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Washington Report – Second Quarter 2002
Much of the second quarter of 2002 was dominated by issues related to the nation's domestic security. For one, White House officials and members of Congress focused considerable attention on President Bush's recent proposal to create a cabinet-level Department of Homeland Security. In a sign of unity, key lawmakers from both sides of the aisle have pledged to work with the administration in an effort to approve the massive government restructuring plan prior to the anniversary of the September 11th terrorist attacks.
Achieving passage of the legislation will likely prove to be quite a challenge, however, as numerous congressional committees will be closely scrutinizing the proposal to fold over 20 federal agencies into the new department. Moreover, time may be running out for members of the 107th Congress to approve the homeland security plan, as a limited number of legislative days remain in the current session.
In addition to homeland security, lawmakers also have focused on several other high priority items, including issues related to the collapse of the beleaguered Enron Corporation, a major trade package, and a fiscal year 2002 emergency supplemental appropriations measure. With regard to the supplemental spending legislation, the Bush administration has threatened a veto of any bill that exceeds the $27.1 billion that the president requested earlier this year. It should be noted that the Senate version of the bill (S 2551) would cost $31.6 billion, while the Congressional Budget Office (CBO) has scored the House measure (HR 4775) at $29.6 billion.
On the fiscal year 2003 appropriations front, Congress continues to lag behind its pace from the last election-year spending cycle. As of this writing, only two of the 13 spending measures for next year - the Military Construction and Defense Appropriations bills - have passed the House. Two years ago, however, the lower chamber had approved nine appropriations bills prior to the July Fourth holiday, with one measure finalized by Congress and signed into law by then-President Bill Clinton.
Given the current pace, many observers are predicting that there is little or no chance that Congress will pass its budget prior to the start of the new fiscal year. In fact, there is talk that members will likely have to come back to Washington after the November elections to face a dreaded lame-duck session.
HOMELAND SECURITY
Background:
President Bush recently forwarded to Congress his legislative proposal to create a new cabinet-level Department of Homeland Security. As envisioned by the administration, the new department would be organized into four divisions: Border and Transportation Security; Emergency Preparedness and Response; Chemical, Biological, Radiological and Nuclear Countermeasures; and, Information Analysis and Infrastructure Protection. All told, 22 federal agencies consisting of roughly 170,000 employees would be merged into the massive new federal bureaucracy.
The department also would include a State, Local, and Private Sector Coordination office responsible for streamlining communication between all levels of government and the private sector. The office, which would essentially serve an intergovernmental affairs function, would coordinate all homeland security programs with state and local government officials.
It should be noted that the president's plan would fold the Federal Emergency Management Agency (FEMA) into the Emergency Preparedness and Response Division of the new department. Under the administration's proposal, the new department would continue FEMA's mission of employing a comprehensive, all-hazards emergency management program of preparedness, mitigation, response, and recovery. The department also would assume authority over federal grant programs for first responders, including those programs currently managed by the Department of Justice (DOJ), the Department of Health and Human Services, and FEMA.
The White House also has indicated that interoperable communications will be a top priority of the new cabinet department. Accordingly, the administration is planning to ensure that emergency responders at all levels of government are able to effectively communicate and coordinate efforts in the event of a major terrorist attack.
With regard to efforts to create a new first responder program, President Bush is recommending that Congress provide $3.5 billion to prepare, equip, and train state and local law enforcement, fire, and emergency medical personnel in the war against terrorism. According to administration officials, the president's First Responder Initiative represents an initial infusion of dollars, and is intended to be a long-term program.
Under the administration's plan, FEMA, acting under the authority of the new Department of Homeland Security, would be charged with administering the first responder grant program. The proposal calls for the Office of Domestic Preparedness (ODP), which currently resides in DOJ, to be transferred to FEMA in order to consolidate the nation's preparedness efforts under one agency.
