This Week on the Hill
The House is in recess until September 5.
The Senate convenes today and will hold a cloture vote on the nomination of Kevin Newsom to be U.S. circuit court judge for the Eleventh Circuit. Several committees have scheduled hearings this week: the Energy and Natural Resources Committee will hold a hearing Wednesday on water security and drought preparedness; the Environment and Public Works Committee will hold a hearing Tuesday on oversight of the Superfund program; and the Finance Committee will hold a hearing Tuesday on the affordable housing crisis.
Fiscal Year 2018 Budget Update
The House passed a “minibus” appropriations bill (H.R. 3219) last week by a vote of 235-192, which included four different spending bills totaling nearly $790 billion. The bill covered spending for the Department of Defense, Military Construction-Veterans Affairs, Energy and Water, and the Legislative Branch. The package also contains a portion of the Homeland Security appropriations bill – approximately $1.6 billion – for physical barrier construction on the Southern border. The bill increases base defense spending to $584.2 in fiscal year 2018, significantly exceeding the current law statutory budget cap of $549 billion.
The Senate Appropriations Committee approved three appropriations bills last week, bringing the total to six completed bills, but will not hold any markups this week. First, the committee approved the $53.4 billion Commerce-Justice-Science bill by a vote of 30-1. The funding total is $4.4 billion above the President’s request but $3.2 billion below the fiscal year 2017 enacted level. The bill provides $2.3 billion for state and local law enforcement and crime prevention grant programs, including the Byrne/JAG program and Second Chance Act grants. Next, the committee approved the $60.1 billion Transportation-Housing and Urban Development bill by a vote of 31-0. The funding total is $2.4 billion above the fiscal year 2017 enacted level and includes increased funding for the TIGER program, which was zero funded in the House version. Finally, the committee approved the $3.2 billion Legislative Branch bill by a vote of 31-0; an additional $1.32 billion is reserved for the House. The funding level is $50 million above the fiscal year 2017 enacted level and includes additional funds for cybersecurity capabilities and training. All bills are now available for scheduling on the Senate floor.
Health Care Reform Update
The Senate held votes on three different bills to repeal or repeal and replace the Affordable Care Act (ACA) last week, with the last vote occurring early Friday morning. Ultimately, all three bills failed to garner the requisite 51 votes for passage in the Senate. Action began on Tuesday, when the Senate approved a motion to proceed with consideration of the House-passed legislation to repeal and replace the ACA; the Senate was using the House bill as a vehicle to consider substitute amendments. The first substitute amendment was the Senate’s bill to repeal and replace the ACA, the Better Care Reconciliation Act of 2017 (BCRA). With a vote of 43 to 57, this bill did not garner enough votes to pass the Senate. Next, the Senate considered a repeal-only measure (with a two-year delay to develop a replacement) and that bill was defeated by a vote of 45 to 55. Early Friday morning, the Senate voted on a slimmed-down bill that would have made a few changes to the ACA such as eliminating the individual and employer mandate. A score from the Congressional Budget Office projected that enactment of the “skinny” repeal would have resulted in an additional 16 million people being uninsured by 2026, while saving $135.6 billion over ten years. This bill failed by a vote of 49-51. No further action on health care has been scheduled at this time.
Republicans Release Tax Reform Statement
On Thursday Republican leadership in Congress and the White House released a joint statement on tax reform. The statement indicates that the House Ways and Means Committee and Senate Finance Committee will take the lead to begin producing legislation for the President to sign, with a mission to “protect American jobs and make taxes simpler, fairer, and lower for hard-working American families.” Although the statement does not include specific details on tax reform, it does indicate priorities including a lower tax rate for small businesses, lower rates for all businesses, reducing tax rates as much as possible, allowing unprecedented capital expensing, and creating a system that encourages American companies to bring back jobs and profits from overseas. Significantly, the statement says a border adjustment tax will not be included as part of the plan. According to the statement, legislation is expected to move through the committees this fall, under regular order, followed by action on the House and Senate floors.
