reported out by voice vote S. 798, the PROTECT Act, after approving by voice vote an amendment in the nature of a substitute offered by Chairman John McCain (AZ). The McCain substitute allows the export of encryption products of unlimited strength to U.S. allied countries, but restricts exports to other countries to a 64-bit strength. The bill also establishes an Encryption Export Advisory Board responsible for reviewing unlimited strength encryption applications and granting the President a veto power over the Board's decisions for national security reasons. During the mark-up, the Committee rejected by voice vote an amendment offered by Sen. Ernest Hollings (SC) that would have banned the importation into the U.S. of encryption products from countries that do not enforce the Wassenaar international agreement on encryption exports.

On the House side, the Commerce Committee reported out H.R. 850, the SAFE Act, by voice vote. The bill had been amended by the Telecommunications Subcommittee the week before to transfer the decision-making process on encryption exports to the National Telecommunications and Information Administration (NTIA) in the Department of Commerce, within two years of the bill's enactment, among other things. See, Bulletin, Vol. 6, No. 20 (6/17/99).

During the markup, the Committee approved several amendments by voice vote. Two, offered by Rep. Michael Oxley (OH), grant the Departments of Defense, State, and Justice, and the CIA, a role in reviewing encryption exports, and clarify that encryption exports are not exempt from U.S. sanctions. A Dingell amendment requires that countries importing U.S. encryption products must be able to obtain the equivalent products from other foreign suppliers. Rep. Cliff Stearns (FL) also was successful in adding two amendments to the bill. The first makes it illegal to knowingly export encryption over 54-bits to the Chinese army or a military company. The second requires that encryption data subpoenaed by a court must be decrypted into plain text. Rep. Oxley also withdrew an amendment that would have allowed the federal government to require a contractor to use encryption with a key-recovery system.
 

Governor Davis Urges Senate to Fully Fund SCAAP

On June 21, Gov. Gray Davis in conjunction with the Governors of Arizona, Illinois, New Jersey, and New York wrote urging the Senate to fund the State Criminal Alien Assistance Program (SCAAP) at its maximum $650 million level. Last week, the Senate Appropriations Committee moved to cut SCAAP funding by 83 percent to $100 million. See, Bulletin, Vol. 6, No. 20 (6/17/99). The letter to Majority Leader Trent Lott and Minority Leader Tom Daschle points out that although immigration is a fully federal responsibility, the states bear the brunt of the costs of illegal immigration. The SCAAP program partially reimburses the states for the costs of incarcerating illegal criminal aliens.

Earlier this year, the entire California congressional delegation wrote House Appropriations leadership urging full funding of the program. The House Committee has not yet acted on its bill.
 

House Passes Transportation Spending Measure

The House passed its version of the Transportation Appropriations bill by a vote of 429-3 on Wednesday, including $44.5 billion dollars for fiscal year 2000. Primary among the amendments to the committee passed version was one in which Rep. Tom Coburn (OK) struck $5.9 billion from the FAA, zeroing out operations funding. An amendment by Rep. Bill Young (FL) cut $300 million from FY99 unobligated balances in the airport improvement program. Rep. Andrews (NJ) was the author of an amendment which cut $300,000 from the Amtrak Reform Council, and an amendment by Rep. Sanford (SC) cut one million for the transportation administrative service center.

Of particular California focus, Rep. James Rogan (Glendale) was the author of an amendment which passed 241-190 prohibiting any of the bill's funding from being spent on an extension of the 710 (Long Beach) freeway through South Pasadena. Several California and New York members of the House also used the discussion of the House Appropriations bill to express their concern over the Senate Transportation Appropriations bill's "transit equity" measure, capping transit funding for all states at 12.5% of all transit funding. Rep. Wolf (VA), Chairman of the House Transportation Appropriations Subcommittee, said in response to concerns about this topic that he is committed to doing "everything we can to attempt to make this the way it should be with regard to fairness" and to work with both the California and New York delegations.

For details on the Transportation Appropriations bills prior to Wednesday's action, see http://www.calinst.org/pubs/tranapp00.htm .
 