The president's plan would allocate approximately $2 billion for state and local first responders to purchase a wide range of equipment, including personal protective gear, chemical and biological detection systems, and interoperable communications equipment. The proposal also would direct roughly $1.1 billion to train firefighters, police officers, and emergency medical technicians to respond and operate in the event of a chemical or biological attack. The balance of funding would be available to support state and local governments in developing comprehensive terrorist response plans, including a coordinated training and exercise program.
It should be noted that the Bush plan specifies that at least 75 percent of the funds would need to be directed to localities. However, the proposal leaves to the states the decision of how much funding individual jurisdictions would receive.
In addition to the First Responder Initiative, another major piece of the homeland security puzzle is in the area of bioterrorism readiness. For fiscal year 2003, the White House has requested roughly $5.9 billion to prepare for potential bioterrorist attacks, of which approximately $1.4 billion would be dedicated to state and local governments. The proposed increases would come on the heels of last year's appropriation of $2.9 billion in supplemental bioterrorism funds.
The administration's fiscal year 2003 funding request breaks down into four main areas:
Status:
Both the House and the Senate have included funds for first responders in their respective versions of the fiscal year 2003 emergency supplemental appropriations legislation. In the Senate, lawmakers approved nearly $175 million for first responder programs administrated through DOJ. The Senate bill would provide a portion of the funds under section 1014 of the USA Patriot Act for states and localities to make needed equipment purchases and to provide training and technical assistance to first responders. In addition, dollars would be available under section 819 of the Antiterrorism and Effective Death Penalty Act of 1996, which authorizes funds for local firefighter and emergency services training.
The upper chamber's bill also would provide $85 million to establish the Community Oriented Policing Services (COPS) Interoperable Communications Technology program. The funds would be designated for activities related to combating terrorism by providing grants to states and localities to improve communications within, and among, law enforcement agencies.
The legislation also includes $175 million for FEMA to improve state and local all-hazards operational planning, including response planning for natural disasters and events involving terrorism. Additionally, the bill recommends $300 million for FEMA's Fire Grant Program as authorized by the Federal Fire Prevention and Control Act of 1974.
The Senate measure also would provide $92 million for the existing national urban search and rescue system, $115 million for interoperable communications equipment for firefighters and emergency medical services personnel, and $56 million for grants to state and local governments for emergency operations centers.
It should be noted that the House-passed version of the fiscal year 2002 supplemental appropriations bill contains less funding for homeland security initiatives. Nonetheless, the measure does include $175 million for various DOJ-administered counter-terrorism programs, including funds for first responder training and equipment.
The House version of the bill also would provide over $150 million for emergency management planning and assistance for expenses related to the September 11th terrorist attacks. Of the funds, $50 million would be available for the Bush administration's Citizen Corps initiative, while $56 million would be for improvements at state emergency operations centers. The measure also would provide $5 million for the development of mutual aid agreements, as well as over $32 million to increase and enhance the preparedness of the national urban search and rescue system.
In a victory for localities, the House bill includes local consultation provisions drafted by CSAC and the League of California Cities. The original version of the legislation did not include language addressing local first responders with respect to the development of statewide strategic plans.
The language, pushed by Reps. David Dreier (R-CA) and Sam Farr (D-CA), would ensure that state emergency response plans address immediate first responder needs. The provision specifies that states, in the development and implementation of their plans, are expected to consult with local governments regarding the scope, design, and allocation of resources so that state and local strategies are consistent.
In other developments, the Senate Environment and Public Works Committee recently approved legislation (S 2664) that would authorize roughly $3.5 billion per year for fiscal years 2003-2006 for a new first responder program. The legislation would require that 75 percent of the funds be passed through to local governments and "local entities." In addition, the Senate bill would require that states provide the funds to localities no later than 45 days after receipt.
Across Capitol Hill, lawmakers in the House have not yet considered legislation to authorize a new first responder program. Nonetheless, the lower chamber will likely consider a similar package, either as an authorization measure or as part of a fiscal year 2003 appropriations bill.
With respect to bioterrorism, President Bush recently signed into law the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (PL 107-188). The new law provides for increases in hospital capacity, heightened security at laboratories, and special protections for the nation's water and agricultural supplies.
