JULY 2015

 

 

 

FEDERAL UPDATE

 

Congress is back in session after their July 4th recess. They will only be in session for 16 days before their summer recess. Before Congress leaves for their summer recess they aim to work on several pieces of legislation. First on the agenda is legislation that overhauls the No Child Left Behind law (S 1177). Also, on the agenda are measures to reauthorize the Export-Import Bank and fund surface transportation. It is expected that legislation for these two will be grouped together and introduced as a single bill. Congress will continue to work on medical bills. It is expected that the 21 Century Cures Act (HR 6) will be voted on during the week of July 6 and that other healthcare related acts, especially ones that repeal the medical device tax (HR 160 and HR 1190) will be debated throughout the upcoming weeks. Congress will continue to work on appropriation bills. If appropriation bills are not passed by the end of the fiscal year, September 30, the government could face another shutdown. After the August Recess, the House is scheduled to be in session for only ten days and the Senate is in session for fifteen days until the end of the fiscal year. All appropriation bills have been introduced, but only six have passed the House so far and none have passed the Senate. As of now, all spending bills will be filibustered by Senate Democrats and/or vetoed by the President. The spending bills that passed the House are listed below with their statuses:

 

·         The Transportation, Housing, and Urban Development appropriation bill (HR 2577) was approved by the Senate Appropriations Committee and was placed on the Senate Legislative Calendar No. 138.

 

·         The Military Construction and Veterans Affairs appropriation bill (HR 2029) was approved by the Senate Appropriations Committee and was placed on the Senate Legislative Calendar No. 98.

 

·         The Legislative Branch appropriation bill (HR 2250) was approved by the Senate Appropriations Committee and was placed on the Senate Legislative Calendar No. 116.

 

·         The Energy and Water appropriation bill (HR 2028) was approved by the Senate Appropriations Committee and was placed on the Senate Legislative Calendar No. 96.

 

·         The Department of Defense appropriation bill (HR 2685). A different version of the bill (S 1558) was approved by the Senate Appropriations Committee and was placed on the Senate Legislative Calendar No. 115.

 

·         The Commerce, Justice, and Science appropriation bill (HR 2578) was approved by the Senate Appropriations Committee and was placed on the Senate Legislative Calendar No. 120.

 

The appropriation bills that have not passed the House are listed below with their statuses:

 

·         The State & Foreign Operations appropriation bill was approved by the House Appropriations Committee and has been scheduled to be marked up by the Senate Appropriation Committee on July 9.

 

·         The Labor, HHS, and Education appropriation bill was approved by the House Appropriations Committee and a different version of the bill was Approved by the Senate Appropriation Committee and was place on the Senate Legislative Calendar No. 137.

 

·         The Department of the Interior and Environment appropriation bill was left as unfinished business by the full House and is expected to see a vote after recess. Also, a different version of this appropriations bill (S 1645) was approved by the Senate Appropriation Committee and was placed on the Senate Legislative Calendar No. 126.

 

·         The Homeland Security appropriation bill has not been introduced in the House, but it has been in the Senate (S 1619). S. 1619 was approved by the Senate Appropriations Committee and was placed on the Senate Legislative Calendar No. 122.

 

·         The Financial Services appropriation bill was approved by the House Appropriation Committee.

 

·         The Agriculture and FDA appropriation bill is scheduled for markup by the House Appropriation Committee on July 8.

 

2016 Race for the White House

Since our last update in the June issue of Capitol Commentary, additional presidential hopefuls have formally entered the race.   The latest to announce include Chris Christie, Jeb Bush, Bobby Jindal, and Donald Trump, who make the GOP tally 14. Republicans slated to announce include Wisconsin Governor Scott Walker on July 13 and Ohio Governor John Kasich on July 21. On the Democratic side, there are 5 contenders, with Jim Webb being the most recent to announce on July 2.

 

Health Care

 

Affordable Care Act

In a 6-3 decision authored by Chief Justice John Roberts, the Supreme Court upheld a key provision of ObamaCare. The King v. Burwell decision made on June 24 is a huge victory for President Obama, allowing 6.4 million people to continue to receive subsidies to purchase health insurance on the federal exchange in 34 states.

