The California Institute For Federal Policy Research California Capitol Hill Bulletin Volume 3, Bulletin 36 -- October 17, 1996 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. CENTER PROJECTS JOBSEEKERS ARE MOVING TO CALIFORNIA AGAIN A new report by the Center for Continuing Study of the California Economy (CCSCE) projects that the number of people moving into the state will exceed those leaving by at least 25,000 people over the next year. This would be the first time since the 1990-91 recession that the state has seen a "domestic net migration." According to Stephen Levy, director of CCSCE, "Job growth is once again bringing people to California." With as many as 350,000 new jobs expected this year, people from the East and Northeast are again relocating to California, and the number of California residents moving to the Pacific Northwest and other Western states has declined. The computer electronics industry in the Bay Area, with its strong emphasis on higher wage, foreign trade jobs has fueled the migration. Southern California, on the other hand, continues to have a net decline in migration. Los Angeles lost 77,000 residents in the last year, although that is significantly less than the 127,000 the L.A. basin lost in 1993-94. It is possible that, in another year or two, L.A. will also see a net increase in migration, according to Levy. CCSCE is a private think-tank that provides economic assessments and longterm economic forecasts on California to private and public organizations. Stephen Levy, the Director of the Center, also serves as Vice-Chair of the California Institute's Economic Advisory Council. IMMIGRATION POLICY BRIEFING SET FOR MONDAY A briefing entitled, "U.S. Immigration Policy: What's Next" will be held on Monday, October 21, at 10 a.m. at the Hyatt Regency Washington, 400 New Jersey Avenue, N.W. The briefing is sponsored by the Times Mirror Corporation and Matthew Bender & Company. Speakers will include Richard Day, Chief Counsel of the Senate Immigration Subcommittee; J. Michael Myers, Minority Staff Director of the subcommittee; Stanley Mailman, Satterlee Stephens Burke & Burke LLP; and Stephen Yale-Loehr, Adjunct Professor, Cornell Law School. The moderator is Kathryn M. Downing, President and CEO Matthew Bender & Co. The briefing is free and open to the public, but reservations are required. If you wish to attend, please call Dan Erck at 202-667-0901. STATE TAKES FIRST STEP TOWARDS REFORMING WELFARE State officials, last Wednesday, joined approximately 25 other states and took the first step -- formally applying for the federal government's new welfare block-grant -- to begin the process of cutting welfare payments to approximately 2.7 million recipients of Aid to Families with Dependent Children (AFDC). The new provisions, which take effect on the first of the new year, will cut recipient payments in urban areas by 4.9% and payments in rural areas by 9.8%, implementing reductions approved by the State Legislature as part of the state's budget. The Legislature had included the AFDC cuts in the recent state budget but they were never set into action because, under the previous federal welfare law, the state needed a formal waiver from the federal government to do so. State finance officials believe that the state will receive approximately $260 million more in federal funds than the state had anticipated in their budget. The Legislature will determine in the next session how best to apply the additional federal welfare money. The next step in the welfare reform process will come early next year when Governor Wilson is expected to unveil his proposal to drastically overhaul California's welfare system, as provided for in the landmark welfare reform legislation President Clinton signed in August. Among other stipulations, the new law mandates that no federal funds be spent on welfare recipients who remain on the rolls for more than two years. PROP 211 BATTLE CONTINUES IN CALIFORNIA; HEALTHCARE INSTITUTE SURVEY CONCLUDES R&D MAY SUFFER IF MEASURE PASSES With the election only three weeks away, the battle over Proposition 211 continues in full force in California. Prop. 211, which will be on the November ballot, would substantially ease the standard of proof for shareholders bringing suit against companies for misstatements made in regard to the sale of stock. It would also prohibit indemnification of directors and officers, and allow plaintiffs to seek punitive damages. Two recent polls show the difficulty of gauging voter reaction to the measure. A recently released Field poll, sampling voters whether or not they expected to vote in November, found support for Prop. 211 ahead 41 percent to 27 percent, with 32 percent undecided. But the poll also showed that those voters who were knowledgeable about the proposition opposed it by a margin of 21 percent to 10 percent, with 23 percent undecided. In contrast to this poll, a Los Angeles Times poll released last month showed stronger opposition to Prop. 211, with 42 percent opposed, 26 percent in favor, and 32 percent undecided. In the meantime, a study released this week by the California Healthcare Institute (CHI) concludes that