CSAC Bulletin Article

Federal Issues Update: Health Bill Dies, Tax Plan Announced

Latest Health Reform Bill Dies in Senate

A last ditch effort by Senate Republicans to unwind the Affordable Care Act failed earlier this week after GOP sponsors of the legislation were unable to muster the requisite support to advance their bill. In a bit of legislative déjà vu, Republicans once again fell just short of securing the backing of at least 50 of members of their own caucus – the number needed to pass an ACA repeal measure under special budget rules. With those budget rules slated to expire at midnight on September 30, the quest to dismantle President Barack Obama’s signature domestic achievement has come to an end for the immediate future.

Crafted by Republican Senators Bill Cassidy (LA), Lindsey Graham (SC), Dean Heller (NV) and Ron Johnson (WI), the legislation would have distributed the current pot of Medicaid expansion funds to all 50 states instead of the current 30 states (including California) that chose to cover additional individuals under the ACA. Pursuant to the bill, the expansion funding would have ended for all states in the year 2026. Additionally, the Medicaid program would have been transformed into a per-capita block grant program, with each state receiving a fixed amount of funds for each eligible individual.

According to an analysis by the California Department of Health Care Services, the Cassidy-Graham proposal represented the “most devastating repeal bill so far,” with the state of California expected to lose over $137 billion in federal Medicaid support over the next decade. Likewise, the nonpartisan Congressional Budget Office (CBO) in a preliminary estimate of the legislation projected that the bill would reduce federal Medicaid spending nationwide by roughly $1 trillion over the next ten years, with millions of enrollees losing health coverage.

In the wake of the most recent bill’s collapse, Senate leaders are attempting to pivot back to a bipartisan measure that is designed to support some state marketplaces for individuals purchasing health insurance. The effort began in the Senate Health, Education, Labor and Pensions (HELP) Committee but was interrupted once the Cassidy-Graham proposal surfaced. Four hearings were conducted and the basic outlines of a legislative agreement was drafted. That agreement would continue Cost Sharing Reduction payments for insurers to help low-to-moderate income individuals pay their deductibles and co-pays while giving states more flexibility under the ACA to design their programs.

Looking ahead, attempts to revive yet another repeal of the ACA are not likely until Congress adopts a tax-reform package. To that end, Republicans in both chambers of Congress are currently working on a fiscal year 2018 budget resolution that will likely include reconciliation instructions allowing the Senate to adopt a tax bill by a simple majority vote. GOP leaders have indicated that they will not attach provisions affecting the ACA in the first budget resolution, but, if Congress passes a tax-reform bill, they may draft a second budget resolution to allow another ACA repeal attempt at a later date.

Trump Administration, GOP Lawmakers Release Tax Overhaul Plan

This week, President Trump – along with the Republican leadership of the House Committee on Ways and Means and the Senate Committee on Finance – released the much-anticipated framework of a comprehensive tax overhaul plan. According to GOP committee leaders, the outline will serve as a template for their panels as they work in the coming weeks to develop legislation through what they indicated would be a transparent and inclusive process.

At the heart of the Republican tax plan is a proposal to shrink the current seven tax brackets into three – 12 percent, 25 percent and 35 percent – with the potential for an additional top rate for the highest-income taxpayers. The plan also would roughly double the standard deduction while expanding the Child Tax Credit.

While the framework proposes the elimination of “many itemized deductions,” it would retain tax incentives for home mortgage interest and charitable contributions, as well as tax incentives for work, higher education, and retirement security. Notably, the proposal does not explicitly call for the repeal of the state and local tax (SALT) deduction, though it has been widely speculated that committee leaders and the White House are looking to eliminate the deduction as a means to help offset the overall cost of the tax package.

Likewise, it remains unclear if GOP tax writers will seek to eliminate or cap the tax exemption for municipal bond interest. Both the SALT deduction and municipal bond exemption are longstanding components of the tax code and have been used to support essential investments in local transportation, housing, water, and other public works projects.

As for next steps, and as previously noted, Republican congressional leaders intend to use the budget reconciliation process to move their tax overhaul in order to avoid a potential Democratic filibuster in the Senate. Along with the need to produce a final fiscal year 2018 budget later this fall, tax reform is expected to remain at the top of the Republican legislative agenda for the remainder of the year.

