The House comes in on Wednesday, July 6, 2011, to continue its consideration of the Department of Defense Appropriations Act, 2012 (H.R. 2219). In the wake of President Obama’s call upon Congress to work through the debt ceiling negotiations, Majority Leader Reid (D-NV) decided to forgo a scheduled July 4 recess and the Senate will come back in session on Tuesday, July 5, to consider the Kerry-McCain Libya resolution.
- Senate July Fourth Weeklong Recess Cancelled. With a budget deal still not in sight, an August 2 deadline for raising the debt ceiling looming, and President Barack Obama calling on Congress to cancel all scheduled recesses until a budget agreement is reached, the Senate will stay in session next week. Senators will have a long weekend and return on July 5 so that Senate leaders can continue budget meetings with President Obama and the Senate as a whole can begin consideration of a resolution proposed by Senate Foreign Relations Committee Chairman John Kerry (D-MA) and Senator John McCain (R-AZ) which would authorize U.S. military involvement in Libya (S.J. Res. 20).
- Senate Budget Resolution. Senate Budget Committee Chairman Kent Conrad (D-ND) indicated he will release his FY2012 budget proposal next week. He will present the proposal to the Democratic caucus before making it public. It is anticipated the proposal will reduce the deficit by $4 trillion over ten years through spending cuts and revenue increases, including $1 trillion generated through the cessation of tax breaks. However, it appears he will continue to hold off on a committee markup of the bill pending progress on the ongoing deficit reduction negotiations.
- Senate Appropriations Activity. The Senate Appropriations Committee passed its first FY2012 spending bill on June 30, 2011 - the Military Construction-Veterans Affairs appropriations bill. It is will likely be brought to the Senate floor before the August recess. Without an FY2012 budget resolution, Senate appropriators are reluctant to move forward and markup any bills on which they cannot propose funding levels similar to those put forth in the House (the Senate Military Construction-Veterans Affairs bill provides only $3 million less than the House-passed bill). Therefore, no additional Senate appropriations markups are currently scheduled.
- House Appropriations Activity. The FY2012 Interior-Environment and Commerce-Justice-Science bills are tentatively scheduled for subcommittee markups on July 6 and July 7.
OTHER BUDGET, APPROPRIATIONS NEWS
- High Level Deficit Reduction Efforts Continue. President Obama and Senate Democrats are scheduled to continue efforts to reach a deficit reduction package and an increase in the debt ceiling after the July Fourth weekend. Divisions remain, even within the two parties, over entitlement spending and taxes. Generally, the White House and Democrats persist that revenue must be part of a “balanced package,” while Republicans claim they cannot generate enough support, particularly in the House, to pass any tax increases.
- SEA Reauthorization. STEM education advocates recently made their case in a letter to lawmakers that science achievement should be considered with math and reading as a “core element” of the accountability system in any ESEA rewrite. The STEM Education Coalition put forth additional ideas to make science, technology, engineering and math a more central part of the law.
- Pell Grant Funding. In his June 29 news conference on negotiating a debt deal, President Obama reiterated his commitment to maintaining funding for the federal Pell Grant program, stating “If we do not have revenues, that means there are a bunch of kids out there who are not getting college scholarships.” Lawmakers are still considering proposals to restructure the program but have different priorities for doing so.
- Upcoming Hearing. The House Education and the Workforce’s Subcommittee on Higher Education and Workforce Training will hold a joint hearing July 8 with the Committee on Oversight and Government Reform's Subcommittee on Regulatory Affairs, Stimulus Oversight and Government Spending. The hearing is titled, “The Gainful Employment Regulation: Limiting Job Growth and Student Choice." No witnesses have been named.
- College Cost Lists. On June 30, the U.S. Department of Education released several College Affordability and Transparency Lists, which it says will “help students make informed decisions about their choice for higher education.” The College Affordability and Transparency Center on the Department’s College Navigator website will host the lists. Additionally, federal regulations published in October 2010 required schools with “gainful employment programs” to report certain information about their students, including loan debt incurred, on-time graduation rates, tuition, fees and other costs, and job placement rates. On July 1, that information was made available to prospective students, and the Department is planning to post the information on its website soon.