passage of Proposition 211 could slow advances in nearly 400 medicines and treatments for serious health problems, such as AIDS and heart disease. The study was conducted by KPMG Peat Marwick LLP and CHI and is based on a state-wide survey of biomedical executives. It concludes that passage of Prop. 211 would increase legal costs to the extent that 43 percent of biotech and medical device companies in California would be forced to cut back on research and development. The report also showed that nearly half (49.6%) of those biomedical company executives surveyed are considering moving their headquarters out of California if the measure passes. NASA & LOCKHEED MARTIN BRIEF DELEGATION STAFF ON X-33 On Wednesday, California Congressional delegation staff were briefed on the X-33, NASA's reusable launch vehicle prototype program which will be built by Lockheed Martin Skunk Works of Palmdale and a range of subcontractors, several of which are also California-based, including the Rocketdyne division of Rockwell International, Rohr Industries, Sverdrup, and Allied Signal. The briefing was given by Gary Payton of NASA and T.K. Mattingly from Lockheed Martin Skunk Works. Payton noted that a primary goal of the X-33 program is to cut launch costs. Current payload costs for space cargo runs between $8,000 and $12,000 per pound. An RLV ultimately could cut costs to as low as $1,000 per pound -- a much more commercially viable level -- because its reusability means the production costs are spread over multiple launches, rather than just one. Payton noted that the X-33's metallic skin would allow the craft to fly through rain, and that its lightweight fuel tanks and advanced "aerospike" engine design would represent significant technical advances. Payton estimated that ultimately each RLV craft might cost roughly $500 million, and it is hoped that each will be launched several hundred times. In response to questioning, he said that NASA anticipates that less than half of the launches will be for NASA missions, even in the early stages of the program. Mattingly has previously stated that roughly 60% of the NASA program will be "invested" in California, and that the X-33 project will be developed in close proximity to California's satellite user community. He also stated that proximity to commercial space launches will be another advantage. As currently envisioned, the X-33 will be launched from Edwards Air Force Base during early development, and from elsewhere in later development. Mattingly noted that the craft will be equipped with a "health monitoring system" similar to those found on modern commercial jetliners. Such a system will allow engineers to determine whether the craft is ready for immediate or near-term re-flight, perhaps avoiding the need for extensive between flight overhaul. Federal funding for the X-33 program was $43 million in FY96 and $251 million in FY97. NASA and the contractors anticipate seeking $333 million in FY98 and then $312 million in FY99. In addition, the manufacturers stated that they plan to seek indemnification legislation early in the 105th Congress. NASA plans to begin meetings with affected fly-over communities next week, starting with Montana, Washington and Utah, and moving toward Southern California subsequently. AGREEMENT ON PRICE FLOOR FOR MEXICAN TOMATOES SETTLES DUMPING CASE Last Friday, the Commerce Department announced an agreement with Mexico to keep a floor under the price of tomatoes shipped to the U.S. A dumping case had been brought this year by Florida tomato growers. Florida grows 45% of tomatoes sold in this country, while California accounts for nearly 15%. The remaining 40% are imported from Mexico. The agreement averts what could have been a significant trade war, with the U.S. imposing steep dumping duties and Mexico retaliating by restricting the billions of dollars worth of U.S. agricultural exports shipped to Mexico. Many of those impacted agricultural goods would have been from California. WILSON CALLS ON CLINTON ADMINISTRATION TO ALLOW COMMERCIAL VEHICLE BORDER CROSSINGS In a recent letter to Transportation Secretary Federico Pena, Governor Pete Wilson urged the Administration to make good on a NAFTA provision allowing the opening of U.S. border states, such as California, to international commercial vehicles from Mexico. Secretary Pena has indicated that the opening of the borders for this purpose will be delayed due to the need to assure vehicle safety. Wilson asserts, however, that after spending more than $25 million to build and staff two commercial vehicle enforcement facilities, it is "fully prepared to conduct safety inspections of commercial vehicles at key points along the border." Given the reliance of California's economy on a successful trading relationship with Mexico and the state's success in making safety inspection preparations, the Governor urged Secretary Pena to implement a three-part plan to remedy the current disadvantageous situation. The three steps are: (1) allow properly inspected and documented commercial vehicles based in Mexico to operate throughout the state as a pilot project; (2) to propose that the Secretary ask Mexico ask for reciprocity for California-based trucks; and (3) in order to confine Mexican-based vehicles to California, during the test period, the U.S. Department of Transportation should issue "ICC" certificates limited to California. For more information, contact John Garrish in Governor Wilson's Washington office at 202-642-5270 OPERATION GATE KEEPER TO ADD 224 NEW AGENTS Last Thursday, the Immigration and Naturalization Service (INS) announced that Operation Gate Keeper, the two year-old effort to control illegal immigration at the U.S.