Finance Committee Chairman Charles E. Grassley expects that the corporate tax cut bill will not be completed until after the August recess. The House bill (HR 4520) and the Senate bill (S 1637) both replace an export subsidy ruled illegal by the World Trade Organization with business tax breaks to force the European Union to lift its retaliatory trade sanctions. The EU’s duties, currently 9 percent for more than 1,600 US products, will otherwise continue to increase by 1 percent each month.

The Senate has still not appointed conferees, and Senate Majority Leader Bill Frist (R-Tennessee) blames the delays on demands from Democrats. Minority Leader Tom Daschle (D-South Dakota) is insisting upon establishing similar ground rules to those used on the highway reauthorization bill (HR 3550), which assured the inclusion of Senate Democrats in the drafting of the final bill. Other Democratic demands include requirements that the Food and Drug Administration regulate the tobacco buyout, preventing the administration from implementing new overtime pay rules, and including enough revenue increases to offset the cost of tax cuts. Grassley predicts that Congress will finish the bill before the November elections.

House conferees will respond to their Senate colleagues’ offer of $318 billion when the conference committee on HR 3550 meets on Wednesday. House Republican leaders have yet to decide what level of funding they are willing to support. One powerful conferee, Rep. Don Young (R-Alaska), has already announced his intentions, stating that “there will not be any less out of this than we passed in the House.” Earlier this session the House approved $283 billion in transportation funding. However, House Majority Leader Tom DeLay (R-Texas) publicly rebuked the Senate offer, as did House Ways and Means Chairman Bill Thomas (R-California). House Speaker Dennis Hastert (R-Illinois) sided with DeLay’s concerns through a spokesman.

Some Republicans believe that President Bush can be dragged into supporting a bill with higher spending than it desires given sufficient Republican pressure. Yet this may be a difficult task, given that both DeLay and Hastert have expressed their opposition towards any bill that president opposes. Wednesday will be the third meeting of the conference committee.

While House congressional appropriators will be busy during July’s three-week legislative session, the Senate does not have a similar schedule planned. For the House, each day will include action either on the floor or in the Appropriations Committee for the FY05 spending bills. This week floor debates are scheduled on legislation to finance the Commerce, Justice and State departments and committee action is expected on the military construction and foreign operations bills. According to this current schedule, 11 of 13 regular annual appropriations bills should have passed the House by the end of the month.

The Senate’s July agenda does not include appropriations, and there is no set plan on handling those bills awaiting action. By the end of the week, Senate Appropriations Chairman Ted Stevens (R-Alaska) plans to have bills approved from nine of his subcommittees, including Commerce-Justice-State, Energy and Water Development, Transportation-Treasury, and VA-HUD. A markup session has not been scheduled in the full committee, leading some to theorize that Stevens might be planning to assemble an omnibus measure using the Homeland Security Bill (S 2537) to wrap up the appropriations work before October. However, at the Senate’s current pace it is not likely that lawmakers will finish this year’s cycle before October.

On Thursday, June 17 the Task Force on State and Local Homeland Security Funding released a report containing findings and recommendations. The task force found that state governments met their statutory deadlines in distributing homeland security grants to county and local governments. However, various impediments to rapid distribution of funds were found. The procurement processes of state and local governments, DHS reimbursement procedures and guidelines, a lack of national standards and urgent security needs were all found to have unintentionally delayed the distribution of funds to local and municipal governments. The task force recommended several steps to streamline and speed-up the grant distribution process, including the alteration of state and local procurement processes, the establishment of national standards for grant tracking and management and more effective use of DHS grants for securing short-tem and urgent threats. Throughout the report, the consensus nature of the findings and recommendations were stressed by the task force, which included governors, mayors, county and tribal officials. Placing blame on any single government entity or agency was specifically avoided as unproductive.

Responding to complaints that states had withheld or delayed distributing DHS grants to local and municipal governments, the task force examined the funding process of the DHS to state, county, municipal and tribal governments. Secretary Ridge instructed the task force to look at funding for first responders, catalog best practices and produce recommendations to streamline the distribution of funds. The distribution of $3.3 billion awarded by the DHS Office of Domestic Preparedness (ODP) between the fiscal years 2002 and 2003 was examined.

