This week the House passed legislation, (HR 5186), to significantly expand loan forgiveness for math, science and special education teachers by eliminating millions of dollars in excess subsidies to private loan providers.

HR 5186 eliminates a provision in the Higher Education Act (HEA) that, since the 1980s, has allowed some lenders to receive a 9.5% return rate on federal student loans compared to the roughly 3.5% that most students pay. The bill would temporarily eliminate the subsidy – for one year- while lawmakers work on the HEA reauthorization. The Government Accountability Office recently estimated that the loophole resulted in $1 billion in overpayments in fiscal year 2004.

The legislation also helps address critical teacher shortages in math, science and special education by expanding student loan forgiveness. Currently, under the HEA, teachers who commit to high-poverty schools for five years may have up to $5,000 in student loans forgiven, and that number would be more than tripled to $17,500 under the House-passed bill.

On October 1, the Senate approved the "Public Transportation Terrorism Prevention and Response Act of 2004" (S. 2884), which aims to expand and improve anti-terrorism measures for the nation's public transportation systems and intercity bus operators. The measure authorizes nearly $3.4 billion for public transportation security grants, which would be based on risk and vulnerability assessments consistent with the recommendations of the 9/11 Commission.

The bill requires the Transportation Security Administration (TSA) to identify and evaluate transportation assets that need to be protected and set risk-based priorities for defending them. TSA also would be required to develop a plan, budget, and funding to implement this effort, as well as assign roles and missions to relevant federal, state, regional, local, and private stakeholders. Funds would go directly to transit providers.

The bill authorizes a total of $3.38 billion over three years: $775 million in fiscal year 2005, $825 million in fiscal 2006, and $880 million in fiscal 2007 for transit systems' capital investments. It also authorizes $400 million in fiscal 2005, $300 million in fiscal 2006, and $200 million in fiscal 2007 for transit system operations, such as security training, drills, canine patrols, and overtime reimbursement.

The bill also requires private intercity and charter bus operators to submit a security plan in order to receive a grant. Eligible activities include terminal, garage, and station reconstruction to improve security; protection of bus drivers; passenger screening; employee training; and surveillance and emergency communications equipment.

A similar bill in the House, H.R. 5082 has passed the Transportation and Infrastructure Committee and awaits House action. That bill authorizes $3.5 billion over three years. With Congress preparing to adjourn to campaign for the November elections, it is unlikely that the bill will see final House approval.

Some House lawmakers are asking the Federal Communications Commission (FCC) to assert federal jurisdiction over Internet telephony or Voice Over Internet Protocol (VoIP) as it known. This is in light of the evidence that legislation dealing with the industry is unlikely to be enacted. The letter would ensure the VoIP industry growth.

The House letter says the FCC is on "firm ground" to declare VoIP an interstate telecommunications service because the technology allows consumers to make calls anywhere.

The FCC already has determined that calls that travel solely on the Internet should not be regulated.

As the FCC and lawmakers debate how to move forward, some large phone companies have begun to launch their own VoIP signaling a larger shift toward Internet-based calling.

The House leadership is lining up a series of symbolic votes this week to give its members some added cover as they head home for the election. The first such vote will apparently be on a bill to re-establish the draft. The purpose of putting the bill on the floor is to emphatically demonstrate there is no push for a draft. Second on the hit parade appears to be a bill that embodies the final offer the House made in the failed House-Senate Conference to reauthorize the TEA-21 programs. The bill brought to the floor will re-authorize the programs at the funding levels ($284 billion in guaranteed spending and $299 billion in Contract Authority) last proposed by the House. The bill is still being developed as this is written. It apparently will contain a highway funding formula friendly to donor states, thus reflecting the position of House Majority Leader Tom DeLay (R-Texas).

Democrats on the House Committee on Transportation and Infrastructure are expressing their distaste for this effort, which is not being done on a bipartisan basis. However, the bill is likely to receive significant majorities in both the GOP and Democratic caucuses of the House. We do not expect this action to have any impact on the eventual settlement of the issues between the House and Senate on this legislation.

With a target recess date of October 8, Senate Committee chairman James Inhofe (R-Oklahoma) is seeking to “hotline” the Water Resources Development Act (WRDA) to the Senate floor. Numerous Senators have placed holds on the bill, registering their dissatisfaction with policies and projects included in the bill that authorizing programs and projects for the U.S. Army Corps of Engineers.

