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California Capitol Hill Bulletin

                Volume 8, Bulletin 16 -- May 17, 2001    [or see pdf version]


Dreier Replaces Lewis As Head of State's Republican Delegation in House

Senate Finance Committee Clears Tax Cut Package; Floor Debate Begins on Reconciliation Bill

President Releases National Energy Policy Proposal

Gallegly/Sherman Santa Monica Mountains Bill Clears Resources

Hill Staff Briefed Regarding 20-Year Plan for California's Rail System

Science Subcommittee Examines the Aerospace Industrial Base

Governor Davis Releases May Revise of 2001-2002 Budget

Luncheon Features Wine Vintners, Members of Congress

California State Society Announces May 24 Event


To expand communications between Washington and California, the California Institute provides periodic faxed bulletins regarding current activity on Capitol Hill which directly impacts our state. Bulletins are published weekly during sessions of Congress, and occasionally during other periods. The e-mail edition is made possible in part by in kind donations from Sun Microsystems and IBM Corp.

Dreier Replaces Lewis As Head of State's Republican Delegation in House

The California Republican delegation elected Rep. David Dreier (San Dimas) as its new chair, on Thursday, May 17. Dreier will replace Rep. Jerry Lewis (Redlands) who stepped down after five years of leading the GOP delegation.

Rep. Dreier was first elected to Congress in 1980, and has been Chairman of the House Rules Committee for the past two years. He has served as the point person on various legislative challenges and is a key liaison to the technology community. Rules Committee staff member Matt Reynolds will staff the delegation assignment for Dreier.

During Rep. Lewis' tenure, the California Congressional delegation significantly expanded its bipartisan activities, conducting joint meetings, hosting events, and preparing a numerous bipartisan delegation letters signed by every or nearly every Member of Congress from the state.

Also on Thursday, the California Republicans selected Rep. Ken Calvert (Corona) as Vice Chairman. The elections of Reps. Dreier and Calvert were both unanimous.

 

Senate Finance Committee Clears Tax Cut Package; Floor Debate Begins on Reconciliation Bill

The Senate Finance Committee approved its $1.35 trillion 11-year tax package on Tuesday, May 15, by a vote of 14-6. In addition to the tax rate cuts, and repeal of the estate/death tax, the bill also contains other provisions of particular importance to California. It would make permanent and expand to graduate education the tax benefits provided under Section 127 for employer-paid education expenses, for courses beginning after Dec. 31, 2001. It would also create a new tuition deduction. In 2002 and 2003, families with incomes under $65,000 would be eligible to take a $3,000 tax deduction. In 2004 and 2005, the maximum deduction would be $5,000.

During the markup, the Committee defeated, 7-13, an amendment that would have permanently extended the research and development tax credit, which is set to expire in 2004. A majority of members from both sides of the aisle support the credit. Thus, the defeat was more a decision to put off finding the offsetting $47 billion needed to pay for it over 10 years until the bill reaches the Senate floor. Sen. Orrin Hatch (UT) is expected to offer an amendment on the floor to make the credit permanent.

Another amendment, offered by Sen. Bob Graham (FL), which would have eliminated a state death tax credit from repeal of the estate tax was defeated 6-14.

The proposal would also repeal the estate tax by 2011 and raise exemption levels to $4 million; double the $500 child tax credit by 2010 and broaden low-income participation in the credit; and permit larger contributions to IRAs and 401(k) and similar plans.

Up to 20 hours of debate are expected in the Senate. The House and Senate hope to reconcile their versions of the tax cut plan and send it to the President before the Memorial Day recess, which begins May 26.

 

President Releases National Energy Policy Proposal

On Thursday, May 17, President George W. Bush released a long-anticipated plan for addressing the nation's energy crisis. The report, the product of Vice President Richard Cheney's National Energy Policy Development Group, summarizes the current state of energy in the U.S., assesses factors which it believes contributed to our present difficulties, and makes more than 100 recommendations for action. California's current predicament is described in various sections as an illustrative example of what can go terribly wrong. Below are summarized many of the report's recommendations. The complete proposal is available on the Department of Energy website at http://www.energy.gov/HQPress/releases01/maypr/energy_policy.htm .

