California Capitol Hill Bulletin, 5/2/97 Page 1 THE CALIFORNIA INSTITUTE FOR FEDERAL POLICY RESEARCH 419 New Jersey Avenue, SE, Washington, D.C. 20003 202-546-3700 fax:202-546-2390 ransdell@calinst.org www.calinst.org California Capitol Hill Bulletin Volume 4, Bulletin 15 -- May 1, 1997 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. HISTORIC ŗCALIFORNIA DAY˛ DRAWS DECISION-MAKERS FROM ALL LEVELS OF GOVERNMENT Californiašs Members of Congress, Senators Feinstein and Boxer, 47 State Legislators, several city and county officials, and Governor Pete Wilson met in Washington for an historic all-day summit Tuesday on Capitol Hill. The occasion was ŗCalifornia Day,˛ created by Reps. Jerry Lewis (Redlands) and Lucille Roybal-Allard (Los Angeles) and scheduled to coincide with the annual visit of state legislators to Washington. The state legislators (30 members of the Assembly and 17 state Senators) were in town pressing their case on various federal issues, including education, electric utility restructuring, health (Medicaid & medicare), immigration, international trade, public safety & juvenile justice, transportation & ISTEA reauthorization, water & flood issues, and welfare reform. Among the various local elected officials attending the event were all five members of the Los Angeles County Board of Supervisors. In addition to a standing-room-only breakfast with all parties and a luncheon featuring House Speaker Newt Gingrich and House Minority Leader Richard Gephardt, the day featured intensive discussion segments regarding priority issues for the Congressional delegation, including education, health & Medicaid, and ISTEA. These topics have been among the primary issues addressed by the California delegationšs new bipartisan task force (see separate article), whose members also addressed the session. * EDUCATION PROGRAMS: Reps. Frank Riggs (Windsor) and Lynn Woolsey (Petaluma) chaired a session focused on several formula grant programs currently being considered or drafted (including disabled education, job training, vocational and adult education), as well as reauthorization of higher education programs and grants which will be considered in 1998. * HEALTH ISSUES: Reps. Henry Waxman (Los Angeles), Brian Bilbray (San Diego) and Anna Eshoo (Atherton) led the discussion regarding health issues -- primarily Medicaid. A key focus was altering the funding for Disproportionate Share Hospitals (DSH) to ensure that other states follow the targeting rules the way California already does. In addition, participants sought to prevent the imposition of a state-by-state per capita cap on federal Medicaid distributions. * ISTEA: The bipartisan California ISTEA Task Force, led by Reps. Jay Kim (Diamond Bar), Bob Filner (San Diego) and Juanita Millender-McDonald (Carson) and which includes most of the California Congressional delegation, has taken an active role in identifying and promoting the interests of California in the reauthorization process. Among the priorities mentioned were incorporating a factor for goods movement into the funding formulas (perhaps by measuring freight), meeting Californiašs substantial border infrastructure needs, and ensuring a fair share of funds for the Congestion Mitigation and Air Quality program. The participants stressed that California is a donor state (giving more in gas tax than it receives back) with respect to highway funds. Various other topics were discussed during the session, including the critical issue of the treatment of legal immigrants under various federal programs, protecting the statešs borders, reimbursement for costs of providing services to illegal immigrants, disaster relief and disaster insurance, global trade and trade assistance, water projects and bay delta restoration, research, encryption, the research & development tax credit, capital gains, and retention of defense assets. In addition to sponsoring several events during the state legislative trip, the California Institute provided background information to both state legislators and Members of Congress in advance of the discussions. For copies of these briefing sheets (prepared regarding Medicaid, illegal immigrant cost reimbursement, education formulas, and ISTEA reauthorization), contact the Institute at 202-546-3700 or ransdell@calinst.org. Within 24 hours, the briefs will be added to the Institutešs web page at www.calinst.org. CALIFORNIA DELEGATION CREATES BIPARTISAN ISSUES TASK FORCE; FIRST EFFORT ARE LETTERS ON MEDICAID, ILLEGAL IMMIGRATION, AND DSH In order to promote Congressional priorities for the state, Californiašs delegation chairs recently appointed a six-member task force on bipartisan issues. The existence of the task force was formally announced during Tuesdayšs California Day activities. The task force