California Institute Capitol Hill Bulletin, Saturday, September 20, 1997 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 31 -- September 18, 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. Rep. Lofgren Addresses Institute's Advisory Board Rep. Zoe Lofgren (San Jose) spoke on Thursday at the Institute's Advisory Board breakfast, hosted this month by IBM. Rep. Lofgren outlined several issues that she has been focusing on in this session of Congress; chief among them was H.R. 695, the encryption export bill, which she has co-sponsored with Rep. Bill Goodlatte (VA). The bill has already been successfully reported out by the House Judiciary and International Relations Committees. However, it has now run into trouble in the House National Security and Commerce Committees. Ms. Lofgren was most concerned about the FBI's recent attempts to have the bill amended to severely restrict not only export of encryption devices but their use and accessibility in the United States. She has called on the White House to step in and formulate a reasonable policy that will not undermine either U.S. encryption device and software manufacturers or U.S. companies and services that will be able to provide better services to U.S. citizens by using encryption. Rep. Lofgren also discussed the status of the bills concerning protection of copyrights on the Internet and patent reform. In both cases, she doubted that final action would occur this year, but encouraged the industry to continue to work on developing acceptable solutions to both issues. Finally, Rep. Lofgren highlighted her participation in the Team California Task Force to encourage bipartisanship within the California delegation. She called on members of the Advisory Board to come to her with issues that would be appropriate for bipartisan action by the delegation. Volume 4, Bulletin 31 -- September 18, 1997 Unanimous 52-Member California Delegation Urges 9th Circuit Study Earlier this week, for only the fourth time in recent history, and the fourth time this Congress, the entire 52 member California congressional delegation co-signed and forwarded a letter to Subcommittee on Commerce, Justice, State and Judiciary Appropriations Chairman Harold Rogers (KY), urging him to reject a Senate rider sponsored by Senator Judd Gregg (NH) that would split the Ninth Circuit Court of Appeals into two separate circuits. Under Greggıs rider, California and the territorial islands of Guam, the Marianas, and American Samoa would be relegated to the 9th Circuit, while Alaska, Arizona, Idaho, Montana, Oregon, and Washington would be incorporated into what would be a newly created 12th Circuit. Nevada and Hawaii would be provided the option to join either circuit of their choice. ³The only sure and effective way to guarantee that any division is practicable, efficient and fair to the litigants served by the courts,² the September delegation letter reads, ³is to allow the independent commission established by H.R. 908 to inquire into the myriad of questions and issues that realigning any of the federal circuits may entail.² H.R. 908, which establishes a bipartisan commission to study the issue, was unanimously passed by the House on June 3, 1997 and is awaiting action in the Senate. In addition to the delegation letter, Governor Pete Wilson, in a letter to Chairman Rogers dated September 5, also expressed his serious concerns about the proposal to divide the 9th Circuit without first convening an impact study. Volume 4, Bulletin 31 -- September 18, 1997 Child-Support Enforcement Letter Garners 46 Delegation Signatures Forty-six members of the California congressional delegation, including both Senators, today delivered a letter to Ways and Meansı Subcommittee on Human Resources Chairman E. Clay Shaw Jr. (FL), expressing their collective concern over what appears to be a negative unintended consequence of a child support enforcement issue being considered by the full Committee today. At issue is the Department of Health and Human Servicesı (HHS) mandate that all states meet an October 1997 deadline in setting up a certified automated child support system to comply with the Family Support Act of 1988. Many large states such as California have experienced difficulty implementing a single automated child support system because of the inherently larger case loads natural to the more populated states. Unfortunately, states that do not meet this deadline will face severe financial penalties including the loss of federal funding for child support programs at a minimum and possibly some or all TANF grant funds. In their letter to Chairman Shaw, the 46 members of the delegation stated their concern that the unachievable deadlines and the subsequent penalties ³could result in harming the people for whom this program is designed to serve....One constructive alternative would be for these states to develop corrective action plans in consultation with the Department of Health and Human Services.