The report proposes an increase of $300 million, to $1.7 billion, for the Low Income Home Energy Assistance Program (LIHEAP), and it recommends that a portion of federal oil and gas royalties should be designated for low-income energy assistance. (The LIHEAP program is typically consumed by cold-weather states; California currently receives less than 5% of its funds.) It also recommends an increase in funds for the Weatherization Assistance Program of $1.2 billion over 10 years, and it urges that funds from the weatherization program and state energy programs be transferrable to LIHEAP.

The task force urges the Environmental Protection Agency (EPA) to recommend proposals to Congress for reducing sulfur dioxide, nitrogen oxides and mercury emissions from fossil fuel power plants. It recommends expedited permitting for power plants and other energy projects. It also urges oil and gas exploration in the Arctic National Wildlife Reserve and proposes a royalties fund from such activities be used for land conservation and eliminating maintenance backlogs on federal lands. It urges conservation at federal facilities, shortened depreciation and tax credits for cogeneration, and flexibility in environmental permitting.

At the Transportation Department, the report recommends reviewing and promoting mass transit, navigation systems, freeway management, electronic toll collection, fuel-cell powered buses and other technology advances aimed at easing traffic congestion, as well as reducing emissions and fuel consumption of long-haul trucks.

It proposes that the Interior Department explore reducing federal royalty payments on offshore oil and gas development, in frontier areas, from deep gas wells and in small fields that otherwise would be uneconomical, and it urges the Departments of Commerce and Interior to re-examine the current federal legal and policy regime regarding energy development in coastal zones and on the Outer Continental Shelf.

On the electricity front, the report urges comprehensive electricity legislation for "promoting competition, protecting consumers, enhancing reliability, promoting renewable energy and improving efficiency." It also proposes repeal of the Public Utility Holding Company Act (PUHCA), changes to the Public Utility Regulatory Policies Act (PURPA), and a $2 billion investment in clean coal research and provide tax breaks for it. It recommends expanding nuclear generating via tax incentives, relicensing of existing power plants, expedited licensing of advanced-technology reactors, and possibly reprocessing spent nuclear fuel to recycle plutonium. It also urges reform in hydroelectric power plant licensing and relicensing procedures.

In alternative and renewal energy, the report urges opening federal lands to increase renewable energy production from biomass, wind, solar and geothermal plants. It suggests a $39.2 million increase in the Energy Department's budget for research and development of renewable energy resources, expanded tax credits for windmills and biomass facilities, a 15% tax credit for solar panel purchases, broadened alternative fuels tax incentives which would include methane gas emission capture for electricity generation from landfills.

The plan urges the Energy Department to participate in developing hydrogen and fusion energy technologies and integrate them with fuel cell research. Specifically, the report "recommends that the President direct the Secretary of Energy to develop next-generation technology -- including hydrogen and fusion."

Electricity transmission and the power grid was the focus of a significant number of recommendations. The report urged the DOE and FERC to improve the reliability of interstate transmission system, creation of a self-regulatory organization subject to FERC oversight for enforcing transmission grid policies and resolving disputes, consider establishing an national transmission grid, expanding R&D on transmission reliability and superconductivity, developing incentive ratemaking to relieve transmission constraints, and expanding transmission lines to relieve the "Path 15" bottleneck in Central California which prevents power moving easily from south to north.

Regarding natural gas transmission, the report calls for expedited construction of a pipeline for transporting Alaskan natural gas to the lower 48 states, expedited pipeline permitting, and adoption of FERC measures to improve regulatory process governing interstate natural gas pipeline projects. It also urges streamlining permitting for new oil refineries, limiting regulatory overlap and examining current refinery regulations. The report also makes myriad recommendations for international energy policy shifts and improvements.

