Capital Thinking Update - May 14, 2012

    View Author 14 May 2012

    General Legislative

    The House is not in session on Monday, May 14, 2012. The House will meet at 12:00 p.m. on Tuesday, May 15, for morning hour and 2:00 p.m. for legislative business. On Tuesday the House will consider several bills under suspension of the rules. Beginning Wednesday, May 16, the House will turn to H.R. 4970, the Violence Against Women Reauthorization Act of 2012. Thereafter, the House will consider H.R. 4310, the National Defense Authorization Act for Fiscal Year 2013 for the balance of the week.

    The Senate convenes at 2:00 p.m. on Monday, May 14, 2012, and will resume consideration of the motion to proceed to H.R. 2072, the Export-Import bank Reauthorization Act.



    • House Agriculture Subcommittee Hearing. On May 8, the House Agriculture Subcommittee on Nutrition and Horticulture held a Farm Bill reauthorization hearing to examine specialty crop and nutrition programs. The first panel of witnesses included growers and representatives of the specialty crop industry discussing the programs under Title X (Horticulture and Organic Agriculture) of the 2008 Farm Bill, including the Pest and Disease Prevention program and Specialty Crop Research Initiative. The second panel of witnesses discussed the Supplemental Nutrition Assistance Program (SNAP) and other nutrition and food assistance programs supporting food banks. During the second panel, most of the discussion focused on SNAP, particularly the growth of the program and combating fraud.
    • Upcoming Hearings. The House Agriculture Committee will continue its series of hearings in the formulation of the 2012 Farm Bill. On Wednesday, May 16 and Thursday, May 17, the Subcommittee on General Farm Commodities and Risk Management will hold hearings on commodity and crop insurance programs. On Friday, May 18, the Subcommittee on Conservation, Energy, and Forestry will hold a hearing on energy and forestry programs.
    • Upcoming Markups. The House Agriculture Committee will hold a markup on Thursday, May 17, to consider the following bills: (1) H.R. 4235 – the “Swap Data Repository & Clearinghouse Indemnification Correction Act of 2012”; (2) H.R. 1838 – the “Swaps Bailout Prevention Act”; and (3) H.R. 3283 – the “Swap Jurisdiction Certainty Act.”
      On May 8, Chairman Frank Lucas (R-OK) stated that the Committee will likely mark up the Farm Bill in June.


    • Institute of Medicine Report on Obesity Prevention. On May 8, the Institute of Medicine (IOM) released “Accelerating Progress in Obesity Prevention: Solving the Weight of the Nation,” a report that reviews the evidence related to the obesity epidemic in the United States. The report also offers specific recommendations, strategies and actions to be implemented in the short term to accelerate progress in obesity prevention over the next ten years. The report examines five “critical areas”: (1) environments for physical activity; (2) food and beverage environments; (3) message environments; (4) health care and work environments; and (5) school environments.

      The report recommends a number of actions the federal government and industry should take to address the obesity problem, including the following:
      • The President should appoint a task force to evaluate the relationship between agriculture policies and the American diet and to develop recommendations for policy and future policy-related research.
      • The Food and Drug Administration and the Department of Agriculture should implement a standard front-of-pack and retail store shelves labeling system that is harmonious with the Nutrition Facts panel.
      • The food, beverage, restaurant and media industries take “broad, common, and urgent voluntary action to make substantial improvements in their marketing aimed directly at children and adolescents aged 2-17.” These standards should align with the Dietary Guidelines for Americans and apply to a broad range of marketing and advertising practices, including digital marketing and the use of licensed characters and toys.
      • The Department of Agriculture should ensure that foods and beverages provided to children and adolescents in schools meet strong nutritional standards and are aligned with the Dietary Guidelines for Americans. The report also recommends that access to sugar-sweetened beverages be prohibited, and that the Department should adopt the strictest IOM recommendations for all foods and beverages sold outside of school meals programs.
    • Supplemental Nutrition Assistance Program Awards to States. On May 9, Agriculture Deputy Secretary Kathleen Merrigan announced $4 million in awards to help states expand availability of wireless technology in farmers markets not currently participating in SNAP. In addition to the awards, the Department’s Food and Nutrition Service (FNS) will publish a notice in the Federal Register soliciting public input on how to best use such funds in the future.
    • Food Security. On Friday, May 18, President Obama will deliver the keynote address at the Symposium on Global Agriculture and Food Security in advance of the G-8 Summit. His remarks will focus on the G-8’s efforts to promote food security and address nutrition and hunger issues. The Chicago Council on Global Affairs is sponsoring the event.