 

In a separate provision of the Affordable Care Act, the medical device tax repeal, HR 160, passed a House vote 280 to 140. The bill, that called for the repeal of a contentious 2.3 percent medical device tax, now heads to the Senate.  The tax went into effect at the beginning of 2013 and includes certain classes of regulated medical devices, including replacement joints, pacemakers, and other implantable devices. The bill may have enough bipartisan support to get through the Senate. However, President Obama has threatened to veto the repeal if it makes it to his desk.

 

Additionally, companies are grappling with the controversial Cadillac tax, one of the last components of the Affordable Care Act to go into effect. At issue is a 40 percent excise tax on the health benefits companies provide their workers above a certain threshold. In 2018, the tax will hit insurance and related incentives valued at more than $10,200 for singles and $27,500 for families. Taxing those benefits represents a major shift in tax policy.

 

21st Century Cures Act

The 21st Century Cures Act (HR 6) is expected to be voted on by the full House during the week of July 6. The House Rules Committee will meet on July 8 to discuss the bill, the last step for major legislation before it goes to the floor for a vote. The bill has been amended several times and the House Rules Committee released the modified version of the bill on July 2. The Congressional Budget Office estimates that the legislation would cost about $106.4 billion through 2020. To help offset the costs, the legislation would expand on the sale of oil from the Strategic Petroleum Reserve to 80 million barrels from 2018 through 2025. The bill also finds savings by pegging Medicaid payments for medical equipment to rates established by Medicare, making changes to Medicare Part B payments, and creating new programs to reduce Medicare Parts C and D prescription drug abuse. This version of the bill would not delay Medicare prescription drug plan payments. The modified version of the bill would only increase the NIH funding to $8.75 billion over the five years, while the original version of the bill would have increased funding to $10 billion over the five years. However, the new version of the bill would appropriate $1.86 billion annually from fiscal year 2016 through fiscal year 2020 for a new “NIH and Cures Innovation Fund.” The original bill would have appropriated more money to create separate funds and initiatives. The 21st Century Cures Act would authorize $10 million annually for the creation of drug development tools and $110 million for cures development. Besides funding the modified legislation would:

 

·         Exempt the FDA from sequestration on their user fees and streamline the FDA approval process on drugs, medical devices and procedures.

 

·         Create a program through the FDA to evaluate evidence based on clinical experiences and testing and have the FDA develop a risk-assessment model for the drug approval process that uses patient data.

 

·         Allow drugs that could treat a life-threatening disease be considered for an accelerate development plan, where the FDA could sponsor the plan, but also terminate it.

 

·         Allow drug sponsors to use previous data and information to repurpose a previously approved precision drug for rare and deadly diseases. These drugs that are repurposed would also be given a six month patent extension.

 

·         Require pharmaceutical companies that develop drugs that treat serious diseases to publish their policies for evaluating and responding to patient requests for access to unapproved drugs

 

·         Modify payment rates for Medicare and for infusion drugs.

 

The 21st Century Cures Act has been called an “exceptional” piece of legislation by lawmakers. The bill is supported by Democratic and Republican lawmakers along with many industry leaders. However, a small number of public health groups oppose the legislation and wrote a letter expressing concerns that the bill imposes harmful regulatory changes and financial incentives that would put patient safety at risk. Currently the bill has 230 cosponsors and should easily pass the House. The Senate Health, Education, Labor and Pensions Committee has held several hearings on this or similar legislation and is working on its own version of the bill.

 

Transportation

On July 31, federal highway, transit, and safety programs along with the Highway Trust Fund will expire. Congress is working on a long-term bill, but Congress has been unable to find a  sufficient bipartisan source of funding. Throughout several hearings this year, there have been many proposals and ideas on how to fund a long term bill. A number of long term bills have been introduced, but they do not include funding sources (ex. Drives Act). The most popular and most talked about suggestions to fund surface transportation are a miles driven tax, an increase to the gas tax, a yearly fee tied to vehicle registration, spending cuts, state funding (includes tolls), tax code overhaul and repatriation of foreign earnings. Congress is must unlikely to increase the gas tax. It is also unlikely that Congress will be able to work out the logistics of a miles driven tax or come to a bipartisan agreement on a tax overhaul by the end of the month. A bill with severe cuts to offset funding costs of a transportation bill would not make it through the Senate nor would it be signed by the President. Finally, because several committees share jurisdiction over this matter, a long-term surface transportation bill is unlikely to go from conception to completion by July 31. 

