The California Institute For Federal Policy Research http://www.calinst.org California Capitol Hill Bulletin Volume 4, Bulletin 19 -- June 5, 1997 FIGHT LOOMS OVER RESTORATION OF LEGAL IMMIGRANT BENEFITS Rep. Clay Shaw (Fla.), Chair of the House Ways and Means Subcommittee with jurisdiction over welfare benefits to legal immigrants, unveiled an alternative plan this week to the agreed on provisions in the budget deal restoring Supplemental Security Income (SSI) payments to some legal immigrants while changing eligibility provisions. The White House, as well as House Democrats, have expressed concern that the alternative plan violates the budget agreement and puts the deal in jeopardy. Under the budget resolution agreed to by the White House and Congressional negotiators, legal immigrants living in the United States as of August 22, 1996, who were either disabled at that time, or become disabled in the future, would remain eligible to receive SSI payments. Immigrants, however, who were receiving SSI solely by virtue of age and poverty level would be ineligible to receive benefits. Under Shaw's alternative, legal immigrants receiving SSI as of August 22 could continue to receive those benefits, regardless of any disability. However, those immigrants whose sponsors's income exceeded 150% of the poverty level (about $25,000 annually for a family of four) would be dropped from the rolls. Moreover, other legal immigrants in the United States as of August 22 would not be eligible in the future to receive any benefits, whether based on disability, age, or both. The Shaw proposal would rectify a problem spotted by Sen. Dianne Feinstein (see Bulletin Vol 4., No. 18), whereby many elderly legal immigrants currently receiving SSI would be cut off the rolls for months while they proved they were also disabled, but his proposal would deny future benefits to any legal immigrant not now receiving them, who was in the U.S. on August 22, 1996, or who entered the U.S. after that date and subsequently became disabled. The bill also extends from five years to seven the length of time that refugees in the U.S. can receive benefits to help them adjust, and loosens provisions requiring that the minimum wage be paid to welfare recipients in workfare programs. The Human Resources Subcommittee was expected to complete mark-up of the Shaw proposal this (Thursday) evening. WHILE SIZEABLE, CALIFORNIA'S SHARE OF PROPOSED $3 BILLION TANF BLOCK GRANT WOULD BE 20% LESS THAN THE STATE'S SHARE OF WELFARE RECIPIENTS A new welfare-to-work block grant, created in the FY98 budget agreement and passed by a Ways & Means subcommittee this evening, would actually shortchange California, despite the fact that nearly 17% of its funds are slated to come to the state. The funds are meant to help transition welfare recipients into private and public sector employment. The budget agreement includes $3 billion in supplemental TANF funds over the next four years for welfare-to-work activities. (TANF, or Temporary Assistance to Needy Families, replaces Aid to Families with Dependent Children as the primary source of federal welfare funds.) On Thursday, the Human Resources Subcommittee of the House Ways and Means Committee adopted a proposal to allocate the money by giving out half of the funds through competitive grants to cities and counties, and then giving the remaining half to the states through a formula based one-third on the number of adult TANF recipients, one-third on the number of unemployed individuals, and one-third on the number of persons below the poverty level. While California would receive 16.78% (about $251.7 million) of the supplemental funding, this level is well short of our share -- more than 22% -- of all TANF recipients in the nation. As a result, California would receive barely $100 per TANF recipient under the formula, compared to an average of $143 per TANF recipient for all other states. California would fare better under a formula based either on the current TANF funding levels or on the number of TANF recipients in each state, rather than the proposed " - - " approach. The state does the worst if funds are allocated based on the number of poor persons in each state, because although California has 22% of all TANF recipients, it has less than 14% of the nation's poor. In March, California housed 15.4% of the nation's unemployed. Because the program is intended to aid welfare recipients, the actual TANF rolls would be an appropriate factor. Poverty data is less reliable both because the data are usually several years old and because TANF recipients tend to be younger (only 11% are over the age of 40) and poverty data tend to include large numbers of older persons. The full Ways and Means Committee may markup the proposal as soon as next Tuesday. The Education and the Workforce Committee (which also has jurisdiction) will begin considering the provision next week in the Subcommittee on Postsecondary Education, Training and Lifelong Learning chaired by Rep. Buck McKeon (Santa Clarita). The L.A. County Department of Community and Senior Services has prepared information detailing some of the California implications, including a state-by-state factor breakdown. For further information, contact the Institute at 202-546-3700. NEARLY UNANIMOUS CALIFORNIA DELEGATION SEEKS DSH PROGRAM EQUITY Last week, 47 members of the California Congressional delegation wrote to the chairs of the House Commerce Committee and of its Subcommittee on Health and the Environment urging equity in handling any cuts in Medicaid's Disproportionate Share Program (DSH). The bulk of the balanced budget agreement's reductions in Medicaid are slated to come from DSH. The letter, led by Reps. Brian Bilbray, Anna Eshoo, Jerry Lewis and Lucille Roybal-Allard, states that "any policy that