The California Institute For Federal Policy Research California Capitol Hill Bulletin Volume 4, Bulletin 35 -- October 16, 1997 CONTENTS: * National EL Nino summit held in Santa Monica * Private Activity Bond Cap * State's Team California Leaders Support House SCAAP Figure * Child Care Hold-Harmless Provision Beneficial To California * Study Finds California Will Benefit More From Tax Cut Bill * Though Called "Sparing," Clinton Defense Vetoes Hit California * DOE Delays Transport of Nuclear Fuel Rods Through California 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. NATIONAL EL NINO SUMMIT HELD IN SANTA MONICA Following last week's state summit (see Bulletin, Vol. 4, No. 34 -- 10/09/97), on Tuesday, the Federal Emergency Management Agency (FEMA), at the request of Senator Barbara Boxer, convened a national El Nino Community Preparedness Summit in Santa Monica, CA to encourage all Americans to be better prepared for national catastrophes before they occur. At the summit, Director James Lee Witt announced a new campaign by the Administration called "Project Impact" that will demonstrate disaster mitigation in several cities, including Oakland, California. The nation's top weather forecaster, Ants Leetmaa, director of the National Oceanographic and Atmospheric Administration, joined other experts in warning that El Nino, the cyclical warming of ocean waters that can alter weather patterns throughout the world, may increase rainfall and lead to severe storms in California this winter. Vice President Al Gore, state Office of Emergency Services Director Richard Andrews, and Senator Barbara Boxer all encouraged the public to get ready now for El Nino's potentially devastating effects. In his remarks, Gore said that the federal government had spent $8 billion in disaster relief in California since 1989 and was committed to doing more in the future. According to Boxer, a focus of the summit was to build better cooperation between federal, state, and local emergency services. Throughout the course of the day, state and local officials voiced concerns about the slow response by the federal government in completing repairs to Northern California levees and issuing permits to clear cluttered storm drains and flood channels. Federal officials said work on levee repair should be completed in November and that the Army Corp of Engineers is working to shorten its permit process to clear flood channels. WILSON ASKS DELEGATION TO SUPPORT INCREASE IN PRIVATE ACTIVITY BOND CAP Recently, Governor Wilson asked the California Delegation to consider co-sponsoring legislation that would increase the private activity bond cap from $50 to $75 per capita in each state. At present, 27 California Delegation members are co-sponsors. In 1975, Congress allowed states to sell tax-exempt bonds and use the proceeds for low-interest-rate loans to private entities or individuals for projects with defined public benefits. In addition to providing mortgages to lower-income homebuyers, the bonds are used to provide construction loans for affordable rental housing, industrial development, pollution control improvements, and student loans. California created the California Housing Finance Agency (CHFA) to administer the bond program (for more information on CHFA, see ). In his letter, Governor Wilson said an "increase in the private activity bond authority would bring profound economic benefits to California." According to Wilson, last year's $1.57 billion in private activity bond authority created a public benefit that included the financing of 10,000 home mortgages; 6,800 affordable rental housing units which created 17,400 new jobs; and provided for over $96 million in student loans for over 20,000 college students. In 1986, Congress put a limit on the dollar amount of tax-exempt private activity bonds that may be issued in each state. Because there has been no adjustment for inflation, Wilson says that the bonds' buying power has eroded by over 44 percent since 1986. To restore some of that buying power, H.R. 979 would increase the annual bond allocation from $50 to $75 per capita and annually index the cap for inflation. This formulation would increase California's total bond allocation to $2.35 billion. Wilson also stated that the added financing would create thousands of new jobs that could help California implement the welfare to work provisions of welfare reform. The bill, H.R. 979, was introduced by Reps. Barbara Kennelly (CT) and Amo Houghton (NY) and referred to the House Ways and Means Committee in May. Members wishing to co-sponsor the legislation should contact their offices. STATE'S TEAM CALIFORNIA LEADERS SUPPORT HOUSE SCAAP FIGURE In a recent letter, the leaders of the State's Senate and Assembly Team California bipartisan coalition called on appropriations conferees to support the $600 million in funding in the Commerce, Justice, State Appropriations bill for the State Criminal Alien Assistance Program (SCAAP). SCAAP money is used to help reimburse the states for the costs of incarcerating illegal criminal aliens (See Bulletin, Vol. 4, Nos. 25 (7/17/97) and 26 (7/24/97)). The House version of the appropriations bill contains $600 million, but the Senate version contains only $500 million. The bills are now in conference, where the amount of final funding will be determined. The letter, dated October 3 and signed by Senator Bill Lockyer, and Assemblyman Cruz Bustamonte, as well as the nine other members of the coalition, pointed out that California's costs alone for incarcerating illegal criminal aliens will be about $425 million this year, so even the $600 million will only partially alleviate the burden borne by California and other immigration-impacted states. Team California is a joint coalition of California members of the U.S. Congress and the State Senate and Assembly established to work together on