 

·         The House Committee on Transportation and Infrastructure Chairman, Bill Shuster settled for the patch bill that extended the deadline until July 31, but he had wanted an extension until the end of the year, something he will continue to support.

 

·         The House Ways and means Committee Chairman, Paul Ryan preferred that the extension would be to the end of the year and not just to July 31. For a long-term bill he thinks that the best funding source would come from and overhaul to the tax code.

 

·         The Senate Finance Committee Chairman, Orin Hatch has opposed the Administration’s proposed repatriation tax. He has supported past patch bills.

 

·         The Senate Committee on Environment and Public Works Chairman, Jim Inhofe marked up and approved S 1647. The bill is a six year $278 billion policy bill that gives states an incentive to tax electric vehicles. The bill also prioritizes the corridors that move freight. There would be a $90 billion funding gap that is not addressed by the bill. The bill has not been brought to the floor and there are no plans to bring it up for a full vote.

 

·         The Senate Commerce Committee plans to consideration multi-year bill in July. The committee along with Chairman John Thune is open to possibly incorporating the Amtrak reauthorization (S 1626) bill that the committee approved in June with a surface transportation bill.

 

Energy/Environment

 

Michigan v. EPA

In a 5-4 ruling, the Supreme Court blocked a top administration environmental effort on June 29, stating EPA restrictions on emissions of mercury and other pollutants by coal-fired power plants ignored the cost the rules imposed on the industry.  Michigan v. EPA focuses on the EPA’s first limits on mercury, arsenic and acid gases emitted by coal-fired power plants, known as mercury and air toxics (MATS).  The rule will remain while the Court of Appeals for the District of Columbia Circuit decides how the EPA can proceed. The EPA is reviewing the decision and will decide next steps, including reworking the regulation, once that process is complete.  Opponents of the rule, including energy companies, utilities and some states, say the Clean Air Act prohibits the EPA from regulating power plants’ carbon output if other pollution from the plants is also regulated under another section of the law.

 

Renewable Fuel Standard

Opposition from the oil industry may stop Georgia Republican Barry Loudermilk from pushing for the $30.2 billion amendment to the appropriations bill that would block the EPA from implementing the renewable fuel standard. This week, the House is considering the FY2016 interior-environment spending bill. The measure would block the EPA from using funds to advance the biofuels requirement. Concerns for the amendment include whether the measure-if passed- would result in the failure of the underlying appropriations bill, which contains language that would limit the government's ability to regulate fracking on federal land and other riders supported by the oil industry.

 

Clean Power Plan

The White House has begun its review of a proposed federal plan meant to guide states on how to comply with the Environmental Protection Agency's soon-to-be-finalized Clean Power Plan. The federal implementation plan, sent to the OMB on July 2, is meant to serve as a model for any states that refuse to implement the CPP. The EPA considers the plan as an interim measure to ensure mandated emission standards are met until states assume their role as the preferred implementers of the emissions guidelines. The proposed Clean Power Plan, would allow for states to set their own unique carbon emission rates for their own power sectors. The EPA believes that allowing states to regulate their own emission rates is necessary in order to determine to best way to achieve the desired reductions. The final version of the federal implementation plan associated with the CPP is expected to be released in August 2016.

 

Clean Water Act

Since its publication on June 19, the final rule clarifying the scope of the Clean Water Act jurisdiction has been challenged by 18 states. So far three federal courts are facing resulting lawsuits, and more cases are expected to arise from regulated industries in the near future. The rule is meant to take effect on August 25 but must pass a judicial review on July 13 in order to be considered final.