Hotlining requires that all the holds to be identified and addressed before WRDA can be considered on the Senate floor. Some holds will be difficult to satisfy because of major policy differences with S. 2773 as approved by the Senate Environment and Public Works Committee. Significant differences include the Corps’ process for evaluating and recommending water resource projects to congress for authorization, the degree of consultation required with other federal agencies, and mitigation requirements for environmental impacts.

Congress attempts to reauthorize WRDA every two years but has not passed a bill since 2000. The House adopted its version of WRDA last year. The Senate Committee approved S. 2773 in late June but did not file a report until August. Attempts to schedule the bill for Senate floor consideration have been hampered by the Senators’ holds. Senator leaders could place a deadline on removing those holds, but WRDA has not gained the priority attention of the leadership.

Senate Majority Leader Bill Frist (R-Tennessee) indicated Friday that he wishes to speed up the intelligence overhaul bill. A vote on cloture is expected Tuesday, as amendments continue to be added to the bill. (S 2845) More than 160 amendments have already been filed by October 1.

In the House, the GOP leadership has indicated it doesn't wish to have several amendments gain support, including the Shays-Mahoney amendment, which would mirror the Senate bill. Many think the Rules Committee may prevent amendments from being offered on the floor, or otherwise block attempts to alter the bill itself.

The debate continues to rage in the Senate over whether the new intelligence chief will have full budgetary authority over all the intelligence community agencies, including those within the Pentagon. Currently, over 80% of the budget goes to agencies inside the Pentagon, and any shakeup will likely alter the power of both committees and Defense agencies drastically.

Shortly after 5pm EDT today, the Senate cleared for the President's signature the eight-month extension of TEA-21 programs. The original copy of the bill as passed is being flown to Miami so the President can sign it tonight before the programs expire at midnight.

The House today approved by a vote of 409-8 an extension (H.R. 5183) through May 31, 2005 of Federal programs for highways, highway safety, transit and research. The Senate is expected to pass it by unanimous consent this evening. The legislation would allocate $24.5 billion for highways and $5.2 billion for transit. It does not contain demonstration projects. It ensures that the 2.5-cent per gallon Ethanol tax that currently goes in the general treasury would be re-directed to the Highway Trust fund.

Work on a long term reauthorization of TEA-21 will most likely resume early in the next session of Congress. We will stay close to all the major players to make sure our clients and friends are informed.

House and Senate leaders have agreed to delay further action on the remaining appropriations bills until after the election. Before the current fiscal year expires on September 30, the House and Senate are expected to pass a continuing resolution to provide funding for most non-defense government agencies until November 20. The Defense Appropriations bill has already been passed and signed into law.

Appropriators still hope to pass the Homeland Security spending bill and an emergency supplement for hurricane relief before recessing on Oct. 8.

When Congress returns for a lame duck session in November, the 11 remaining appropriations bills will be rolled into an omnibus appropriation, at which time specific appropriations earmarks will be determined.

Today, the House is expected to pass legislation that would extend the 1996 welfare overhaul law for six months and give Congress more time to complete a long term reauthorization.

The bill (HR 5149) would extend welfare programs through March 31. The Senate is expected to pass the legislation soon after the House does.

The program has been extended seven times as partisan squabbles have prevented a long-term reauthorization. Republicans want to toughen the welfare bill's work requirements. Democrats say any change should be accompanied by an increase in funding for child care.

Another major partisan battle is over whether marriage provisions should be included.

Yesterday, Senator Rick Santorum (R-Pennsylvania) failed to add to the a six month extension - a $200 million marriage promotion effort and a $100 million responsible fatherhood program he offered with Senator Evan Bayh (D-Indiana). Minority Whip Harry Reid (D-Nevada) objected to a unanimous consent request from Senator Santorum to take up and pass his bill. Senator Reid suggested that Senator Santorum bring HR 4 - the welfare reauthorization bill back to the floor for debate. Senator Republicans pulled the bill earlier this year in order to avoid a vote on a Democratic amendment raising the minimum wage. The House passed its version of the bill in February 2003.

After ten years and more than 118,000 police officers later, the Justice Department’s popular Community Oriented Policing Services program, or COPS, appears to be coming to an end. After several cutbacks under President Bush, the program handed its last round of grants for hiring police officers earlier this month, and the administration’s 2005 budget proposal contains no money for more. It is not clear whether Congress will intervene to rescue the program.

Administration officials say the Universal Hiring Program, as the grants are known, has more than met its original goal of putting 100,000 new police officers on the streets, and argues that COPS will continue to offer grants for new technology, school-resource officers and law enforcement training. The administration has allocated $97 million for such programs in FY 2005, along with the money for additional law enforcement initiatives in other parts of the Justice Department.