Signing Deadline Tomorrow for R&D Letter; Nearly Unanimous

Nearly every member of the California Congressional delegation has signed a letter to House Ways and Means Chair Bill Archer (TX) and Ranking Member Charles Rangel (NY) asking for a permanent extension of the Research and Development tax credit. The letter will be sent at close of business tomorrow, June 25.

The R&D credit is set to expire on June 30. The letter points out that the research conducted by the pharmaceutical and electronics industries increased from $10.5 billion to more than $64.2 billion during the time since the credit was first enacted. The letter states, "The research conducted by these industries alone has led to the development of many new drugs and medicines and has helped propel us into the Information Age."

To sign the letter, contact Francis Grab with Rep. Robert Matsui (x5-7163) or Dave Olander with Rep. Wally Herger (x5-3076).
 

Senate Banking Continues EAA Hearings

The Senate Banking Committee continued its series of hearings on reauthorization of the Export Administration Act with two days of testimony on Wednesday and Thursday, June 23 and 24. On Wednesday, several officials representing the Departments of Commerce, Defense, Agriculture, Energy, and State testified for the Administration. DOC Undersecretary William Reinsch expressed concern with several provisions in the bill. Among them were requiring the full consensus of all pertinent departments and agencies through Cabinet level before a license application decision could be made, requiring Congressional approval of all international cooperative efforts on export controls, and establishing five country groups based on what the Administration considers inflexible criteria. Deputy Undersecretary James Schroeder of the Agriculture Department opposed the Committee's proposal forbidding the President from imposing export controls on agricultural commodities and medicine on the basis of national security or foreign policy concerns.

On Thursday, the Committee heard from several private sector witnesses. John Douglass, President of the Aerospace Industries Association listed several key items that should be included in the reauthorization package, including that U.S. exports should be allowed to export any product that is available, or expected to be available, from foreign sources, and that unilateral controls should only be imposed as an interim measure leading to multilateral controls.

Karen Murphy of Applied Materials testified on behalf of Semiconductor Equipment and Materials International. She stressed that export controls should be multilateral, and only imposed on technologies that can and should be controlled. She stated that although semiconductor manufacturing equipment is inherently generic in nature, it is often subjected to controls merely because it is advanced technology. She also urged that export controls be flexible enough to respond quickly to evolving technological and commercial realities, to avoid the problem now faced because the industry's ability to produce high-speed mass-market computers is outpacing the Administration's control levels.

The Committee reportedly plans to mark up the Chairman's proposed reauthorization on June 29.
 

Proposal Would Allow for Surplus Base Transfer Without Cost

A provision in the Senate version of the Department of Defense authorization bill would allow DoD to transfer unused base properties to qualified local reuse authorities without cost, thereby streamlining the base closure process and moving surplus property more rapidly into productive use. The provision would approve no-cost conveyances only if the proposed redevelopment of the facility would generate local jobs, and any economic benefit from the use of the property would have to be invested in redevelopment of the base or the immediate area.

More than any other state, the 1988, 1991, 1993 and 1995 base closure rounds hurt California, which began the process with just 15% of U.S. personnel, yet shouldered 60% of the nation's net cuts. The state still has more bases in the closure process than any other state. Under current law, rural bases are already eligible for no-cost conveyance, but bases in non-rural areas are not.  California is the second most urban state in the nation and is thus very limited in its ability to use the method.

The House Armed Services Subcommittee on Military Installations and Facilities is expected to hold a hearing on the topic on Friday, July 2nd. The provision is not included in the House version of the DoD authorization bill, so the item will be resolved in conference.
 

Ways and Means Hears Testimony on Tax Cuts

On Wednesday, June 23, the House Ways and Means Committee held a hearing on myriad tax cut provisions, including the permanent extension of the research and development tax credit, the section 127 employer-assisted education exemption, and a school construction initiative. Testifying in support of permanently extending the R&D Tax Credit were R. Randall Capps, Corporate Tax Director and General Tax Counsel for Electronic Data Systems (EDS) on behalf of the R&D Credit Coalition and Michael Baroody, Sr. Vice President, National Association of Manufacturers. Mr. Capps cited economic findings that a one-dollar reduction in the after-tax price of R&D stimulates approximately one dollar of additional private R&D spending in the short-run and two dollars additional in the long run.