 

Supreme Court Rules Same-Sex Marriage Legal in 50 States

In Obergefell v. Hodges, the Supreme court ruled on June 26 by a 5-4 vote that the Fourteenth Amendment obliges states to license same-sex marriages and to recognize same-sex marriages from other states.  Justice Anthony Kennedy wrote for the majority with the four liberal justices. Each of the four conservative justices wrote their own dissent.  There are still a few holdouts, as various politicians take stands against the SCOTUS decision they argue is revisionist, or even illegal. The U.S. is now the 21st country to legalize same-sex marriage nationwide, including territories.

 

 

 

 

 

 

NEW JERSEY UPDATE

 

Public-Private Partnerships

On June 30, S2489 (the P3 bill) passed the New Jersey State Senate 39-1 with earlier Assembly amendments. It now goes to the Governor for his action.  If signed, New Jersey would join the ranks of more than 33 states and Puerto Rico that have laws authorizing P3s for highway and infrastructure projects, expanding upon an opportunity currently held solely by state and county colleges.

 

A public-private partnership (P3) is a contractual agreement formed between public and private sector partners that allow more private sector participation than is traditional. The agreements usually involve a government agency contracting with a private company to renovate, construct, operate, maintain, and/or manage a facility or system. P3s cover as many as a dozen types of innovative contracting, project delivery and financing arrangements between public and private sector partners. In P3s, the private sector performs functions normally undertaken by the government, but the public sector remains ultimately accountable for the facility and the overall service to the public.

 

In a transportation-related P3 project, a private sector partner designs-builds-finances-operates-maintains (DBFOM) a transportation infrastructure asset (road, highway, bridge, tunnel, etc.) with an emphasis on financing.  Under this type of arrangement, the private sector partner is primarily responsible for securing all or substantially all of the funding necessary to construct new transportation infrastructure and/or rehabilitate existing transportation infrastructure.

 

Other public-private partnerships can provide solutions for fiscal problems plaguing many American cities. Private equity investors make a large upfront payment to run a public service or utility — often for hundreds of millions of dollars. In return, they gain a concession to operate the service under a contract that can last for decades. Gaining much needed cash and operating efficiency are prime incentives for municipalities to undertake such transactions.  However, there are some concerns with requirements related to S2489.  These include issues concerning project labor agreements, long-range maintenance plans, proposal development costs, and the Request for Proposal (RFP) selection process, to name a few.

 

Pensions

Assembly Democrats introduced and voted a resolution on June 29 that urges Governor Chris Christie to use the state’s line of credit to make an upfront $1.3 billion pension payment in July 2015 rather than June 2016 in order to save approximately $90 million in additional investment income for the pension system. Senate and Assembly leaders authored the resolution (ACR244), announcing the measure prior to voting sessions in both houses. The resolution fueled debate over this component of the $33.8 billion budget Christie recently signed.

 

Earned Income Tax Credits

New Jersey's Legislature approved Governor Christie's proposal on June 29 to increase the value of a tax credit aimed at helping low-income residents. The bill passed 62-4-2.  The Assembly signed off on the conditional veto of the millionaire’s tax while increasing the State earned income tax credit from 20 percent to 30 percent of federal earned income tax credit for taxable years 2015 and thereafter.

 

 

 

 

 

 

NEW YORK UPDATE

 

Fracking Ban Official

On June 29, New York state regulators made official the state’s highly controversial ban on high-volume hydraulic fracturing, claiming fracking is too harmful to the environment and public health to be allowed.  After more than seven years of study with a record number of 260,000 public comments, the state DEP’s finding statement, in the works since December,  issued the final document needed to ban.  Fracking has been the top environmental issue in New York,  with more than 300 pages of the DEP’s final study devoted to responding to those comments.  The ban is not permanent, and could be rescinded, with lawsuits expected to be filed.  New York is the only state with significant natural gas resources to ban fracking.

