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 21 -- June 19, 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. BAY-DELTA LETTER CIRCULATING FOR DELEGATION SIGNATURES Reps. Jerry Lewis, Lucille Roybal-Allard, Cal Dooley, and George Radanovich are seeking signatures from their California colleagues for a letter supporting federal funding for the CALFED Bay-Delta restoration project. The letter will be sent to Rep. Joe McDade (PA), Chairman of the House Appropriations Subcommittee on Energy and Water Development. It urges him to make federal funding for the Bay-Delta project a top priority within the Energy and Water Appropriations bill. The President's budget requested the first installment of $143 million in federal funding for the Bay-Delta. Congress authorized a total of $429 million in federal funding during the 104th Congress. This will be supplemented by a nearly $1 billion bond issue passed by California voters last November. The CALFED Bay-Delta Program is a cooperative effort involving representatives of Federal and state agencies, and agricultural, urban, and environmental interests. They are working together to develop a long-term plan to restore the ecological health of the Bay-Delta system while improving the management of water for beneficial uses. There is concern that because of the necessary budget cuts to implement the negotiated budget deal, federal funding for the Bay-Delta project may be in jeopardy. In related news, the Senate Appropriations Committee unanimously approved its 602(b) allocation scheme on Thursday, allocating $21.2 billion for Energy & Water programs. This level is $1.2 billion (more than 5%) higher than the House Committeešs allocation. Members wishing to sign the letter should contact Jeff Shockey or Dave LesStrang with Rep. Lewis' staff at x5-5861 or Sherry Greenberg with Rep. Roybal-Allardšs staff at x5-1766. WAYS AND MEANS BACKS EXTENSION OF CHINA-MFN STATUS The House Ways and Means Committee showed strong backing yesterday for President Clinton's decision to extend Most Favored Nation status to China for another year. Under the privileged procedures that govern congressional consideration of the issue, the Committee voted 34-5 to adversely report H.J.Res. 79, which calls for disapproval of the MFN extension. The measure will still be considered by the full House, but the Committee's action indicates its strong recommendation that the resolution of disapproval be defeated. Opponents of extending MFN have argued that the U.S. can no longer sanction China's continued disregard for human rights, arms proliferation, and intellectual property protection for U.S. products. Advocates, on the other hand, insist that the only way to get China to respond to U.S. demands is to continue to trade with the country, and use that leverage to bring about democratic changes. In 1995, California exported about $1.35 billion in goods to China. Action on H.J.Res. 79 by the full House may come as early as next week. SENATE FINANCE COMMITTEE PASSES WELFARE-TO-WORK GRANT PLAN On Wednesday, the Senate Finance Committee passed its version of a new $3 billion grant program meant to help long-term welfare recipients to transition into the workforce. The Finance Committee bill would allocate a smaller share of formula dollars to California than either of the versions passed by House committees in the previous week. The Senate Finance Committeešs bill would allocate 16.46% of formula funds to California. The plan is similar to a House Ways & Means Committee bill which allocated 17.0% of funds to California -- the difference resulting from a 0.5% small-state minimum in the Senate bill. The version passed by the House Education and the Workforce Committee would produce the largest share for California, 17.8%. None of these three plans provide California with a share equal to its proportion of the nationšs welfare recipients -- the state is home to 22% of current TANF recipients. The House Ways & Means version would raise the maintenance of effort (MOE) requirement from 75% to 80% -- a change which may prove difficult for California. (In the past, California did not use all of its annual JOBS program allotments because of an inability to produce matching funds.) The House Education & the Workforce version and the Senate Finance version would not change the current 75% MOE. All three versions would impose a 33% state matching requirement. All three versions also would allocate some funds via formula and some via competitive grant. (California would likely receive more funds in a formula scheme.) The amount allocated by formula differs among the three versions -- the Education & the Workforce plan would distribute more than 90% via formula, Senate