The California Institute For Federal Policy Research California Capitol Hill Bulletin Volume 4, Bulletin 24 -- July, 10, 1997 http://www.calinst.org/ CALIFORNIA CONGRESSIONAL DELEGATION SUCCEEDS IN BOOSTING FUNDING FOR ILLEGAL ALIEN INCARCERATION COSTS Last week, the entire 52-member California congressional delegation wrote to Subcommittee Chairman Hal Rogers (KY) urging him to fund the State Criminal Alien Assistance Program (SCAAP) at its full authorization level of $650 million. Thursday afternoon, the House Appropriations Subcommittee on Commerce, Justice, State, the Judiciary and Related Agencies marked up its FY98 appropriations bill and included $600 million to partially reimburse the states for the costs of incarcerating illegal alien criminals. This represents a $100 million increase over last year's appropriation and over the budget request for this year, and it can be credited as a significant victory for the bipartisan California congressional delegation. Of the $500 million Congress appropriated last year to help reimburse states for the costs of incarcerating illegal criminal aliens, California and its local governments received about $270 million, or 54 percent If that percentage holds, and the $600 million funding stays in the bill as enacted, California would stand to receive about $324 million. The state estimates that it will cost about $452 million in the coming year to incarcerate illegal criminal aliens. SENATE APPROPRIATIONS SUBCOMMITTEE CUTS BAY-DELTA FUNDING On July 8, the Senate Energy and Water Appropriations Subcommittee reported out its FY98 Appropriations bill with only $50 million in funding for the San Francisco-Bay Delta restoration project. Under authorizing legislation passed last year, Congress authorized $429 million in federal funding for the project, to be paid out at $143 million per year for three years. The federal money would be matched by a nearly $1 billion bond issue passed by California voters last year. The CALFED Bay-Delta Program is a cooperative effort involving representatives of Federal and state agencies, and agricultural, urban, and environmental interests. The coalition has been working together to develop a long-term plan to restore the ecological health of the Bay-Delta estuary while improving the management of water for beneficial uses. The estuary is the largest on the West Coast and provides drinking water for more than 20 million people, is home to 53 distinct species of fish and migratory birds, and provides irrigation water for 200 crops, including 45 percent of the nation's produce. Sen. Pete Domenici (NM), chair of the Energy and Water Appropriations Subcommittee, stated during the markup that although the Bay-Delta program is significant, more information was needed on how the money would be spent before full funding could be provided. The Administration, through the Office of Management and Budget, immediately sent a letter to the full Committee objecting to various provisions contained in the bill, including the cut in Bay-Delta funding. Stating that the program is "central to resolving the water conflicts that have plagued the State for over thirty years," OMB urged the Committee to include the full $143 million funding. Nevertheless, the full Senate Appropriations Committee reported the bill out on Thursday without increasing funding. The House Energy and Water Development Appropriations Subcommittee is expected to mark up its appropriations on Friday, July 11, and the Bay-Delta funding is expected to be significantly higher than the Senate level. DELEGATION CIRCULATES LETTER TO ELIMINATE BOND CAP A substantial majority of the California Congressional delegation has already signed a letter which will be sent Friday to Ways & Means Chairman Bill Archer asking that the House accept the Senate's tax bill provisions relating to a $150 million bond cap on 501(c)(3) organizations. The letter is being circulated by Reps. Steve Horn (Long Beach) and Gary Condit (Ceres) in conjunction with California delegation chairs Jerry Lewis (Redlands) and Lucille Roybal-Allard (Los Angeles). The letter expresses concern "about the ability of the California State University (CSU) to respond to the future education needs of Californians." Under the 1986 tax reform act, Congress limited private nonprofit entities to using no more than $150 million in tax exempt bonds. Because the 23 CSU campuses have nonprofit auxiliary organizations which are needed to finance bookstores and residential living and dining facilities, the CSU system would unintentionally be caught under the $150 million limit systemwide. The Senate tax bill language, which is supported by the Administration, would eliminate the bond cap. Offices wishing to add their member's name to the letter should contact Dave Bartel with Rep. Horn (225-6676) or Joe Theissen with Rep. Condit (225-6131) as soon as possible. SENATE FOLLOWS HOUSE IN NOT ORDERING A FIFTH BASE CLOSURE ROUND, BUT DIFFERS BY NOT BANNING SUPERCOMPUTER EXPORTS During consideration of the DOD authorization bill (S. 936) on Wednesday night, the Senate rejected the Pentagon's request to order one or more rounds of military base closures. In doing so, it echoed the sentiments of the House which has also refused to order additional closings, despite the requests of the Joint Chiefs of Staff and Secretary Cohen. Instead, the Senate asked the Pentagon to assess the costs and benefits of prior closure rounds and to justify its request for further closings. Though the state housed only 15% of the nation's military personnel when the base closure