Late in the evening of May 20, the Senate appointed conferees for the TEA 21 Conference. The House is planning to appoint their conferees after the Memorial Day recess. The current extension expires June 30.

Republicans named to the conference are: Senate Environment and Public Works Committee Chairman James M. Inhofe (Oklahoma), Senate Transportation and Infrastructure Subcommittee Chairman Christopher S. Bond (Missouri), Senate Finance Committee Chairman Charles E. Grassley (Iowa), Senate Budget Committee Chairman Don Nickles (Oklahoma), Senate Commerce Committee Chairman John McCain (Arizona), Senate Banking Committee Chairman Richard C. Shelby (Alabama), Senate Majority Whip Mitch McConnell (Kentucky), and Sens. John Warner (Virginia), George Voinovich (Ohio), Orrin Hatch (Utah), and Trent Lott (Mississippi).

The independent and Democrats on the conference are: Daschle, Senate Environment and Public Works Committee ranking member James M. Jeffords (I-Vermont), Senate Transportation and Infrastructure Subcommittee ranking member (and Minority Whip) Harry Reid (Nevada), Senate Finance Committee ranking member Max Baucus (Montana), Senate Budget Committee ranking member Kent Conrad (North Dakota), Senate Commerce Committee ranking member Ernest F. Hollings (South Carolina), Senate Banking Committee ranking member Paul Sarbanes (Maryland), Bob Graham (Florida), Joseph Lieberman (Connecticut), and Barbara Boxer (California).

With no Senate agreement in sight for the FY 2005 Budget Resolution (S. Con Res. 95 – H. Rept. 108-498), chances for final approval appear bleak. This, even as the House passed the conference report by the narrow margin of 216-213 on the evening of May 19. Senate moderates are demanding a multi-year pay-as-you-go budget enforcement rule that would set a 60-vote hurdle in the Senate for tax cuts or new entitlement spending not linked with revenue increases or spending cuts. The final version of the resolution would impose pay-as-you-go rules only through next April 15 and would exempt a tax package that would move this year under budget reconciliation procedures. Both are opposed by a key group of Senate moderates.

The annual budget resolution is a non-binding plan but it provides procedural protections to subsequent bills. The resolution sets the discretionary spending limits for the annual appropriations bills.

Although it is not desirable to do so without a budget resolution in place, we have confirmed that House Appropriations subcommittees will mark up the Defense, Homeland Security and Interior bills the first week of June. They will use the discretionary limits in the House-passed budget resolution.

In a meeting last week with appropriations staff, we were told that the allocation for their bill is too low to produce a bill that addresses all needs this year. They also called into question the chances for even a mark up.

As part of a thaw in relations between Senate Republicans and Democrats, an agreement was reached May 19 to appoint Senate conferees and begin work towards a House-Senate conference on the TEA--21 reauthorization.

On the heels of a deal reached the previous day to advance the confirmations of 25 Federal judge nominees, the agreement on transportation between Majority Leader Bill Frist (R-TN) and Minority Leader Tom Daaschle (D-SD) signals that Senate leaders are finally working to diminsh the partisan rancor that has brought the legislative process to a virtual standstill in recent weeks.

According to reports we have received, Daschle received assurances from Frist that the ultimate product of the conference would not deviate substantially from the $318 billion level approved by the Senate. This "assurance" would appear to put the Senate, at least, on a collision course with the White House, which continues to insist on nothing higher than $256 billion.

It is still highly unlikely that Congress will get into a veto fight with the President, so this deal may well have been a mechanism for Daschle to avoid having the blame for stopping the bill placed on the Democrat's shoulders because of their refusal to go to conference.

We will have more details shortly.

Under rules adopted by House Republicans six years ago, top positions on the Appropriations Committee will be reordered when Congress reconvenes in January.

Chairman Bill Young (R-Florida) must relinquish his seat, and the three most senior members of the Committee are vying for the top spot. Ralph Regula (R-Ohio), Jerry Lewis (R-California), and Hal Rogers (R-Kentucky) are actively campaigning for full committee chairman. The House Republican Steering Committee, which includes the Speaker, the Majority Leader, key committee chairmen, and regional representatives, is expected to vote for the new chairman shortly after the November election. All Republican House members will then have the opportunity to approve the decision.

The new chairman will have to then relinquish his subcommittee chair. Other subcommittee chairmen also will be forced to give up their leadership roles because House GOP rules limit a chairman’s term of service to six years. Jerry Lewis must retire as chairman of Defense Appropriations and James Walsh (R-New York) must relinquish the chair of VA, HUD, and Independent Agencies, which funds EPA and the economic development programs at HUD. Leadership jockeying is expected to also result in changes at the Energy and Water Development Subcommittee (Corps of Engineers and Bureau of Reclamation programs), Military Construction, and Labor, HHS (labor, health, and education programs).

Tomorrow, the Senate Committee on Agriculture, Nutrition and Forestry is scheduled to mark up a bill reauthorizing the nation’s child nutrition programs.

Currently, free lunches are available to families with incomes up to 130% of the poverty level. Students from families with incomes up to 185% of the poverty level qualify for reduced-priced meals, which cost up to 40 cents each.