Finance distributes 70%, and the Ways & Means plan just 50% by formula. SENATE COMMITTEE MARKS UP FDA REFORM BILL On Wednesday, the Senate Labor and Human Resources Committee favorably reported by voice vote S. 830, the Food and Drug Administration Modernization and Accountability Act of 1997, after replacing it with a substitute amendment offered by Rep. James Jeffords (VT), the Chair of the Committee. The Jeffords Amendment was adopted by a vote of 14-4. Among other changes to the FDA process, the bill would allow the use of third-party private reviewers to assist in the process of approving new drugs and medical devices for sale, but excludes devices that are life-supporting, life-sustaining, or implantable. An amendment offered by Rep. Tom Harkin (IA) which would have permitted the Secretary of Health and Human Services to review the contracts between manufacturers and third party reviewers to ensure that no conflict of interest existed was defeated 8-10. The Committee also defeated an amendment, 5-13, that would have deleted a provision in the bill which will allow food labels to contain health claims that have been verified by any U.S. government scientific body, not just by the FDA. The bill also reauthorizes for five years the Prescription Drug User Fee Act (PDUFA), which requires prescription drug manufacturers to help pay for the costs of federal safety and efficacy reviews. The fees collected under PDUFA have allowed the FDA to hire about 600 additional staffers to speed up the review process. PDUFA is set to expire on September 30. Biotechnology companies in California strongly support speeding up and streamlining the FDA approval process for drugs and medical devices. COMMERCE COMMITTEE PLAN WOULD LESSEN STATEšS DSH REDUCTION The House Commerce Committeešs revisions to Medicaid as part of the FY98 balanced budget agreement would save more than $15 billion by limiting disproportionate share hospital (DSH) payments -- funds intended to reimburse hospitals serving an unusually large share of poor and uninsured patients. California would shoulder more than $500 million over five years, a significant figure but one well below the $1.6 billion estimated to be the statešs share of cuts assumed by the Administrationšs FY98 budget proposal earlier this year. The Committee proposal reduces DSH payments below FY1995 levels for most states (including California) by 1% in FY1998, 2.5% in FY1999, 10% in FY2000, 15% in FY2001, and 20% in FY2002. Five states with very high DSH payment percentages would be reduced by double those rates, while four states with very low DSH percentages would not be reduced. Californiašs perspective on the DSH program is somewhat unique. California has been one of the only states which has followed the original intent of the law and has targeted DSH funds to hospitals which truly serve a disproportionately high share of indigent and uninsured patients. Some other states in contrast provide DSH payments to less deserving hospitals. There have been suggestions that all of the Medicaid savings assumed by the budget agreement could be achieved simply by requiring other states to target funds in the way that California already does. A recent letter from 47 California Congressional delegation members requested that ŗany 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 face a debilitating reduction in funds.˛ The Senate Finance Committee marked up its version of the bill on Wednesday, but DSH change details have been difficult to obtain. One early summary of the Senate Chairmanšs Mark proposed reducing DSH by 4% per year for 5 years, and also suggested the drafting of a new formula which would ŗhave one threshold for all hospitals.˛ At this writing, it was unclear whether these provisions remained in the final bill. Another source reported the reductions were more similar to the House version. Several efforts on both the House and Senate sides to better target DSH funds have been rejected or withdrawn, due to opposition from other states which are less efficient with their funding. Californiašs members of the Commerce Committee (Reps. Bilbray, Cox, Eshoo, Rogan, and Waxman) have worked together in a bipartisan fashion in pursuit of the statešs interests. A key future issue will be California representation on the conference committee. BILBRAY AMENDMENT WOULD REIMBURSE STATES FOR SOME COSTS OF PROVIDING EMERGENCY MEDICAL SERVICES TO ILLEGAL IMMIGRANTS During the House Commerce Committee's markup of its reconciliation bill dealing with Medicaid, Rep. Brian Bilbray (Imperial Beach) was successful in adding an amendment to provide $100 million over five years to partially reimburse the hardest hit states for the costs of providing emergency medical