The California Institute For Federal Policy Research California Capitol Hill Bulletin Volume 4, Bulletin 29 -- September 4, 1997 TEAM CALIFORNIA CONVENES IN SACRAMENTO On August 26, Team California, a bipartisan group of federal and state elected officials, met in Sacramento to follow up on April's successful "California Day," in which Governor Wilson and 47 members of the California Legislature 30 Assemblymembers and 17 Senators converged on Washington, D.C. and met with the California congressional delegation and others to discuss policy issues of mutual concern. Reps. Gary Condit (Ceres), Frank Riggs (Windsor), and Jane Harman (Rolling Hills) attended last week's working strategy session, as did staff for Rep. Lucille Roybal-Allard (Los Angeles). The state legislature was well represented, with attendance by State Senate Pro Tempore Bill Lockyer (Hayward) and State Senators Jim Costa (Fresno), Richard Monteith (Modesto), Barbara Lee (Oakland), and Maurice Johannessen (Redding) participating. From the Assembly, participants included Assembly Speaker Cruz Bustamante (Fresno), Minority Leader Bill Leonard (Upland), Assemblymembers Jim Battin (La Quinta), Carl Washington (Los Angeles), Lynne Leach (Walnut Creek), and Helen Thomson (Davis). Also participating in the meeting were Governor Wilson's Cabinet Secretary Ben Haddad and representatives of both Senators Dianne Feinstein and Barbara Boxer. Presentations at the meeting were made by officials of the State and by the California Institute. Issues addressed by the bipartisan group of California legislators included: * Intermodal Surface Transportation Efficiency Act (ISTEA) reauthorization. Andrew Poat of CalTrans addressed pending changes to the 1991 federal legislation that is due to expire September 30th. Over the course of ISTEA, California has received nearly $10 billion in federal-aid highway funding, a bit more than nine percent of the U.S. total. Although this represents a significant portion of total federal transportation spending, in at least one sense California is in fact considered a "donor state." Each year California contributes significantly more to the Highway Trust Fund than it receives in the form of highway funding, though when federal transit programs are factored in, California's share is closer to the break-even mark. * Reimbursement for Education Costs Associated with Undocumented Aliens. Craig Brown, Director of the State Department of Finance, discussed the headway being made in seeking federal reimbursement to states and local governments for the costs of incarcerating undocumented criminal aliens. Currently, the House Commerce, Justice, State Appropriations bill calls for $600 million for FY98, of which California would receive roughly half, to help offset these costs. The Senate Appropriations bill, however, contains only $500 million. Mr. Brown also discussed the costs borne by State and local governments to provide elementary and secondary education to undocumented children. To date, legislative proposals dealing with reimbursement for these costs have not received significant congressional consideration. There was an unsuccessful attempt last year during consideration of the immigration reform bill to allow the states to choose to prohibit undocumented children from attending public schools. * Funding Formula Issues. Tim Ransdell, Executive Director of the California Institute, discussed various formula programs that allot billions of federal dollars to California each year. Among the programs discussed were: Medicaid, highway grants, welfare, Head Start, WIC, Community Development Block Grants; Job Training Partnership Act (JTPA) and Title I education grants. Ransdell discussed the factors that influence formulas, and pointed out that at present the use of population and poverty data benefits California over the use of factors such as per capita income. * Bay Delta Funding. Doug Wheeler, Secretary of the Resources Agency, discussed funding for the San Francisco Bay/Sacramento-San Joaquin Delta Estuary (the "Bay-Delta"). The Bay-Delta is an increasingly unhealthy 700 square-mile region of waterways, sloughs, and islands where the San Francisco Bay meets the state's two largest rivers. The Bay-Delta supplies some or all of the water needs for two-thirds of the state's homes and businesses and over four million acres of agricultural land. The first installment of $143 million of the congressionally authorized funding for rehabilitation is scheduled for FY1998. However, the House Energy and Water appropriations bill proposes $120 million in Bay-Delta project funding for FY98, and the Senate appropriations contains only $50 million in funding. Both bills passed their respective houses in July and are currently awaiting conference action. * Nuclear Rod Transportation. Bill Keese, Chairman of the California Energy Commission, discussed the proposal by the U.S. Department of Energy to transport a portion of the 19 metric tons of spent nuclear fuel rods returned to this country from foreign research reactors. The current DOE plan would ship the rods through Concord, California and would on the way to permanent storage in Idaho. Many experts in California and elsewhere argue that the DOE should find an alternate port to the densely populated Concord site. Other such choices include: Bremerton, Washington; Tacoma, Washington; and Portland, Oregon. Moreover, transportation from these alternate sites to the Idaho destination would be shorter and less precarious than the canyon routes required through California's Sierra Nevada mountains. Based on discussions last week in Sacramento, there will be further action by both Congressional and State Legislative members of Team California on each of these issues. The next Team California meeting is tentatively scheduled for December, though staff discussions will continue in the interim. HOUSE TRANSPORTATION COMMITTEE LEADERS PROPOSE 3-YEAR ISTEA BILL