Jeffrey Baratta, of Stone & Youngberg investment bankers in San Francisco, testified in support of the Qualified School Construction Bond program and other new, zero-interest tax credit programs for school construction, citing California's school facility needs of $20 billion over the next five years.

Larry McCants testified on behalf of the American Bankers Association and, among other issues, supported the permanent extension of section 127, which exempts from employees' incomes money paid by employers for undergraduate tuition. California's information technology industry strongly supports re-extending the program to graduate level studies as well as undergraduate.

Reps. Randy "Duke" Cunningham (San Diego) and Xavier Becerra (Los Angeles) were among the proponents of the New Millennium Classrooms Act, which would expand an existing tax incentive to encourage businesses to donate powerful computers with multimedia capabilities to schools and libraries, particularly those in low-income areas.
 

House and Senate Address World Trade Org. (WTO) Preparation

Both the Senate Agriculture, Nutrition and Forestry Committee and the House Agriculture Committee held hearings this week on agricultural trade issues, focused on the Administration's preparations for the upcoming World Trade Organization (WTO) Ministerial negotiations in Seattle. WTO negotiations with China, and conflicts with the European Union about genetically-modified agricultural products were also on the agenda. Agriculture Secretary Dan Glickman reiterated the US agricultural agenda for the WTO millennium round of negotiations including: 1) eliminating export subsidies; 2) further reducing worldwide tariffs; 3) raising the ceilings on tariff-rate quotas, and phasing them out over the long run; 4) opening up operations of State Trading Enterprises to marketplace risks; 5) facilitating trade in new technology products, including biotechnology; and 6) making sure the rules governing sanitary and phytosanitary measures continue to be effective. He supported China's accession to the WTO, and stated while the US will work to build a strong trade partnership with China, the timing of China's accession is up to China.

United States Trade Representative (USTR) Charlene Barshefsky told both Committees that agriculture will be at the heart of the Seattle Round's agenda, and that USTR is now developing specific negotiating objectives within each of the major areas mentioned by Mr. Glickman in consultation with interested parties. The USTR and USDA are jointly holding a series of listening sessions throughout the country on this topic, including one on June 29 in Sacramento. She emphasized that the European Union's Common Agricultural Policy (CAP) is the largest single distortion of agricultural trade in the world and reform of the CAP will be a central focus of the Round. With respect to China's WTO accession, she said that while some services and rules issues remain, agricultural negotiations are complete and contain strong commitments on tariff-rate quotas, renunciations of export subsidies, and market access.

The House Committee also heard from a number of additional panelists on this topic, including Montgomery Winkler, a farmer from Ventura County, representing Sunkist Growers. He presented the need to maintain science-based, strong sanitary and phytosanitary (SPS) policies, reform tariff rate quotas administration, and reduce tariffs as top priorities for the WTO negotiations. The Western Growers Association, California Asparagus Commission, California Pistachio Commission, and California Olive Association all submitted testimony for the record that unanimously supports the elimination of subsidies.

For testimony, see http://www.house.gov/agriculture/hearings/testimony.htm . For more information about the Sacramento listening session, call USTR at (202) 395-6127.
 

Curb on Internet Wine Sales Would Cut Market for Small Vintners

A bill introduced by Rep. Joe Scarborough (FL), H.R.2031, would restrict the sale of wine and beer via the internet. The proposal could have a significant negative impact on the nation's small wineries, which do not sell their product via large wholesale wine distributors. More than 40% of the nation's 1,800 wineries are located in California, and the vast majority are small and have little or no access to interstate commerce. The wine industry generates 112,000 California jobs annually and an additional 40,000 to 50,000 jobs during the fall harvest.