- Drilling on Federal Lands. On Friday, July 8, the House Committee on Natural Resources, Subcommittee on Energy and Mineral Resources and the House Committee on Agriculture, Subcommittee on Conservation, Energy and Forestry will hold a joint oversight hearing titled, "Challenges Facing Domestic Oil and Gas Development: Review of Bureau of Land Management/U.S. Forest Service Ban on Horizontal Drilling on Federal Lands."
- OCS Penalties. Effective August 1, the Bureau of Ocean Energy Management (BOEM) will begin enforcing new, higher maximum daily civil penalties for Outer Continental Shelf Lands Act violations ($40,000) and maximum daily fines for Oil Pollution Act financial responsibility violations ($30,000).
- OCS Lease Sale 216/222. BOEM is now accepting public comments on the Draft Supplemental Environmental Impact Statement for the Gulf of Mexico’s Central Planning Area. Public hearings will be held in designated Gulf States in early August.
- Ocean Energy Safety Advisory Committee. The second meeting will be held in New Orleans on July 13-14.
- E15 Fuel. On Thursday, July 7, the House Committee on Science Space and Technology, Subcommittee on Energy and Environment will hold a hearing concerning ethanol blends for E15 fuel titled, “Hitting the Ethanol Blend Wall: Examining the Science on E15.”
- Border Security and Federal Lands. On Friday, July 8, the House Committee on Natural Resources, Subcommittee on National Parks, Forests And Public Lands will hold a hearing to consider H.R. 1505, the “National Security and Federal Lands Protection Act." This bill would prohibit the Secretaries of the Interior and Agriculture from taking action on public lands that may impede border security. The bill seeks to open pristine lands to allow the use of motorized vehicles and the construction of roads, fences, and surveillance equipment.
- Pine Beetle. On Sunday, July 10, the House Committee on Natural Resources, Subcommittee on National Parks will hold an oversight field hearing in South Dakota titled, "Impact of the Mountain Pine Beetle Epidemic in the Black Hills."
- Lead and Copper in Drinking Water. The EPA is inviting small businesses, governments and non-profit organizations to participate as Small Entity Representatives (SERs) for a Small Business Advocacy Review (SBAR) Panel. The panel will focus on the agency’s efforts to revise the current lead and copper rule. The EPA is reconsidering the rule due to findings from a national review of the implementation of the existing lead and copper rule. The review identified several areas of concern about the effectiveness of the existing regulations. The changes under consideration are intended to improve the effectiveness of the measures to safeguard public health to control lead and copper in drinking water. The panel will include federal representatives from the Small Business Administration, the Office of Management and Budget and the EPA. The EPA seeks self-nominations directly from the small entities that may be subject to the rule requirements. To qualify, self-nominations must be received by July 12, 2011.
- E15 Pump Labeling. The EPA is issuing fuel pump labeling requirements for gasoline blends containing more than 10 and up to 15 percent ethanol, known as E15. These requirements are an effort to ensure that E15 is properly labeled and used once it enters the market.
The new orange and black label must appear on fuel pumps that dispense E15. This label is intended to help inform consumers about which vehicles can and cannot use E15. This label will also warn consumers against using E15 in vehicles older than model year 2001, motorcycles, watercraft and gasoline-powered equipment such as lawnmowers and chainsaws.
Over the past year, the EPA issued two partial waivers under the Clean Air Act that in sum allow E15 to be sold for use in model year 2001 and newer cars and light trucks. However, the EPA has not registered the fuel, which is required before E15 can be legally sold for use in conventional vehicles.
The E15 pump label requirements, developed in coordination with the Federal Trade Commission (FTC), adopt elements of the FTC’s existing labels for alternative fuels to promote consistent labeling. The rule also includes a prohibition against misfueling with E15; a requirement to track E15 and other fuels as they move through the fuel supply chain so that E15 can be properly blended and labeled; and a quarterly survey to help ensure that gas pumps dispensing E15 are properly labeled. In addition, it modifies the Reformulated Gasoline (RFG) Program to allow fuel producers to certify batches of E15 as complying with RFG standards.
- Underground Storage Tanks. The EPA is also issuing guidance on the compatibility of underground storage tanks (USTs) with gasoline containing greater than 10 percent ethanol or diesel containing greater than 20 percent biodiesel. The guidance is intended to assist UST owners and operators in meeting the existing federal UST compatibility requirements.