In addition, the act authorizes a new assistant secretary at HHS for bioterrorism. For fiscal year 2003, $1.1 billion is authorized for state and local governments, while $520 million is provided for community and hospital preparedness.
Because the new law was enacted during the midst of the funding process for next fiscal year, lawmakers sought to avoid making changes to the fiscal year 2003 grant process for improving state, local, and hospital preparedness. Accordingly, grant recipients will be a state or states and local political subdivisions. Additionally, the act specifies that all grants to local political subdivisions must be consistent with a state's strategic plan.
Under the new law, the Secretary of HHS will determine block grant allocations to states based on a variety of factors, including population and evidence of state or local financial commitment, among other criteria. In addition, certain political subdivisions with substantial populations and public infrastructure will also qualify for separate, individual grants.
For fiscal years 2004 through 2006, eligible grant recipients will also include partnerships of one or more states, hospitals, and political subdivisions with the intent of covering a wide geographic region.
Activity:
CSAC's Washington representatives were very active on the homeland security front during the second quarter of 2002, engaging in the following activities:
TANF REAUTHORIZATION
Background:
The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996 is set to expire at the end of fiscal year 2002. Accordingly, Congress is currently engaged in the process of reauthorizing the Temporary Assistance to Needy Families (TANF) program, as well as several other key welfare-related programs.
Although this year's deliberations were not expected to be as divisive as the debate from six years ago, there has nonetheless been a great deal of partisanship surrounding the current reauthorization process. For starters, many Democrats have questioned the Bush administration's emphasis on marriage promotion programs. Additionally, a number of House and Senate Democrats vehemently oppose Republican proposals to increase the number of hours that welfare recipients would be required to work.
Status:
In mid May, the full House approved the GOP's TANF reauthorization bill (HR 4737). The legislation, patterned after the Bush administration's welfare proposal, was adopted on a near party-line vote of 229-197.
During floor consideration, Democrats offered an alternative bill (HR 3526) that differed dramatically from HR 4737 in several major respects. For one, the Democratic proposal would have made legal immigrants eligible for federal cash assistance. Additionally, HR 3526 also would have directed significantly more funding for child care services over the five year life of welfare reauthorization. After a highly contentious floor debate, the Democratic alternative was rejected on a 198-222 vote.
Among other things, the House-passed Republican welfare bill would freeze funding for the TANF block grant at the current level of $16.5 billion, with no annual inflationary adjustments. HR 4737 also would continue current law provisions that restrict the amount of time a family can receive TANF benefits to five years.
With regard to child care funding, the House bill would provide $2.9 billion in mandatory child care funding for fiscal years 2003-2007. This funding level would represent a $1 billion increase over current spending levels. In addition, the bill authorizes $2.3 billion in discretionary Child Care and Development Block Grant (CCDBG) funding beginning in fiscal year 2003. Under the legislation, the authorization level would increase by $200 million per year, topping out at $3.1 billion in fiscal year 2007. (The current CCDBG authorization stands at $2.1 billion.)
The bill also would increase from 30 to 40 the number of hours each week that welfare recipients must engage in work and/or work-related activities. HR 4737 stipulates that the first 24 hours each week must be spent in direct work activities, and would allow states to count families engaged in 16 hours of other qualified activities, including substance abuse treatment, rehabilitation activities, work-related training, and job search or job readiness assistance. It should be noted that the bill would allow families to engage in these activities for no more than three months in any period of 24 consecutive months, with limited one-month extensions available only for individuals who are completing a training program.
HR 4737 also would increase the percentage of families in a state that must engage in work activities by five percentage points per year. Under the legislation, the current 50 percent work participation rate would increase to 70 percent by fiscal year 2007 for all TANF families (this differs from current law, which includes separate work participation rates for single and two-parent families).
According to the CBO, if states are required to implement the 40-hour requirement of HR 4737, the cost to states would total up to $11 billion over the next five years. This includes $6 billion in TANF-related work program costs, and $5 billion in increased child care costs for work program participants. (The California Legislative Analyst's Office estimates that the House legislation would cost California $2.8 billion over five years.)