members, Reps. Jane Harman (Marina Del Rey), David Dreier (San Dimas), Tom Campbell (Campbell), Zoe Lofgren (San Jose), Buck McKeon (Santa Clarita), and Gary Condit (Ceres), had been appointed by delegation chairs Lewis and Roybal-Allard. The task force has begun by addressing a limited range of issues, particularly federal formula funding matters. The first focus areas for the task force have been Medicaid (particularly a per-capita cap proposal and DSH payment equity), education formula programs, reimbursement for costs associated with illegal immigration, and ISTEA reauthorization. The California Institute has been providing background information and technical assistance to the task force. On Tuesday, Rep. Harman announced that the task force was behind delegation letters sent to President Clinton and Speaker Gingrich opposing a per capita cap on Medicaid and reimbursement for emergency health services for undocumented immigrants -- which garnered the signature of nearly every California delegation member -- as well as a letter seeking equity on Medicaid DSH payments which later was also signed by a nearly every member of the California delegation. On Tuesday, several task force members suggested that California Congressional delegation members should meet in Sacramento with state legislators, and Rep. Condit also suggested the creation of a multi-level task force, which would include state legislators and local officials in addition to Members of Congress. OTHER HIGHLIGHTS OF STATE LEGISLATIVE VISIT During their trip to Washington, the state legislators met with several high-ranking Administration officials, including Vice President Al Gore, Secretary of Transportation Rodney Slater, Secretary of Education Richard Riley, and INS Commissioner Doris Meissner. Meetings with other Administration officials focused on flood relief and disaster assistance, welfare reform, base closures and re-use, and justice matters. BREAKFAST HOSTED BY INSTITUTE -- The members of the State Assembly and Senate who visited Washington this week began their visit with a breakfast at the Mayflower Hotel hosted by the California Institute. The Institute wishes to thank AT&T, Pacific Bell, and AMD for their support of this event. Addressing the groups were Institute Executive Director Tim Ransdell, Governor Wilsonšs D.C. Director David Wetmore, and California Senate lobbyist David Vienna. After briefing the state legislators on the background of the California Institute, Ransdell informed the group regarding some of the issues the Institute is currently working on, including K-12 education formulas, ISTEA reauthorization, census sampling issues, and Medicaid per capita cap and DSH formula issues. Wetmore applauded the congressional delegation for gathering all 52 members' signatures on a letter concerning the restructuring of the electric utility industry. He also detailed the issues the Governor's office has identified as priorities for this year, including passage of the supplemental funding bill (which includes funding for the recent California floods); preventing the use of a per capita cap in the Medicaid reform proposal; obtaining increased funding for the incarceration costs associated with criminal illegal immigrants; and obtaining first-time funding for California's share of providing emergency medical services to illegal aliens. Vienna's briefing discussed the impending fiscal burden to California's counties if Supplemental Security Income and food stamp payments to legal immigrants are halted, and the adverse impact that California's public hospitals will feel if the Medicaid reform proposal contains significant reductions in disproportionate share (DSH) payments. WHITE HOUSE TRADE OFFICIAL ADDRESSES INSTITUTE LUNCH -- Dan Tarullo, Assistant to the President for International Economic Policy, was the guest speaker at a lunch at the National Press Club on Monday for the state legislators. His speech outlined the rise of the global economy through the growth of trade with Asia, the democratization of the old Soviet Union, and the advent of the technological revolution. He also briefed the group on the Clinton Administration's trade agenda, highlighting three key areas. First, the Administration is pushing for market-oriented reforms throughout the world and urging the extension of market-oriented policies compatible with those of the United States. Second, it will move to integrate the former state-controlled economies into the global economy. And, finally, it will work to protect U.S. trade and business by developing policies that will benefit both and by working to prevent terrorism, international financial fraud, and other countries' economic reversals, such as the peso crisis in Mexico two years ago. LAST DAY TO SIGN DELEGATION LETTER IN SUPPORT OF E-RATE Friday, May 2 will be the last day to sign the California delegation letter, circulated by Rep. Zoe Lofgren (San Jose), calling on Federal Communications Commissioner Rachelle Chong, a Californian, to vote in favor of a proposal to establish an ŗe-rate.