- House Committee on Financial Services to Discuss Mortgage Servicing. On July 7, the House Subcommittee on Financial Institutions and Consumer Credit, chaired by Shelly Moore Capito (R-WV), will convene a hearing on mortgage servicing and foreclosure mitigation.
- House Committee on Financial Services to Discuss Banking Legislation. On July 8, the House Subcommittee on Financial Institutions and Consumer Credit will also hold a hearing on H.R. 1723, which prevents federal bank regulators from arbitrarily penalizing community banks for working with borrowers to modify their loans, and H.R. 2056, which calls for a study on the impact of some FDIC practices and procedures on troubled or failing institutions.
- Treasury Secretary Geithner Considers Leaving Treasury. Treasury Secretary Timothy Geithner is reportedly considering resigning his post after Congress and the Administration reach an agreement to raise the national debt limit. Secretary Geithner has warned that if Congress does not raise the $14.3 trillion debt ceiling by August 2, 2011, the United States risks defaulting on its obligations. In response to media speculation about his plans this week, Secretary Geithner said he is planning to remain at Treasury for the “foreseeable future.”
- FDIC Chairman Bair Calls on Lawmakers to Financially Support Agencies. In her final scheduled appearance before Congress as FDIC Chairman, Sheila Bair warned that federal lawmakers could harm the financial system if they fail to give regulators the money and power necessary to implement the Dodd-Frank Act. She explained that regulators have “considerable work ahead of them,” and “without proper funding and…qualified leadership, the result could be needless uncertainly about the regulatory environment and failure to instill confidence in our financial markets.”
- Former President Clinton Calls for Dodd-Frank Slow Down. Last week, former President Clinton suggested that agencies slow implementation of the Dodd-Frank Act. Although generally positive about the reform legislation, he suggested staggering the regulations through a “more pronounced time table” for the benefit of business. According to former President Clinton, the rules are “common sense,” but “there’s only so much change that institutions can handle at one time.”
- Inspector General Appointed for Federal Reserve, Consumer Financial Protection Bureau. Federal Reserve Board Chairman Ben Bernanke has appointed Mark Bialek as Inspector General of the Central Bank and the Consumer Financial Protection Bureau, effective July 25. Most recently, Mr. Bialek served as Inspector General of the Environmental Protection Agency.
- CFTC to Hold Open Meeting. On July 7, the CFTC will hold an open meeting to consider five final rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act related to the following topics: (1) the definition of “agriculture commodity;” (2) rules regarding business affiliate marketing and disposal of consumer information; (3) privacy of consumer financial information; (4) a prohibition on the use of manipulative and deceptive devices and a prohibition on price manipulation; and (5) larger trader reporting for physical commodity swaps.
- FDIC to Hold Open Meeting. On July 6, the FDIC will hold an open meeting to consider, among other things, a final rule related to retail forex transactions and a proposed rulemaking regarding calculating the maximum obligation the FDIC may incur in liquidating a covered financial company.
- SEC to Hold International Financial Reporting Standards Roundtable. On July 7, the SEC will sponsor a roundtable to discuss the benefits or challenges in potentially incorporating International Financial Reporting Standards (IFRS) into the financial reporting system for U.S. issuers. The event’s three panels will include investors, smaller public companies and regulators. Discussions will focus on investor understanding of IFRS and the impact on smaller companies and on the regulatory environment.
- CFTC to Hold a Roundtable on Issues Related to Commodity Pool Operators and Commodity Trading Advisors. On July 6, the CFTC will hold a public roundtable to discuss issues related to the proposed changes to Commission Regulation 4.5 and the proposed recession of Commission Regulations 4.13(a)(3) and 4.13(a)(4).
- Additional Repatriation Measure in the Works. Last week, Rep. Adam Smith (D-WA) and Sen. Kay Hagan (D-NC) signaled they are in the process of drafting an alternative repatriation bill. While no legislative language is yet available, they are contemplating a two-tiered tax reduction for repatriated earnings – as low as 5.25 percent for companies increasing employment figures above a certain average and as high as 8.75 percent or 10 percent for companies with employment figures remaining level. Either tier would be a significant reduction as compared to the 35 percent rate under current law. Meanwhile, House Way & Means Committee Chairman Dave Camp (R-MI) has expressed reluctance to pursue a one-time repatriation “holiday” outside of the scope of broader tax reform, suggesting that a piecemeal approach to tackling tax reform will improperly remove the focus from some of the broader issues with the current tax Code. Still, Chairman Camp has not ruled out the legislative possibility of a repatriation bill this year. The Obama Administration has repeatedly suggested that a repatriation holiday should be considered, but only in the context of comprehensive tax reform.