    Budget, Appropriations


    • House Passes First FY 2013 Appropriations Measure. Following more than two days of amendment consideration, the House passed its first FY 2013 appropriations bill, Commerce-Justice-Science (CJS), on Thursday, May 10. Twenty-three Democrats voted in favor of the bill, while eight Republicans voted against the measure; the final vote was 247 to 163. Utilizing the spending cap established in the FY 2013 House Budget Resolution (H. Con. Res. 112) that is $19 billion less that the cap established in the Budget Control Act of 2011 (P.L. 112-25), the bill provides $51.1 billion for the Departments of Commerce and Justice and various science agencies such as NASA, the National Institute of Standards and Technology (NIST), the National Oceanic and Atmospheric Administration (NOAA) and the National Science Foundation (NSF). The funding is approximately $1.6 billion lower than current FY 2012 funding levels for programs under jurisdiction of the bill. An amendment to increase the Department of Justice’s Community-Oriented Policing Services (COPS) program by $126 million narrowly passed during floor consideration. This raises the level of funding provided by the House for the program to $199 million, which is less than the $248 million proposed by the Senate but equal to the current FY 2012 funding level. Additionally, several Democratic-opposed policy riders were adopted through the amendment process which bar Department of Justice funding provided in the measure to be used to defend the 2010 healthcare reform law (P.L. 111-148; P.L. 111-152), or to pursue lawsuits to overturn or invalidate specific immigration laws in eight states. The White House reiterated its veto threat against this bill, and any other FY 2013 appropriations bill, that does not adhere to the spending cap established in the Budget Control Act.

      As previously reported, the Senate Appropriations Committee approved its CJS measure on April 19, which provides approximately $51.86 billion for FY 2013. Floor consideration of the Senate bill has not been scheduled.
    • FY 2013 Appropriations Committee Action. While the Senate Appropriations Subcommittees focused on FY 2013 Budget Proposal hearings, four House Appropriations Subcommittees approved their FY 2013 spending bills last week:
      • Defense – provides $607.7 billion, including $519.2 billion for base defense spending and $88.5 billion for the war in Afghanistan and counterterrorism operations. This is $1.1 billion above current FY 2012 funding levels.
      • Military Construction-Veterans Affairs – provides $71.7 billion, including $10.6 billion for military construction and $60.7 billion for the Department of Veterans Affairs.
      • State-Foreign Operations – provides $40.1 billion in discretionary funding, a five percent reduction from FY 2012. The bill provides $8.2 billion in Overseas Contingency Operations. The bill increases foreign security assistance, but reduces funding for economic development, health and disaster assistance. The bill contains several controversial policy provisions that Democrats will likely seek to remove during floor consideration: a prohibition of funding for the United Nations Population Fund; a cap on funding for family planning and reproductive health programs; and several additional anti-abortion riders.
      • Homeland Security – provides $39.1 billion in discretionary funding, $484 million less than FY 2012. The bill provides $5.5 billion in emergency disaster relief funding (which is not expected to raise the same argument as last year in which Republicans insisted the funds must be offset). The bill increases FEMA first responder funding by nearly $400 million, but significantly reduces Transportation Security Administration funding by $422 million.
        Full committee consideration of the Homeland Security and Military Construction-Veterans Affairs bills is scheduled for Wednesday, May 16. A full committee markup of the others may occur this week as well.
    • Senate Budget Plans. Several Republican budget proposals will be offered on the Senate floor this week, likely including: (1) a proposal by Senator Patrick Toomey (R-PA) (S. Con. Res. 37) which seeks to roll back non-defense discretionary funding to FY 2006 levels, lower marginal tax rates by 20 percent, reduce the corporate tax rate to 25 percent, repeal healthcare reform law (P.L. 111-148; P.L. 111-152), and overhaul Medicare and Medicaid; (2) a budget resolution introduced by Senator Rand Paul (R-KY); (3) the House Budget Resolution (H. Con. Res. 112); and (4) a rendering of the President’s FY 2013 Budget Proposal. While Senate Majority Leader Harry Reid (D-NV) is not expected to prevent the votes, motions to proceed on all of the measures are expected to be rejected by the Democratic-controlled Senate.
    • House Sequestration Replacement / Reconciliation Legislation. After being approved by the Budget Committee on Monday, May 7, the House passed the Sequester Replacement Reconciliation Act of 2012 (H.R. 5652) by a vote of 218 to 199 on Thursday, May 10. House members generally voted along party lines, with no Democrats supporting the bill and only 16 Republicans opposing it. The proposal would replace the mandatory spending cuts set to take place in January 2013 that were imposed in the Budget Control Act of 2011 (P.L. 112-25) with a $19 billion reduction in the discretionary cap for FY 2013 - already included in the House’s FY 2013 Budget Resolution - and more than $310 billion in savings measures identified by six authorizing committees: Agriculture, Energy and Commerce, Financial Services, Judiciary, Oversight and Government Reform, and Ways and Means Committees.

      As previously reported, the reconciliation package includes a cut of $35.8 billion from the Supplemental Nutrition Assistance Program (SNAP); savings of $83.3 billion through increased federal worker contributions to pensions; $48.6 billion in savings from capping damages and limiting attorney fees in medical malpractice lawsuits; changes to subsidized health care and child tax credit programs; elimination of the Social Services Block Grant; and major changes to the 2010 financial regulatory and health care overhauls.

      On May 9, the Congressional Budget Office (CBO) released its cost estimate for the Sequester Replacement Reconciliation Act. The CBO determined that, if enacted by July, the reconciliation package would save $243 billion over ten years ($5 billion less if enacted by October). This amount of savings significantly exceeds the estimated $72 billion in automatic sequestrations cuts, but as the measure will certainly not be raised in the Senate, it provides spending cut options for House Republicans as they head into the elections and anticipated debt reduction negotiations in the lame duck session. Therefore, it is possible that pieces of the package could advance as part of a deal at the end of the year to replace the sequestration process.