The House legislation also would create a new superwaiver authority whereby states or sub-state agencies could coordinate multiple public assistance, workforce development, or related programs. The demonstration projects would need to be designed for the purposes of supporting working individuals and families, helping families escape welfare dependency, promoting child well-being, or helping build stronger families. Under the bill, a state or sub-state agency that administers two or more specified programs could apply to the relevant federal agencies for waivers of statutory and regulatory requirements, including application procedures, performance standards, and reporting requirements.
Finally, HR 4737 would require states to terminate all federal assistance to a family (including the children) if a parent fails to meet program expectations for two months. If implemented, the so-called "full-family" sanction would be a significant departure from current law, which provides states with considerable flexibility in designing sanction policies. It should be noted that the bill appears to exempt certain states, including California, from the full family sanction requirement.
Across Capitol Hill, the Senate Finance Committee recently approved its version of TANF reauthorization legislation on a 13-8 vote. The as-yet unnumbered bill, sponsored by Senator John Breaux (D-LA), combines elements of recommendations that are backed by both parties and the Bush administration.
The measure would provide full funding under the TANF block grant, and would increase funding for child care by $5.5 billion. It should be noted that no state match on the new child care funding would be required for the first three fiscal years after the bill's enactment.
Like the House-passed bill, the Senate measure would increase work participation rates by five percentage points per year, from the current 50 percent to 70 percent in fiscal year 2007. The Senate legislation, however, differs from the House measure in the number of hours that families would be required to work per week. Under the upper chamber's bill, welfare recipients would be required to work a 30 hour work week.
In addition, the Senate legislation includes a much broader definition of work, meaning more activities would count toward meeting the work requirements.
The bill also includes a provision that would permit states to serve legal immigrants with TANF funds, an option that is not included in the House bill. Additionally, the Senate measure would allow states the option of serving legal immigrant children and pregnant women under Medicaid and the State Children's Health Insurance Program.
It is unclear when the Senate TANF reauthorization bill will reach the floor of the upper chamber. Given the Senate's slower progress, some congressional offices have expressed concern that lawmakers may not have time to reconcile the competing House-Senate TANF measures. As a result, there is some talk of approving a short-term extension of current law through next fiscal year.
Activity:
CSAC's Washington representatives were extremely active on the TANF reauthorization front this past quarter, engaging in the following activities:
CHILD SUPPORT ENFORCEMENT
Background:
Under the Family Support Act of 1988, Congress required every state to implement a statewide automated child support enforcement system. Pursuant to the act, California entered into a contract with a vendor in 1992 to develop the state's computer system. After several years of development, however, the system failed and the contract was subsequently terminated one month after the federal implementation deadline.
Since 1998, California has incurred significant financial penalties as a result of not having a statewide computer system certified by the federal government. The penalties are levied in the form of reduced federal share of child support administrative costs.
It should be noted that current law is structured in such a way that the state is actually penalized for increased investment in the child support program. By way of illustration, for every additional dollar that California spends on program enhancement, the state must budget $1.30 to cover the federal penalties. In fact, last year, the state spent an additional $145 million on the child support program, resulting in a $41 million increase in federal penalties.
To date, California has paid a total of $217 million in penalties, with an additional $157 million sanction being assessed for fiscal year 2002. The penalty will rise to $181 million beginning in fiscal year 2003 and each subsequent year.
Despite the ongoing penalties, county child support agencies are actively partnering with the new state Department of Child Support Services (DCSS) to efficiently implement many positive programmatic reforms. Even during this transition period, California's child support collections are improving and have reached the $2 billion mark for the first time in history, and are estimated to reach $2.25 billion this year. However, the significant progress of California's child support enforcement program could be seriously undermined if escalating federal penalties continue to be assessed against the state.
It is important to note that the State of California has paid the full cost of the automation penalties since they were first imposed back in 1998. However, earlier this year, Gov. Davis proposed passing along half of the child support penalties to counties. At this point, the State Legislature appears to have rejected the governor's proposal, meaning counties should be insulated from paying the penalties at least through the current fiscal year.