reduces federal DSH payments must be designed so that a state like California which has fully directed its DSH program to hospitals with high proportions of Medicaid and uninsured patients does not race a debilitating reduction in funds." California has been one of the only states which has "played by the rules" and has targeted DSH funds to hospitals which truly serve a disproportionately high share of indigent and uninsured patients. Some other states in contrast have provided DSH payments to less deserving hospitals, thus undermining confidence in the overall program. Some have suggested that all of the Medicaid savings assumed by the budget agreement could be achieved by requiring other states to target funds in the way that California already does -- as was originally intended when the program was created. SUPPLEMENTAL CONFEREES RETAIN PROHIBITION ON CENSUS SAMPLING House and Senate conferees on Wednesday voted to retain a provision in the disaster relief supplemental to ban all current and future use of sampling methods in conducting the census. On a 13-15 vote, conferees narrowly rejected an amendment by Sen. Ernest Hollings (South Carolina) which would have instead substituted Senate-passed language to allow the Census Bureau to move ahead with consideration of sampling plans so long as no decisions were "irreversible." Sampling techniques are used to determine the severity of undercounting. In the 1990 census, California was undercounted by 2.73% or 834,000 persons. California's undercount was considerably higher than the national rate of 1.6%. Because of this differential of rates, California has received less that it should have from a wide range of federal formula grant programs throughout the 1990s. While precise figures are difficult to pinpoint, undercounting will likely have cost California a total of several hundred million dollars in foregone receipts by the end of this decade. One estimating technique suggests that California is losing $40 million per year due to undercounting. Early this decade, the Census Bureau itself attempted to adjust the 1990 figures to correct its errors but then-Commerce Secretary Robert Mosbacher rejected its request; legal appeals up through the U.S. Supreme Court affirmed the Administration's broad discretion regarding the census and denied appellants' request to require statistical adjustment for purposes of funds allocation. The sampling ban in the supplemental appropriations conference report -- which was approved Thursday by the House (220-201) and Senate (67-31) -- states that "no sampling or any other statistical procedure, including any statistical adjustment, may be used in any determination of population for purposes of the apportionment of representatives in congress or among the several States." It further prohibits the use of any funds "in this or any other Act" for such purposes. The sampling ban is one of two provisions in the supplemental spending bill likely to draw a presidential veto. In that event, Congress may reconsider the sampling matter when it passes a new bill. Census Bureau Director Martha Farnsworth Ritchie will hold a briefing at the Department of Commerce, room 4848, at 10:00 a.m. on Friday, June 6 to discuss the effect of limiting sampling. Call Phil Sparks at 202-457-2158 for more information. INSTITUTE TO CO-SPONSOR ENCRYPTION DEMONSTRATION AND BRIEFING WITH REP. ZOE LOFGREN On Tuesday, June 10, Rep. Zoe Lofgren (San Jose) and the California Institute will present a demonstration and briefing on encryption on the Internet. The event will take place in Room 2172 Rayburn House Office Building at 4:30 p.m. on Tuesday. Members, congressional staff, the press, Institute colleagues and the public are invited to attend. John Gage, Chief Scientist of Sun Microsystems, will demonstrate the use of encryption on the Internet to protect privacy and commercial transactions. Sun is a Silicon Valley- based computer company with revenues of close to $9 billion per year. Greg Garcia, Vice President for International Trade, American Electronics Association (AEA), will give a short briefing on the importance of encryption to the future of high technology communications and the importance of expanded encryption sales and exports to California's high technology industry. AEA has over 3,000 company members nationwide, of which over one-half are located in California. Congress is currently debating whether to loosen controls on the export of encryption software and programs. This demonstration and briefing should provide valuable information and insight to the delegation as it considers this important issue. SENATOR BOXER ADDRESSES INSTITUTE ADVISORY BOARD Senator Barbara Boxer spoke at a luncheon meeting of the Institute's Advisory Board members on Wednesday. The Institute wishes to thank IBM for hosting the luncheon. Senator Boxer focused her remarks on a number of issues related to California and the "new economy." The Senator emphasized the importance of technology industries, both to California and the nation as a whole. Last year, for instance, half of the more than 300,000 new California jobs were created in the high tech industry. Boxer noted that despite the economic success which has accompanied technological advancement, current laws and governmental practices have seriously interfered with increased economic growth. For instance, she said, although laws limiting the export of encryption technology once addressed crucial national security concerns, rapid technological change and widespread international availability of such products have rendered the statutes outdated and have undercut the ability of domestic producers to compete in the international marketplace. A related issue is the annual loss of $11 billion in revenue (mostly from Mexico and China) as a