- Tax Reform Hearings Continue. Hearings on fundamental tax reform continue on both the House Ways & Means and Senate Finance Committees. While past hearings have focused in particular on outbound U.S. investment, future hearings are expected to focus on inbound investment and tax administration.
- FATCA Implementation. Last week, a Treasury official in the Office of International Tax Counsel indicated that Treasury is in the process of carefully considering comments submitted by foreign financial institutions in developing guidance on the Foreign Account Tax Compliance Act (FATCA). The law, which was enacted as part of the Hiring Incentives to Restore Employment (HIRE) Act, imposes broad requirements on foreign financial institutions to disclose U.S.-owned accounts to the Internal Revenue Service.
- Spectrum Bill. Spectrum legislation could become part of the debt ceiling measure that Congress must pass before August 2 or risk default on U.S. obligations. Senate Commerce Committee Chairman Jay Rockefeller (D-WV), who wants his bill to pass the Senate floor, said that including the “Public Safety Spectrum and Wireless Innovation Act” in debt ceiling legislation would move the bill more swiftly. S. 911 represents perhaps the most detailed legislative effort advanced thus far to reallocate the 700 MHz D Block to public safety for a nationwide broadband network and move voluntary incentive spectrum auctions closer to reality. A key to the bill’s impact on deficit reduction will be the Congressional Budget Office (CBO) budget cost estimate for the bill, which is expected soon. Rockefeller and Ranking Member Kay Bailey Hutchison (R-TX) have said S. 911 would reduce the deficit by $10 billion with revenues raised by future auctions. Meanwhile, broadcasters from across the country have asked Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY) to help address their concerns about “repacking” issues that would arise if some broadcasters relinquished their spectrum for auction, as proposed in S. 911. Broadcasters told Senate leaders in a letter that S. 911 should require the FCC to preserve “each remaining station’s coverage area so that no viewers are disenfranchised. Even if stations are assigned new channels, every remaining station should be permitted to broadcast in the same manner that they do today.”
In the Republican-controlled House, leaders of the Energy and Commerce Committee continue to prefer an auction of the 700 MHz D Block spectrum rather than reallocation to public safety. Committee Chairman Fred Upton (R-MI) and Communications and Technology Subcommittee Chairman Greg Walden (R-OR) have yet to introduce a bill on the subject. It is unclear how this differing approach between the House and the Senate will impact the spectrum measure if it is to move with debt ceiling legislation.
- Privacy. Members of the Senate Commerce Committee were split on whether comprehensive privacy legislation is necessary, although they agreed at a June 29 hearing on the need for some sort of national data breach reporting standard to replace varying state laws. Committee Chairman Jay Rockefeller (D-WV) and Senator John Kerry (D-MA) favored comprehensive privacy protections, but ranking member Pat Toomey (R-PA) was less inclined to consider broad-based legislation. Toomey said he wanted to know the potential harms to consumers that would be addressed by any privacy bill along with the potential cost to industry. Rockefeller has offered a data-breach bill with Senator Mark Pryor (D-AK) that has drawn industry support. Several similar measures are being considered in the House.
The House Energy and Commerce Committee will hold the first in a series of hearings on consumer privacy and data collection on July 14. Commerce, Manufacturing, and Trade Subcommittee Chairwoman Mary Bono Mack (R-CA) and Telecom Subcommittee Chairman Greg Walden (R-OR) will hold the joint hearing featuring testimony that includes regulators from the Federal Communications Commission and Federal Trade Commission. The hearing will focus on existing privacy laws in hopes of identifying key issues for future legislation. Future hearings are expected to address consumer awareness and control of data collection; aggregation and anonymization of personally identifiable information; and the role of targeted online advertising.