Status:
In early June, Rep. Matsui introduced the Child Support Reinvestment Act of 2002 (HR 4857). The legislation would change the base year upon which the federal child support penalties are calculated (to fiscal year 1997). This change would have the effect of reducing the current sanctions by roughly 50 percent. In addition, the bill would allow the state of California to reinvest a portion of the ongoing penalty dollars back into the child support program if the state increases spending by specified percentages.
The Matsui bill has garnered 26 California cosponsors, of which three are Republican members. However, the legislation faces an uphill battle in the House, where a number of key Republicans within the California delegation are not currently in support of altering the child support penalty structure.
Across Capitol Hill, Sens. Feinstein and Boxer also are exploring ways to alleviate the current penalties. Feinstein recently sent a letter to the chairman of the Senate Finance Committee urging that the upper chamber's TANF reauthorization bill include child support penalty relief for the state of California. As is the case in the House, however, the prospects for penalty relief remain slim in the Senate.
With regard to the state of California's ongoing automation efforts, DCSS recently received a single, $1.2 billion bid on a proposed contract that it hopes will guarantee the delivery of a new functional system. Counties have expressed concern over the State's present course, however, questioning whether such a bid represents the best value for California taxpayers.
Additionally, counties remain concerned that a $1.2 billion program investment would generate $1.3 billion in federal penalties between now and 2006 (with 2006 representing the most optimistic timeframe for certification of the proposed new system). The State also is expected to incur $1.2 billion in training costs associated with the implementation of the automated system.
In response to recent developments, California counties are asking the state's congressional delegation to push legislation that would prohibit the State from passing any future automation penalties on to counties. As justification for such a request, counties have pointed out that the State excluded them from the design and implementation of the first failed attempt to create a statewide automated system. Additionally, the State has largely precluded counties from participating in the current automation procurement process as well.
It should be noted that counties also are asking lawmakers to work with the federal Office of Child Support Enforcement (OCSE) in an effort to ensure that OCSE will approve the linkage of two existing child support systems in California. Under the counties plan, two present systems (ARS and CASES) would be connected to a common database to satisfy the requirements of current law. In addition, the proposal would require the 21 counties in the state that are not on either ARS or CASES to migrate to one of those two systems.
CSAC estimates that ARS and CASES could be converted to relational database/browser-based user interface that all counties could easily implement for less than $150 million. Furthermore, CSAC projects that the conversion process could be completed by September 30, 2004, meaning that much of the remaining federal penalties could ultimately be avoided.
Activity:
CSAC's Washington representatives engaged in the following child support-related activities this past quarter:
DISPROPORTIONATE SHARE HOSPITALS/UPPER PAYMENT LIMIT
DSH Background:
The Disproportionate Share Hospital (DSH) program provides payments to hospitals that serve a disproportionate number of low-income Medicaid or uninsured patients. These safety-net hospitals offer an open door to the most vulnerable Californians, fulfilling a unique role in the state's health care delivery system. With county and University of California hospitals providing California's contribution to this joint federal-state effort, over 130 public and private hospitals received payments of approximately $2 billion in 2000-2001.
The Balanced Budget Act of 1997 established a series of cuts for DSH hospitals across the country that amounted to $10.4 billion from 1998-2002. Under the Medicare, Medicaid, and S-CHIP Beneficiary Improvement Act of 2000, however, Congress postponed the cuts scheduled for fiscal years 2001 and 2002. Nonetheless, beginning in fiscal year 2003, the DSH program is again facing further steep decreases; for California, the impact is estimated at $184 million.
In response to the cuts, Rep. Ed Whitfield (R-KY) and Sen. Lincoln Chafee (R-RI) have introduced the Medicaid Safety Net Continued Preservation Act (HR 854/S 572). The legislation would remove the impending "cliff" in DSH payments and allow each state's allotment to grow at the rate of inflation. At this time, California's senators and 38 members of the state's House delegation have co-sponsored the legislation.