result of copyright infringement and the failure of foreign governments to insure intellectual property protection rights. Boxer briefly discussed her support of the budget deal. Specifically, she argued that a balanced budget like the one adopted will be good for the "new economy." She expressed concern, however, over the funding levels for the National Institutes of Health and felt that that total should be at least doubled. Regarding the supplemental appropriations bill, the Senator voiced concern that recent add-ons to the bill (such as a prohibition on census sampling and an automatic budget extension) will jeopardize disaster relief funding. California is expected to receive around $2 billion of the $5.4 billion allocation. In responding to questions from Advisory Board members, Senator Boxer also discussed the future of the Bay Delta agreement and the possibility that this year's $143 million federal payment may run into difficulty in the Senate. She also shared the concern of members representing California businesses over a recent proposal by Senators McCain and Levin to tax the stock options given to employees. This form of compensation is widely utilized in California's high technology industry. Responding to a question, Boxer expressed doubt about the likelihood of Superfund reauthorization this year. The Senator also responded to a question on her long-term priorities by emphasizing the need to improve America's education system to ensure a properly prepared workforce for the jobs of the future. PRESIDENT FORMALLY RENEWS CHINA'S MOST-FAVORED-NATION STATUS As expected, President Clinton sent Congress official notification that the Administration is renewing China's Most-Favored-Nation trade status. Such status grants China the same preferential tariff treatment that the U.S. extends to its other trading allies. The debate in Congress over whether to approve the President's extension, however, is expected to be more heated than last year. See Bulletin Vol. 4, No. 18. Under expedited procedures, Congress now has until August 31 to pass legislation denying the preferential status. If it does vote to deny China MFN status, the legislation will be subject to a presidential veto and, thus, a two-thirds vote to override. CALIFORNIA RECEIVES COMMUNITY POLICING GRANTS The Department of Justice awarded federal funding nationally this week for two programs aimed at helping localities combat crime. Under the COPS Regional Community Policing Institutes program, California will receive $3 million out of the total of $33 million awarded nationwide. The Los Angeles County Sheriff's Department, the Sacramento Police Department, and the San Diego Police Department will each receive $1 million of the award. The money will be used for community violence prevention programs, neighborhood revitalization programs, and community problem solving programs. DOJ also distributed $77 million in grants under the COPS More '96 program, of which California will receive $9.76 million. This program will allow 80 jurisdictions in California to hire civilian personnel or buy more efficient equipment to free up their police officers and allow them to spend more time on the streets. Although California received about 10% of the total funds allotted, that is still less than its percentage of the U.S. population, which is about 12%. Regarding the grants to the state, Sen. Barbara Boxer stated that "Community policing programs are big successes in California because they work to actually prevent conflict and crime." COX BILL WOULD PROHIBIT TAXATION OF INTERNET COMMERCE The Senate Commerce Committee held a hearing recently on H.R. 1054, a bill introduced by Rep. Chris Cox (Newport Beach) that would place a moratorium on Internet taxes. The committee also addressed the Senate companion bill, S. 442, introduced by Rep. Ron Wyden (Ore.). Commerce conducted over the Internet, such as sales of software, online newspapers, and database services, generated $500 million in total receipts in 1995, and $1.1 billion in 1996. According to the Commerce Department, within five years, revenues generated by the Internet and related purchases could total at least $70 billion. These numbers have led some state and local governments to begin imposing new Internet taxes, and makes the Net vulnerable to multiple taxation from thousands of potential taxing authorities. Rep. Cox's bill will prohibit state and local governments from imposing taxes on Internet access and online service, and requires the Administration to study international taxation of Internet commerce and make recommendations to Congress. During the hearing, Assistant Secretary of the Treasury Larry Summers endorsed the bill for the Clinton Administration, and Commerce Committee Chairman John McCain (Ariz.) stated that he intended to mark the bill up in early June and send it to the Senate floor. A bipartisan group of 23 Californians has co-sponsored Rep. Cox's bill, and Governor Pete Wilson has also endorsed it. On the opposing side are several major public sector organizations, including the National Governors' Association, the National League of Cities, and the National Association of Counties. These and several other groups recently wrote to Vice President Al Gore stating that the bill would be "a significant infringement on state and local sovereignty." Gore will meet with representatives of these groups on Friday, June 6. CALIFORNIANS PROPOSE ESHOO-BARTON FDA MEDICAL DEVICE REFORM BILL On May 22, Reps. Joe Barton (Texas) and Anna Eshoo (Atherton) introduced a bipartisan bill to reform the Food & Drug Administration's handling of medical device matters. Original cosponsors include several of California's House Commerce Committee members, including Christopher Cox, Brian Bilbray, and James Rogan. The bill, the