FAA Extension

With operational and revenue authority for the Federal Aviation Administration (FAA) slated to expire at midnight on September 30, members of Congress spent a good portion of this past week debating a multi-purpose bill that would, among other things, provide a temporary extension of federal aviation programs. Lawmakers are in the position of having to approve a short-term FAA measure after failing to once again agree to the terms of a new multi-year reauthorization bill.

On Thursday, the House approved a six-month extension of the FAA (HR 3823) on a 264-155 vote. Although House Democratic leaders signaled their support for a stop-gap aviation bill, they encouraged their rank-and-file members to oppose the package because of extraneous provisions they say were added without their input. In addition to extending the FAA, HR 3823 would provide tax relief for areas affected by the recent hurricanes, as well as encourage the creation of private flood insurance markets.

Following Thursday’s House vote, a member of the Senate Republican leadership indicated that the upper chamber does not have the votes to clear the FAA measure, as drafted. Accordingly, Senate GOP leaders intend to drop the provisions on private flood insurance, pass the bill, and send the legislation back to the House. With very little time remaining before the FAA’s ability to collect fees expires, the lower chamber will likely need to agree to the Senate’s changes.

Water Infrastructure Hearing

On September 26, the House Transportation and Infrastructure Committee’s Water Resources and Environment Subcommittee held a hearing entitled “Building a 21st Century Infrastructure for America: Water Stakeholders’ Perspectives.” The hearing – which was conducted as part of a series of committee discussions designed to highlight the need for greater investment in the nation’s infrastructure – sets the stage for potential subcommittee action later this fall on the water resources-related title of a broader public works package.

Among others, the subcommittee received testimony from David Pedersen, the general manager of Las Virgenes Municipal Water District. Mr. Pedersen provided testimony on behalf of the Association of California Water Agencies (ACWA) and the California Association of Sanitation Agencies (CASA).

As part of his presentation to the House panel, Mr. Pedersen signaled strong support for the State Revolving Fund (SRF) Loan Programs, Water Infrastructure Financing and Innovation Act (WIFIA) Program, and other programs that provide federal funds for water infrastructure projects, such as the Bureau of Reclamation’s Water Recycling and Reuse Program and WaterSMART Program.

Pedersen also requested that Congress modernize the allocation formula used to distribute Clean Water SRF Program funds to states. As noted by Pedersen, the program’s formula – which is based on a variety of factors, including census population and capital needs – has not been updated since 1987. Incidentally, and as concluded by the U.S. Environmental Protection Agency (EPA) in a recent report to Congress, most States do not currently receive appropriated funds in proportion to their reported needs or population.

For an archived webcast of the hearing and to access witness testimony, please click on the following link: House Infrastructure Hearing – Water Resources – 9-26-17

Forestry Hearings

On September 27, the Senate Environment and Public Works (EPW) Committee and House Committee on Natural Resources held separate hearings focused on forest management and the mitigation of catastrophic wildfires. The EPW Committee heard from Jessica Crowder, policy advisor to the office of Wyoming Governor Matthew Mead; Lawson Fite, general counsel for the American Forest Resources Council; and Collin O’Mara, president and chief executive officer for the National Wildlife Federation. The witnesses were asked to provide their views on several bills that are currently pending before the committee, including legislation (S 1731) that would provide the U.S. Forest Service with additional tools to address the wildfire threat caused by dead or dying trees. A video of the hearing and witness testimony can be found here.

The House hearing, entitled “Exploring Solutions to Reduce Risks of Catastrophic Wildfire and Improve Resiliency of National Forests,” featured testimony from Ravalli County (MT) Commissioner Greg Chilcott; Geos Institute Chief Scientist Dr. Dominick DellaSala; Lawson Fite, General Counsel at the American Forest Resource Council; and, Intertribal Timber Council President Philip Rigdon. The discussion focused on many of the same issues that were addressed at the Senate hearing; however, Dr. DellaSala also discussed the role of climate change in the increasing number and severity of wildfires across the West. The hearing and witness testimony can be accessed here.

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