services to undocumented immigrants. The amendment was adopted by a vote of 27-18. Although illegal immigrants are ineligible for most welfare programs, Congress in 1986 provided that they are eligible for emergency medical services, including childbirth, under Medicaid. The federal government and the state each pay 50% of the cost of these benefits. The Governor's budget estimates that California's share of these costs will be approximately $398 million in Fiscal Year 1997-98. The federal government has never reimbursed the states for their share of the costs of providing these benefits. However, the Fiscal Year 1996 budget which was vetoed by the President in late 1995 contained a 5-year $3.5 billion block grant under the Medicaid proposals to reimburse states for these costs. Subsequently, in the 1996 immigration reform bill, Congress authorized reimbursement to the states for emergency medical services for undocumented immigrants, but no money was appropriated. The $20 million funded annually under the Bilbray amendment will be allocated to the twelve states with the highest number of undocumented aliens. California is home to 40-45% of such persons. HOUSE AND SENATE DEFENSE REAUTHORIZATION BILLS MOVE TO FLOOR; MCCLELLAN PRIVATIZATION PROVISION PULLED FROM SENATE VERSION This week, both the House and Senate FY98 Defense Authorization bills moved to their respective floors where prolonged consideration is expected. As reported last week, the House National Security Committee authorized spending of $268.2 billion for defense programs, about $2.6 billion over the Presidentšs initial request and the maximum spending allowed by the budget resolution. Among the panel's procurement decisions was a $23.1 billion increase in funding for the Joint Strike Fighter Program. The Committee also decided to revitalize the B-2 bomber program with a $331.2 million increase over the Presidentšs request. Also of special importance to California was the panel's decision to retain subcommittee language designed to force closure of two large Air Force depots at McClellan Air Force Base (Sacramento) and Kelly Air Force Base (Texas) and to prohibit the privatization of work performed by the depots. Meanwhile, the Senate Armed Services Committee continued to meet last week in a closed markup session on their $268 billion FY98 Defense Authorization bill. Unlike the Housešs decision to more than double funding to reestablish elements of the Northrop Grumman B-2 production line that have been shut down, the Senate panel included a provision to end B-2 production, providing an increase of just $21.8 million to be used only for B-2 modifications and improvements. The Senate panel joined its House counterpart in passing provisions that would effectively kill the public-private competitions for depot work at Kelly and McClellan Air Force Bases and would instead divert the work now performed at the bases to military depots in other states that will remain open. Specifically, the reauthorization packages approved by the Committees prohibited work which is now performed at depots scheduled to close by the 1995 Base Realignment and Closure (BRAC) Commission from being transitioned to the private sector unless the remaining public depots are operating at well above their current capacity. (Scuttling privatization of depot functions could cost as many as 2,200 McClellan jobs in the Sacramento area which could otherwise have been transferred to private industry.) However, as the defense package moved to the Senate floor this week, the anti-privatization language met with strong opposition from members of the California and Texas Senate delegations, some of whom traveled to the White House and elicited a presidential veto threat from Vice President Gore. The bipartisan Senate group, including Senators Dianne Feinstein and Barbara Boxer, responded to the anti-privatization provision Wednesday with a parliamentary maneuver blocking consideration of the bill. The move also prompted a Sacramento delegation of county officials and business leaders to make a lobbying trip to Washington this week. Following drawn out closed-door negotiations, the provision was dropped from the legislation clearing the way for floor consideration of the bill late Thursday afternoon. Critics of the privatization plan are expected to reintroduce the provision in an Senate floor amendment. Meanwhile, the House Floor consideration of the FY98 Defense Authorization was also delayed by procedural disputes. Democrats sharply criticized several features of the proposed rule controlling debate on the bill. In response to mounting controversy, the Rules Committee Chairman Gerald Solomon (NY) suggested an amendment to the rule, later