 

Legislature End of Session Negotiations

New York lawmakers approved in June legislation to continue rent controls in New York City, a statewide property tax cap while providing rebates to homeowners over four years, as well as new provisions on state education curriculum and testing.  For rent-regulated New York City apartments, with more than two million tenants, the legislation will extend controls for four more years, raise the threshold for vacancy decontrols and add indexing through the rent guidelines board. Tax rebate checks will be statewide the first year and income-based the following  three years, with a top income limit of $275,000.  The bill also contains a four-year extension of tax breaks for city residential developers who provide some affordable housing in the apartments and condominiums they build in the city. However, it also requires an agreement within six months between real estate and labor interests to set construction wages.   As it relates to state education curriculum and testing, constituents have requested review of the Common Core curriculum and the age appropriateness of exams. 

 

 

 

 

OHIO UPDATE

Supreme Court Rules Redistricting Commissions Constitutional

On June 29, in a 5-4 ruling, the Supreme Court gave powers to Ohio and voters in other states to draw new, more competitive congressional districts for both political parties. The ruling was a setback to U.S. House Speaker John Boehner (R-West Chester) who favored the current system.  Historically,

the party controlling the Ohio legislature and the governor’s office designed districts, allowing favor to their candidates. Should the legislature or a citizens group place it in time for the November 2015 ballot, it will allow for Ohio voters to vote on a constitutional amendment to draw new congressional districts.  Most likely the vote will not take place until the November 2016 ballot.  Still, voters will have a chance this November to approve a companion measure changing the way the 99 districts for the Ohio House and the 33 districts for the Ohio Senate are drawn. If approved, a seven-member board of majority and minority party members would design new Statehouse districts in 2021. The new districts, which would last the traditional 10 years, would require the approval of at least two minority party members on the board. Otherwise, the maps would be redrawn four years later.

GOP Appoints Northeast Ohio Native to Work on Upcoming Republic National Convention in Cleveland

The Republican National Committee assigned two party officials to work on the GOP's 2016 convention to take place on July 18-21 in Cleveland.  RNC Chairman Reince Priebus announced that Sara Armstrong will be vice-president, and Chris McNulty will be director of community and political affairs.  McNulty, the national Republican Party's political director during the 2014 election cycle, is a Vermilion, Ohio native; graduate of Lorain Catholic High School and John Carroll University; worked for more than 10 years for the Ohio Republican Party including the role of executive director;  and served as political aide to U.S. House Speaker John Boehner.  Armstrong is the national GOP's chief operating officer, worked as a special assistant to then-President George W. Bush and deputy chief of staff to then-First Lady Laura Bush, among other White House jobs.

 

 

PENNSYLVANIA UPDATE

 

Budget Update

Governor Tom Wolf vetoed the entire state budget, House Bill 1192, along with liquor privatization, the fiscal code and the public school code on June 30.  This was the first time in recent history that a governor has rejected a budget in its entirety. Some of the concerns the Governor expressed as they relate to the budget include the following:  does not address the challenges PA faces; does not invest enough in education – spends less than 3 cents per school child/per day; no reasonable severance tax; no property tax relief; and does not deal with the budget in an honest, true fashion. Administration officials and legislative aides have said the state can continue to operate without a budget - and without noticeable interruption to state services - for at least several weeks. Following the Governor’s veto last week, talks resumed Monday in Harrisburg between Administration staff and all four legislative caucuses. Discussion focused on the main spending bill.

 

Online Gambling

As state budget discussions continue, at least four proposals to legalize online poker or all forms of casino gambling are before the Legislature.  State lawmakers could legalize internet gambling to help fill a $1.2 billion budget deficit in Pennsylvania, a state that could initially generate nearly $260 million in permit fees and taxes if all 12 casinos chose to opt in.  Proposed online tax rates are 14 percent, 28 percent and 54 percent.  With a tax rate and a $5 million licensing fee, online gaming could bring approximately $100 million to the state in its first year.  Opposition to online gaming in the Commonwealth cite the proposed high tax rate, poor performance in states that currently offer it, competition with legalized gambling, and addiction. Currently, New Jersey, Delaware and Nevada are the only states with legal online gambling. 

 

 

 

 

 

 

 

Duane Morris Government Strategies, LLC will continue to monitor these and other
important issues. Contact us at
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