      Congressional Democrats and the White House continue to express concerns over the sequester replacement measure, insisting they support replacing the automatic across-the-board spending cuts but prefer a package that takes a “balanced approach.” House Budget Committee Ranking Member Chris Van Hollen (D-MD) attempted to offer a substitute amendment to the bill that included a number of Democratic proposals, including: eliminating direct payments to agriculture commodity and risk management programs; increasing flood insurance premiums; limiting oil and gas subsidies; and instituting the “Buffett rule” to set a minimum tax rate for millionaires. The Rules Committee rejected the amendment based on the “cut-go” rule, which requires new spending to be offset by eliminating an existing program of equal or greater value and bars the use of tax increases to pay for new spending.

      Senate Majority Leader Harry Reid (D-NV) spoke out against the bill on May 9, noting that sequestration was intended to force the two parties into a comprehensive deficit reduction agreement and emphasizing that without a balanced approach – including revenue into the mix of spending cuts - sequestration would go forward as mandated in the Budget Control Act. The White House also echoed Democrats’ strong opposition to the House package in a Statement of Administration Policy that argued that the bill was “unbalanced” and failed to properly address the problem of sequestration. 




    • Senate Cybersecurity Legislation. As previously reported, the House completed action on four cybersecurity bills during their “Cybersecurity Week.” At this juncture, the Senate continues to work on discussions that could address the differences in the two competing bills in the Senate. One bill, S. 2105, introduced by Senate Homeland Security and Government Affairs Committee Chairman Joe Lieberman (I-CT), Ranking Member Susan Collins (R-ME) and a number of other Senate Democratic Chairmen, would give DHS the primary role in overseeing domestic cybersecurity efforts and set standards for owners and operators of critical infrastructure, while the other, S. 2151, the SECURE IT Act (S. 2151) introduced by Senator John McCain (R-AZ) and a number of other key Ranking Members in the Senate, is silent on critical infrastructure—focusing on information sharing, Federal Information Security Management Act (FISMA) reform, research and development and other limited issues.

      Majority Leader Harry Reid (D-NV) remains committed to bringing cybersecurity legislation to the floor, potentially late May or early June.
    • Privacy Issues. As the Senate continues its work on cybersecurity legislation, Chairman of the Senate Committee on Commerce, Science, and Transportation John Rockefeller (D-WV) acknowledged the privacy concerns raised around the various House cybersecurity bills and suggested that privacy provisions could be added to a cybersecurity bill given that the Congress was unable to come to a consensus on separate privacy legislation. Chairman Rockefeller introduced a bill, S. 913 – Do Not Track Online Act of 2011, that would regulate how companies handle the data that they track on consumers but he acknowledged that the bill does not have much of a chance of passing on its own. With no traction on a broader privacy bill, Chairman Rockefeller is hoping to add some of these provisions on consumer data breaches and security into Senator Lieberman’s cybersecurity legislation that is currently pending. Although Members of both parties have expressed concerns about how companies track consumers online, there is a difference of opinion on how best to combat tracking practices.
    • FY 2013 National Defense Authorization Act. The House Armed Services Committee approved the National Defense Authorization Act for FY 2013 after an extensive markup on May 9. Included in the bill is a provision authored by Committee Chairman Howard “Buck” McKeon (R-CA) that confirms that the Pentagon has “the authority to conduct clandestine military activities in cyberspace.” Although the bill does not define what “clandestine military activities” include, this language clarifies that the Pentagon can launch secret cybersecurity operations to support military efforts and guard against network attacks. 




    • Student Loan Interest Rates. On May 8, Republican Senators blocked a Democratic proposal (S. 2343) May 8 to extend the current 3.4 percent student loan interest rate for one year (currently set to expire July 1), which would pay for the $6 billion cost by eliminating a tax break for S corporations. Democratic leaders in the Senate vowed to continue fighting for their proposal but cancelled plans for a revote two days later when it was clear they did not have the votes to beat back another Republican filibuster. Senator Scott Brown (R-MA) offered a solution, which would create a pay-for by reducing “improper payments” made by the federal government, estimated at $115 billion in FY 2011. His draft legislation (S.2834 and S. 2835) also would require colleges and universities to post online comprehensive tax and budget information, such as faculty and administrative salary and benefit packages, to help students make better-informed decisions. Majority Leader Reid opposed the proposal because it is unclear that it would actually save money.