 

Gallegly/Sherman Santa Monica Mountains Bill Clears Resources

The House Resources Committee reported out H.R. 640, which amends the National Parks and Recreation Act of 1978 to adjust the boundaries of the Santa Monica Mountains National Recreation Area in California. Reps. Elton Gallegly (Simi Valley) and Brad Sherman introduced the legislation. The bill will enhance and protect the principal wildlife corridor in the urban area between the Simi Hills to the north and the Santa Monica Mountains. It adds nearly 3,700 acres of public and private lands to the Recreation Area at no cost to the taxpayer. Of that, 2,797 acres donated to the Santa Monica Mountains Conservancy, a state agency, will be transferred to the National Park Service. Another 570 acres is publicly and privately owned open space. The rest of the land, about 330 acres, is comprised of developed residential areas in the cities of Calabasas and Agoura Hills, according to the testimony. The rights of private property owners and municipalities within the designated area would not be affected by H.R. 640.

To date, floor action on the bill has not been scheduled.

 

Hill Staff Briefed Regarding 20-Year Plan for California's Rail System

On Monday, May 14, Amtrak, the Office of Governor Gray Davis, and the California Institute hosted a briefing on the future of the California Passenger Rail System 20-Year Improvement Plan. Other co-sponsors of the briefing included: the San Joaquin Valley Rail Committee, the Coast Rail Coordinating Committee, the LOSSAN Task Force and the Capitol Corridor Joint Powers Board.

The 20-Year Improvement Plan was a result of a two year effort by Amtrak partnering with the State of California, commuter railroads, freight railroads, local and regional elected officials, and representatives of joint powers boards to develop the consensus and community based plan. The Plan details $10.1 billion of improvements over 20 years and calls for faster, more frequent and convenient passenger rail service to all of the state's major population centers. It establishes goals for the state's existing and emerging rail corridors and proposes: hourly service between Los Angeles and San Diego, with a trip time of less than two hours, down from the current two hours and 45 minutes; hourly service between San Jose, Oakland/San Francisco and Sacramento, with a trip time of 2 hours 20 minutes, down from the current 3 hours; expand service Bakersfield to Sacramento and Bakersfield to Oakland; the first Los Angeles to San Francisco service along the coast in 30 years; expanded service to Las Vegas, Palm Springs, Monterey, Reno and Redding; and expanded Metrolink, Coaster, ACE and Caltrain commuter rail service.

Funding sources outlined for the Plan include: State General Funds and gas tax revenues, State Transportation Improvement Program (STIP); California statewide bond issues; and California County Expenditure Plans. The Plan is also contingent on federal programs such as the High Speed Rail Investment Act of 2001 (S. 250). Both Senators Dianne Feinstein and Barbara Boxer are co-sponsors of this bill, which if passed would authorize Amtrak to sell $12 billion worth of bonds over the next 10 years to finance improvements on passenger rail corridors throughout the country.

For more information on the California Passenger Rail System 20-Year Improvement Plan please visit the Amtrak West website at http://www.amtrakwest.com/califuture .

 

Science Subcommittee Examines the Aerospace Industrial Base

On Tuesday, May 15, the House Committee on Science, Subcommittee on Space and Aeronautics chaired by Rep. Dana Rohrabacher, held a hearing on the Aerospace Industrial Base. The purpose of the hearing was to examine the current trends in the aerospace industry and the ability of the industry to competitively maintain the country's leadership in aerospace. The following witnesses provided testimony: Retired Brigadier General John Douglass, President, Aerospace Industries Association; Retired General Tom Moorman, Partner, Booz, Allen and Hamilton; Mr. Gayle White, Chair, Space Committee, National Defense Industrial Association; and Ms. Heidi Wood, Vice President, Morgan Stanley.

