Washington legislative wrap-up: 1994.
The accompanying chart tracks the major issues and what happened to them. While for some of the legislative proposals GFOA has not necessarily provided active support for all aspects of the programs, these bills contain specific provisions on which GFOA has taken policy positions. This was the case, for instance, with the environmental programs except for the issue of flow control. In other legislation, such as flow control and tax-exempt bond relief, the association strongly supported the proposals and worked for their enactment. GFOA also aggressively pursued revisions to the many health care proposals under congressional consideration. These activities are discussed in the Pension & Benefits Report on page 48.
As the chart shows, there were a few bright spots in the record of the second session of the 103rd Congress. The major anticrime bill, which was vigorously supported by many state and local government groups, incorporated the Local Partnership Act, which GFOA supported. The airport improvement legislation was enacted without authority to escrow disputed airport fee increases, a provision which GFDA opposed. There were provisions in the Community Development and Regulatory Improvement Act that included changes and timing provisions regarding collateralization of public deposits that were supported by GFOA. The provisions of the Bankruptcy Act amendments regarding the security of property tax liens and the ability of public pension systems to participate in bankruptcy reorganization equity and debtor committees have long been GFOA policy.
Two subject areas emerged during 1994 that had not been on GFOA's legislative agenda at the beginning of 1994: the General Agreement on Tariffs and Trade (GATT) and flow control. As the details of the new GATT became known, it was clear that state and local governments would have to work to insure that the new agreement would not allow automatic preemption of state and local laws by trade dispute settlements in which the state and local governments played no role. GFOA, with vigorous assistance from the association's grass-roots network of FOCAL Teams (Finance Officers Calling for Action on Legislation), joined with several other state and local government groups in persuading members of Congress to include in the GATT implementing legislation strong provisions prohibiting automatic preemption of state and local laws. The GATT implementing legislation was to be considered in a lame duck session of Congress at the end of November and beginning of December. If Congress does not accept GATT, the administration will surely press for further consideration in 1995.
GFOA's FOCAL Teams also were especially active in contacting their U.S. Senators and Representatives regarding the need for federal legislation to permit state and local governments to direct or otherwise regulate the movement of locally generated municipal solid waste (MSW) and to designate the facilities at which MSW will be managed (referred to as flow control). Flow control was found by the U.S. Supreme Court in a May 1994 decision (C. & A. Carbone v. the Town of Clarkstown) to violate the Commerce Clause of the U.S. Constitution by discriminating against interstate commerce. GFOA and a number of other groups representing local governments and authorities worked together in support of federal legislation to permit flow control, since only Congress has authority to regulate commerce between the states. Although a bill passed the House of Representatives in late September, it did not come up in the Senate, and Congress recessed without completing action on flow control legislation.
Flow control is one of several subject areas that will be legislative priorities for GFOA in the 104th Congress. GFOA believes it is vital that local governments have the option to use flow control as one of the municipal solid waste management tools available to them.
The issue of unfunded federal mandates is also high on the list for 1995. A great deal of progress on the issue was made in the 103rd Congress, and there was clearly widespread support for curtailing unfunded federal mandates. Unfortunately, time ran out before differences between the House and Senate bills could be worked out. State and local government groups, including GFOA which strongly opposes unfunded federal mandates, expect to be working harder than ever to get legislation enacted in the 104th Congress.
Other priorities include revisions to the federal tax code which will ease compliance with existing pension provisions under the distribution and nondiscrimination requirements. Health care reform also will be a focus and efforts to secure equitable treatment for public employers the priority.
As the accompanying chart makes clear, a number of subject areas that have been priorities for GFOA in past years saw no action in the 103rd Congress. Among these are tax-exempt bond relief and infrastructure. FOCAL Team members worked hard and contributed much to obtaining the cosponsorship of more than half the members of the House Committee on Ways and Means for Representative Coyne's Public Finance and Infrastructure Investment Act (H.R. 3630). The proposed legislation, however, was never considered on its own in the committee, and no tax legislation was sent to the floor in which the provisions of H.R. 3630 could have been incorporated. This proposed legislation would enact many of the recommendations of the report of the Anthony Commission on Public Finance, and GFOA will be working closely with other state and local government organizations for its enactment in the 104th Congress. There is speculation that there will be less skittishness in 1995 than there was in 1994 to take up a tax bill, because there will be pressure for consideration of a number of tax issues that were not addressed in 1994. Included among these issues are provisions that were allowed to expire, such as the highly popular tax deduction for health coverage costs incurred by self-employed individuals.