      The Obama Administration supports the Senate Democrats’ plan and continued to raise the issue throughout the week in a series of appearances and conference calls held by senior Administration officials. Additionally, Congressional staff continue to work on a solution to extend the rate with an offset that both parties can support. Despite these efforts, we expect the debate to drag out through much of this and next month before a compromise is reached.
    • National Science Foundation Funding. During floor consideration of the FY 2013 Commerce-Justice-Science Appropriations bill, the House adopted (218-208) an amendment barring the National Science Foundation (NSF) from spending funds on its political science program, which allocated approximately $11 million in peer-reviewed grants for FY 2012. Congressman Jeff Flake (R-AZ), who offered the amendment, called it a “meritless program.” Such a provision is not included in the Senate bill and is not likely to appear in any final measure.
    • Hearings and Events. The following events have been noticed:
      • May 16 – The House Veterans Subcommittee on Economic Opportunity will hold a hearing titled “Examining Executive Order #13607 and Its Impact on Schools and Veterans.” Last week’s edition of Capital Thinking discussed Executive Order #13607 - “Establishing Principles of Excellence for Educational Institutions Serving Service Members, Veterans, Spouses, and Other Family Members,” which sets forth guiding principles for how institutions receiving military and veteran education benefits recruit students, disclose financial information, and track student outcomes.
      • May 16 – The Early Childhood, Elementary and Secondary Education Subcommittee of the House Education and the Workforce Committee will hold a hearing titled "Exploring State Success in Expanding Parent and Student Options" at 10:00 a.m.
      • May 17 – The House Ways and Means Committee will hold a hearing at 10:00 a.m. titled "Supporting Economic Growth and Job Creation through Customs Trade Modernization, Facilitation and Enforcement." Also at 10:00 a.m. that day, the Senate Health, Education, Labor and Pensions (HELP) Committee will hold a hearing titled "Beyond Seclusion and Restraint: Creating Positive Learning Environments for All Students"
      • May 31 – The House Veterans Affairs Committee scheduled an oversight hearing at 10:15 a.m. to review Implementation of the Veterans Opportunity to Work (VOW) to Hire Heroes Act of 2011, which provides tax credits to employers that hire veterans.


    • McNair Program. On May 9, the Department of Education announced availability of funds for the Ronald E. McNair Post baccalaureate Achievement Program. The McNair Program is one of the eight programs known as the Federal TRIO Programs, which provide postsecondary educational support for qualified individuals from disadvantaged backgrounds. The deadline for applications is June 8, 2012, and 127 awards are expected.
    • Upward Bound. On May 11, the Department of Education announced its first set of awards for 780 Upward Bound projects, which totals more than $254 million in funding. The Upward Bound program is another one of the eight TRIO Programs.
    • Student Loan Collection. This month, the National Consumer Law Center released a report titled “Borrowers on Hold: Student Loan Collection Agency Complaint Systems Need Massive Improvement.” The Law Center released the report after reviewing the Department of Education’s oversight and use of collection agency contractors to recover defaulted federal student loans. The report found there is growing evidence that borrower dissatisfaction with collection agencies has increased and accuses the Department of failing to protect student borrowers while creating financial incentives that encourage collectors to put profits first.




    • Congressional Hearings. On Thursday, the Senate Energy and Natural Resources Committee will receive testimony on Chairman Jeff Bingaman’s (D-NM) Clean Energy Standard Act of 2012 (S. 2146).


    • Hydraulic Fracturing. Comments on EPA’s draft permitting guidance for the underground injection of HF-related activities using diesel fuels are due by July 9. Comments on the Bureau of Land Management’s proposed rule to regulate HF activities on federal and tribal lands are due by July 10.
    • OCS Blowout Preventers. The Bureau of Safety and Environmental Enforcement will host a May 22 technical forum in Washington, D.C. on next-generation BOPs and control systems technology, management, and regulations. Information gleaned from several panel discussions and stakeholder input will be used to inform a forthcoming OCS “Increased Safety Measures for Oil and Gas Operations” rule expected in June.
    • OCS Scientific Committee. The plenary session of the Outer Continental Shelf Scientific Committee will be held May 22-24 in Santa Barbara, California.
    • FERC. Comments on the Federal Energy Regulatory Commission’s Notice of Proposed Rulemaking regarding transmission planning reliability standards are due July 6. It should be noted that FERC does not believe that the North American Electric Reliability Corporation’s modified proposal —to allow a transmission planner to plan for non-consequential load loss following a single contingency plan that undergoes an open stakeholder process —would meet the statutory criteria required for approval. FERC’s final rule to enhance electricity market surveillance and analysis by requiring each Regional Transmission Organization and Independent System Operator to electronically deliver market data to the Commission will become effective on July 6.
    • Pipeline Safety. Comments on the Pipeline and Hazardous Materials Safety Administration’s Advisory Bulletin, regarding recordkeeping for maximum operating pressures for gas and hazardous liquid pipeline facilities, are due June 6. PHMSA is considering subjecting older pipelines to new pressure testing in order to verify continued safe maximum allowable operating pressure.




    • Corporate Environmental Responsibility. On Tuesday, May 15, the Senate Committee on Environment and Public Works, Subcommittee on Children’s Health and Environmental Responsibility will hold a hearing titled, “Growing Long-Term Value: Corporate Environmental Responsibility and Innovation.”
    • Forests and Water. On Monday, May 14, the House Committee on Natural Resources, Subcommittee on Water And Power And Subcommittee on National Parks, Forests And Public Lands will hold a joint subcommittee oversight field hearing concerning litigation as it impacts forests, jobs and water, and power supplies. The field hearing will take place in Montrose, Colorado.


    • Surfactants. The EPA has released the final report on alternatives to nonylphenol ethoxylates (NPE) through the Design for the Environment (DfE) Alternatives Assessment Program. NPEs are widely used surfactants with a range of industrial applications and are commonly found in consumer products, such as laundry detergents. When released into the environment, they can be persistent and highly toxic to aquatic organisms. The report identifies eight safer alternatives to NPE that meet the EPA’s criteria for safer surfactants. The report provides information on the availability of safer alternatives, DfE’s hazard evaluation method for surfactants, and the progress being made in adopting safer surfactants. The EPA evaluated hundreds of chemicals for their biodegradability and their potential effects on aquatic organisms.