Since 1995, COPS has handed out more than $9 billion in grants for the police hiring program. Under the program, the federal government has paid for 75 percent of the cost of each officer over the first three years, localities were required to come up with the other 25 percent, and also had to agree to fully fund a fourth year on their own.

Outside studies, however, did reveal that over the years many officers were not retained after the grant periods had expired and that some departments were illegally using grant money for existing operations. Conservatives also objected to the COPS program being assigned to the federal government and believed the program should fall under the responsibilities of state and local governments.

The COPS program is particularly popular among local governments in small and rural communities with a limited ability to expand their police forces on their own.

The school-resource officers program is expected to continue under the administration’s proposed budget. The administration has proposed to continue funding the training and technical assistance program at $17 million, $20 million for tribal law enforcement programs and $10 million for police training.

Media reports this morning confirm that the prospects for a six-year reauthorization of TEA-21 before year's end are getting dimmer. House Majority Leader Tom DeLay (R-Texas) was quoted in today's Washington Post as saying prospects for the legislation are "not good." Given that he is the moving force in the House behind getting a bill done, DeLay's comment indicates just how high the barriers are to completion of a bill. House Committee on Transportation & Infrastructure Chairman Don Young (R-Alaska) is advancing an eight-month extension of existing programs. He proposes to include $1.8 billion of "high priority projects" in the extension. House and Senate staff discussed this option well into the day yesterday. While there is some opposition from some Senators to including any projects in the bill, history suggests they will go along, provided the Senate is given an equitable amount of project money to divide as it sees fit.

In the very short term, it appears a Continuing Resolution to keep all federal agencies afloat from October 1 - 8 will include provisions releasing enough money from the Highway Trust Fund to prevent the shut-down of federal agencies that receive administrative funding from that source. This may obviate the need for action on the TEA 21 extension this week.

Further word on this topic may come today. We will be in touch as soon as it does.

Health and Human Services Secretary Tommy Thompson told members of Congress yesterday that he would use his statutory authority to redistribute $660 million in unspent federal funds to cover any state spending gaps for a children's health insurance program.

Secretary Thompson said the administration plans to work with Congress to target the $1.1 billion in unspent SCHIP funds with the help of faith-based organizations, community groups, states and schools.

In previous years where there were unspent SCHIP funds, Congress and the White House reached an agreement to allow states more time to use the money.

In what is becoming an annual fight between Congress and the Bush administration, there is another fight this year over whether to give states more time to spend grants for a children's health insurance program.

At the end of the fiscal year later this week, states will lose access to $1.1 billion in federal funds for the State Children's Health Insurance Program (SCHIP). Some states facing budget challenges can't utilize the money because they are having a difficult time supplying the matching funds.

Democrats and moderate Republican senators say they will work to continue to push for a time extension.

SCHIP was created in 1997 to provide states with grants to offer health insurance for children whose families' incomes exceed the limit for Medicaid eligibility but are too low to buy private health insurance. In order to obtain the federal funding, states much put up a match for the grants.

The administration has indicated that it wants to shift some funds to bolster the President's faith-based initiatives.

The nation's governors have ventured into the reauthorization debate, joining organizations such as the American Association of State Highway and Transportation Officials (AASHTO). AASHTO has been continuing to press Congress to get a reauthorization bill done this year, but has also urged Congress to pass a longer term extension.

Yesterday a bipartisan group of governors from California, Connecticut, Massachusetts, Nevada, New York and Pennsylvania called on Congress to pass a long-term extension of current surface transportation programs if they can't pass a reauthorization bill this year. In their letter, they specifically called for a one-year extension to give states time to prepare for a "complete construction season and would provide similar benefits to transit authorities while Congress works to complete the long-term legislation promptly."

Another letter signed by Governor John Baldacci (D-Maine), president of the Coalition of Northeastern Governors, didn't specify the length of the extension, but called for an extension that would minimize disruptions to programs and projects during the reauthorization.

Yesterday, President Bush sent a request to Capitol Hill for $7.1 billion in emergency hurricane relief funds. This brings the current total for relief funds to more than $12 billion, covering four different storms and several states.

The large request is expected to pass, but the vehicle by which it will move forward is not yet known, given the impending adjournment date. The Senate has indicated the only method to move forward with the request is to attach it to the fiscal 2005 Homeland Security appropriations bill currently in conference. Using this method, however, would deny House Republicans the ability to vote against a drought-relief amendment, which they oppose. The GOP representatives want to instead include the relief funds in a stand-alone bill. The difficulty with this approach is that the bill would be debated hotly upon reaching the Senate, and would also take longer than simply amending the Homeland Security bill in conference.