˛ On May 8, the FCC will vote on a recommendation to implement the Telecommunications Act of 1996 for schools and libraries, including a provision to provide an education rate for telecommunications service. The e-rate would offer school districts deep discounts of 20-90 percent for all telecommunications services based on poverty levels and discounts on inside connections to classrooms and Internet access including installation and maintenance costs. Despite Californiašs leadership in the high technology industries, a 1996 survey found that 85% of Californiašs schools lack on-line access, the third lowest rate in the fifty states. If your member is interested in signing the letter, contact Tom Oscherwitz in Rep. Lofgrenšs office (225-3072) by late Friday morning. DISASTER AID BILL MEETS WITH POLITICAL DIFFICULTIES IN THE SENATE; IMMIGRANT BLOCK GRANT PROVISION UNFAIR TO CALIFORNIA After much discussion and heated debate, the Senate Appropriations Committee succeeded yesterday in adopting, 16-2, an emergency spending bill. The billšs appropriations total nearly $7.7 billion, including $5.6 billion in emergency natural disaster spending and $1.8 billion for overseas peacekeeping and restoration of military readiness accounts depleted by activities in Bosnia and Southwest Asia. The remaining $270 million is to be directed toward non-emergency supplemental appropriations. Spending for the measure will be paid for with rescissions and offsets similar to those adopted in the House bill. Early estimates indicate that California would receive over $2 billion to cover cleanup costs, government reconstruction loans, and emergency levee maintenance and repair required after its recent floods. Items specifically earmarked for California include $176 million for Yosemite National Park, $27 million for National Forest System Repairs, $9 million for Redwoods National Park, and $9.5 million for tree assistance programs (small orchards). Unlike its House counterpart, the Senate measure includes a number of hotly contested riders, including: (1) a $31 million appropriation for D.C. schools and police; (2) language preventing any Commerce Department funds from being used for ŗsampling˛ in the 2000 Census (see separate article); (3) a provision waiving a number of flood control projects from the requirements of the Endangered Species Act; and (4) a $125 million block grant to states to pay for a two month extension of SSI benefits for legal immigrants. Although the provision extending certain welfare benefits for legal immigrants is estimated to bring $48.7 million to California, the block grant contains minimum allocation provisions which skew monies toward small states with few legal immigrants. Consequently, states with large legal immigrant populations would receive less than their fair share of funding. This inequity is best seen in the amount each state would receive from the $125 million pot for each immigrant recipient. According to the Center on Budget and Policy Priorities, the per recipient amount ranges from $250 in Oregon to $8,333 in Wyoming. Eleven small population states will receive more than $1,000 for each immigrant being served. With an estimated 165,000 immigrants to be terminated from SSI, California would expect only $295 for each recipient over the two-month period. Almost every state with a $1,000 plus per immigrant allocation benefits heavily from the billšs $250,000 minimum state allocation. CENSUS SAMPLING ISSUE LINKED TO DISASTER RELIEF BILL The Senate version of the emergency spending bill for fiscal year also contains language that would prohibit the Census Bureau from preparing to use sampling in the 2000 Census. On Wednesday, efforts to strike the sampling prohibition language from the disaster relief bill failed in the Senate Appropriations Committee by a 15-13 vote. Senator Barbara Boxer voted in favor of an amendment that would have removed the provision pertaining to the census (section 303 of chapter 10). The language of the Senate provision is so broad that it would likely have the effect of prohibiting the Census Bureau from utilizing not only a sample, but also the traditional long form which is sent only to a sample of households and collects a wide range of demographic data that are needed to implement and administer critical federal programs. In addition, the restrictive Senate language would prevent the Census Bureau from even administering a post-census survey to measure the extent of undercounts and overcounts. In 1990, the Bureaušs follow-up study revealed