This Week on the Hill
The House is in recess until September 4 while the Senate is scheduled to return August 15.
Fiscal Year 2019 Budget Update
With passage of a four-bill spending package (H.R. 6147) last week, the Senate has now approved 7 of the 12 fiscal year 2019 appropriations bills. On Wednesday the chamber voted 92-6 to approve a $154.2 billion spending bill covering Interior-Environment, Financial Services, Transportation-Housing and Urban Development, and Agriculture. Prior to passage, the Senate voted 50-47 to reject an amendment from Sen. Patrick Leahy (D-VT) to add $250 million for grants to states to strengthen election security. Under the bill, the Department of Transportation would receive $26.6 billion in discretionary funding and an amendment was adopted that would give projects another year to use 2012 and 2013 TIGER grant funding. The bill now moves to conference with the House, which passed their version containing the Interior-Environment and Financial Services bills last month by a vote of 217-199.
Administration Releases Short-Term, Limited Duration Plan Final Rule
The Departments of Treasury, Labor and Health and Human Services released a final rule on short-term, limited-duration insurance that will expand access by allowing a maximum coverage period of up to 12 months with insurers able to renew the policies for up to 36 months. Short-term plans were designed for people with a temporary gap in health coverage and are not required to comply with Affordable Care Act rules including covering essential benefits or pre-existing conditions. Under prior rules, these plans were available for no longer than 3 months. The departments estimate that 2019 enrollment in short-term, limited-duration insurance will increase by 600,000 with enrollment increasing to 1.6 million by 2022. A fact sheet on the rule can be found here.
Treasury Issues Proposed Regulations on Repatriation and Expensing Under the New Tax Law
Last week the U.S. Treasury Department released two proposed regulations implementing provisions of the Tax Cuts and Jobs Act (TCJA), signed into law last December. First, the department released a proposed regulation relating to the section 965 transition tax, on U.S. multinational companies’ overseas income, which is being repatriated under section 965 of the TCJA. The proposed guidance affects U.S. shareholders with direct or indirect ownership in certain specified foreign corporations, as defined in the new tax code provision, and addresses a one-time transition tax on post-1986, untaxed foreign earnings. The TCJA treats these foreign earnings as repatriated and places a 15.5 percent tax on cash or cash equivalents, and an 8 percent tax on the remaining earnings. Second, the department released proposed regulations on increasing and expanding the first-year depreciation deduction for qualified property. The TCJA increased the first-year depreciation deduction from 50 to 100 percent for qualified property acquired and placed in service after September 27, 2017.
President Signs National Flood Insurance Program Extension
On Tuesday the President signed S. 1182 into law, extending the National Flood Insurance Program (NFIP) through November 30, 2018; the prior authorization was set to expire on July 31. The Senate had previously voted 86-12 to pass the bill, sending it to the President’s desk hours before the program would have lapsed. The extension is the seventh short-term extension passed by Congress since last September; the House has passed a full five-year reauthorization bill (H.R. 2874) but the Senate has yet to consider the legislation.
Administration Issues Guidance on Education Savings Plans Changes
Last week the Internal Revenue Service and Department of the Treasury announced their intent to issue regulations on three recent tax law changes affecting 529 education savings plans. First, the 2015 Protecting Americans from Tax Hikes (PATH) Act added a special rule for the beneficiary of a 529 plan, usually a student, who receives a refund of tuition or other qualified education expenses; the departments intend to issue future regulations simplifying the tax treatment of these transactions. Next, the Tax Cuts and Jobs Act (TCJA) allows distributions from 529 plans to be used to pay up to a total of $10,000 of tuition per beneficiary each year at an elementary or secondary public, private, or religious school; the proposed guidance will define “elementary or secondary” schools. Finally, the TCJA allows funds to be rolled over from a designated beneficiary’s 529 plan to an Achieving a Better Life Experience (ABLE) account for the same beneficiary or a family member; the guidance is expected to set a rollover cap.
Administration Releases Proposed Rule on Fuel Standards
Last Thursday the Environmental Protection Agency (EPA) and Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) released a notice of proposed rulemaking that would revise the existing fuel economy and greenhouse gas emissions standards for cars and light trucks and establish new standards for model years (MY) 2021-2026. The administration’s preferred alternative is to retain model year 2020 standards through model year 2026, but comment is sought on a range of alternatives discussed throughout the notice. The proposed rule also calls for revoking California’s ability to set its own emission standards, which have been adopted by 12 other states and the District of Columbia, citing the Department of Transportation as the only entity that can set fuel economy standards. Comments are due 60 days after the notice is published in the Federal Register. Additional information from EPA can be found here and information from NHTSA can be found here.