The Clinton administration is expected to unveil an infrastructure proposal early in 1995, but it is unclear what form it will take. GFOA will be making strong representation that any infrastructure proposal should include tax-exempt bond relief. If the DeLauro/Gephardt bill (H.R. 5120) and the Specter and Shays bills (S. 2535 and H.R. 5279) are reintroduced next year, those proposals will be a part of the infrastructure mix as well.
Other issues that likely will be the subject of legislative proposals next year address investment adviser regulation, derivatives and interstate mail order sales. GFOA has taken policy positions in each of these areas and expects to be involved in efforts to enact relevant legislation.
One area in which GFOA expects to be particularly active in 1995 involves the regulatory arena. There was a great deal of activity in 1994 related to disclosure in the secondary market for municipal securities, and GFOA played a lead role in responding to regulatory proposals. The association will continue to play such a role as developments related to disclosure unfold.
GFOA also will continue to monitor the lawsuit challenging the constitutionality of the Municipal Securities Rulemaking Board's (MSRB) Rule G-37 relating to political contributions by municipal finance professionals and to share information with other state and local government groups. GFOA opposed Rule G-37 when it was proposed, partly on the grounds that it might violate the constitutional rights of individuals, and suggested that more adequate disclosure was one aspect of a workable and equitable way of bringing about reform of abuses related to political contributions. It is interesting that the chairman of the MSRB has been quoted as saying that if Rule G-37 is declared unconstitutional, the MSRB would probably propose a tough, new rule requiring disclosure of political contributions.
GFOA expects to continue to be involved in the proposed rules of the National Association of Securities Dealers, Inc. (NASD) governing sales practices in the government securities market. GFOA will monitor carefully how NASD responds to the concerns it raised about the proposed rules and will follow through with its threat to appeal to the SEC or Congress if necessary, if those concerns are not addressed.
With respect to tax-exempt bond regulations, GFOA will continue to work to obtain an adequate definition of "sewage facility." GFOA was not alone in criticizing the initial proposal--even the Environmental Protection Agency criticized the proposed definition. A reworked definition is likely to be proposed next year, and GFOA will examine it carefully. Another item in the tax-exempt bond area is the definition of private activity bond. The IRS still has not put forth a proposal for such a definition but is expected to do so in 1995.
GFOA's legislative agenda for the first session of the 104th Congress depends to a large extent on the makeup of that Congress and the interaction between the Congress and the administration.
The association expects to work with both branches in 1995 to further the programs that are its legislative and regulatory priorities.
1994 CONGRESSIONAL ACTION ON ISSUES OF CONCERN TO STATE AND LOCAL GOVERNMENTS
Unfunded Federal Mandates
* Two bills would require Congressional Budget Office (CBO) analysis of legislation to determine costs to states and localities. If costs exceed $50 million, authorizing committee must either fund and authorize funding, or bill is subject to a separate floor vote on whether to impose the mandate. Status: Bills cleared committees in both Senate and House (S. 993 and H.R. 5128) but were not brought to floor of either body.
* H.R. 5120, the National Infrastructure Development Act, was introduced by Reps. Rosa DeLauro (D-CT) and Richard Gephardt (D-MO), House Majority Leader. Bill would create a new class of tax-exempt bonds called public benefit bonds and a federally chartered "National Infrastructure Corporation" to provide financing and credit support for infrastructure projects. Status: No action.
* The New Urban Agenda Act of 1994 (S. 2535), introduced by Sens. Arlen Specter (R-PA), Carol Moseley-Braun (D-IL) and Harris Wofford (D-PA), would provide incentives to stimulate economies of the nation's urban centers. Incentives would relate to federal and foreign aid purchases from businesses in urban zones, location or relocation of federal facilities in distressed cities, expansion of Historic Rehabilitation Tax Credit and use of commercial industrial development bonds, easing of arbitrage rebate requirement, elimination of unfunded federal mandates, and easing of environmental restrictions for governments and providing for redevelopment of contaminated industrial sites. Similar legislation in House (H.R. 5270) was introduced by Reps. Christopher Shays (R-CT), Rick Santorum (R-PA), Robert Borski (D-PA), Susan Molinari (R-NY) and Tom Ridge (R-PA). Status: No action.
Tax-exempt Bond Relief and Pension Tax Compliance Relief
* Major legislation, the Public Finance and Infrastructure Investment Act (H.R. 3630) introduced by Rep. William Coyne (D-PA), would provide significant relief from restrictions on tax-exempt financing and create a new tax-exempt bond program, the Distressed Community Economic Development Bond. Bill garnered cosponsorship of a majority of the members of House Committee on Ways and Means. Status: No action.
* Technical Corrections and Tax Simplification Act (H.R. 3419) included arbitrage-related tax-exempt bond relief provisions. H.R. 3419 also contained provisions that simplified pension distribution rules under Internal Revenue Code (IRC) Section 415 and indexed the maximum annual deferred compensation limit ($7,500) for IRC Section 457. Status: Passed House. No similar legislation in Senate.