² A second factor of concern to the signers is the subcommitteeıs consideration of legislation to revise the Child Support Enforcement Program incentive funding system as required by last yearıs welfare reform law. Many believe that the proposed incentive would unduly harm California because the incentive program would mandate that the state apply their collection system broadly on every case as opposed to focusing on the most egregious and hard to collect cases. ³California, for example,² the letter notes, ³stands to lose as much as $40 million annually in child support incentive funds because of its concentration on difficult cases rather than universal collection.² Volume 4, Bulletin 31 -- September 18, 1997 Letter To Seek Support for Open-Skies Aviation Routes Californiaıs congressional delegation deans, Rep. Lucille Roybal-Allard (Los Angeles) and Rep. Jerry Lewis (Redlands), are currently seeking co-signers for a delegation letter to Transportation Secretary Rodney Slater supporting an agreement that would allow U.S. and California-based aviation firms greater access to the rapidly expanding Asian aviation market. Current restrictions on passenger flights between the United States and Japan have dramatically affected Californiaıs tourism and travel economy and have to some degree restricted the growth of the aerospace industry. The letter from the two delegation deans notes that ³an agreement between the United States and Japan could dramatically expand air services between the two countries and offer unprecedented opportunities for expanded tourism, employment, trade, and economic growth benefitting our state.² The deadline to co-sign the letter to Secretary Slater is the close of business Friday. Members wishing to learn more about or to co-sign the letter, should contact Sherry Greenberg in Rep. Roybal-Allardıs office (225-1766) or Dave LesStrang in Rep. Lewisı office (225-5861) as soon as possible. Volume 4, Bulletin 31 -- September 18, 1997 FDA Bills Reported by House Subcommittee; Senate Continues Consideration of its Bill As the Senate continued consideration of its FDA reform bill, the House Commerce Committee's Health and Environment Subcommittee successfully reported its three separate FDA bills on Wednesday. With bipartisan agreement, the Subcommittee decided that outstanding concerns would be addressed before the bills are considered by the full Commerce Committee on Thursday, September 25. Two major issues contained in H.R. 1710, which regulates medical devices, remain to be resolved. One is the provision allowing manufacturers of medical devices to hire accredited third-parties to handle the review process, rather than requiring FDA personnel to conduct the review. The other is language limiting the FDA's review to only those uses that the manufacturer states are intended. The other components of the reform package are H.R. 1441, streamlining the FDA's approval process, and H.R. 2469, amending FDA's food labeling regulations. Before reporting the bills by voice vote, the Subcommittee accepted an amendment to each which substantially changed the original provisions and reflected differences worked out between the two sides before the markup. In the meantime, the Senate on Tuesday again invoked cloture to limit debate on S. 830, its FDA reform bill (see Bulletin Vol. 4, No. 30, 9/11/97). The motion, passed by a vote of 94-4, limits debate to 30 hours and proscribes certain amendments from being offered. Nonetheless, Sen. Edward Kennedy (MA) continued his opposition to the provision limiting FDA review to only those uses the manufacturer states are intended. Both the House and Senate versions of the reform legislation contain reauthorization of the Prescription Drug User Fee Act (PDUFA), which expires on September 30. Reauthorization before then is needed to allow the FDA to continue to collect user fees to expedite its review process. The biotechnology industry has made FDA reform and reauthorization of PDUFA one of its major legislative initiatives for this year. Volume 4, Bulletin 31 -- September 18, 1997 ISTEA Reauthorization Proposals Would Not Raise State Share Neither the House nor the Senate proposal for renewing the nationıs highway and transit programs would appreciably raise the stateıs share of highway funds, according to an analysis by the California Department of Transportation (CalTrans). In fact, Californiaıs share would likely decline under either of the plans. According to CalTrans, the state received 9.32% of ISTEA formula funds. The House reauthorization plan, entitled BESTEA, would return 9.158% of the nationıs