adopted, to allow consideration of two Democratic amendments. One amendment, by Rep. Ronald Dellums (Oakland), would move funds allocated to the B-2 program into the account for the National Guard. The other, authored by Rep. Barney Frank (MA), would freeze defense spending to current year levels. During Thursday eveningšs floor consideration, the House adopted an amendment (by a 332-88 vote) to require prior federal approval for export of supercomputing equipment to countries developing nuclear weapons. Debate will continue Friday. In related news on Thursday, the Senate Appropriations Committee agreed, on a 27-0 vote, on its ŗ602(b) allocations˛ for FY98. The Defense Appropriations subcommittee would receive $246.8 billion, about $1.3 billion less that the House allocations would provide. The situation was roughly reversed for the Senatešs Energy & Water Development Subcommittee, which would receive $21.2 billion, or $1.2 billion more than its counterpart in the House. SENATE FINANCE RESTORES SOME SSI PAYMENTS FOR LEGAL IMMIGRANTS During the markup of its reconciliation bill to comply with the budget agreement, the Senate Finance Committee this week moved to restore $9.7 billion over 5 years in Supplemental Security Income payments to legal immigrants. The Finance Committee measure will allow all legal immigrants on SSI as of August 26, 1996, whether disabled or not, to continue to receive benefits. Additionally, legal immigrants in the U.S. as of August who became disabled after that date would be eligible for SSI disability payments if they apply before September 30, 1997. This provision differs somewhat from the House Ways and Means provision agreed to last week, and to that in the budget deal agreed to by the White House and congressional leadership (See Bulletin Vol. 4, No. 20). The House version provides about $9 billion so that both elderly and disabled legal immigrants residing in the U.S. and on SSI as of August 22, 1996 will retain eligibility for continued benefits, but, unlike the Senate bill it provides no window for immigrants who became disabled after August to get benefits. The FY98 budget agreement would sanction the cutoff of benefits to elderly, non-disabled immigrants already receiving SSI, but allow for immigrants in the U.S. as of August 22, 1996, whether or not disabled, to be eligible for benefits in the future if they become disabled. On a related note, in a June 16th letter, California State Senate President Pro Tempore Bill Lockyer and State Assembly Speaker Cruz Bustamante urged the members of the Finance Committee to include the "Becerra Amendment" in the bill to permit restoration of SSI to both disabled and elderly legal immigrants. The amendment, offered by Rep. Xavier Becerra (Los Angeles), would have added to the House provision by extending benefits to those legal immigrants in the U.S. as of last August, and who become disabled in the future. His amendment was defeated during the Ways and Means markup. The two leaders argued in the letter that eliminating SSI to any group of legal immigrants would constitute an unfunded mandate on California and jeopardize many elderly and disabled legal immigrants in California if the amendment is not adopted. SENATE COMMERCE PASSES ENCRYPTION BILL OPPOSED BY TECH INDUSTRY On Thursday, the Senate Commerce Committee approved S. 909, sponsored by Sens. John McCain (AZ) and Bob Kerry (MA), which allows limited expansion of exports of products which employ encryption technology. The technology community instead supports alternative legislation, sponsored by Sen. Conrad Burns (MT), which was rejected on an 8-12 vote. The House Judiciary Committee has passed encryption export legislation more similar to the Burns bill which is supported by Californiašs large high technology industry, and the House International Relations Committee is still preparing its bill. POPULATION RESOURCE CENTER HOLDS IMMIGRATION BRIEFING On Thursday, June 19, the Population Resource Center held another in its series of briefings on immigration issues. Dr. James P. Smith, the RAND Chair in Labor Markets and Demographic Studies, discussed the recently released report by the National Research Council entitled The New Americans: Economic, Demographic, and Fiscal Effects of Immigrants. Discussing immigrants and welfare reform from a California perspective was Margaret OšBrien-Strain, a Research Fellow with the Public Policy Institute of California. Finally, Ann Morse, Manager of the Immigrant Project for the National Conference of State Legislatures, briefed the audience on the progress made to date by the states in implementing welfare reform legislation. The New Americans study, which Dr. Smith chaired, focused on three issues: the size