The report made the following findings:

• DHS and state governments fulfilled their requirement to make grant funds available to local governments within 45 days.
• The reimbursement requirements proscribed by the Cash Management Act of 1990 and DHS and Department of Treasury guidelines were found to be problematic to state and local governments.
• The need for the rapid acquisition of homeland security related goods and services conflicted at times with procurement procedures that stress deliberation.
• A lack of national standards governing the distribution, tracking and oversight of DHS grants added to the delays experienced.
• There are urgent and short-term security needs of a different nature than long-term planning and preparation.

In response to these finding, the report issued these recommendations:

• Congress should exempt DHS grants from the Cash Management Act of 1990 and allow funds to be provided up to 120 days prior to expenditures by state and local governments.
• State and local governments should alter procurement guidelines so that homeland security-related items may be acquired more rapidly. In many states, homeland security-related expenditures could be acquired under emergency authority, which streamlines procurement laws. In addition, state legislatures should work to compose an expedited authorization and appropriations process for homeland security expenditures.
• DHS should work to establish multi-state cooperative purchasing consortia to allow greater access by state and local governments to equipment and expand access the federal procurement systems such as the GSA schedule.
• State and local governments should be allowed to “piggy-back” on existing bulk purchasing agreements and should establish bulk purchasing procedures consistent with the State and Urban Area Homeland Security Strategies.
• DHS, in coordination with state and local governments, should establish national standards for grant funding and develop an automated grant tracking system. Minimum staffing recommendations for grant management personnel should be established.
• Congress should establish deadlines for obligating funds from one level of local government to another.
• The approved uses of SHSGP funds should be altered to improve response to short term security threats. DHS, other federal agencies, state and local governments should create a method for comprehensive risk assessment, allowing high-risk events and critical infrastructure to be identified.

The topsy--turvy world of congressional scheduling continues. After receiving confirmation early on July 1 that the previously scheduled July 8 mark-up for the Transportation-Treasury Appropriations Bill had been postponed indefinitely, we are now told it is back on. Stay tuned as this could change again.

Congress returns from its "Independence Day Work Period" on Tuesday, July 6. This is a good time to take stock of where things stand with regard to the reauthorization of TEA-21.

House and Senate Conferees will meet on July 7 for their third session. On top of the agenda for this meeting is the House's response to the "offer" made by the Senate at the last meeting to formally adopt $ 318 billion (the Senate's figure) as the total funding for the six-year legislation. When he put this offer before the House at the last meeting, Conference Chair Sen. Jim Inhofe (R-OK) indicated he expected a response from the House on July 7. Many have referred to the Senate move as "throwing down the gauntlet." House Majority Leader Tom DeLay (R-TX) responded within 24 hours to this offer by indicating the Senate number relies on tax increases and gimmicks and can't be sustained. It is unclear whether the House will come to the July 7 meeting with a counter offer or with no offer at all.

In any case, key staffers we have talked to have indicated this upcoming meeting may well be the crucial one for determining the future of this legislation. If the House brings an offer back to the Senate, it is certain it will be no more than $ 275 billion -- the House-passed number. More likely, it would be $ 256 billion -- the Administration's proposed number. If the latter number were offered, the Senate might well push their collective chairs back from the table and declare the conference over. If the former number is offered, there may be a basis for negotiation because this will signal the GOP Leadership of the House is prepared to send the President a bill he may well veto. If the House makes no offer, the Senate might agree to give them another week or so to see if they can come up with one.

While manuevering continues on the "big" number, House and Senate staff have continued to meet to find areas of agreement on more minor issues. So far, they have identified the provisions where the two bodies have very similar positions or where one has a provision and the other doesn't. For most of those they are coming to agreement to insert the provisions in the final product. There has been no discussion so far, even at the staff level, of any topic which could be considered controversial.

We continue to believe there is not enough impetus towards compromise for this legislation to be completed before the November election. However, we continue to behave as if things will progress quickly and are in regular contact with Members and staff on the conference committee.

Watch for another update immediately following the July 7 meeting of the conference.

Senate Judiciary Chairman Orrin Hatch (R-Utah) has postponed action on his proposed constitutional amendment prohibiting the desecration of the American flag. Although Hatch had originally wanted to send the measure to the floor before Flag Day, June 14, and then before the Fourth of July, the earliest this measure will advance is July 8 since the Senate is now in recess. The contentious resolution, which is identical to a measure (H J Res 4) passed by House last year, divides much of the Senate along party lines, making it unlikely to garner the necessary two-thirds majority.