      DfE’s Alternatives Assessment Program is intended to help industries choose safer chemicals and offers a basis for informed decision-making by providing a comparison of the potential human health and environmental effects of chemical alternatives. To date, the DfE program has labeled more than 2,700 safer products including detergents that contain only safer surfactants and other chemicals. All companies participating in the DfE Safer Detergents Stewardship Initiative have eliminated NPE from their product lines to meet DfE criteria. Click here for more information on the DfE Alternatives Assessment Program and the NPEs Report. 


    Financial Services


    • House Financial Services Subcommittee to Discuss SIFIs. On Thursday, May 17, the House Financial Services Financial Institutions and Consumer Credit Subcommittee will hold a hearing titled “The Impact of the Dodd-Frank Act: What It Means to be a Systemically Important Financial Institution.” The hearing is expected to discuss the designation of systemically important financial institutions by the Financial Stability Oversight Council (FSOC), as required by the Dodd-Frank Act. To date, the FSOC has not designated any financial companies (banks or nonbanks) as systemically important.
    • House Subcommittee to Discuss U.S. Access to Chinese Markets. On Wednesday, May 16, the House Financial Services International Monetary Policy and Trade Subcommittee will hold a hearing titled “Increasing Market Access for U.S. Financial Firms in China: Update on Progress of the Strategic & Economic Dialogue.”
    • House Agriculture Committee to Markup Title VII Legislative Proposals. On Thursday, May 17, the House Agriculture Committee will review three legislative proposals: the Swap Data Repository & Clearinghouse Indemnification Correction Act of 2012 (H.R. 4235), the Swaps Bailout Prevention Act (H.R. 1838), and the Swap Jurisdiction Certainty Act (H.R. 3283).
    • House Subcommittee to Consider Global Insurance Market. On Thursday, May 17, the House Financial Services Insurance, Housing and Community Opportunity Subcommittee will hold a hearing titled “U.S. Insurance Sector: International Competitiveness and Jobs.”


    Health Care


    • FDA User Fee Reauthorization. The House Committee on Energy and Commerce approved their version of the long negotiated user fees legislation, H.R. 5651, the Food and Drug Administration Reform Act of 2012, which could end up on the House floor for consideration as early as next week. The bipartisan agreement would extend authorization of the FDA’s user fee program for prescription drugs and medical devices for five years as well as establish user fees for the review of biosimilars and generic drugs, which helps to fund the FDA’s approval process. The package also includes incentives for the development of pediatric drugs through the permanent reauthorization of the Best Pharmaceuticals for Children Act and the Pediatric Research Equity Act, as well as addresses drug shortages by expediting the approval of drugs in need. Following floor consideration, the bill must be reconciled with the Senate version, S. 2516, the Food and Drug Administration Safety and Innovation Act, which was approved by the Senate Committee on Health, Education, Labor and Pensions last month.
    • Bipartisan SGR Repeal Bill. Representatives Allyson Schwartz (D-PA) and Joe Heck (R-NV) introduced a bill, the “Medicare Physician Payment Innovation Act of 2012,” that would fully repeal the Medicare Sustainable Growth Rate formula and replace it with a series of different payment models for physicians to choose from. The bill is based on a similar proposal introduced by Rep. Schwartz last November and would similarly offset the cost of the repeal by using the Overseas Contingency Operations fund. The plan would allow for a period of testing and evaluating new payment models to identify the best practices and delivery options, followed by a transition period to implement the selected models. Physicians would be allowed to stay in traditional fee-for-service, although reimbursement rates would decrease over time to encourage a transition to one of the new models.
    • Senate HELP Hearing. The Senate Committee on Health, Education, Labor and Pensions Subcommittee on Primary Health and Aging will hold a hearing on Tuesday, May 15, on “The High Cost of High Prices for HIV/AIDS Drugs and the Prize Fund Alternative.” Witnesses include Dr. Mohammed Akhter, DC Department of Health, Frank Oldhan with the National Association of People With AIDS, Suerie Moon with the Harvard Global Health Institute and Harvard School of Public Health, Joseph Stiglitz of Columbia University, Lawrence Lessig of Harvard Law School, Creative Commons, and the Stanford Center for Internet and Society, and James Love with Knowledge Ecology International.
    • House VA Hearing. The House Committee on Veterans’ Affairs Subcommittee on Health has scheduled a hearing on Wednesday, May 16, titled “Optimizing Care for Veterans with Prosthetics.”
    • House Ways and Means Hearing. The House Committee on Ways and Means Subcommittee on Oversight will hold a hearing on Wednesday, May 16, on Tax Exempt Organizations. The hearing will focus on certain current issues related to tax-exempt organizations, including the current IRS compliance initiative related to Universities, recently enacted reporting requirements for tax-exempt hospitals, recent efforts by tax-exempt organizations to design and implement good governance standards, and taxpayer involvement in redesigning the Form 990. In addition, the hearing will discuss the history of recent legislative changes to the tax code dealing with tax-exempt organizations and what prompted those changes.
    • Senate HELP Hearing. The Senate HELP Committee has scheduled a hearing on Wednesday, May 16, titled “Identifying Opportunities for Health Care Delivery System Reform: Lessons from the Front Line.”
    • House Judiciary Hearing. The House Judiciary Committee Constitution Subcommittee will hold a hearing on Thursday, May 17, on legislation that would make it illegal for a doctor in the District of Columbia to perform an abortion after the twentieth week of pregnancy.