CMS Releases Proposed Rule on DSH Allotment Reductions
Last week the Centers for Medicare & Medicaid Services (CMS) released a proposed rule that delineates a methodology for implementing annual allotment reductions for state Medicaid Disproportionate Share Hospital (DSH) allotments. The Affordable Care Act (ACA) requires aggregate reductions to allotments annually beginning with fiscal year 2018 and ending in fiscal year 2025, using a DSH Health Reform Methodology (DHRM). The proposed DHRM would generate a state-specific DSH allotment reduction amount for each fiscal year specified in statute; each state and the District of Columbia are subject to an allotment reduction except Tennessee, which receives an annual allotment of $53.1 million. The aggregate reductions increase each year, beginning at $2 billion in fiscal year 2018 and increasing to $8 billion for fiscal years 2024 and 2025. Comments must be received by August 28. Additional information on DSH can be found in MACPAC’s February report to Congress.
DOT Issues Questions and Answers on FAST Act Rescission
The Department of Transportation’s Federal Highway Administration recently released a set of questions and answers on the rescission included in the Fixing America’s Surface Transportation (FAST) Act. A rescission is legislation enacted by Congress that cancels the availability of budget authority before that authority would otherwise expire. The FAST Act contains a $7.569 billion rescission that will take effect in fiscal year 2020, with the actual rescission taking place on July 1, 2020. The department’s fiscal year 2017 appropriations act also included a rescission of $857 million. The questions and answers provide additional information on funding that is not subject to the rescission, the methodology used to calculate rescission amounts, and how it will be applied among the states. FHWA notes that states do not have the flexibility to determine the programs and amounts by program from which the rescission is taken. Unobligated balances of apportioned funding subject to the rescission as of September 30, 2016 can be found here.
Labor Takes First Step in Revising the Overtime Rule
On Wednesday the Department of Labor published a Request for Information (RFI) in the Federal Register to solicit input on revising overtime regulations. The Obama administration finalized a regulation in May 2016 that increased the standard salary level from $455 per week to $913 per week; that rule was challenged in the courts and subject to a preliminary injunction from the U.S. District Court for the Eastern District of Texas before it could take effect. In the RFI, the department states “it has decided not to advocate for the specific salary level set in the final rule at this time and intends to undertake further rulemaking to determine what the salary level should be. In light of the pending litigation, the department has decided to issue this RFI rather than proceed immediately to a notice of proposed rulemaking.” The RFI solicits feedback on questions related to the salary level test, the duties test, the salary test for highly compensated employees, and automatic updating of the salary level tests. Comments must be submitted by September 25.
House Judiciary Committee Holds Hearing on Online Sales Tax Legislation
The House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law held a hearing Tuesday on H.R. 2887, the No Regulation Without Representation Act. The bill, sponsored by Rep. Jim Sensenbrenner (R-WI), would codify the current Supreme Court precedent (Quill decision) that only allows states to collect sales tax on online purchases from retailers with a physical presence in that state. The National Governors Association and National Conference of State Legislatures issued a statement opposing the legislation, noting “this bill’s audacious scope not only expands the “physical presence” rule to all state and local taxes, it swells to capture all regulations.” An archive of the committee hearing, and links to witness testimony, can be found here.
DOJ Issues Byrne/JAG Immigration Requirements, Conditions on Funding
On Tuesday the Department of Justice (DOJ) announced new conditions for fiscal year 2017 Byrne/Justice Assistance Grant (JAG) funding related to immigration requirements. The Byrne/JAG program is the primary provider of federal criminal justice funding to states and local units of government; the program was authorized $335 million for fiscal year 2017 formula grant funding. According to information from the department, grant recipients will be required to do the following: certify compliance with section 1373, a federal statute applicable to state and local governments that generally bars restrictions on communications between state/local agencies and officials at the Department of Homeland Security (DHS); permit personnel of DHS to access any detention facility in order to meet with an alien and inquire as to his or her right to be or remain in the U.S., and provide at least 48 hours advance notice to DHS regarding the scheduled release date and time of an alien in the jurisdiction’s custody when DHS requests such notice in order to take custody of the alien.