The Scarborough bill would further complicate what the San Francisco-based Wine Institute recently called the "two decade struggle by wineries attempting to respond to consumer demand for limited direct shipments of hard-to-find wines not available through the state-mandated system of producer to wholesaler to retailer". In 1997, a unanimous California Congressional delegation wrote Florida Governor Lawton Chiles opposing a state law preventing Florida residents from purchasing out-of-state vineyard or brewery products via common carrier.

Reps. George Radanovich (Mariposa) and Mike Thompson (St. Helena), founders of the new Congressional Wine Caucus, are among those seeking to prevent the Scarborough bill from moving to the House floor via the Suspension Calendar. For further information concerning the topic, contact either Tom LaFaille in Rep. Thompson's office at x5-3322 or John McCammon with Rep. Radanovich at x5-4540.
 

PPIC Releases Study of Immigrant Entrepreneurship

The Public Policy Institute of California (PPIC) has released a new report titled, Silicon Valley's New Immigrant Entrepreneurs, authored by AnnaLee Saxenian . The study focuses on the contributions of highly skilled immigrant workers to the economy. The study shows that skilled immigrant engineers are contributing to the creation of regional jobs and wealth in the Silicon Valley. They are also having an effect internationally by building business ties to regions such as Asia. The research suggests that highly skilled immigrants contribute to Silicon Valley's economy, "both directly, as engineers and entrepreneurs, and indirectly, as traders and middlemen linking California to technologically advanced regions of Asia." If you would like more information on this topic, or a copy of the study, you can contact PPIC through its website at http://www.ppic.org .
 

Latino Immigrants Access To Health Care Services

A new report was released by the Henry J. Kaiser Family Foundation and prepared by The Project HOPE Center for Health Affairs, titled California's Undocumented Latino Immigrants: A Report on Access to Health Care Service. The intent of the report was to increase the level of current knowledge about undocumented populations by using 1996-97 surveys completed by 533 undocumented Latinos in the Los Angeles and Fresno areas. Some key findings of the study consist of a low use of physician services by undocumented immigrant Latinos in both Los Angeles and Fresno, and a lack of insurance and affordability of medical services by these individuals. Included in the report are various implications for policy such as the finding that access to health care services does not have a significant effect on immigration. If you would like a copy of the report or more information about this topic contact the Henry J. Kaiser Family Foundation at 1-800-656-4533 or via the web at http://www.kff.org
 

Two Reports on Growth Released

At a briefing in the House and Senate last week, the National Association Of Local Government Environmental Professionals (NALGEP) released new research titled, Profiles Of Business Leadership On Smart Growth, authored by Kenneth Brown, Andrew Seth and Matthew Ward. The focus of the report is on businesses that are actively engaged in the effort to lessen the effects of urban sprawl and promote smart growth. Included in the report are 19 profiles of activities and approaches taken by various business groups, including the Silicon Valley Manufacturing Group, based in Santa Clara. The report concludes with a set of recommendations of actions businesses can take in order to promote smart growth. For additional information, contact NALGEP via their web page at http://www.nalgep.org .

On Monday of this week, the Environmental and Energy Study Institute (EESI) and the Senate and House Northeast-Midwest Coalition hosted a briefing Monday entitled "Sprawl in Europe and the United States: Contrasting Patterns of Urban Development and Their Policy Implications." The event featured Pietro Nivola, a Senior Fellow at the Brookings Institution discussing his recent book Laws of the Landscape: How Policies Shape Cities in Europe and America, and two authors of another recent book, Once there Were Greenfields: How Urban Sprawl is Undermining America's Environment, Economy and Social Fabric, Don Chen (of the Surface Transportation Policy Project) and Kaid Benfield, with the Natural Resources Defense Council.