Status:
In late June, the House approved legislation (HR 4954) that would establish a prescription drug benefit under the Medicare program. Included in the measure is a provision that would increase Medicaid DSH payments. However, the increases are less generous than those called for by HR 854, the bill supported by county and public hospital advocates.
According to the National Association of Public Hospitals and the California Healthcare Association, the provisions in HR 4954 would provide California with an additional $55.4 million in fiscal year 2003, compared to the $174.5 million that HR 854 would direct to the state. Under current law, California's DSH allotment for next year will be $900 million.
Republican members of the state's congressional delegation who sit on the House Energy and Commerce Committee are working closely with Speaker Hastert's office in an effort to increase funding for DSH, though success is not guaranteed. The immediate obstacle is cost, with HR 854 costing approximately $900 million in fiscal year 2003, compared to the $400 million cost of HR 4954. In addition, other prominent lawmakers are simply no longer supportive of programs such as DSH, which utilize intergovernmental transfers.
On the Senate side, the upper chamber is expected to consider a prescription drug package later this year. However, the House and Senate would likely have a difficult time crafting a final compromise bill as the mid-term elections draw near.
Activity:
CSAC's Washington liaisons engaged in the following activities during the second quarter of 2002:
UPL Background:
On January 14, 2002, the Centers for Medicare and Medicaid Services finalized a rule overturning a bipartisan congressional agreement permitting public hospitals to receive 150 percent of what Medicare would pay for the same health services. This agreement was reached in November 2000 between Congress and the Clinton administration in recognition of the high costs incurred by public hospitals in their unique role as safety-net providers.
The reduction of the UPL to 100 percent will result in a loss of at least $1 billion for public and private hospitals in California during the transition to the new rule, and $300 million per year after that. Although the UPL proposal would apply only to public hospitals, the new rule would affect some private children's and teaching hospitals because of the way California's supplemental Medi-Cal payment system is structured. In sum, the UPL changes will place California's Medi-Cal program in peril and will reduce or eliminate emergency room and trauma care services.
Status:
A federal district court judge in Arkansas ruled May 13 that HHS can implement the UPL rule, writing that a 100 percent reimbursement rate is sufficient. If such a rate is shown to be insufficient, however, HHS and public hospital stakeholders must seek congressional involvement to adjust payment levels, the judge said.
Following the ruling, Rep. Eliot Engel (D-NY) and Sen. Paul Wellstone (D-MN) introduced a resolution of disapproval (HJRes 92, SJRes 37), a procedure by which Congress can overturn a federal rule with a majority vote in the House and Senate. Such resolutions still require the president's signature. Although Rep. Engel attempted to add his resolution to HR 4954 during the Energy and Commerce Committee's consideration of the bill, the amendment was ruled non-germane.
On a related matter, Gov. Davis's Washington office recently reported that the Center for Medicare and Medicaid Services (CMS) is challenging the renewal of the Selective Provider Contracting Program (SPCP) 1915(b) waiver as submitted by the state of California. Under the waiver, the State negotiates with selected California hospitals to provide Medi-Cal services, allowing the State to make supplemental Medicaid payments to other hospitals statewide for emergency services, trauma care, and medical education.
Under the 1915(b) waiver, the cost of the program cannot exceed what it would have been in the absence of the waiver. According to CMS, the agency does not believe that California should be permitted to count managed care savings as part of the SPCP. If CMS ruling stands, California's ability to make supplemental Medicaid payments would be severely cut back. In fact, it is estimated that California could lose as much as $300 million over the next two years, forcing hospitals to reduce emergency services, or in some cases, even close down.
Activity:
CSAC's Washington representatives engaged in the following UPL-related activities during the second quarter:
STATE CRIMINAL ALIEN ASSISTANCE PROGRAM
Background:
The State Criminal Alien Assistance Program (SCAAP) provides federal assistance to states and local governments for the costs incurred for the imprisonment of undocumented criminal aliens. Traditionally, the State of California has received approximately 40 percent of all SCAAP funds that are appropriated. It should be noted, however, that the total cost of incarcerating undocumented aliens in California alone is estimated to be in the neighborhood of three times what California receives.