* Other bills would ease restrictions on tax-exempt financing (H.R. 13), broaden market for tax-exempt bonds (H.R. 2102), increase bank deductibility issuance limit (H.R. 2171), create a new category of tax-exempt bonds for contaminated industrial site cleanup (H.R. 2340), repeal the limitation on tax-exempt financing by public power facilities (H.R. 1938) and restore capital gains treatment to tax-exempt bonds purchased at market discount (H.R. 4714). Status: No action.
* Interstate Waste Transport (Flow Control). Status: Separate bills passed House and Senate; no final agreement before adjournment.
* Clean Water Act Reauthorization. Status: Hearings in House; Senate committee approval but not taken up by full Senate.
* Safe Drinking Water Reauthorization. Status: Separate bills passed by House and Senate; no agreement in conference.
* Superfund Overhaul. Status: Bills cleared committees in House and Senate; no floor votes.
Investment Advisers Regulation
* Bills were introduced in both Senate and House (S. 423 and H.R. 578) to increase resources available to the Securities and Exchange Commission (SEC) to provide additional oversight of investment advisers and financial planners and fidelity bonding. Status: Separate bills passed House and Senate, differences worked out in conference; approval by House; not taken up by Senate.
* A number of bills were introduced in the House and Senate providing for federal regulation of the derivatives market. House Committee on Banking, Finance and Urban Affairs held hearings at which GFOA testified. Status: No action.
* Legislation implementing the General Agreement on Tariffs and Trade (GATT) contains provisions prohibiting automatic preemption of state and local laws by trade bodies. In order for U.S. to sign the GATT agreement, legislation must be approved by both House and Senate without amendment. Status: Action postponed until after November elections. A "lame duck" session will consider GATT implementing legislation in late November, early December. No other legislation scheduled.
Interstate Mail-order Sales
* Senate bill, the Tax Fairness for Main Street Business Act (S. 1825), would permit states to require out-of-state firms to collect state and local taxes and remit taxes to states and local governments. Hearings held in Senate. No similar bill in House but hearings on general subject held in House subcommittee. Status: No action.
* Legislation to rewrite the Communications Act of 1934 to ease the way for telephone companies, cable television broadcasters and telecommunications firms to compete in the rapidly expanding field of information networks was introduced and considered in the House and in Senate committee (H.R. 3626, H.R. 3636 and S. 1822). Status: Compromise bill passed by House. No action by Senate.
Credit Card Fees and Surcharges
* Legislation was introduced (H.R. 2175) that would prohibit credit card vendors from imposing limitations on ability of state and local governments to pass on to credit card users fees and surcharges associated with use of credit cards for governmental payments. Hearing held in House subcommittee at which GFOA testified on behalf of eight state and local government organizations. Status: No action.
* Federal Aviation Authorization Act of 1994 includes funding for airport improvements. Provisions that would have diverted disputed airport fee increases into an escrow fund were deleted because of concern for impact of provision on airport bonds. Status: Enacted into law. (P.L. 103-305.)
Fiscal Assistance to State and Local Governments
* Provisions of H.R. 581, the Local Partnership Act, were included in anticrime bill to provided grants to local governments for crime prevention programs. Status: Enacted into law. (P.L. 103-322.)
Collateralization of Public Deposits
* Community Development and Regulatory Improvement Act of 1994 contains provisions regarding changes and timing surrounding collateral and valid collateral agreements. This codifies FDIC policy. Status: Enacted into law. (P.L. 103-325.)
Bankruptcy Act Amendments
* Provisions in bankruptcy reform bill would permit local governments to collect property taxes on properties involved in bankruptcy proceedings by permitting property liens to retain their secured status and would permit public pension plan participation on equity and creditor committees formed in bankruptcy reorganization proceedings. Status: Enacted into law. (P.L. 103-394.)
* Legislation would enhance veterans health care, reemployment and pension rights. Health care benefits are to be continued for certain active duty personnel and reinstated for returning veterans. The legislation establishes a time period during which certain returning veterans may apply for job reinstatement and by imposing a series of requirements to allow reemployed veterans to make up pension benefits lost during military service. Although effective on December 12, 1994, a two-year transition rule enables governmental plans to make necessary pension plan changes. Status: Enacted into law. (P.L. 103-353.)
Election Worker Social Security Exemptions
* The Social Security Reform Act (H.R. 4277) increases the Social Security wage exemption for election workers from $100 to $1,000 annually starting January 1, 1995. The $1,000 maximum will be indexed for inflation starting in 2000. Status: Enacted into law. (P.L. 103-296.)