    • Rules to Reduce Regulatory Burden. The Centers for Medicare and Medicaid Services (CMS) released two final rules aimed at cutting health care “red tape.” The first revises the conditions of participation that hospitals and critical access hospitals (CAHs) must meet to participate in the Medicare and Medicaid programs in order to reduce procedural burdens on providers. The second identifies and reforms various Medicare and Medicaid regulations that CMS determined were unnecessary, obsolete or excessively burdensome on health care providers and beneficiaries. The Administration stated the new rules are projected to save a total of $5 billion over five years.
    • Medicaid Payment Rule. CMS released a proposed rule to implement a provision in the Affordable Care Act (ACA) requiring Medicaid primary care doctors to be reimbursed at rates “not less than” Medicare levels during calendar years 2013 and 2014. The regulation would apply to specified primary care services furnished by a physician with a specialty designation of family medicine, general internal medicine, or pediatric medicine, as well as to services paid through Medicaid managed care plans.
    • Reg Deadlines. On Monday, May 14, the Food and Drug Administration (FDA) closes its comment period on industry guidance on direct-to-consumer television advertisements. Comments are also due next week on a proposed rule delaying the deadline for complying with expanded diagnosis and procedure codes (ICD-10) until October 1, 2014.


    • House Approps Advances Foreign Health Aid Spending. The House Committee on Appropriations approved the State-Foreign Operations measure that includes $2.47 billion for global health programs and the United States Agency for International Development (USAID), $5.54 billion for international HIV/AIDS relief, as well as abortion funding restrictions on international assistance projects.


    • NIH Drug Deal. The National Institutes of Health (NIH) announced a new agreement this week that would allow for grants to academic researchers to develop new uses for experimental drugs shelved by pharmaceutical companies, as well as allowing the universities and companies to share the profits. The new National Center for Advancing Translation Sciences (NCATS) will provide $20 million in FY 2013 for the first round of grants, with another $20 million available in FY 2014 and FY 2015. The agreement marks what could be the largest collaboration between the NIH and the private sector to date.
    • MACPAC Meeting. The Medicaid and CHIP Payment and Access Commission (MACPAC) has scheduled a meeting for Tuesday, May 22,. Meeting agenda to follow next week.
    • IOM Meeting. The Institutes of Medicine (IOM) Committee on the Examination of the Adequacy of Food Resources and SNAP allotments will hold its third meeting on Monday and Tuesday May 14-15. The committee will examine the adequacy of Supplemental Nutrition Assistant Program (SNAP) allotments, specifically the (1) the feasibility of establishing an objective, evidence-based, science-driven definition of SNAP benefit adequacy consistent with the program goals of improving food security and access to a healthy diet, and other relevant dimensions of adequacy, and (2) data and analyses needed to support an evidence-based assessment of the adequacy of SNAP allotments.


    International, Defense, Homeland Security

    • Homeland Security Hearings and Markups. On May 9, the House Homeland Security Appropriations Subcommittee marked up its version of the FY 2013 homeland security appropriations bill. Subcommittee Republicans, led by Chairman Robert Aderholt (R-AL), held to their plan of targeted reductions, particularly in transportation security (proposing a $422 million cut for the Transportation Security Administration) and Department of Homeland Security (DHS) administrative costs. On the other hand, Congressman Aderholt adhered to the traditional Republican prioritization of border security, proposing a modest increase in the Customs and Border Protection (CBP) allotted for additional Border Patrol agents. The net result was a Subcommittee bill that, if enacted, would appropriate $39.1 billion for DHS in FY 2013, which is almost $400 million less than President Obama’s request and almost $500 less than the FY 2012 allocation. The full House Appropriations Committee and the Senate Homeland Security Appropriations Subcommittee have not yet scheduled their markups.
      Also on May 9, the House Homeland Security Committee (HHSC) reported out several stand-alone bills.
      • H.R. 2356, sponsored by Congressman Bill Pascrell (D-NJ) and HHSC Chairman Peter King (R-NY), which, if enacted into law, would implement several biodefense recommendations from the Weapons of Mass Destruction (WMD) Commission co-chaired by former Senators Bob Graham (D-FL) and Jim Talent (R-MO).
      • The Committee also approved Congressman Bob Turner’s (R-NY) H.R. 3857, which would allow transportation security grant funds to be used to maintain, not just create, canine units and other specialized patrol teams.
      • The HHSC also considered favorably Congressman Janice Hahn’s (D-CA) legislation (H.R. 4005) to require a DHS study and plan on shortcomings in port security.
      • Finally, the Committee unanimously supported Congressman Steve Scalise’s (R-LA) bill (H.R. 3173) to streamline the Transportation Worker Identification Credential (TWIC) process. Next week, HHSC Subcommittee hearings will examine aviation checkpoint security (Wednesday, May 16) DHS ethical standards (Thursday, May 17) and terrorist financing (Friday, May 18).
    • Foreign Policy Hearings and Markups. As expected, on May 9, House Foreign Operations Appropriations Subcommittee Republicans, led by Chairwoman Kay Granger (R-TX), reported out a $40.1 billion FY 2013 bill that would cut $2 billion from FY 2012 levels and is over $6 billion lower than President Obama’s budget request. Subcommittee Republicans offered relative support for foreign assistance programs which they deemed directly relevant to national security, such as by fully funding the Administration’s $8.2 billion request for the Overseas Contingency Operations (OCO) account for efforts in Pakistan, Afghanistan, and Iraq. On the other hand, the Subcommittee displayed the GOP’s longstanding reluctance to fund U.S. contributions for the United Nations and other international multilateral institutions, proposing a more than $700 million cut to the Administration’s request.  Subcommittee Ranking Member Nita Lowey (D-NY), full Committee Ranking Member Norm Dicks (D-WA), and other Appropriations Committee Democrats are expected to question Republican funding decisions, including on the reinstated “Mexico City policy” ban on funding to family planning groups that support abortion, at the full Committee markup, which has not yet been scheduled. Meanwhile, the Senate Foreign Operations Appropriations Subcommittee is likely to mark up its FY 2013 on May 22.