highway formula funds to California -- thus ranking California 33rd among the states, per CalTrans. The Senate version of the highway bill, which is called ITA (Intermodal Transportation Act), passed the Senate Environment and Public Works Committee Wednesday, would return 9.145% of funds to the state. (Estimates of the stateıs share of expenditures are for the highway formulas only -- they exclude transit, discretionary and demonstration project funding.) By contrast, California contributes roughly 10.3% of the nationıs dollars into the highway trust fund in gas taxes and other revenues. California is thus a ³donor state² with respect to the highway trust fund, and it would remain one. CalTrans estimates that each one-tenth of one percent (0.1%) change in formula funds to or from California represents approximately $100 million for the state over a 6 year period. Other differences between the bills as highlighted by CalTrans include the following: * The House bill spends $103 billion over 3 years, quickly reaching the limits outlined in this summerıs budget agreement, whereas the Senate bill spends $135 billion over 6 years. * The Senate bill would distribute nearly all its funds via formula, whereas the House bill leaves a much larger share ($14 billion over 3 years) to be allocated via discretionary grants. * The House bill funds a new border infrastructure program at $270 million from the highway trust fund, whereas the Senate bill funds one at $750 million from the general fund. Both bills would update the outdated census data usage which has limited fund shifts to California and other growing states. The ITA bill now moves to the Senate floor. Action on the House BESTEA bill, originally scheduled for Wednesday the 17th, was postponed for a week. In related news, shortly before recessing last week the California State Legislature passed a resolution echoing the requests of the California Congressional delegation for fairness for the state in the ISTEA reauthorization process. The measure, A.J.R. 39, seeks spending flexibility, CMAQ funding changes, border infrastructure targeting, and a fairer shake for donor states like California. The resolution was devised by the members of TeamCalifornia, the bipartisan, bicameral working group on federal issues which includes leaders of the Assembly, the state Senate, the Governor, and the California Congressional delegation. Volume 4, Bulletin 31 -- September 18, 1997 Military Construction Appropriations Bill Sent to President Congress completed action on a $9.2 billion military construction appropriations package today and forwarded it, the first of the 13 appropriations bills to clear Congress, to the White House for signature. Included in the package, shaped largely by House Subcommittee Chairman Ron Packard (Oceanside), were a wide range of projects at active California facilities, including: $27 million for a launch operations center at Vandenberg Air Force Base, nearly $20 million for upgrades at San Diegoıs North Island Naval Air Station, $48 million for various activities at Camp Pendleton, $23 million for an ordinance support facility at the Concord Naval Weapons Station, and $21 million for a maintenance shop for the Sacramento Army Reserve Center. Also included were funds for family housing at various bases, including $22 million at Camp Pendleton, $23 million at Lemoore NAS, $29 million at Mirimar, and $23 million at Twentynine Palms Marine Corps Center. The bill also includes a range of funding projects in order to meet the obligations set by the first four base closure rounds. Included in these funds are: $49 million for a support facility at Mirimar, $29 million for an operational facility at North Island, $50 million for improvements and facilities at Travis AFB, and $24 million for various activities at Beale AFB. Volume 4, Bulletin 31 -- September 18, 1997 B-2 Funding Compromise Possible According to press reports, House supporters of additional funds for keeping B-2 bomber production lines alive have been discussing a compromise proposal with Senate counterparts this week. The plan would reportedly appropriate the disputed $331 million for additional B-2s, but would ³fence² the funds from expenditure until next March, when an independent commission completes a report on the aircraft. Volume 4, Bulletin 31 -- September 18, 1997 House Declines To Make Sweeping K-12 Education Formula Changes; Gorton Amendment to Be Resolved in Conference Last weekıs Senate-proposed changes to the federal governmentıs K-12 education programs were not duplicated in the House this week, leaving the issue to be resolved in an upcoming House-Senate conference over the Labor-HHS-Education appropriations bill. On a 51-49 vote a week ago, the Senate approved an amendment offered by Sen. Slade Gorton (WA) to dramatically change the formulas for distributing funds for the Title One program (the largest education formula grant and the 4th largest federal formula overall) as well as myriad other K-12 programs. This week, Rep. Peter Hoekstra (MI) agreed to withdraw his amendment to make similar changes to the House version of the bill. Also this week, a letter by Education Secretary Richard Riley expressed opposition to the changes proposed by the Gorton Amendment and stated that the presence of such language in the final bill would draw a presidential veto. Neither the backers of the proposed change nor the Administration has provided state-by-state impact figures for the proposed change. However, in examining some of the factors proposed for the formula change, the California Institute has attempted to make very general predictions regarding the possible impact on the state. General Findings: * The Gorton amendment proposes new allocation schemes for two areas. First, it would change the distribution mechanism for all Title One funds. Second, it would consolidate several other K-12 programs into a single block grant, which would be divided based on K-12 enrollment and per capita income. * The Gorton amendment proposes dividing funds among local school districts -- largely circumventing the U.S. Department of Education and state education departments. * A 100% ³hold harmless² provision would prevent any funding share changes among states or school districts for FY1998 -- more significant shifts could occur in out years. Title One Findings: * In FY1997, California received 11.33% of Title One basic grant funds and 12.86% of Title One concentration grant funds -- for a combined share of these two programs of 11.40%. However, the share rises to 12.02% when Title One subprograms for migrant education, neglected-delinquent, even start and evaluation are also considered. These shares are determined via a complicated formula. * The Gorton amendment proposes dividing funds based on every school districtıs count of Title One eligible children (primarily poor children) as of FY1997. Californiaıs share of the nationıs children in poverty has risen steadily over the years, from just 9% in 1980, to 11.85% in 1990, to more than 16% in 1994. Californiaıs child poverty rate is now the 6th highest among states. * Californiaıs share of Title One funds are traditionally suppressed by a factor in the formula which cuts funds to states with low per-pupil expenditure levels -- California has one of the lowest such levels of any state. Thus, once the lingering effects of the hold harmless provisions diminished, the Gorton amendment could improve Californiaıs share of Title One funds by dividing them based on eligible poor children, without regard to state per-pupil expenditure. Block Grant Findings: * The amendment also would consolidate several other major K-12 programs -- including drug-free schools, immigrant and bilingual education, Eisenhower professional development, Title VI, Indian education, magnet schools and charter schools, plus portions of vocational education and rehabilitation -- into a block grant based on child counts, adjusted by state per capita income. * While funds would be based on enrollment count taken by all U.S. school districts, estimates are possible based on 1995 figures for school age population (children aged 5-17). California had 12.17% of the nationıs school age children in 1995. * California has a relatively high per capita income -- the state is ranked 12th highest among the 50 states. That ranking means that Californiaıs share of children would be reduced by 5% according to the Gorton amendment formula. * Thus, if the current enrollment matched the 1995 share of school-age children, California would eventually receive 11.57% of block grant funds. (Again, several years of program growth would be required to dillute the negative impact of hold-harmless language.) Volume 4, Bulletin 31 -- September 18, 1997 President Unveils Fast-Track Bill; Uphill Battle Looms After much delay, the Clinton Administration sent its fast-track trade agreement reauthorization bill to the Congress, with the hope that it can be enacted before the end of the year. The bill would give the Administration the authority to negotiate trade agreements with U.S. trading partners that would only be subject to an expedited up-or-down vote by Congress. In an attempt to find a middle ground between proponents and opponents, the bill calls for labor and environmental standards to be negotiated as part of a trade agreement only where those standards are directly related to trade. On the other hand, it establishes the negotiation of labor and environmental standards, through the World Trade Organization, as a principal negotiating objective of the