Although many states and the federal government used to have similar flag protection laws, in 1989 and 1990 the Supreme Court declared them unconstitutional because they violated free expression. Opponents of the amendment agree with this ruling, insisting that flag burning is a legitimate form of expression. Supporters argue recriminalizing flag burning is an appropriate way to honor the flag, which is a universally honored symbol of freedom deserving of constitutional protection. The House has passed many flag protection resolutions since the 1990 Supreme Court ruling, however, the proposals have all died in the Senate.

Senator Ted Kennedy (D-Massachusetts) will no longer block a bill to allow off-duty and retired law enforcement officials to carry concealed weapons. Kennedy still opposes the measure, S 253, but will no longer delay its passage by unanimous consent. Senate supporters now await the referral of the House version, HR 218, to the floor by Judiciary Chairman, and sometime Kennedy ally, Orrin Hatch (R-Utah).

Former and off-duty officers would have to maintain their firearms training and registration, as well as carry identification verifying their affiliation with a law enforcement agency to qualify for the program. The exemption would not apply when officers are under the influence of alcohol or illegal drugs. Supporters hope that allowing officers to carry concealed weapons off-duty and after-retirement will help fight crime. Critics of the provision, such as Kennedy, argue that it would unduly prohibit states from enacting their own gun-control statues. In March, the exemption was approved 91-8 as an amendment to a gun liability bill that was later defeated.

Thursday, House Majority Leader and conferee Tom Delay (R-Texas) issued a press release that harshly criticized the Senate’s offer of $318 billion during the TEA-21 reauthorization conference. DeLay ripped into the overall spending level and revenue sources of the bill. “Instead of creating a fiscally responsible highway bill, the Senate is using it as a slush fund to rob other programs and raise taxes,” his press release said. Conference chairman Senator James Inhofe (R-Oklahoma) responded quickly. “Having just read the news release of my dear friend of 18 years, I have concluded that he has not read the Senate Highway Reauthorization Bill. In a five paragraph release, not one of the statements is true, not one,” Inhofe’s press release countered. Senator Charles Grassley (R-Iowa) added that the House bill provides insufficient funding and adds billions more to the deficit than the Senate bill.

At the center of the dispute are the revenue raising mechanisms in the Senate bill. DeLay considers them tax increases, while Grassley and Senator Max Baucus (D-Montana), both of whom sit on the conference committee and Senate Finance Committee, say this view “unfairly [portrays] anti-tax shelter and anti-fraud provision in the highway bill as ‘tax increases.’” According to BNA an aide to DeLay said a “lot of people call things corporate loopholes when they really are tax increases.” DeLay’s comments have further complicated what already promised to be difficult negotiations between the House and Senate.

In an attempt to crack down on gang violence, yesterday the Senate Judiciary Committee agreed to expand federal law enforcement’s role by making it a federal crime to participate in a “criminal street gang.” This legislation (S 1735) authorizes $650 million for gang prevention and suppression programs and criminalizes the recruitment of minors. Although the House has not considered a similar measure, Senator Dianne Feinstein (D-California), who is a co-sponsor of the bill, feels a strong federal response is necessary given the recent increase in gang violence.

The American Civil Liberties Union criticized the bill’s expansion of the federal death penalty, increase in prosecution of juveniles as adults, and failure to address the issues that motivate people to join gangs. The committee rejected two similar measures that would have focused on preventive action rather than prosecution. Support in the full Senate for the bill is not yet definite.

In response to the military’s widely publicized abuse of prisoners, last night the Senate added a provision to the defense authorization bill (S 2400) that would require the Pentagon to inform Congress of the status of detainees. At the end of a long day of hearings, briefings and debate, five Republicans and all but one Democrat voted to require both reporting and justification of all instances where detainees are denied POW status. The result of over a month of debate, the $447.2 billion defense bill passed Wednesday night with Patrick J. Leahy’s (D-Vermont) prisoner abuse amendment added. This amendment stipulates that detainees whose status is ambiguous must be granted the protections of the Geneva Convention and their cases be rapidly prosecuted. It is unlikely that Leahy’s amendment will survive in conference with the House, who passed their version of the defense bill May 20.

Since the defense bill authorizes an additional $25 billion for military operations that will be available upon its enactment, many have been anxious to have the measure pass quickly. Many other Democratic amendments to the defense bill were blocked by the Republican leadership, including one requiring the president to give Congress an estimate of the number of US troops that will be in Iraq next year. The Senate also agreed to an amendment proposed by John McCain (R-Arizona) that would ensure future Pentagon contracts with Boeing Co. are done responsibly.