policy issues impacting the State. SENATE LABOR-HHS BILL CONTAINS CHILD CARE HOLD-HARMLESS PROVISION BENEFICIAL TO CALIFORNIA Because of an error in its calculation of state allocations under the Child Care and Development Block Grant, the Department of Health and Human Services (HHS) recently informed California that it will withhold $9.7 million from the state's FY98 allocation to cover the overpayment caused by the miscalculation. Fourteen other states would also lose money, but the total of all of their losses would only reach $8.9 million. In response to HHS's proposal, Sen. Bob Kerrey (NE) added a hold-harmless provision to the Senate version of the Labor-Health and Human Services Appropriations bill to allow the states to keep the overpayments. That bill is now in conference with the House measure that does not contain a hold-harmless. California receives over $90 million annually in child care assistance payments under the program. STUDY FINDS CALIFORNIA WILL BENEFIT MORE FROM TAX CUT BILL A report from the Tax Foundation, a Washington D.C.-based think tank which examines taxation issues, estimates that a California taxpayer will benefit slightly more than an average taxpayer nationwide from the recently enacted Taxpayer Relief Act, which was part of the bipartisan budget deal. The group found that over the ten years from FY1997 to FY2007, the average California taxpayer would see a $2,288 reduction in taxes, while the average taxpayer nationwide would see only a $2,136 reduction. Californians would enjoy a $34.2 billion reduction in federal taxes over the period, which is 12.42% of the $275.4 billion reduction nationwide. The report, entitled "Bottom Line on the Taxpayer Relief Act of 1997," notes that the $275 billion nationwide figure is reached by subtracting $126 billion in increased airline and cigarette taxes nationwide from the tax reduction of $401.4 billion in other areas, including a $500 per child tax credit ($183.4 billion), education tax incentives such as the HOPE scholarship tax credit ($76 billion) and an education IRA ($14 billion), capital gains tax relief ($21 billion), IRA changes ($20 billion), alternative minimum tax changes ($20 billion), and estate and gift tax provisions ($34.4 billion). Over the 1997-2002 period, the average California tax filer will pay more of the increased airline taxes ($682) than the average U.S. filer ($618), but he or she will pay the second-lowest per filer amount of cigarette tax increases ($86) compared to the national average ($129), owing largely to our state's very low smoking rate. On the tax cut side, the average California filer will enjoy total tax cuts of nearly $3,300, compared to a national average of slightly above $3,100. The report was prepared by Patrick Fleenor of the Tax Foundation, which can be reached at 202-783-2760 or at . THOUGH CALLED "SPARING," CLINTON DEFENSE VETOES HIT CALIFORNIA President Clinton used his line-item veto authority this week to delete just one-tenth of one percent of the $247.5 billion in defense appropriations for FY98. But more than $80 million of the $144 million deleted (56% of the total) will come from funds slated to be spent in Southern California. Compared to previous use of the veto authority, these deletion seem relatively minor. The week before, Clinton had line-item vetoed $287 million ($28 million in California) from a military construction appropriation bill which spent just $9 billion total. See Bulletin, Volume 4, No. 34, 10/9/97. This week's defense vetoes, however, hit California more than other states. The largest cut among the vetoes would terminate the SR-71 high-altitude reconnaissance aircraft program, based in Kern County. Clinton vetoed $30 million for SR-71 operations there, as well as $9 million for improvements and upgrades to the craft, which would have taken place in Palmdale. Also deleted was $35.7 million which would have been spent in Southern California to fund a technology demonstration project to test the feasibility of an anti-satellite weapon. In a related matter, press reports predict the President's line-item veto authority may temporarily disappear as early as next year. The act which created the veto requires that funds saved in a line-item veto shall be used to reduce the deficit rather than spent on other projects. An unintended consequence, according to some budget analysts, is that the authority will thus be suspended when the federal budget is in balance. DOE DELAYS TRANSPORT OF NUCLEAR FUEL RODS THROUGH CALIFORNIA In response to concerns raised by several members of the California congressional delegation, the Department of Energy announced last week that it will delay until at least April shipping spent nuclear fuel rods through the Concord Naval Weapons Station. The shipments, which were expected to begin early in 1998, entail transporting the fuel rods by train from Concord through the Bay Area to Idaho. The official reason for the delay involved concerns about encountering snow enroute. Reps. George Miller (Martinez), Ellen Tauscher (Pleasanton), Wally Herger (Marysville), and Gary Condit (Ceres), joined by other members of the delegation, wrote separate letters to Energy Secretary Federico Pena objecting to the shipments because of several recent train derailments along the possible route of the shipments. Reps. Miller and Tauscher called for a Federal Railroad Administration study before any shipments begin, and Reps. Herger and Condit urged that the shipments go through Oregon or Washington, instead of California. Although the delay gives the delegation more time, it does not resolve the issue and the California members will continue to oppose the shipments. ______________________________________________________________ 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: ______________________________________________________________