U.S., and calls for the negotiation of separate side agreements with U.S. trading partners on these issues . Nevertheless, critics from both sides of the issue are unhappy with this formulation, arguing either that it does not go far enough or that it goes too far. Both the House and Senate began hearings on the issue. On Tuesday, the House International Relations' Subcommittee on International Economic Policy and Trade heard from private witnesses on fast-track authority, and on Wednesday, Secretary of the Treasury Richard Rubin, and United States Trade Rep. Charlene Barshefsky testified in support of the legislation before the Senate Finance Committee. More hearings are expected to be held shortly. The Administration hopes that a bipartisan compromise on the issue can be enacted by Congress this year. Volume 4, Bulletin 31 -- September 18, 1997 Judiciary Subcommittee Holds Hearings On WIPO Treaty and Internet Copyright Liability Limitation Bills The Courts and Intellectual Property Subcommittee of the House Judiciary Committee heard from over 20 witnesses this week on two bills: H.R. 2281, the WIPO Copyright Treaties Implementation Act, and H.R. 2180, the Online Copyright Liability Limitation Act. H.R. 2281 would implement the World Intellectual Property Organization Copyright Treaty and Performances and Phonograms Treaty negotiated last year, and H.R. 2281 would limit the liability for copyright infringement of Internet and on-line service providers on the Internet when the infringing material is posted by a third-party. Most witnesses favored the expeditious passage of H.R. 2281 to implement the WIPO Treaty, although manufacturers of encryption devices expressed grave concerns about the provisions in the bill limiting the use of encryption devices to circumvent copyright protection systems. Their concern is that the specific language in the bill will stifle manufacturing of encryption devices, because in most cases they can be used to circumvent copyright protection systems as well as to protect them. On the Internet copyright liability bill, disagreement over the circumstances under which liability will attach to a service provider still remains the major stumbling block. Service providers argue that legislation limiting the liability of companies that provide access to the Net to third parties is needed to ensure continued growth of the Internet, whereas the owners of copyrighted material generally contend that the current legal framework controlling copyright infringement in general is sufficient to develop clear judicial standards governing service provided liability. Service providers contend that H.R. 2180 does not provide a sufficiently clear exemption, while content owners argued that the bill provides too broad an exemption. Action on the bill is not expected this year. Volume 4, Bulletin 31 -- September 18, 1997 House Agriculture Committee Examines New Clean Air Standards On Tuesday, members of the House Agriculture Committee heard from witnesses regarding the Environmental Protection Agencyıs new and more stringent national ambient air quality standards (NAAQS). Testifying at the hearing were Reps. John Dingell (MI) and Ron Klink (PA), EPA Administrator Carol Browner, a professor from Texas A&M, and Roger Isom, Director of Technical Services for the California Cotton Ginners & Growers Association. The EPA this summer added a standard for particulate matter (PM) which is 2.5 microns in diameter -- previously, only particulates in the 10 micron range were regulated. In addition, the EPA tightened the standard for ground-level ozone from 0.12 parts per million (ppm) to 0.08 ppm, and shifted the ozone measuring period from 1 hour to 8 hours. In his testimony, Rep. Dingell pointed out that the EPAıs own scientific panel which examined the proposed standards was divided regarding the appropriate stringency of new rules. He added that the EPA does not yet know which areas will and will not comply with the new standards, a point echoed by panel member Rep. Charles Stenholm (TX). Dingell argued that, rather than going forward with implementing a set of standards whose impacts are yet to be determined, Congress could instead enact the Klink-Upton-Boucher bill (H.R. 1984) to postpone implementation yet still meet the timetable envisioned by the Administration. Committee Chair Bob Smith (OR) expressed concern that small farmers may be heavily impacted. Rep. Klink testified that the Clean Air Act has worked well to date but still has a ways to go, and that it would be premature to make immediate shifts now. Echoing concerns about the uncertainty of impacts, he noted that the EPA plan will require increasing the nationıs monitors for these pollutants from 50 to 1,450 over the next two years, and he suggested that the monitors should be in place and operational before the standards are changed. He added that nothing in the new standards deals with ³transport² of airborne pollution from one region to another. Administrator Browner sought to assuage fears about impact on farmers by stating, ³The EPA will not regulate farmers, it will not restrict tillage, there will be no targeting of controlled burnings on private lands, and we will not make any farmer change the way he does business.