and compilation of the present and future U.S. population; the impact of immigrants on the U.S. economy; and the impacts that immigrants have on the native born U.S. population. Under the first issue, the study found that in 1995, 25% of the American population was foreign born, compared to 10% in 1970. However, to show the cyclical nature of immigration, Dr. Smith also pointed out that in 1900, 25% of the U.S. population was foreign born. Regarding the impact on the U.S. economy, the study found that overall immigrants add to the U.S. economy a net gain of about $10 billion annually to the $7 trillion national economy. Thus, although there is a net gain from immigration it is not large enough to become the driving force for the argument that immigration per se will expand the nation's economy; neither, however, can the argument that immigration is bad for the economy be supported. Finally, on the impact of immigration on native born Americans, The New Americans found that although immigrants are a net gain to the U.S., there are segments that are winners and losers. For instance, there are pockets throughout the country where some job displacement of other racial and ethnic groups occur, but overall immigrants do not displace workers based on ethnicity, but rather on education. New immigrants displace highschool dropout workers. Second, there are significant variations in the fiscal and social impact of immigration on particular states and localities. For instance, the study concluded that while California had a net fiscal burden per household of $1,178 as a result of immigration, New Jersey had only a net fiscal burden of $232. Ms. O'Brien of the Public Policy Institute of California discussed her ongoing study of the amount of income immigrant families in California will lose if they are denied SSI and food stamp benefits and, if eligibility is restored, what share of the benefits will go to immigrant families living in poverty. Her preliminary results show that on average, immigrant food stamp recipients will lose $1,295 to $1,717 per year in income if food stamps are denied. SSI recipients stand to lose a much greater share of their income: on average, $5,100 to $5,600 annually. If food stamps are restored, according to Ms. O'Brien's data, more than $3 of every $4 would go to families in poverty, and if SSI is restored $2 of every $3 will go to families living in poverty. Ms. Morse briefed the audience on the progress states are making implementing welfare reform legislation passed by Congress last year. Regarding the law's option for states to deny Temporary Assistance for Needy Families (TANF) benefits to legal aliens, only Alabama has indicated that it will deny all TANF coverage to immigrants. Additionally, most states appear to be pursuing alternatives to continue some type of Supplemental Security Income benefit to elderly and/or disabled legal immigrants, whether it be through expansion of existing state programs, or development of new ones. For copies of the handouts from the briefing, contact the Population Resource Center at 202- 467-5030. Also, a summary of the New Americans report can be found at the National Resource Council website: http://www.nap.edu/readingroom/. STATE ASSEMBLY REPUBLICANS SELECT NEW LEADER On Tuesday, California State Assembly Republicans unanimously selected veteran legislator Bill Leonard (Upland) as the successor to former Speaker Curt Pringle (Garden Grove) who will voluntarily step down from the post following the conclusion of the current state budget negotiations. Leonard, who has served nearly twenty years in the Legislature -- first in the Assembly then more recently in the Senate -- took the unconventional step last year of moving from the higher house to the lower house in an effort to maximize his length of tenure in the new era of legislative term limits. Technically a freshman, the selection of Leonard potentially provides the Assembly Republicans with stable leadership for the next five years. ASSEMBLYMAN LOUIS CALDERA SELECTED TO DIRECT AMERICORPS PROGRAMS Assemblyman Louis Caldera (Los Angeles) confirmed Wednesday that he will resign his Assembly seat by the end of the year to take a Clinton Administration position as the managing director of the Corporation for National and Community Service. Caldera, who still must be confirmed by the U.S. Senate, will become the number two ranking official in the agency that administers the national service initiatives such as the National Senior Service Corporation, Learn & Serve America, and the 30,000-participant Americorps volunteer program. Depending on how quickly the Senate moves on Caldera's confirmation, Caldera could vacate his Assembly seat as early as late summer.