Mr. Nivola discussed the market force, geographic, demographic and governmental policy causes of the differences between European and American cities in their degree of urban expansion. Among policy causes, he included subsidies to French farmers twelve times higher than those in the US, which enable farmers to remain on the outskirts of Paris. He contrasted public investment in roads: in the US, roads constitute 85% of transportation funding, while European cities in France in Britain target 40-60% of transportation funds to mass transit. Tax structure differences, such as Europe's high energy tax, also account for differences. He concluded that absent a broader public agenda, he does not believe that current regional land use planning and empowerment zone concepts are likely to create major shifts in sprawl control given that gasoline is currently less expensive than bottled water. But he does believe that if the US is to stop "over stimulating" urban sprawl, we should consider changing some tax structures and address the issue of fiscal burden sharing.

Messrs. Chen and Benfield discussed the impact of urban sprawl, but argued that their work is not anti-development or anti-car, nor does it advocate top-down solutions to urban sprawl. They do propose less use of cars, however. They discussed goals and outcomes for different growth methods, and suggested that the role of Congress is to adopt policies to remove barriers to smart growth and support cooperation with the private sector. They also attempted to identify various environmental, fiscal and social impacts of urban expansion in detail.
 

Bay Area Economic Forum Report Highlights Importance of R&D

The Bay Area Economic Forum (BAEF), in conjunction with a group of regional leaders and scientists, has produced a report on the importance to the Bay Area's regional economy of its research institutions entitled "The Bay Area's Research Institutions: How an Extensive Research and Development Infrastructure Drives the Region's Innovative, Knowledge-Based Economy."

The report includes descriptions of the current state and evolution of the Bay Area's research institutions and companies, and private sector bioscience research firms, and collaborations between them. This regional assessment is designed to accomplish three additional objectives: 1) advocate to federal decision-makers that the Bay Area's R&D infrastructure "offers the nation the best return on its investment in publicly-sponsored R&D in terms of cost-effective use of these institutions," 2) stress to the State Administration and Legislature that the state's economy is "dependent on its scientific and technological strength,"and 3) create a formal regional approach for sustaining the Bay Area's role as a leading research and technology center for the country in the coming century. The report suggests a regional collaborative program called the Bay Area Science Infrastructure Consortium (BASIC) be established through the BAEF in order to ensure support for Bay Area R&D facilities by increasing awareness of the importance of the infrastructure to the region, and by fostering collaboration between the private sector, research laboratories, and research universities.

For copies of the report, contact BAEF, (415) 981-7117 or http://www.bayeconfor.org/new.htm
 

Upcoming Events: Roundtable Lunch with Rep. Cox on Tuesday

The next Golden State Roundtable luncheon will be held next Tuesday, June 29, at 12:00 noon, and will feature comments by Rep. Chris Cox (Newport Beach). For more information or to reserve tickets, contact Matt Birkhofer at 202-659-0330. Tickets are $22.50 for California State Society corporate sponsors and $30.00 for others. Checks should be made payable to the "California State Society". Please note that comments are intended to be off the record.
 

Upcoming Events: California State Society Picnic on Saturday

The California State Society's annual picnic will be held this Saturday, June 26, from 11:00 a.m. to 4:00 p.m. in Jones Point State Park in Alexandria, VA. The festivities will include live music by Ruthie and the Wranglers, a volleyball tournament, food and refreshments, a "Taste of California", carousel and moonbounce, charity raffle, and a free T-shirt.

Tickets are $10 for State Society Members, $15 for non-members, and $20 at the entrance. Kids under 16 get in free. You can still buy tickets by making special arrangements with Michele Lee at (202) 416-5151 before Saturday, or just pay at the entrance.

To field a team for the volleyball tournament (teams of 3 men and 3 women get free picnic admission), call Bob Cochran or Brandi at 202-225-1956. Grand prize for the winning team.

From D.C., take the GW Parkway South past the airport. In Alexandria, it turns into Washington Street. Continue past King Street for 8 blocks, turn left on Green Street, then right on Royal Street. Turn left on the side road, marked "Jones Point", before the Woodrow Wilson Bridge. Follow the road past the stop sign. Jones Point Park is on your right.

From the Beltway, Exit Route 1 North toward Alexandria, turn right on Franklin Street, go six blocks and turn right on Royal Street, then follow the directions above.
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