that California had been undercounted by 834,000 persons -- nearly three percent of the state's population. Despite the acknowledged undercount, California has been forced to provide government services without any assistance from the federal government for the 834,000 persons that the Bureau had failed to detect in their initial enumeration effort. In a letter to Appropriations Committee Chairman Ted Stevens (Alaska), Franklin Raines, Director of the Office of Management and Budget, stated that inclusion of the prohibitive language would result in a Presidential veto of the supplemental funding measure. The full Senate will likely consider the supplemental spending bill next week, after the House passes its version of the bill which does not contain any language related to the 2000 Census. FIFTH BASE CLOSURE ROUND LOOKING MORE LIKELY A fifth major round of base closings, probably within two to four years, is beginning to sound very likely. During a meeting this week between several California state legislators and Pentagon officials, a state official inquired regarding further base closing prospects. The officials responded that another round of base closures is ŗa very strong possibility.˛ In particular, the officials reportedly commented that military depot facilities continue to operate at 30% to 40% under capacity, which suggests the value of additional closures. He added, however, that operations facilities would also be part of the mix. Regarding the scope of closures, the official reportedly stated that all four past rounds (in 1988, 1991, 1993, and 1995) shut down about 25 major facilities nationwide, and that a similar figure would be reasonable again. The official predicted a closure round ŗin a couple of years,˛ though some observers doubt it before the 2000 elections. California was far and away the biggest loser from the first four base closure rounds, shouldering 60% of the net job losses nationwide, despite the fact that only 15% of the nationšs personnel were located in the state before the closure process began. With half of Californiašs closing bases still yet to be shuttered, Californiašs share of military salaries had already fallen to 9% by last year. According to the Governoršs Office of Planning and Research, California will have lost 101,500 military and civilian jobs due to base closures, and has so far regained 13,800 at re-used facilities. SUBCOMMITTEE MARKS UP ENCRYPTION EXPORT BILL The House Judiciary Subcommittee on Courts and Intellectual Property marked up H.R. 695 on Wednesday. The bill was reported out unanimously without amendment. It would allow for the export of computing equipment and software that contain encryption systems, as long as comparable systems are available for commercial use from other sources in the world. The bill has been co- sponsored by 78 members of the House, including 16 members of the California congressional delegation. The bill is strongly supported by companies in the computer industry that manufacture and program encryption devices. They argue that their global competitiveness is being damaged by strict U. S. export controls on encryption devices. The Administration, however, has argued that the ability to catch terrorists and other criminals will be hampered if strong encryption systems become widespread. NIH DIRECTOR TESTIFIES BEFORE PUBLIC HEALTH AND SAFETY SUBCOMMITTEE National Institutes of Health (NIH) Director Harold Varmus today testified before the Senate Subcommittee on Public Health and Safety to state the NIH's case for the agency's ability to independently set the agenda for biomedical research priorities and to retain latitude when it comes time to allocate financial resources within the agency. Director Varmus, in his testimony before the committee, cautioned against the inherent dangers of an NIH that would be "micro-managed" by Congress through the resource allocation process. Because science attempts to discover what is unknown, Varmus argued, science itself is inherently unpredictable. Varmus noted that "in this sense, it is unlike most industries, which can employ well-established methods to generate planned amounts of known products. History has repeatedly shown the benefits of allowing a significant portion of our research activity to be governed by the imagination and productivity of individual scientists, not by a regimented plan for alleviating diseases we do not yet fully understand." California is a substantial recipient of NIH funding, particularly at the University level. NIH funding at the University of California, San Francisco, for example, amounted to 90 percent of all federal support for the University's R&D programs. In general, California received $1.36 billion from Health and Human Services (HHS) research programs in FY 96, a