Moreover, the nationwide cost to states and localities for housing criminal aliens is believed to be approximately $2 billion. Nonetheless, the federal government has recently appropriated only $565 million of this expense.
In the current fiscal year, California is receiving approximately $143 million in SCAAP funding, or a decrease of $15 million from last year. The state's counties, however, are receiving an $8 million increase, for a total of nearly $75 million in fiscal year 2002 funding.
With regard to President Bush's fiscal year 2003 budget request, the administration has proposed entirely eliminating the SCAAP program. The White House has attempted to justify its proposed cut, claiming that SCAAP does little or nothing to prevent violent crime. The administration also has pointed to the fact that the program only provides partial reimbursement to states and localities.
On the legislative front, Sen. Feinstein has sponsored bipartisan legislation that would reauthorize the expired SCAAP program. The measure (S 862) would set the program's authorization ceiling at $750 million per year through fiscal year 2006.
Legislation also was introduced in the first session of the 107th Congress to provide federal reimbursement for the indirect costs associated with the incarceration of illegal criminal aliens. The bills, known as SCAAP II, also would authorize funds to reimburse states and localities for emergency health services furnished to undocumented aliens. In addition, the measures (HR 823/S 169) would authorize dollars to reimburse jurisdictions for the costs of incarcerating juvenile criminal aliens.
Status:
The Senate Judiciary Committee recently postponed a markup of S 862. However, the legislation is expected to be considered in committee in the near future.
With regard to fiscal year 2003 funding for SCAAP, neither the House nor the Senate has begun consideration of the Commerce-Justice-State (C-J-S) Appropriations bill. While the House bill is expected to provide level funding for the program, the Senate measure will likely include very little funding for SCAAP.
Activity:
CSAC's Washington-based representatives engaged in the following SCAAP-related activities during the second quarter:
MONITORING AND REPORTING
LOCAL LAW ENFORCEMENT BLOCK GRANT
Background:
The Local Law Enforcement Block Grant (LLEBG) continues to remain a popular funding program among the nation's counties and cities. The block grant, which provides local governments with funds to underwrite projects to reduce crime and improve public safety, is currently funded at $400 million.
It should be noted that the current funding level represents a $123 million reduction. Prior to the cut, the block grant had been consistently funded at approximately $523 million per year.
In California, the state's localities received nearly $63 million from the LLEBG program in fiscal year 2001. California's counties are utilizing LLEBG funds for a wide variety of public safety programs, including equipment purchases, hiring of personnel, and crime prevention programs.
Status:
The Bush administration has proposed eliminating the LLEBG in fiscal year 2003. Alternatively, the administration is proposing to fold the LLEBG and the Byrne Memorial Block Grant ($595 million this year) into a new $800 million Justice Assistance Grant Program.
It is unclear how federal funds would be distributed under the administration's proposal. Accordingly, there is concern that the new program would not provide direct funds to localities, and instead could leave to the states the decision of how to allocate and/or spend the dollars.
Like SCAAP, the LLEBG must be funded as part of the fiscal year 2003 C-J-S spending bill. At this point, lawmakers in the House and Senate have not yet begun consideration of the legislation.
TEA-21
Background:
In June of 1998, then-President Bill Clinton signed into law the Transportation Equity Act for the 21st Century (TEA-21). The six-year, $217 billion TEA-21 law authorized record levels of funding for both roads and transit, and departed from previous surface transportation acts by requiring that all federal gasoline tax revenues go to the Highway Trust Fund to be solely used for transportation spending.
TEA-21 created a mechanism that provides for the annual adjustment of highway funds, known as revenue aligned budget authority (RABA), which ensures that highway gas tax receipts equal funding authority. For the first few years of TEA-21, the adjustment translated into a positive RABA because gas tax receipts were higher than expected under TEA-21, providing California with millions of dollars in extra highway funds.