process began nine years ago, California bore a disproportionate 60% of the nation's net cuts from the 1988, 1991, 1993 and 1995 base closure rounds. With California having been hit so hard by prior rounds, many observers consider it ironic that the Administration is being criticized for giving California special favors by seeking to privatize depot maintenance operations at Sacramento's McClellan Air Force Base, which would otherwise be slated for full closure. In another defense authorization issue, the Senate declined to require licenses for the export of supercomputing products, opting instead for a government study of the matter. In June, the House passed a defense bill restricting exports of computers capable of more than two billion operations per second. In defense funding action this week, the Senate Appropriations defense subcommittee approved a $247 billion DOD spending bill for FY98 which is generally similar to the authorizing legislation, but adds funds for two additional C-17s, and cuts funds for two Trident D-5 missiles. LOCKHEED MARTIN - NORTHROP GRUMMAN MERGER MAY FACE EUROPEAN OPPOSITION SIMILAR TO BOEING - MCDONNELL DOUGLAS COMPLAINTS The massive $11.2 billion merger proposal of Northrop Grumman and Lockheed Martin announced last week is expected by many to be approved by U.S. regulatory authorities but may face opposition internationally. European officials are already edgy after last week's FTC approval of the merger between Boeing and McDonnell Douglas, which consolidated 70% of the world's market share of large commercial airliners in one entity, leaving the four-nation Airbus Industrie consortium with the remaining 30%. The European Consortium, the 20-member governing authority for the European Union, has called the deal "anticompetitive" and may impose a $5 billion penalty unless it extracts "remedies." In particular the EU officials are concerned about Boeing's contract to be the exclusive supplier of jets to American, Delta and Continental. EU review of the Boeing merger is slated to culminate with a vote later this month. Similar concerns may be raised about the Lockheed Northrop consolidation in the defense sector. While the Consortium has made no formal comment regarding the defense merger, some analysts predict a similar reaction. Northrop Grumman Corp is based in Los Angeles and builds the B-2 stealth bomber and other products in California. After merging with Martin Marietta several years ago, Lockheed closed its Calabasas headquarters but has retained a large employee base in California. The merger would result in the closure of Northrop Grumman's headquarters operation in Century City but reportedly no other near-term reductions. Worldwide, Lockheed Martin employs 190,000 people and had $27 billion in 1996 sales, with the US government accounting for 70% of that amount. Northrop Grumman has 46,600 employees and had 1996 sales of $8 billion, 83% of which were with US government. Various consolidations in the defense sector have resulted from a 50% reduction in military procurement budgets over the past 10 years. Reps. Bernie Sanders (VT) and Chris Smith (NJ), who led last year's successful effort to limit defense contractors' recovery of merger-related costs, are expected to offer a House floor amendment to end restructuring costs deductions entirely when the FY98 defense appropriations bill moves to the House floor later this month. HOUSE APPROPRIATIONS APPROVES NADBANK FUNDING The House Appropriations Committee reported out the Foreign Operations Appropriations bill on Wednesday, which includes the full $56.5 million for the North American Development Bank. NADBank was created under NAFTA to finance environmental clean-up projects along the U.S.-Mexico border. Border clean-up projects in Southern California will be at least partially financed through the bank. Under the agreement between the U.S. and Mexico, Mexico matches the U.S. funding dollar-for-dollar. Rep. Esteban Torres (La Puente) has championed NADBank in the House over the last several years and has successfully pushed for its funding. SENATE JUDICIARY COMMITTEE HOLDS HEARING ON ENCRYPTION BILL On Wednesday morning, the Senate Judiciary Committee heard testimony concerning S. 909, sponsored by Sens. John McCain (AZ), Bob Kerry (MA), and Ernest Hollings (SC), which deals with the export of products that employ encryption technology. However, the export expansion envisioned in the bill is limited since it requires any exported encryption product of a strength greater then 56 bit DES (a measure of the size of the encryption algorithm) to be "based on a qualified system of key recovery" that will be maintained by an approved third-party from whom law enforcement officials could gain access to the keys. S. 909 also allows the domestic private sector to use encryption of any strength within the United States and to elect voluntarily to participate in a key recovery system. Witnesses representing the high technology community are opposed to S. 909, citing enormous costs, as well as a lack of technology needed to employ a third-party key recovery system of the proposed magnitude. They also made the argument that criminals and terrorists can circumvent any key recovery system by using a foreign encryption program free of such requirements. Also testifying, F.B.I. director Louis Freeh and N.S.A. deputy director William Crowell supported S. 909, providing examples of risks to national security that they argued could be reduced with a key recovery system. SENATE BILL WOULD BOOST FUSION FUNDING SLIGHTLY; NIF FULLY FUNDED