The Senate budget resolution (S. Con. Res. 95) would allow an additional $842 million over five years to expand eligibility for the free lunch category to families earning up to 140 % of the federal poverty level and eliminate the 40-cents meals.

While senators are hoping to authorize an expansion, the House and Senate have not yet agreed on a compromise budget resolution. Therefore, the committee is likely to work only within the $232 million allotted to continue programs set to expire this year.

The House on March 24 passed legislation (HR 3873) to reauthorize and revise various provisions in the main school lunch programs. The bill does not contain language to expand program eligibility. However, it does try to increase participation in the free and reduced price lunch plans by providing direct certification for food stamp and welfare recipients and allowing parents to submit a single application for more than one child.

Both the House and Senate passed legislation (S 2241) in March (when it was set to end) extending the program until the end of June.

Both Republicans and Democrats have proposed eliminating the reduced-price category, arguing that 40 cents is more than poor families can afford. Senator Dole (R-North Carolina) has proposed legislation to expand free-lunch eligibility to 185% of the poverty level over five years.

After planning for months to consider the Water Resources Development Act (WRDA) before the Memorial Day recess, the Senate Environment and Public Works Committee conceded that the mark-up will be sometime in June. Committee staff expects to put the finishing touches on writing the bill during the week-long break at the end of May.

WRDA authorizes all water resources programs administered by the U.S. Army Corps of Engineers, including navigation, flood control, and environmental restoration. Congress usually adopts amendments every two years but hasn’t completed a bill since 2000. The House adopted its version late last year, putting pressure on the Senate to take up the legislation this year.

The bill is currently delayed because of continuing controversy over the highway bill, which has preoccupied staff members who would otherwise be engaged in WRDA reauthorization. The committee’s senior Democrat, Harry Reid (D-Nevada), also has stalled committee action to protest a delay in approving the nomination of a member of his staff to a government commission.

Senior committee members are motivated to adopt a bill this year and may forego subcommittee action in order to expedite consideration by the full committee. The total cost of authorized projects is a major concern with Congress anxious to restore funding for $500 million of local projects that the White House eliminated from the FY05 budget request. Big ticket projects are also awaiting authorization such as navigation and environmental restoration projects in the upper Mississippi River and Louisiana coastal areas.

The Senate just voted to reauthorize the Individuals with Disabilities Education Act (IDEA) 95-3. The next action will be for the Senate to conference with the House on HR 1350 that was passed in April 2003.

The House bill would allow governors to set the attorneys' fees in their states for IDEA cses in which parents prevail. Critics say the restrictions would cut down on the availability of lawyers for such cases and especially penalize poor families.

A Senate Republican led task force has recommended a number of proposals to limit medical liability awards, make it easier for small businesses to band together to purchase coverage and create tax credits for individuals who purchase insurance. The estimated cost for the proposals would be $93 billion over five years.

Task force members are planning on producing a broad bill but conceded that the package probably would not pass the chamber.

Several of the initiatives are a rehash of proposals already offered and rejected. The medical liability legislation has failed to garner enough support to bring it to a vote and association health plans for small businesses have encountered stiff opposition.

In addition to these proposals, the task force also recommended programs aimed at expanding community health clinics and allowing faith-based organizations to get federal funds to run them, expanding drug-discount card savings beyond the Medicare population and creating incentives to encourage uninsured young adults to sign up for coverage.

The task force remained divided on how to make it easier for small businesses to increase purchasing power through association health plans. Members were divided on whether or not to allow businesses to bypass individual state regulations. Republicans say their plan would expand coverage for between 21 million and 29 million currently uninsured Americans.

On the House side, Republican leaders are pursuing a parallel strategy of passing proposals on these issues for a second time in the 108th Congress.

The House is scheduled today to take up three bills that mirror many of the administration’s proposals. They will consider two measures virtually identical to bills the House already passed. The first, HR 4281, would allow Association Health Plans to sidestep some state mandates, while the second, HR 4280 would cap non-economic malpractice awards at $250,000. The third bill, HR 4279, would allow employees to transfer up to $500 of unused funds in flexible savings accounts to the newly created health savings accounts or the following year’s flexible savings accounts.

Peyser Associates clients and avid readers of peyser.com will not be surprised to hear that House Appropriations Committee Chair Bill Young (R-Florida) on Wednesday instructed subcommittee chairs to begin working on their spending plans for the fiscal year beginning October 1. Committee staff are saying the plan is to have all 13 bills through the full committee by late July. Specific allocations of funding for each subcommittee have been discussed between Young and the subcommittee chairs. While the full committee must approve those allocations before mark-ups can occur, subcommittee chairs have enough to go on now to begin their planning.

This news confirms our expectation that House mark-ups could begin in mid-June. In the days ahead, we will know more about which subcommittees are expected to move when.

The Senate is not quite so far along as the House, but we expect similar movement there after the Memorial Day recess.

Yesterday, the Senate voted 92-5 for a bill that would create $170 billion in new tax breaks for business while also cracking down on a number of tax shelters. The $170 billion in corporate tax cuts over the next decade would replace export subsidies previously granted to U.S. firms by Congress that prompted $4 billion in retaliatory tariffs by the European Union.