Medical Device Regulatory Modernization Act (H.R. 1710), would clarify FDA's mission to encourage innovation and availability of devices, update procedures, broaden use of performance standards, and sanction independent review. For further information, contact Rep. Eshoo's office at 202-225-8104 or the California Health Care Institute at 619-551-6677. ELECTRIC UTILITY DEREGULATION HOLDS CONGRESSIONAL ATTENTION This week House and Senate Committees directed their attention toward the issue of electric utility restructuring. California has an especially significant stake in Congressional consideration of electric utility deregulation. Last year, following months of careful and intensive deliberation by a broad-based coalition of stakeholders, Governor Wilson signed a state law that provides for the nation's first fully competitive electric utility system. Not surprisingly, California's congressional delegation is seriously troubled by any federal action that could jeopardize the state's carefully crafted electric utility deregulation plan. To that end, this spring all 52 Members of the California House delegation signed a letter urging House Commerce Committee Chairman Tom Bliley to respect "that the decisions made in California on utility restructuring and competition are the right ones for our state, and must have the opportunity to be fully implemented." On Thursday, the Senate Banking, Housing and Urban Affairs Committee approved, by voice vote, a measure to repeal the Public Utilities Holding Company Act of 1935 (PUHCA). The Act limits control over the electric utility industry by interstate companies, and it is one of the few remaining statutory roadblocks to deregulation of the industry. Despite the unanimous committee vote, the bill is expected to encounter difficulty on the floor from Senators opposing incremental deregulation of the power industry, favoring instead a comprehensive reform proposal. The House Judiciary Committee held a hearing Wednesday to examine the antitrust implications of deregulating the electric utility industry. Among those appearing before the committee were Robert Pitofsky, Chairman of the Federal Trade Commission. Pitofsky acknowledged that developments in electric power technology have made the current regulation of the industry "outmoded" and have resulted in reduced regulation and increased competition at the state level. The Chairman also told the committee that, in deregulating the electric utility industry, it should expect the same benefits and problems encountered during deregulation of the long distance telephone, airlines, trucking and railroad industries. Specifically, any consumer benefits achieved in electric utility deregulation "may be jeopardized without vigorous enforcement during and after deregulation. The antitrust agencies must ensure that public regulation is replaced by private competition, not private collusion or dominant firm behavior." The Chairman also noted that existing antitrust laws are applicable to all deregulated industries, including electric utilities, and that adequate antitrust protection could be achieved through existing statutes. DEFENSE PANEL OMITS BASE CLOSINGS IN ITS FY98 MARKUP On Wednesday, the House National Security's subcommittee on Military Installations and Facilities marked up its portion of the defense authorization bill on Wednesday, proposing to increase the President's request for military construction by three-quarters of a billion dollars, to $9.1 billion. The markup was also notable for what it did not do. The panel remained silent on the Administration proposal to close more military facilities by employing one or two more base closure rounds. The Pentagon is hoping to use revenues projected from base closings to modernize weapons systems, but many in Congress are reluctant to engage in yet another painful set of base cuts. California was excessively downsized in the first four closure rounds, shouldering 60% of the nation's net personnel reductions, despite having only 15% of domestic personnel. MEXICAN GOVERNMENT OUTLINES ECONOMIC REVITALIZATION PLAN Earlier this week, Mexican President Ernesto Zedillo announced a new economic plan designed to revitalize Mexico's economy and create new jobs for citizens slowly rebounding from the crash of the peso just two years ago. Presented jointly with Finance Minister Guillermo Ortiz, Zedillo's plan endeavors to achieve average economic growth of 5% over the next several years while reducing inflation to 7.5% by the year 2000. The President has also predicted that, by the year 2000, the plan will result in private savings rising to 18% and investment increasing to 25% of the gross domestic product. The announcement comes just one month before Congressional elections in which the President's PRI party is expected to lose its majority to the more conservative National Action Party. For a California perspective on the economic, political and social circumstances in Mexico, the California Research Bureau has recently published a report entitled "The Many Faces of Mexico." For a copy of the report, contact the CRB at 916-653-7843. OFFICIALS ATTEND NIF GROUNDBREAKING CEREMONY On May 29, Lawrence Livermore National Laboratory hosted a groundbreaking ceremony for the National Ignition Facility, an ultra-high powered laser optics facility which will be a centerpiece of the nation's stockpile stewardship program, which manages the safety, reliability and performance of the U.S. nuclear weapons stockpile in a test ban environment. Among those speaking at the ceremony were Energy Secretary Federico Pena, Assistant Secretary of Defense Harold P. Smith Jr., Rep. Ellen Tauscher (Pleasanton), and U.C. President Richard Atkinson. ---------------------- 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.