- Patent Reform. On June 23, the House of Representatives passed H.R. 1249, the America Invents Act, by a vote of 304-117. Having also passed the Senate, differences in the two bills will now have to be reconciled before it is sent to the White House for the President’s signature. At issue will be differences in how the two bills deal with U.S. Patent and Trademark Office (PTO) funding. The Senate bill (S. 23) allows the PTO to keep and spend all revenue generated by fees. Alternatively, the House bill, in a move to placate House appropriators, moves fees in excess of Congressionally-approved funding levels into a separate account to be made available to the PTO via future appropriations bills. PTO Director David Kappos has urged the Senate to simply pass H.R. 1249 as soon as possible. Complicating that effort, however, is Senator Tom Coburn’s (R-OK) vow to block any bill that prohibits the PTO from keeping and spending all the fees it collects. Despite this protest, Senate leaders are currently seeking to unanimous consent from its members to bring the House bill to the floor for consideration as early as the week of July 11 (although it is unclear how that may be affected by the Senate’s decision to stay in Washington to work on the debt ceiling rather than take their scheduled July 4 recess. The Administration is urging swift Senate passage of H.R. 1249.
- Net Neutrality. Ten Democratic Senators, including Jay Rockefeller (D-WV) and John Kerry (D-MA), wrote to the Senate Appropriations Committee on June 29 opposing any action that would prevent the Federal Communications Commission from securing funds needed to enforce the net-neutrality rules passed in December. Also signing the letter were Senators Al Franken (D-MN), Maria Cantwell (D-WA), Tom Udall (D-NM), Richard Blumenthal (D-CN), Mark Udall (D-CO), Ron Wyden (D-OR), Bernie Sanders (I-VT) and Mark Begich (D-AK). The House recently voted to block any funding that would be used to implement the rules, which most Republicans oppose. This action occurs just after the FCC submitted its net neutrality rules to the Office of Management and Budget (OMB) for final review and approval. Once OMB publishes its receipt of the rules, a 30-day comment period will begin. Following review of comments and OMB’s expected approval, the final rules will be published in the Federal Register – which is expected later this fall. At that time, although they would not go into effect for an additional 60 days, it is expected that various court challenges will commence.
- FCC Open Meeting. At the regularly scheduled open meeting on July 12, the FCC will consider Notice of Proposed Rulemakings (NPRM) on the following items: 1) low power FM and FM translator stations; 2) E-911 location accuracy; and 3) prevention and detection of unauthorized telephone bill charges ("mystery fees" or "cramming") by improving the disclosure of third-party charges on wireline telephone bills. Senate Commerce Committee Chairman John Rockefeller (D-WV) indicated that he also plans to look closely at the “cramming” issue in the coming months.
- Supreme Court. On June 27, the U.S. Supreme Court agreed to review the constitutionality of the FCC’s broadcast indecency rules, setting the stage for a ruling next term on the FCC’s authority to regulate broadcast content (FCC, et al. v. Fox Television Stations, et al.). The Court also upheld lower court rulings overturning California violent video game restrictions targeting youth (Brown, et al. v. Entertainment Merchants Association, et al.).
- SAFETEA-LU Reauthorization: The timeframe for release and markup of the House and Senate reauthorization measures appears to be slipping, with considerable uncertainty as to the path forward. House Committee on Transportation and Infrastructure Chairman Mica is not expected to get floor time in July for the bill, pushing potential consideration until after the August recess. That argues for delaying the release of the bill as well, so that it can be released, marked up and moved to the floor expeditiously. On the Senate side, Chairman Boxer's stated intent is to markup the highway title by the end of July. However, the Finance Committee continues to confront the task of producing top-line funding levels and the outline of a revenue title that will be necessary for real progress. An additional $12 billion in new revenue is needed for a two-year bill, which is now the clear focus of Senate deliberations as opposed to a six-year measure. Should there be a revenue deal, the Senate will still face deep differences with the House on policy as well as funding and revenue levels. The House is expected to report a six-year bill that operates within Trust Fund revenues, resulting in an anticipated 30% reduction in authorized spending levels. The path to a bill would likely require introducing and marking up House and Senate bills in early September at the latest, which could potentially justify a shorter-term extension into late 2011 or early 2012 while the House and Senate pass their respective bills and move to conference. However, given the present timeline and the vexing issues involved, many observers are pointing to a straight extension as an increasingly likely outcome.