Appropriations Bills

On Wednesday, June 9, the House Appropriations Committee approved its 302(b) allocations for $821.4 billion in fiscal year (FY) 2005 discretionary budget authority for its 13 subcommittees. The panel agreed to proposals by committee chairman C.W. Bill Young (R-Fla.) to add $1.2 billion to the Homeland Security Subcommittee to fund the Coast Guard, reducing the Defense Subcommittee allocation by the same amount, and to adjust the jurisdiction of seven subcommittees by shifting five programs. An amendment by the panel's ranking member Rep. David Obey (D-Wis.) to add $14 billion to the allocations and offset it by repealing several tax cuts was rejected. An additional markup was scheduled for Tuesday, June 15, and is expected to address defense and potentially energy/water spending bills.

In addition, the committee approved a $32 billion spending bill for the Department of Homeland Security (DHS), with state and local first responders and other activities to receive about $4.1 billion. The committee accepted an amendment adding language that would prevent DHS from contracting with expatriate corporations. The bill provides approximately $1.2 billion for the state formula grant program, which is a reduction from the FY 2004 level of $1.7 billion. It also includes $1 billion for the high-threat, high-density urban areas, with $100 million for rail security; approximately $125 million for port security; approximately $600 million for firefighter grants; and $2 billion for disaster relief.

The committee also approved an FY 2005 spending bill totaling $19.5 billion for the Department of the Interior, representing about $257 million less than current funding and $220 million less than the President's request. The bill includes about $92 million for state land acquisition grants under the Land and Water Conservation Fund (LWCF); $49 million for federal land acquisition under LWCF, which is $104 million less than the President's request; and $2.6 billion for the National Fire Plan. The committee reduced funding for a number of wildlife-related grant programs. In addition, the committee did not include the President's proposal for an additional $53 million for the Abandoned Mine Reclamation Fund because Congress has yet to approve changes to the current fee collection and allocation system.

The House Energy and Water Development Subcommittee also passed a $28 billion Energy and Water Development appropriations bill for FY 2005. The funding level reflects $734.5 million above FY 2004 levels and $49.6 million above the President's request. The bill includes $343 million for renewable energy programs, an increase of $1 million over FY 2004 levels; $4.82 billion for the Army Corps of Engineers civil works program, an increase of $243 million over FY 2004 levels; and $7.8 billion for Department of Energy environmental management cleanup activities, which is $330.6 million over FY 2004 levels.

On the Senate side, a preliminary draft of the Senate Appropriations Committee's 302(b) allocations indicates that 12 of its 13 subcommittee will receive the same discretionary authority as the House subcommittees but the Defense Subcommittee would likely receive a smaller amount. Since a budget resolution has not been enacted in the Senate, the committee has to work from the $814 billion spending cap enacted in last year's budget, which is lower than the $821 billion budget level contained in the House-passed budget resolution.

House Appropriators Approve Reduced Yucca Funding

A House Appropriations Subcommittee approved the FY 2005 Energy and Water funding bill with only $131 million allocated for Yucca Mountain, $749 million below the President's request. House and Senate appropriators overwhelmingly support increased funding for Yucca Mountain, but are at odds with the Administration over offsetting the additional spending by tapping into the Nuclear Waster Fund.

The proposal would require a change in existing law before the funds can be used, which lawmakers say will not happen this year. Rather than squeeze funding from other programs within the Energy and Water bill, the subcommittee approved only the remaining $131 million. The feud between Congress and the White House on Yucca funding will likely continue, but some members and nuclear lobbyists believe that a solution will be reached before the end of the year, even if Nuclear Waste Fund money is not available.

Energy Secretary Spence Abraham said in a May 24 letter that such a deep cut in Yucca funding would result in major layoffs and place DOE's planned construction license submission in December at risk, and probably delay the opening of the repository in 2010.