      Also on May 9, the House Foreign Affairs Committee’s (HFAC) Middle East Subcommittee, led by Chairman Steve Chabot (R-OH), held a hearing to question the State Department and USAID on the Administration’s response to the Arab Spring. Congressman Chabot and other Subcommittee Republicans believe the Administration has been too forward-leaning with regard to U.S. foreign assistance to Egypt, the Palestinian Authority, and elsewhere. This week, the HFAC and its Subcommittees will examine Iran sanctions, the Trans-Pacific Partnership trade talks, Cuban foreign policy, South Asia, and Chinese human rights issues. Meanwhile, on Thursday, the Senate Foreign Relations Committee offered a cautious endorsement of the Administration’s policies toward NATO on the eve of the Alliance’s summit in Chicago. However, Chairman John Kerry (D-MA), Senator Bob Corker (R-TN), Senator Jeanne Shaheen (D-NH), Senator Mike Lee (R-UT), and others called most NATO members on the carpet for failing to spend a minimum of two percent of their Gross Domestic Product (GDP) on defense. Phil Gordon, the Assistant Secretary of State for European Affairs, agreed with their assessment that if that trend continues, it will be increasingly difficult to maintain the current levels of political and practical U.S. support for NATO operations, like those undertaken in Afghanistan, Libya, Kosovo, and elsewhere. The SFRC will consider several ambassadorial nominations on Wednesday, May 16 and Thursday, May 17.
    • Defense Hearings and Markups. As expected, the House Appropriations Committee’s Defense Subcommittee marked up its FY 2013 Appropriations bill in a closed session on Tuesday. In contrast to other appropriations bills, the $607.7 billion bill does not abide by the limits set in the budget control law enacted last August. Senate Democrats are likely to produce a defense appropriations bill that does adhere to the Budget Control Act’s requirements, setting up a showdown later this year.

      After a marathon markup that ended early Thursday morning, the House Armed Services Committee (HASC) reported out the FY 2013  National Defense Authorization Act (NDAA). The bill authorizes $642 billion in FY 2013  spending. On a related note, the Committee has not yet agreed on a plan to avoid the approximately $450 billion in automatic defense cuts slated to take place under sequestration, although HASC Chairman Buck McKeon (R-CA) and Ranking Member Adam Smith (D-WA) reiterated their desire to do so. Meanwhile, the Senate Armed Services Committee is likely to mark up its version of the NDAA the week of May 21.



    • Senate Republicans Block Student Loan Bill with S Corporation Treatment Offset. On May 8, the Senate fell eight votes short of the 60 needed to proceed to Senate Democrats’ version of legislation to extend federally subsidized student loan rates (S. 2343) – the bill would have prevented the current 3.4 percent interest rate from doubling on July 1, 2012. The House passed its bill (H.R. 4628) last month.

      While the House measure finances the rate extension (costing roughly $6 billion for the one-year extension) by eliminating the Prevention and Public Health Fund created under the 2010 health care reform law, the Senate bill, introduced by Senate Majority Leader Harry Reid (D-NV), would have offset the one-year extension by eliminating a payroll tax exemption for S corporations. The Senate Democrats’ offset would have required all S corporations that have three or fewer employees, each whose annual income is at least $200,000 ($250,000 for joint filers), to contribute payroll taxes. While, to date, Congressional leaders have been unable to reach agreement on structuring the offset of the rate extension, it is expected that a compromise will be achieved prior to the scheduled rate increase in July.
    • Senate Finance Committee Holds Nomination Hearing on Treasury Appointees. On May 8, the Senate Finance Committee held a hearing to consider the nominations of Dr. Mark J. Mazur (for Assistant Secretary of the Treasury), Mr. Matthew S. Rutherford (for Assistant Secretary of the Treasury), and Ms. Meredith M. Broadbent (for Member of the United States International Trade Commission). The Committee Members focused on: (i) reforming the Tax Code, including the Treasury Department’s activities with regard to comprehensive tax reform, closing tax “loopholes” to raise revenue, and lowering the corporate tax rate; (ii) addressing the tax gap, or the difference between the amount of income taxes owed but not collected; (iii) addressing issues related to the expiration of the 2001 and 2003 tax rates; (iv) measuring fairness and equality in the tax system; and (v) avoiding the debt ceiling. While no Committee Member indicated opposition to confirmation of the nominees, the Committee has not yet proceeded to its vote.
    • Senate May Move for Consideration of Measure Touted to Promote Small Business. As early as next week, Senate Majority Leader Reid may move for cloture on the Senate Democrats’ Small Business Jobs and Tax Relief Act (S. 2237). The measure, touted as a small business bill, would extend the bonus depreciation tax break and provide a new tax credit equal to 10 percent of the cost of new job creation or wage increases in 2012 (capped at $500,000). Senate Republicans may offer an alternative measure. While the process has yet to unfold, the Democrats’ current proposal is not likely to secure the 60 votes necessary to proceed to consideration.
    • Tax Hearings Next Week. The following tax hearings are scheduled next week in the House Ways and Means and Senate Finance Committees, as well as the Joint Economic Committee:
      Tuesday, May 15: Senate Finance Committee hearing on “Tax Reform: What It Could Mean for Tribes and Territories”
      Wednesday, May 16: House Committee on Ways and Means Subcommittee on Oversight hearing on Tax Exempt Organizations
      Wednesday, May 16: Joint Economic Committee hearing on "How Taxation of Labor and Transfer Payments Affect Growth and Employment"