On Thursday, Chairman Bud Shuster (Pennsylvania) and Ranking Democrat Jim Oberstar (Minnesota) unveiled their long-awaited House Transportation Committee rewrite proposal to the expiring Intermodal Surface Transportation Efficiency Act (ISTEA). The California impact of the plan is not yet clear. The bill proposes spending $103 billion over its three-year lifespan -- nearly as much as the recently-reached bipartisan budget agreement envisioned would be spent on transportation over five years. (The budget agreement assumed transportation spending of $110 billion over five years, or $22 billion per year in ISTEA spending. That level was as much as $10 billion annually below that which Chairman Shuster had sought.) Entitled "BESTEA" (Building Efficient Surface Transportation and Equity Act), the bill proposes spending of $30.3 billion in FY1998 ($24.9 billion for highways, $5.4 billion for transit); $34.4 billion in FY1999 ($28.5 billion for highways, $5.9 billion for transit); and $38.4 billion in FY2000 ($32.0 billion for highways, $6.4 billion for transit). The committee released partial state-by-state spending breakdown, but only the highway funding is included -- no proposed allocation of transit funds were released. According to a committee spreadsheet, California would receive 9.16 percent of highway funds over the three years. While the dollar figures rise, from $1.96 billion in 1998, to $2.20 billion in 1999, and to $2.45 billion in 2000 -- for a total of $6.62 billion over the three-year period -- California's percentage share of the nation's receipts would remain roughly stable throughout the period. A California share of slightly above nine percent would represent little if any substantial change from that experienced during the preceding six years under ISTEA. California would remain a "donor state" with respect to highway funds alone, though our donor-state status improved considerably when ISTEA's transit spending was also considered. It remains to be determined how California would fare under BESTEA's transit scheme. In addition to formula equity, the bipartisan California Congressional delegation had sought several components from any ISTEA rewrite, including border infrastructure financing, recognition of the impact of trade (particularly NAFTA-related trade) on roads, a maintenance of the federal commitment to transit programs, and changes in the rules governing an air quality section of ISTEA. According to Rep. Jay Kim (Diamond Bar), who co-chairs the California delegation's ISTEA Task Force, California's share of funds from the CMAQ (Congestion Mitigation / Air Quality) program under ISTEA will rise from 15 percent to 19 percent thanks to the removal of a per-state cap on such funds. The California delegation also sought and won an agreement to allow CMAQ funds for so-called maintenance areas -- those with air quality which is poor but not as bad as in non-attainment areas. Rep. Kim noted that this change would be of particular benefit to the San Francisco Bay Area. Rep. Kim also noted that the bill proposes a new $270 million pot for NAFTA border projects, of which $90 million would be spent in states bordering Mexico (the rest in Canadian border states). In addition to large formula-based allocations, several billion dollars in "discretionary" funds would continue to be distributed for specifically earmarked road, bridge, tunnel and other demonstration projects. Such projects would be expected to total $4.3 billion over the three years. Those decisions will be made later, perhaps at the full committee markup stage. At present, the committee plans a subcommittee markup on Wednesday, September 10 and a full committee markup on Wednesday, September 17. Some observers predict a difficult road ahead for the bill because of its budgetary implications, and Senate Environment and Public Works Chairman John Chaffee (Rhode Island) has been quoted as not wishing to reauthorize ISTEA for less than an additional six years. FDA REFORM MAY MOVE IN SENATE; HOUSE ACTION LESS LIKELY Senate Majority Leader Trent Lott (MS) filed a cloture petition on Wednesday to limit debate on S. 830, the Food and Drug Administration reform bill. The move is intended to encourage Senate negotiators to reach agreement on two issues in the bill, so that floor consideration can begin. The two major obstacles to consideration are the provisions that would allow third-parties to review new medical device applications during the FDA approval process and that would establish national standards for labeling many over-the-counter drugs and cosmetics. Senator Edward Kennedy (MA) has led the opposition to these provisions. The cloture vote may occur on Friday. If invoked, cloture will clear the way for Senate consideration of the bill. However, on the House side, Majority Leader Dick Armey (TX) stated earlier this week that the FDA reform bill is unlikely to be considered in the House this year. Passage of FDA reform, with provisions allowing for third-party review, has been a major legislative priority of the state's large biotechnology industry. HOUSE AND SENATE CONTINUE CONSIDERATION OF ENCRYPTION BILLS The Senate Judiciary Subcommittee on Technology held a hearing Wednesday on S. 909, its version of encryption export reform, which was introduced by Sens. John McCain (AZ), Bob Kerrey (NE), and Ernest Hollings (SC). The Senate Commerce Committee reported out the bill before the August break. S. 909 tracks the Administration's policy on encryption exports by requiring any exported encryption product of a strength greater then 56-bit DES (the algorithm measuring the encryption strength) 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. As expected, the Administration testified that it prefers S. 909 to the House version, H.R. 695, which would allow encryption exports without a key recovery system, as long as comparable products were commercially available overseas. The high technology