Several factors were identified for their role in the decline of the U.S. aerospace industry. Some of the factors discussed in the hearing included: a shrinking workforce; loss of market share to European competition; declining government and commercial investment in aerospace research and development; unfair foreign trade practices; and strict U.S. export controls. The effect of these factors on the aerospace industry is of significant importance to California, as the State and particularly Southern California continues to be a major center of the aerospace industry.

To review the testimony of each witness please visit the committee website at http://www.house.gov/science/space/spacehearings.htm.

 

Governor Davis Releases May Revise of 2001-2002 Budget

On Monday May 14, Governor Davis released a revised version of his proposed 2001-2002 Budget. The surges in revenue from stock option income seen in the last two Budget years, according to Davis, have declined and as a result the State is experiencing a moderate decline in revenues this year. Although General Fund revenues for Fiscal Year 2000-2001 are actually higher by approximately $1.144 billion than projected in January, revenues for the 2001-2002 Budget year are expected to be $4.592 billion less than estimated when Davis introduced his proposed budget in January.

In the revised budget, Governor Davis proposes to reduce General Fund spending by $3.177 billion compared with his original proposed budget in January, and proposes a $570 million reduction from the current fiscal year. To do this, the Governor proposes reducing many program expansions from the January budget and reducing base level funding in some programs. Governor Davis also proposed a 2.5 percent reduction for State departments and agencies and he urged Constitutional officers to meet the same level of reduction. Additionally, Davis stresses the Budget maximizes federal funding and unused special funds

Due to the energy crisis, State legislation was passed to authorize advances from the General Fund for the Department of Water Resources to purchase power, and revenue bonds have been authorized for the purpose of repaying the General Fund. This revised proposed budget from the Governor is based on the assumption that these bonds are to be sold in mid to late August resulting in reimbursement to the General Fund at that time.

Education continues to be Governor Davis' top priority, with $33.216 billion proposed for K-12 education. Funding for California classrooms will increase by $3.2 billion over the current fiscal year. The Governor also proposed $541 million in one-time funds to assist schools to pay for increased energy costs this year and to assist schools in energy conservation efforts, conditional on reducing energy by 10% in order to receive the funds. Another priority outlined by Davis is that of Public Safety, which would be increased $4.4 million over current fiscal year funding.

Agencies with significant cuts include the Business, Transportation, and Housing Agencies, with a reduction of $1.2 billion from the current fiscal year for the Department of Transportation and a reduction of $348.3 million from the current fiscal year for the Department of Housing and Community Development. Another agency which will be cut is the Technology, Trade and Commerce Agency with a reduction of $6.9 million from the current fiscal year. Some of the reductions can be seen in the California Technology Investment Program, where the Governor eliminated his proposed $6.2 million augmentation. The Defense Adjustment Matching grants will be reduced by $2 million from the proposed $3 million augmentation. The elimination of other proposed augmentations is also proposed.

To view the May Revision of the Governor's proposed budget, please visit the California Department of Finance website at http://www.dof.ca.gov .

 

Luncheon Features Wine Vintners, Members of Congress

The vintners of the Wine Institute visited Washington this week and spoke at their annual Golden State Roundtable luncheon on Tuesday, May 15. In addition to remarks by Wine Institute President and CEO John De Luca, and Washington Office head and Senior Vice President Bobby Koch, the capacity crowd also heard from Reps. George Radanovich (Mariposa) and Mike Thompson (St. Helena). The two members co-chair the Congressional Wine Caucus; Rep. Radanovich is a vintner himself and Rep. Thompson is a former vintner. The discussion was concluded by Louis (Bob) Trinchero of Trinchero Family Estates in St. Helena, who serves as chair of the Wine Institute's board.

 

California State Society Announces May 24 Event

The California State Society will hold a membership event, entitled a Beer Bash, on Thursday, May 24, at the American Legion Hall (4th and D Streets, SE) from 6:00 pm to 8:30pm. The event is free for current members of the State Society. For non-members $10 will cover admittance to the event, beer, food and a membership in the Society. For further information call 202-745-1938.

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