It would reduce income taxes for U.S. manufacturers and includes more specific provisions that have been characterized by critics as a windfall for special interests but defended by supporters as incentives needed for job creation. The five senators voting against the bill were Judd Gregg (R-New Hampshire), Jon Kyl (R-Arizone), John Sununu (R-New Hampshire), Bob Graham (D-Florida) and Ernest Hollings (D-South Carolina).

The bill would also allow U.S. companies to bring profits earned overseas back to this country at a discounted rate for one year, put new limits on the outsourcing of work by federal contractors and make it less profitable for companies to move headquarters abroad to avoid U.S. taxes.

The $170 billion price tag would be offset by the repeal of the export subsidies and by curbing a number of corporate tax abuses by increasing penalties for violations, making it easier for the Internal Revenue Service to pursue tax shelters and other such steps.

Today, the Senate is expected to move quickly and on a bipartisan manner on the Reauthorization of the Individuals with Disabilities Education Act (IDEA).

IDEA is the main federal education program for the nation's 6.5 million disabled students.

Senator Judd Gregg (R-New Hampshire), chairman of the Health, Education, Labor and Pensions Committee (HELP), worked with ranking Democrat Edward Kennedy of Massachusetts to write the underlying bill. The HELP committee passed that underlying bill almost a year ago - but funding levels were left out of the bill so that it could be debated on the floor.

Senator Tom Harkin (D-Iowa) and Chuck Hagel (R-Nebraska) have offered an amendment that would increase funding by $2.2 billion annually over the next eight years to get to 40% of the average per-pupil cost of educating every child with a disability - the amount the federal government authorized in the original 1975 law to reimburse states.

Earlier today, the Senate defeated an effort to extend federal unemployment benefits.

Democrats tried to attach the benefit to a corporate tax bill. But on a 59-40 vote in the Senate, they fell short of the 60 votes they needed to overcome objections that extending the benefits violated last year's budget agreement.

The amendment would have offered emergency federal unemployment benefits for six months, temporarily giving 13 more weeks of assistance to workers who have exhausted their state benefits which generally last 26 weeks.

The amendment was offered by Senators Maria Cantwell (D-Washington) and George Voinovich (R-Ohio). Senator Ben Nighthorse Campbell (R-Colorado) was considered a swing vote but stuck with the GOP leadership while Senator Kerry (D-Massachusetts) was not present.

This is the second time that Democrats have tried to extend unemployment benefits. With the support of 12 Republicans, the Democrats tried earlier this year, but the measure failed by a narrow margin.

As soon as tomorrow, the Senate may take up a bill that would reauthorize the Individuals with Disabilities Education Act (IDEA). IDEA is the main federal education program for the nation's 6.5 million disabled students. It guarantees special-needs children a free public education in the "least restrictive environment" and provides federal assistance to states and school districts.

Senate Majority Leader Bill Frist (R-Tennessee) said that the Senate would take up the bill after it finishes S 1637, a corporate tax bill.

In 1975, the original law authorized the federal government to reimburse states for up to 40% of the average pupil cost of educating every child with a disability. Congress is trying to reach that 40% percent level. The President's fiscal 2005 request only covers 20% of those costs.

Senators Tom Harkin (D-Iowa) and Chuck Hagel (R-Nebraska) have offered an amendment that would increase funding by $2 billion annually over the next eight years to get to the 40% level.

The bill also would streamline student discipline measures which critics say are too lenient toward special needs children with violent behavior.

It is perhaps indicative of the torpor of this congressional session that even the smallest sign of movement on important legislation is a cause for optimism. Recent soundings of some of our contacts on Capitol Hill have caused us to be optimistic that we may see some action on key appropriations bills before the August recess.

For months, it has been an article of faith in Washington that the only appropriations bills with a hope being completed by September 30-- indeed by the November elections-- have been Defense, Military Construction and Homeland Security. While recent contacts we've had confirm that, they do give us reason to believe that some substantial work may occur on some other appropriations measures this summer..

The present hold-up is due to the lack of an agreed-upon budget resolution between the House and Senate GOP leaderships. They are hung-up over the Senate's insistence on re-instating a relic of the 90's -- the "pay-go" rule. The quaint concept behind this rule is that any spending increase or tax cut beyond a baseline amount must be "paid for" by an equal spending cut or tax increase.

Ideally, in terms of the rules of the congressional budget process, a budget resolution should be in place before the appropriations subcommittees begin action. The resolution serves as the basis for allocations of Budget Authority to each subcommittee. In the absence of an agreement between the House and Senate on a budget, there is precedent for each body deeming its resolution to be the basis for subcommittee allocations.

We expect that if the budget dispute is not resolved by Memorial Day, the chairs of the House and Senate Appropriations Committees will ask their leaders for permission to move ahead with allocations based on their respective budget resolutions. This could lead to House subcommittee action beginning in mid-June and Senate subcommittee action in July.

We are in frequent touch with several subcommittees in both the House and Senate and will keep our clients and friends posted on developments.