industry supports H.R. 695, and believes that S. 909 would continue the competitive disadvantage the industry faces as a result of requiring key recovery (See Bulletin, Vol. 4, Nos. 17 (5/15/97), 22 (6/26/97), 26 (7/24/97), & 27 (7/31/97)). On the House side, the Commerce Committee held a hearing on H.R. 695 this week, and the Select Intelligence Committee has one scheduled for September 9. The National Security Committee is also scheduled to mark up the bill on September 9. SENATE JUDICIARY HOLDS HEARING ON COPYRIGHT INFRINGEMENT ON THE INTERNET The Senate Judiciary Committee held a hearing on Thursday addressing the issue of copyright infringement on the Internet. The main issue revolves around the liability of on-line and Internet service providers if users post copyrighted material onto the Net without permission. Service providers fear that current copyright law, which is based primarily on hard copy, published material, is insufficient to protect them from liability given the Net's almost infinite capability to disseminate information from infinite sources. Those with copyrights to protect, however, are concerned that limiting the service providers' liability will undermine their ability to enforce and protect their material. In his opening statement, Chairman Orrin Hatch (UT) stated that he has not introduced legislation to deal with the issue, because he has not decided what the solution is. He stated his intention to work with both sides to reach a mutually agreeable solution. The Committee heard testimony from Fritz Attaway, Sr. V.P. and General Counsel of the Motion Picture Association of America. Mr. Attaway cautioned the Committee to move slowly and not push a legislative solution before it determined if there were any problem with the current legal status quo. On the other hand, Roy Neel, President and CEO of U. S. Telephone Association, discussed the uncertainty facing providers because current copyright law was not written to deal with the unique capabilities of the Internet. USTA's legislative proposal calls for copyright owners to notify providers of infringement, and the providers would not be liable for infringement unless they failed to take action to halt further abuses. The Committee also heard from: Cary Sherman, General Counsel, Recording Industry Association of America; Daniel Burton, Vice President, Novell, representing the Business Software Alliance and Software Publishers Association; George Vradenburg, Senior V.P. and General Counsel, America Online, Inc.; and, Prof. Robert Oakley, Director of the Law Library and Professor of Law, Georgetown University Law Center, representing 17 national library and educational organizations. Copies of the testimony can be obtained from the Senate Judiciary Committee at 202-224-5225. WASHINGTON RELEASES WELFARE-TO-WORK GRANT FUNDS California is receiving 17 percent of funds from a newly- created federal grant program aimed at assisting the transition of welfare recipients into the workplace. At the White House on Wednesday, Vice President Al Gore formally awarded the $1.1 billion, the first of two years of funding. California's $189 million allocation for FY98 is nearly twice that of the second largest recipient. The formula allocation is based half on welfare recipients per state and half on persons in poverty per state. California's high share is largely thanks to the fact that nearly 22 percent of the nation's welfare recipients reside in the state. The federal grants impose a 33 percent matching requirement to be raised within state borders, and it is as yet unclear how California's match will be met. Total TANF welfare-to-work grants will be $1.5 billion each for FY98 and FY99. Cities will apply for more than $350 million per year in competitive grants, in addition to the $1.1 billion distributed annually by formula. FEDERAL PAY RAISE TO BENEFIT SOME CAL CITIES MORE THAN OTHERS President Clinton's authorization of a 1998 pay raise for federal employees will benefit some localities more than others, the Office of Personnel Management in Washington D.C. reported this week. On average, the nationwide increase will amount to 2.3 percent. However, under current law, white collar executive branch pay rates in 31 nationwide metropolitan areas including four California cities may be adjusted to help federal salaries catch up to those salaries paid by private sector companies in that metropolitan area. San Francisco-based federal employees will experience the greatest increase in California with a 3.59 percent raise. Sacramento's white-collar federal employees will receive a 3.34 percent raise. San Diego and Los Angeles employees will be the recipients of 3.13 percent and 3.09 percent raise respectively when the change goes into effect next January. FLORIDA WINE IMPORTATION RESTRICTION OVERTURNED BY COURT Citing the U.S. Constitution's due process clause, a Florida circuit court judge on August 29 rejected Florida's recently- passed law restricting the sale of out-of-state wines delivered by common carrier. The judge ruled that the Constitution prohibits out-of-state companies from being sued in states with which they have not had "minimum contact," and that the State of Florida had not proved that out-of-state wineries had minimum contact with their customers. In July, all 52 Members of Congress from California joined together in signing a bipartisan delegation letter asking Florida's governor to seek repeal of the law. The Florida Attorney General is expected to appeal the decision. ----------------------- 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. _____________________________________________________________ _ Tim Ransdell, California Institute for Federal Policy Research 419 New Jersey Ave., SE, Basement Level, Washington, DC 20003 Voice: 202-546-3700 -- Fax: 202-546-2390 -- Cell: 202-288-6598 -- Home: 301-773-4078 -- Website: _____________________________________________________________ _