² She commented that the thrust of these new regulations were focused on large industries and power plants, rather than on the farming industry. During questioning, Chairman Smith noted that, while the EPA may not require such changes, the state agencies which must ensure compliance with the new standards may have no choice but to force major changes on the agricultural sector. Browner responded that airborne agricultural dust is only a small percentage of particulate matter, and added that governors of key agricultural states would look to other industry sectors to make up the difference -- to which Stenholm countered that those governors also represent the utilities and large industries who will be no more pleased with mandates to change. Responding later to a question from Rep. Helen Chenoweth (ID) regarding prescribed burns, Browner stated that there would be ³no reason why farmers couldnıt use burns on a day when pollution would not be otherwise high.² In later testimony, Mr. Isom of the California Cotton Growers urged adequate time for research before decisions are made, and predicted that the agriculture industry would be heavily affected by the new regulations. Anecdotally, he noted that when the PM-10 standard was implemented in the San Joaquin Valley in 1987, officials implemented windblown dust control rules requiring ³no-till² days, water sprays, and air pollution permits for farms. He noted that it took until 1995 to gather enough monitoring and meteorological data to determine that PM-10 was actually not exceeded on windy days. Volume 4, Bulletin 31 -- September 18, 1997 Legislators Urge DOE to Rethink Nuclear Fuel Rod Transport Route Last week Rep. Wally Herger (Marysville) and a bipartisan group of California members wrote to Energy Secretary Federico Peña opposing the transportation of spent nuclear fuel rods by rail through the Concord Naval Weapons Station. The U.S. Department of Energy (DOE) plans to transport a portion of the 19 metric tons of spent nuclear fuel rods returned to this country from foreign research reactors along a route that begins in Concord and winds its way northwest along the Feather River on its 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, Rep. Herger asserts that 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: ³DOE's own analysis showed, in comparison with other west coast ports, that Concord has higher population densities, potential scheduling conflicts with weapons handling, greater potential consequences in the event of a severe port accident, longer routes to its final storage site in Idaho, and inferior spent fuel handling capabilities.² The nuclear rod transportation issue was widely discussed during the state legislative session, and the topic was discussed during the bipartisan Team California meeting in Sacramento during August. Volume 4, Bulletin 31 -- September 18, 1997 Federal/Private Partnership to Develop Extreme U-V Lithography On Thursday, September 11, semiconductor manufacturers Intel, Advanced Micro Devices (AMD), and Motorola announced that they had reached a historic agreement to partner with Lawrence Livermore, Sandia, and Berkeley National Laboratories to create a new Limited Liability Company (LLC) to manufacture extreme ultra-violet (EUV) lithography computer chips that are potentially 100 times more powerful than todayıs standard computer chips. The new organization, christened EUV-LLC, will invest upwards of $250 million in private funding over the next three years to develop extreme ultraviolet lithography for commercial manufacturing of computer chips. The LLC project represents the largest investment ever made by a private industry in a Department of Energy research project. Rep. Ellen Tauscher (Pleasanton), whose Congressional District is host to both the University of California-operated Lawrence Livermore laboratory, hailed the pact as the ³most significant technological collaboration and financial investment partnership enacted between the powerhouses of the Laser Valley and the Silicon Valley that has ever been announced.² The technologyıs development was begun at Californiaıs national labs, having been supported from the inertial confinement fusion account and then by the Technology Transfer Initiative before being embraced by the consortium. Volume 4, Bulletin 31 -- September 18, 1997