The U.S. Department of Transportation recently announced earlier this year that the Highway Trust Fund experienced a negative RABA in 2001, meaning that fewer revenues flowed into the trust fund than anticipated. President Bush's fiscal year 2003 budget proposal reflects this drop in revenues by requesting a highway funding level of $23.8 billion, compared to nearly $32 billion in fiscal year 2002. The administration stressed that the calculation of the adjustment is not a policy position, but rather a budget calculation based on law.
While the adjustment affects highway and bridge programs, as well as the congestion mitigation air quality improvement program, under TEA-21, the mass transit account of the Highway Trust Fund is exempt from this adjustment. Nevertheless, the proposed $8.6 billion reduction in federal highway spending would translate into a roughly $620 million transportation funding cut for the state of California.
Status:
In response to the funding reduction, key members of Congress introduced the "Highway Funding Restoration Act," which would restore part of the $8.5 billion shortfall. The bipartisan, bicameral legislation (HR 3694/ S 1917) introduced on February 7, 2002, would amend TEA-21 by restoring a minimum of $27.746 billion for fiscal 2003.
In May, the House approved HR 3694, which includes "sense of Congress" language recommending that RABA be repaired. The bill also includes $4.4 billion in additional highway funding that can only be spent for transportation purposes.
On the Senate side, the Environment and Public Works Committee cleared S 1917 in early June, increasing federal highway funding in fiscal year 2003 to $28.9 billion. The Senate measure also includes "sense of the Congress" language stating that RABA should be fixed to allow for more predictability and stability in highway funding.
On a different track, the fiscal year 2002 supplemental appropriations legislation that currently is in conference would restore a portion of the highway funding shortfall. The House-passed supplemental mirrors HR 3694 and would restore $4.4 billion, while the Senate version would also reinstate that amount, but would allow Senate appropriators to increase highway funding to as high as $28.9 billion.
With regard to the reauthorization of TEA-21, Congress has held a series of hearings this year to discuss various legislative options. Congressional committees are expected to begin drafting a reauthorization bill this fall, but legislation is not likely to be introduced until sometime early next year.
It should be noted, however, that the chairman of the Senate Finance Committee, Max Baucus (D-MT), is preparing to introduce a bill soon to reauthorize the revenue-related part of the federal highway and transit programs. Chairman Baucus would redirect some of the proceeds from the tax on gasohol from the general fund to the Highway Trust Fund. This provision is included in the Senate's version of the energy bill.
For its part, the Bush administration is expected to have its reauthorization proposal ready by January or February of next year. The administration's package is likely to continue central elements of TEA-21, including budgetary firewalls and funding flexibility.
Both Congress and the administration are almost certain to consider the following issues as part of the TEA-21 reauthorization process: environmental streamlining, the ethanol tax break, an increase in highway funding, and mass transit allocations. The administration recently ruled out a hike in the gasoline tax, but key lawmakers may consider indexing or boosting fuel taxes to support the nation's infrastructure.
PAYMENT-IN-LIEU-OF-TAXES
Background:
The Bush administration requested $165 million for PILT in its fiscal year 2003 budget, a $45 million reduction from the fiscal year 2002 level. If enacted, this reduction would reverse much of the recent funding increases after years of stagnant payments.
Notwithstanding the proposed cuts, PILT funding still falls far short of the program's $335 million authorization level. Moreover, current funding does not keep pace with the true cost of complying with various federal mandates.
Status:
The House Interior Appropriations Subcommittee and the full Senate Appropriations Committee recently approved $220 million for PILT as part of the fiscal year 2003 Interior Appropriations bill. This action constitutes a sharp reversal of the Bush administration's stated policy of returning to "historical" PILT funding levels.
With both the current House and Senate Interior bills including the same boost in funding for PILT, it appears very likely that the program will receive an increase beginning next year. Even with the approved increase, champions of PILT may attempt to add even more funding as the spending bills move to the House and Senate floor.
We hope this information is useful to California County officials. If you have any questions or comments, please do not hesitate to contact our office.
Mailing Address: 1100 K Street, Ste. 101, Sacramento, CA 95814 - Phone: 916-327-7500