Court Rules DOJ Cannot Withhold Funds from Cities Based on Immigration Enforcement
On Wednesday the U.S. Court of Appeals for the 9th Circuit ruled that President Trump’s executive order limiting federal funding to “sanctuary cities” was unconstitutional, and that federal funding can be refused only with congressional authorization. The appeals court also noted that the lower court went too far by blocking the policy nationwide and sent the case back for “reconsideration and further findings.” The executive order, signed in January 2017, limited funding to cities that do not cooperate with federal immigration enforcement.
Grants Available for States to Assist with School Emergency Planning
The U.S. Department of Education issued a notice inviting applications for new awards in fiscal year 2018 for the Grants to States for School Emergency Management program. The program provides grants to state educational agencies to increase their capacity to assist local educational agencies by providing training and technical assistance in the development and implementation of high-quality school emergency operations plans. There is an estimated $8 million in funds available, and the estimated awards are for $250,000 to $750,000 per year for up to five years; the department estimates making 16 awards. Previous recipients of these funds can be found here. Applications are due September 4.
Recently Released Reports
Medicaid Managed Care: Improvements Needed to Better Oversee Payment Risks
U.S. Government Accountability Office
New Federal Opportunities to Advance Two-Generation Approaches to Improving the Lives of Children and Parents
The Aspen Institute
Trends in Supplemental Nutrition Assistance Program Participation Rates: FY 2010-2016
U.S. Department of Agriculture
High Hopes and Altered States: Choice, Marijuana, and Tax Revenue
Tax Policy Center
Data Note: Changes in Enrollment in the Individual Health Insurance Market
Kaiser Family Foundation
Economic News
Economy Adds 157,000 Jobs in July
New data released last week by the U.S. Bureau of Labor Statistics showed that total nonfarm payroll employment increased by 157,000 in July and the unemployment rate edged down to 3.9 percent. This is lower than the expected 190,000, but job gains have still averaged 215,000 this year, above last year’s pace of 182,000. The data also shows that in July there were 6.3 million unemployed persons, down from 6.6 million in June. The number of long-term unemployed (jobless for 27 weeks or more) was essentially unchanged at 1.4 million, accounting for 22.7 percent of the total unemployed. The number of reentrants to the labor force (persons who previously worked but were not in the labor force prior to beginning their job search) decreased by 287,000 to 1.8 million, following an increase in June. The labor force participation rate, at 62.9 percent, was unchanged over the month and over the year. In July, job gains occurred in professional and business services (51,000), manufacturing (37,000), health care and social assistance (34,000), food services and drinking places (26,000) and construction (19,000). Employment saw little or no change for mining, wholesale trade, transportation and warehousing, information, financial activities, and government. The average hourly earnings for all employees increased by 7 cents to $27.05 in July, following an increase of 5 cents in June. Over the year, average hourly earnings have risen by 71 cents, or 2.7 percent.
Federal Reserve Holds Interest Rates Steady for Now
At its August meeting, the Federal Open Market Committee voted 8-0 to maintain the target range for the federal funds rate at 1.75 to 2.0 percent. The committee noted information received since the June meeting indicates that the labor market has continued to strengthen, and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions and inflation near the Committee’s 2 percent objective over the medium term. The Committee states it will continue to monitor economic conditions to determine the timing and size of future adjustments to the target range.
Salaries Grew 2.8 Percent Over the Last Year
The U.S. Bureau of Labor Statistics released data last week that shows compensation costs for civilian workers increased 0.6 percent, seasonally adjusted, for the 3-month period ending in June 2018. Wages and salaries (which make up about 70 percent of compensation costs) increased 0.5 percent and benefit costs (the remaining 30 percent of compensation) increased 0.9 percent. Compensation costs for civilian workers increased 2.8 percent for the 12-month period ending in June 2018 compared with a compensation costs increase of 2.4 percent in June 2017. Compensation costs for state and local government workers increased 2.3 percent for the 12-month period ending in June 2018, with wages and salaries increasing 1.9 percent and benefit costs increasing 3.1 percent.