-Mexico border, will immediately receive 100 emergency Border Patrol agents, with an additional 124 to be added by the end of the year. The 224 new Gate Keeper agents will all be assigned to the besieged eastern section of San Diego County which, in the last two years, has experienced an influx of illegal immigrants trying to avoid the better patrolled western region of San Diego County. Currently, only 189 agents are permanently assigned to the eastern section of the County. In addition to the new agents, stations in eastern San Diego will also receive six new night vision scopes, 264 underground sensors, three four-wheel-drive buses to transport illegal immigrants, and a five member horse patrol team. Additionally, about 6 1/2 miles of new fencing will be built in Tecate and Jacumba and INS funding for overtime pay will be increased to allow more agents to work six-day weeks. Fearing a loss of forces in his own state, Texas Governor George W. Bush condemned the move. Bush contends that 46 of the 244 new Border Patrol agents who will be reassigned to California, will come from his state. In related news, a U.S. District Court Judge has ordered the INS to reopen deportation proceedings in cases where the INS failed to adequately inform individuals of their right to a hearing prior to deportation. The judge ruled that the INS violated the 5th Amendment's Due Process clause by failing to properly inform about 5,000 individuals charged with using false documents that they have a right to a hearing in order to rebut those charges. ROCKWELL/LOCKHEED MARTIN TEAM WINS $179 MILLION SATELLITE CONTRACT AND $7 BILLION SPACE SHUTTLE OPERATION CONTRACT A Rockwell/Lockheed Martin team announced Tuesday that the U.S. Air Force and Missile Systems Center in Los Angeles had selected the team for the Space Based Infrared System Low Earth Orbit Demonstration/Validation phase contract. The $179 million award includes the design, test, launch and on-orbit operations of a flight experiment satellite. The contract extends through 1999. As the prime contractor, Rockwell's Space Systems Division will be responsible for systems engineering and flight experiment operations. Much of the construction associated with the contract will take place in California. The satellite sensors will be built by Rockwell's Autonetics & Missile Systems Division in Anaheim, and the spacecraft bus and launch vehicle will be constructed by Lockheed Martin Missiles & Space in Sunnyvale. The flight experiment is scheduled to be delivered within 27 months. Earlier this month, NASA and the United Space Alliance agreed to a six-year, $7 billion contract which would have Rockwell and Lockheed Martin take over about 35% of day-to-day Space Shuttle operations. The move constitutes the first step toward privatization of the space shuttle program. The deal will consolidates twelve "parent company" contracts held by either Rockwell or Lockheed Martin and eventually will cover the bulk of the work related to operation of the Space Shuttle. The primary goal of the contract is to save NASA enough money to meet its cost targets for the Shuttle program. CHINA BANS U.S. POULTRY IMPORTS FROM 10 STATES; NOT CALIFORNIA In reponse to fears that U.S. poultry may be carrying a plague, China has banned the import of poultry from 10 states: Arkansas, Florida, Maryland, Minnesota, New Jersey, New York, North Carolina, Texas, Utah and Wisconsin. California poultry producers will not be subject to the ban. Chinese officials are concerned that the U.S. imports carry a fowl virus known as highly pathogenic avian influenza, or HPAI. Since there have been no cases of HPAI in the United States since the early 1980s, U.S. Agriculture authorities suspect that there has been some confusion by Chinese investigators between HPAI and the more common avian influenza (AI). In an effort to clear up the confusion, the Agriculture Department send a technical team to Beijing. U.S. and Chinese officials met in Beijing Tuesday to try to resolve the issue. China is the second-largest foreign market for U.S. poultry products. California produced 1.1 billion pounds of broilers in 1994, compared to 32.5 billion pounds nationwide. The affected states produced more than 12 billion pounds. CALIFORNIA AND U.S. JOBLESS CLAIMS RISE IN MOST RECENT WEEK The U.S. Department of Labor announced today that first-time claims for unemployment benefits rose last week faster than expected for both the U.S. and California. Nationwide, claims rose by 18,000 (from 322,000 to 340,000). Claims in California rose by 5,361, reportedly due to layoffs in the food and service industries and in agriculture.