The Senate version of the FY98 Energy & Water Appropriations bill would give a slight increase to magnetic fusion programs over the prior year. The bill would spend $240 million on magnetic fusion, compared to $232 million in 1997. The Senate subcommittee marked up its bill on Tuesday, and the full committee was to complete action on Thursday. The House full committee is expected to take up the bill on Friday, and there is concern that Chairman McDade wishes to cut fusion funds, particularly funding for the International Thermonuclear Experimental Reactor, which is based in part in San Diego. The Senate appropriations bill provides full funding of $197.8 million for the National Ignition Facility (NIF) project which is now under construction at Lawrence Livermore Laboratory. SUBCOMMITTEE ON HEALTH AND ENVIRONMENT TO HOLD SAN DIEGO HEARING ON TRANSBORDER AIR POLLUTION On Monday, July 14, 1997, the Subcommittee on Health and Environment will hold a field hearing on the subject of Transborder Air Pollution. It will take place at 10:00 a.m. Pacific time in Room 310, the Board of County Supervisors' Chambers at 1600 Pacific Highway in San Diego. Congressman Brian Bilbray (Imperial Beach) has introduced H.R. 8, which would require automobiles entering the United States on a regular basis to comply with California or other applicable state motor vehicle emission laws. The bill was prompted by the presence of thousands of automobiles with Mexican plates, driven by commuters, that cross the border and do not meet California's smog requirements. Rep. Bilbray's legislation also hopes to dissuade U.S. residents from registering their cars in Mexico to avoid California smog inspection. Prior to the hearing Congressman Bilbray will take other members of the Subcommittee on a border tour to examine firsthand the pollution problem. A study by the San Diego Air Pollution Control District found that 7,000 commuter vehicles registered in Mexico cross the border daily and produce 13 percent of the region's total vehicle air pollution. WILSON CALLS FOR EFFECTIVE GRANDFATHER CLAUSE IN ANY ELECTRIC UTILITY RESTRUCTURING BILL In a letter sent to Chairman Dan Schaefer of the Commerce Committee's Energy and Power Subcommittee this week, Governor Pete Wilson called on the committee to amend H.R. 655, the utility industry restructuring bill, to include an effective grandfather clause to protect California's electric utility restructuring initiative from being undermined by federal legislation. The Governor pointed out several areas, including deadlines, public power, stranded costs, and renewables, where the bill conflicts with California's approach and stated that perfecting amendments on each of these areas would be a poor alternative to a single self-contained grandfather clause. The Governor pointed out that while H.R. 655 defers to state programs that allow full retail access by December 15, 2000, that may not adequately protect California, because its plan does not mandate full retail access until 2002. Thus, an effective grandfather clause is still needed. The letter also notes that although California does not need federal restructuring legislation, should a bill be pursued there are three areas where federal legislation could be helpful. First, amending or repealing the Public Utility Regulatory Policies Act would remove a federal impediment to free market operation. Second, the Governor stated that reforming the Public Utility Holding Company Act to allow investor-owned utilities more flexibility would be useful. Finally, he asks Congress to require reciprocity among states that choose to move toward competition, so that all buyers and sellers could function in a nondiscriminatory business environment. HOUSE PASSES CALIFORNIA FOREST MANAGEMENT BILL On Wednesday, by a vote of 429-1, the House passed H.R. 858, the Quincy Library Group Forest Recovery and Economic Stability Act of 1997, sponsored by Rep. Wally Herger (Marysville). All 52 members of the California delegation voted for the bill, after amendments were made to ensure the bill was consistent with current environmental laws. The bill requires the Secretary of Agriculture to set aside 49,000 to 70,000 acres each year for five years in California's Plumas, Lassen and Tahoe National Forests for pilot projects on forest management to reduce the risk of fire. The bill derives its name from the Quincy Library Group (QLG) established in 1993 in Quincy, California which developed a compromise forest management program acceptable to the forest products industry, environmentalists, public officials, and concerned citizens. Under the bill, the Forest Service will be required to thin out specifically selected trees and underbrush to create firebreaks and provide fire resistance and control safeguards. NEW-BUSINESS INCORPORATIONS ON FAST PACE IN CALIFORNIA According to a recent study, the rate of new business incorporation in California is at its fastest pace since 1989, providing evidence of the state's improving economy. With a 5.1% increase from last year, 13,075 new businesses registered with the state from April to June. CDB Infotek reports that these figures represent the seventh consecutive quarter of increases for the state in new-business incorporations. The only discouraging aspect of CDB's report comes from the low 0.1% increase in Los Angeles County. Nevertheless, like the rest of the state, Los Angeles is also having its best year since 1989. _________________ 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. 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