The impasse should be resolved later this week, when the GOP leadership meets with the heads of the appropriations committees.

The House Highways, Transit and Pipelines Subcommittee of the Transportation and Infrastructure Committee will mark up on September 28 H.R. 5082, the Public Transportation Terrorism Prevention and Response Act of 2004. The bill will authorize $3.5 billion over the next three years for public transportation security grants. Funds will be discretionary grants and will go directly to local and regional transportation agencies. These will be based on assessments of risk and vulnerability consistent with the recommendations of the 9/11 Commission.

Although H.R. 5082 is to receive a subcommittee mark up, we do not anticipate that the bill will become law this year. There is a slim chance that the bill could see action on the House floor during a lame duck session of Congress, but we see this as unlikely as well. This will serve as a starting point where the issue will be addressed fully next Congress.

The bill directs the Secretary of Transportation (DOT) to enter into a memorandum of understanding with the Secretary of Homeland Security (DHS) to define the respective public transportation security roles and responsibilities of the DOT and DHS. The bill authorizes DOT to award grants for specified capital transportation security improvements and operational transportation security improvements.

The bill also directs the Federal Transit Administration (FTA) to submit all public transportation security assessments conducted by it to the DHS for review by the Secretary of Transportation and the Secretary of Homeland Security. It requires such reviews to ensure that the assessment of each public transportation system identifies critical assets of the system, including threats and security weaknesses in the system and its assets. The Secretary of Transportation is required to use the assessment information to: (1) establish a process for developing security guidelines for public transportation security; and (2) design a security improvement strategy that minimizes terrorist threats to public transportation systems and maximizes the efforts of such systems to mitigate damage from terrorist attacks.

Under the legislation the Secretary of Transportation will need to establish a program for making grants to private operators of over-the-road buses for specified system-wide security improvements to their operations.

Funding would be divided as follows:

Capital (system protection; explosive/chemical detection; surveillance, communications, emergency response equipment; evacuation improvements) -

• $775 Million in 2005
• $825 Million in 2006
• $880 Million in 2007

Operations (security training, drills, canine patrols, overtime reimbursement) -

• $500 Million in 2005
• $300 Million in 2006
• $100 Million in 2007

Congress returns to work this week and it’s an important one with regard to the extension of the federal highway and transit programs and the fate of the six-year reauthorization bill as well. On Friday, September 24 the federal-aid highway program lapsed. The other programs funded in TEA-21 (transit, highway safety, research, etc.) expire on September 30, this Thursday.

We are hearing that House leaders and the Senate GOP leadership may announce this week an "agreement in principle" on how to move ahead on the highway formula with a total six-year program level of $284 billion in guaranteed spending and $299 billion in contract authority. This "agreement" would require significant work by staff and members to produce a final conference report. Therefore, it is anticipated that if any action is taken this week, it may well be merely an extension to October 8 -- the projected date for Congress to go home for the elections. The other date being considered by those pushing for a speedy conclusion to the reauthorization debate is November 20. That would take the process into the lame duck session, which has not been officially announced but which almost everyone expects to begin the week of November 15.

Given recent history, our best guess would be that we'll see this week an extension to October 8. Then next week would be when the final "gut check" would be made on whether to extend into the lame duck or push the issue ahead into next year.

It is important to note that Senate Democrats are not part of the potential "agreement in principle." Their point person on this bill, Sen. Harry Reid (D-Nevada) has stated in recent weeks that Democrats will hold firm for a $318 billion bill and will not support anything less. He has stated he has a handshake agreement with Sen. Jim Inhofe (R-Oklahoma), Chairman of the Committee on Environment and Public Works, that no bill would come back to the Senate floor unless they both agreed to it. The fact that Inhofe appears to be ready to sign-on to something Reid opposes indicates that "deal" may not be in place. If Democrats hang together on their position, they should be able to block a conference report from final passage. If they begin to break apart along regional lines, they may not be in a position to impact the process. The Democratic position at this juncture appears to be a longer extension.

The effort for a longer extension was given a push last week when Senators Bond (R-Missouri) and Reid introduced a six-month extension bill in the Senate. They were joined by Sens. Jeffords (I-Vermont), Shelby (R-Alabama) and Sarbanes (D-Maryland). They are seeking co-sponsors among the ranks of those who feel it would be better to decide this matter in 2005.

We will stay in close touch with you as this important week unfolds.