CMS Releases Guidance on Extended Use of SNAP for Medicaid Eligibility
The Centers for Medicare & Medicaid Services (CMS) issued an Informational Bulletin discussing the conditions under which CMS may approve waivers to authorize states to rely on findings from the Supplemental Nutrition Assistance Program (SNAP) to support Medicaid eligibility determinations at application and renewal for certain populations. In particular, CMS is modifying previous guidance in order to extend the availability of certain waiver authority for states facing new or severe and persistent eligibility system-related issues that affect Medicaid applicants and beneficiaries. The bulletin encourages states that are experiencing application or renewal backlogs or other circumstances that might be alleviated by the implementation of the “SNAP strategy” or other targeted enrollment strategies to contact CMS for technical assistance.
EPA Publishes WOTUS Repeal Proposed Rule
The Environmental Protection Agency published a proposed rule on Thursday to rescind the 2015 Waters of the United States Rule (WOTUS) clarifying what bodies of water fall under federal jurisdiction for purposes of the Clean Water Act. The department released the proposed rule in June but published it for comment in the Federal Register last week. The proposed rule would rescind the 2015 rule, currently stayed by the Sixth Circuit before it could take effect, and recodify the 1986 regulation and 2008 guidance. In a second step, the agency will pursue rulemaking to conduct a substantive re-evaluation of the definition of “waters of the United States.” Comments must be received by August 28.
Drinking Water Bill Advances Out of Committee
On Thursday the House Energy and Commerce committee approved by voice vote the Drinking Water System Improvement Act (H.R 3387), which seeks to increase funding to address drinking water system infrastructure as well as aid states and utilities with compliance and operation of the drinking water program. Specifically, the bill does the following: authorizes $8 billion in capitalization grants over five years for the Drinking Water State Revolving Fund program (fiscal year 2018 to 2022), which represents an increase of nearly $350 million in the first fiscal year; increases the authorization for state Public Water System Supervision programs from $100 million to $150 million per year through fiscal year 2022; opens the eligible uses of the revolving fund to now cover costs associated with preconstruction activities and replacing or rehabilitating aging facilities; and creates a strategic plan to have an electronic system that allows water utilities to send their compliance data to states, who then send the data to EPA. An amendment adopted by the committee requires local governments to continually monitor unregulated contaminants and directs utilities to develop emergency response plans for severe weather or terrorist attacks on drinking water supplies. The bill is now available for scheduling on the House floor.
Recently Released Reports
Federal CHIP Funding: When Will States Exhaust Allotments?, Medicaid and CHIP Payment and Access Commission
Status and Trends in the Education of Racial and Ethnic Groups 2017, National Center for Education Statistics
Medicaid Expansion: Behavioral Health Treatment Use in Selected States in 2014, U.S. Government Accountability Office
A Review of College Promise Programs: Evidence from the Midwest, Midwestern Higher Education Compact
Economic News
GDP Increased 2.6 Percent in the Second Quarter of 2017
Last week the U.S. Department of Commerce Bureau of Economic Analysis released data on the gross domestic product (GDP) for the second quarter of 2017 (advance estimate), showing an increase at an annual rate of 2.6 percent. Real gross domestic product is the value of goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes. Many economists had expected growth to rebound from the first quarter increase of 1.2 percent. The increase in real GDP in the second quarter reflected positive contributions from personal consumption expenditures (up 2.8 percent), nonresidential fixed investment (5.2 percent), exports (4.1 percent) and federal government spending (2.3 percent), partially offset by negative contributions from residential fixed investment (down 6.8 percent), and state and local government spending (0.2 percent). The “second” estimate for the second quarter, based on more complete data, will be released on August 30.
Federal Reserve Holds Interest Rates Steady for Now
At its July meeting, the Federal Open Market Committee voted 9-0 to maintain the target range for the federal funds rate at 1.00 to 1.25 percent. The committee noted information received since the June meeting indicates that the labor market has continued to strengthen and that growth of economic activity has been rising moderately this year. Job gains have been solid, on average, since the beginning of the year, and the unemployment rate has declined; household spending and business fixed investment have continued to expand. Inflation has continued to run below the Committee’s 2 percent longer-run objective. Looking at future possible adjustments, the statement says, “The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”