    Legislative Activity

    • Privacy. Following a May 9 online-privacy hearing, Senate Commerce Committee Chairman Jay Rockefeller (D-WV) said it would be “desirable” to hold a markup on privacy legislation this year and the committee “would like to get that done. More generally on the subject of privacy, Rockefeller noted: 'I really don't see it as that complicated a subject.
    • Cybersecurity. Negotiations continue on cybersecurity in the Senate. Senate Commerce Committee Chairman Jay Rockefeller (D-WV) said May 9 that he is abiding by provisions on critical infrastructure and that he will not budge on the language. Revising that language would be 'just like giving up the basic national security protection of the country," he told reporters. Rockefeller is a co-sponsor of the legislation introduced by Sens. Joe Lieberman (I-CT) and Susan Collins (R-ME) that would direct the Department of Homeland Security to establish minimum cybersecurity standards for critical infrastructure, such as electric grids, telecommunications networks or banks. Supporters, including the White House, argue the standards would prevent a significant cyberattack. However, Sen. John McCain (R-AZ) and other Republicans say the standards are unnecessary and would impose an unreasonable burden on companies. GOP House leaders have indicated they will not allow a floor vote on any legislation that creates new cybersecurity regulations. The House passed its cybersecurity bill, the Cyber Intelligence Sharing and Protection Act (CISPA), last month. The bill would encourage companies to voluntarily share information about cyber attacks. The White House has threatened to veto CISPA, citing lack of critical infrastructure mandates and weak privacy protections.
    • Broadband Loans. The House Energy and Commerce Subcommittee on Communications and Technology will hold a hearing on Wednesday, May 15, entitled “Broadband Loans and Grants.” Witnesses will be announced.

    Regulatory Activity

    • Verizon-SpectrumCo Deal. Consumer group Public Knowledge asked the Federal Communications Commission (FCC) on May 9 to publicly reveal details about Verizon's plan to launch a joint research operation with cable companies. The research project is part of a $3.6 billion spectrum acquisition between Verizon and cable companies Comcast, Time Warner Cable, Bright House Networks and Cox, which entered into an agreement to research new technologies. The deal would also allow Verizon to buy wireless airwave licenses from the cable companies, and the companies agreed to cross-sell each other's services. The FCC is investigating whether the agreements are in the public's interest. The Justice Department has launched its own inquiry into whether the arrangements violate antitrust lawThe Federal Communications Commission (FCC) and the Commerce Department’s National Telecommunications and Information Administration have spent the last two months analyzing and beginning implementing their respective provisions of the Middle Class Tax Relief and Job Creation Act of 2012 (the Spectrum Act). 
    • FirstNet. The Commerce Department’s National Telecommunications and Information Administration on May 7 sought nominations for the Board of Directors of the First Responder Network Authority (FirstNet). FirstNet is an independent authority within NTIA that will establish and oversee a single nationwide, interoperable public safety broadband network, among other duties. The 15-member Board of Directors will be responsible for making strategic decisions regarding FirstNet’s operations. The Secretary of Commerce selects 12 of the members. In addition, the Secretary of Homeland Security, the Attorney General and the Director of the Office of Management and Budget serve as permanent members of the Board. Each board member must have expertise in at least one of the following areas: public safety; technical; network; and financial. In addition, three board members must represent collective interests of states, localities, tribes and territories; three must have served as public safety professionals; and the board as a whole should reflect geographic and regional diversity. Expressions of interest for membership on the FirstNet Board of Directors will be accepted until May 25. NTIA must appoint the FirstNet Board by August 20 under the Middle Class Tax Relief and Job Creation Act.



    • SAFETEA-LU Reauthorization. The Conferees on the surface transportation bill met publicly on May 8, to make opening statements and set the tone for the Conference. The opening statements, as well follow-up conversations with key House and Senate players, confirmed that the Keystone Pipeline issue is the single most significant issue in the fate of the surface transportation bill. Staff-level talks on the transportation policy provisions began this week and are expected to continue in earnest next week, with staff from the Senate EPW and Banking Committees meeting with their counterparts on the House Transportation and Infrastructure Committee. During the opening Conference session, EPW Chairman Boxer set a target deadline of early June to complete conference negotiations so as to allow time for preparation of a final Conference Report and final votes in the House and Senate in advance of the June 30 expiration of the current extension.