full 14.3 percent of HHS's total national allocations. U.S. TO FILE WTO COMPLAINTS FOR INTERNATIONAL COPYRIGHT PIRACY U.S. Trade Representative Charlene Barshefsky announced Wednesday that the United States intends to file World Trade Organization (WTO) complaints against four countries -- Denmark, Sweden, Ireland, and Ecuador -- that have failed to honor international obligations to protect copyrights from piracy. The action comes as a result of an annual review of various country's copyright and intellectual property protection laws, an extremely important issue to California with its significant concentration of entertainment companies. The review noted that China, a perennial violator of copyright laws, has shown "significant improvement" but that the country will continue to be monitored to ensure that they comply with the bilateral agreement on intellectual property protection. Other countries that Barshefsky said need to be closely monitored include Argentina, Egypt, Greece, India, Indonesia, Paraguay, Russia, Turkey and the European Union. In related news, a presidential commission assembled to investigate the impact of foreign exchange markets on U.S. trade, has recommended that the U.S. government increase their vigilance in monitoring foreign exchange rates. The report noted that the U.S. government should be particularly vigilant to ensure that foreign governments do not manipulate their exchange rates to achieve competitive advantage. U.S. manufacturers, including many in California's Silicon Valley, have argued that the healthy U.S. dollar coupled with a weak Japanese yen have hurt their ability to compete on the global marketplace. A strong dollar makes U.S. goods more expensive, while a week yen makes Japanese goods cheaper. GINGRICH CALLS FOR LIMITING CHINA-MFN EXTENSION Speaker Newt Gingrich has recommended that Most Favored Nation status for China be limited to as little as three months to give the U.S. time to see how China handles the return of Hong Kong to Chinese control. If China does not preserve Hong Kong's autonomy, Speaker Gingrich stated it will seriously undermine U.S.-China relations. Legislation to amend the 1974 Trade Act to allow limiting the MFN time period will be needed and is currently being drafted in the House and the Senate. President Clinton must make his decision on whether to recommend extending China's MFN status for one year by June 3. Congress will then have until August 31 to disapprove the extension by joint resolution if it so chooses. LAEDC RELEASES INTERNATIONAL TRADE REPORT The Los Angeles Economic Development Corporation has released its annual report on international trade trends and impacts in the Los Angeles Region. The report finds that while international trade continued to grow in 1996, it was at a much slower 3.6 percent rate, rather than the double-digit figures experienced over the past few years. Two-way trade through the local Customs District rose to $170.1 billion, according to the report. The District includes the ports of Long Beach, Los Angeles, Hueneme, Los Angeles International Airport, and McCarren Field in Las Vegas. The Los Angeles Customs District continued to rank number one nationally, with New York in the number two slot with $155.8 billion in trade. The District's number one trading partner continues to be Japan, with a two-way trade value of $45.6 billion; trade with China, the District's second largest trading partner also continued to grow to a value of $21.2 billion. The report also found that the San Diego Customs District posted a dramatic 23.3 percent increase in two-way trade, with $18.5 billion in value, while San Francisco's trade rose only 2.6 percent. Copies of the report are available from LAEDC at 213-622-4300. AEA REPORT HIGHLIGHTS SUCCESS OF CALIFORNIAšS TECHNOLOGY INDUSTRY In a recent paper titled Cyberstates Report, the American Electronics Association (AEA) analyzed the status of the high technology industry in each of the fifty states. The report found the high technology industry to be the nationšs largest manufacturing employer, accounting for 11 percent of the GDP. As expected, California led the states in high technology activity in 1995. With more than 669,000 Californians working in high-tech companies, the number doubled that of the nearest state, Texas with 313,000. Perhaps more important than the number of employees was the high- wage nature of the positions. On average, California high-tech workers earned $55,160 a year, compared to an overall average private sector wage of $30,021. California was also the leading state from a trade perspective. In 1995, the statešs high-tech exports exceeded $58 billion, accounting for more than 60% of all manufactured exports from the state. AEA is selling the report for $195 (202- 682-9111).