Transportation Conferees Hold First Meeting

House and Senate conferees to the surface transportation bill (H.R. 3550) held an initial meeting on Wednesday, June 9, approving a handful of non-controversial items identified by committee staff. Among these were provisions that would: set aside 10 percent of funds spent for highways, transit, and research for small businesses owned by economically and socially disadvantaged individuals; continue authorization for the Puerto Rico Highway Program; require regulations for high-visibility clothing worn by highway workers; allow public transportation systems to use transit funds for security improvements; authorize a "new freedom" program for the elderly and disabled; terminate a light rail technology pilot program; and emphasize that contracts for services should be competitively bid.

The next conference committee meeting is scheduled for June 23. Conferees still face the challenge of reconciling the $36 billion gap in funding between S. 1072 and the $282 billion House-passed bill. The Administration has issued a veto threat for any bill over its proposed $256 billion measure. The current extension expires on June 30, but with the Independence Day recess scheduled to begin on June 25, discussions about the length of the next extension may begin next week.

DHS Announces Firefighter Grants

Last Friday, June 4, the Department of Homeland Security (DHS) announced the first round of firefighter grant awards of approximately $4.6 million to about 76 communities in 34 states. The awards are part of the FY 2004 Assistance to Firefighters Grant Program that helps local fire departments purchase firefighting equipment, fund firefighter health and safety programs, enhance emergency medical services programs, and conduct fire education and prevention programs. Fire departments apply directly for grants, which are administered by the DHS Office for Domestic Preparedness (ODP). A total of $750 million was appropriated for this program in FY 2004, and DHS intends to make approximately 8,000 awards over the year. More information about the firefighter grants program and a list of communities receiving awards are on the ODP website. http://www.ojp.usdoj.gov/odp/

GAO State Fiscal Relief Report

A draft report by the General Accounting Office (GAO) criticized the $10 billion in state fiscal relief that was provided in 2003. It contends that the aid was distributed too late to be of much value as an economic stimulus and that it could prove to be a disincentive to plan for future budgetary shortfalls because states may rely on federal government assistance instead of funding budgetary reserves. The draft report, released yesterday by Senate Budget Committee Chairman Don Nickles (R-Okla.), an opponent of the aid package, also noted the difficulty in tracking the unrestricted funds and questioned the effectiveness of the per capita basis distribution formula.

The report appears flawed because the conclusions it reaches are based on previous studies by GAO rather than on a unique analysis of state fiscal relief. In addition, it does not address the fact that at the time of the aid, states were experiencing the worst fiscal situation in the past six decades. It also fails to include the $10 billion in fiscal relief provided to the states through a temporary increase in the Federal Medical Assistance Percentage (FMAP), which was much more targeted to states in need than the $10 billion in block grants that were based on a per capita basis.

CMS Administrator Testifies on Prescription Drug Discount Cards

At a hearing on Tuesday, June 8, before the Senate Finance Committee, Centers for Medicare and Medicaid (CMS) Administrator Mark McClellan defended the new Medicare prescription drug card program. He testified that more than 3 million seniors have joined the program since enrollment began on May 3, with 2.4 million of that total automatically enrolled through their Medicare health maintenance organizations. Concerns were raised by several Senators about the confusion surrounding the number of cards available and the low participation by poor seniors in the program. Several Democratic Senators advocated an automatic enrollment for low-income beneficiaries from the Medicare Savings Program (MSP). In response, Administrator McClellan noted that seven states are currently planning to automatically enroll low-income seniors but that "practical concerns" must be addressed before further steps are taken, including ensuring that states have the deeming authority, the willingness to implement, and the ability to ensure that other prescription drug coverage is not being utilized.

Sales Tax Deduction Added to Corporate Tax Bill

House Ways and Means Committee Chairman Bill Thomas has added a federal deduction for state sales tax payments to his revised corporate tax bill (H.R. 4520) in an effort to attract additional support. The proposal would allow taxpayers to deduct from their federal taxable incomes either their state income tax or sales tax payments. State sales taxes were deductible until 1986. Supporters of the provision argue that the elimination of the sales tax deduction unfairly penalizes taxpayers who reside in states that do not impose income taxes such as Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming.