BUDGET AND APPROPRIATIONS

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November 5, 2007

© 2007, BLANK ROME GOVERNMENT RELATIONS LLC. Notice: The purpose of this newsletter is to review the latest developments which are of interest to clients of Blank Rome. The information contained herein is abridged from legislation, court decisions, administrative rulings, and other sources and should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.

BUDGET AND APPROPRIATIONS

Appropriations Debacle

At long last, the first House and Senate conferences on the fiscal year 2008 (FY08) appropriations bills have begun, but talks are off to a rocky start. Members are currently negotiating regarding three measures—Labor-HHS-Education (LHHS), Defense, and Military Construction-VA (MilCon-VA). Democrats had hoped to create a mini omnibus package out of these three bills by adding Defense and MilCon-VA onto the LHHS measure. Due to recent developments, however, the Defense bill was removed from this package. Although the Defense spending bill does not include any funding for the war in Iraq, many members had concerns about including it with the other two bills. According to reports, the bill was pulled to avoid giving members a reason to vote against the pack-age.

Conferees appear to be moving forward with their plan to combine the remaining two measures, LHHS and MilCon-VA. On November 1, the House-Senate conference approved the two bill package, which provides $215.4 billion in dis-cretionary funding. The package, however, faces strong opposition from Republican members in both chambers. Congressional Quarterly (CQ) recently reported that Sen. Arlen Specter (R-PA) and Rep. Jim Walsh (R-NY), both ranking members on the LHHS appropriations subcommittees in their respective chambers, believe that separate bills should be sent to the president. The president has threatened to veto the LHHS bill for its high funding level but has indicated that he would sign the MilCon-VA measure. House Appropriations Chairman David R. Obey (D-WI), however, insists that combining the spending bills is the best strategy to take. Obey has blamed Congress’ delay in completing work on the FY08

House Passes Bill Regulating Chemical

in Fertilizer Used by Terrorists

On October 23, 2007, the House passed H.R. 1680, the Secure Handling of

Ammonium Nitrate Act of 2007, which

would regulate the production, sale, and purchase of ammonium nitrate fert-ilizer. Ammonium nitrate, which is a com-mon ingredient in agricultural fertilizers, has been used as an explosive for terror-ists ranging from the Oklahoma City bombing in 1995 to the bomb attacks on the U.S. embassies in Kenya and Tanzania in 1998.

The bill, passed by voice vote, would require ammonium nitrate facility own-ers to maintain sales records for two years after the sales. It also orders produc-ers, sellers and some purchasers of ammonium nitrate to register with the Department of Homeland Security. In May, Sen. Mark Pryor (D-AR) introduced a companion measure, S. 1463, also called the Secure Handling of

Ammonium Nitrate Act of 2007.

The House also passed a bill on October 23, 2007, H.R. 1955, the Violent Radicalization

and Homegrown Terrorism Prevention Act of 2007, which would create a commission to

study the causes of and means for preventing homegrown terrorism.

appropriations bills on the president’s unwillingness to compro-mise on spending levels.

Currently, many Republican members are pushing to separate the bills. Both Sen. Specter and Sen. Kay Bailey Hutchinson (R-TX) have indicated that they will take floor action to separate the Milcon-VA bill from the LHHS measure.

DEFENSE AND HOMELAND SECURITY

Battle Looming Over War Funding

Another front in the war over spending between the President and Congress was opened when President Bush formally requested an additional $45.9 billion to fund military operations in Iraq and Afghanistan on October 22. This would bring the total amount of requested funds for the war efforts to $196.4 billion for fiscal year 2008.

Democratic leaders have indicated that they will use the coming supplemental debate as an opportu-nity to force the end of the war in Iraq. Two stead-fast opponents of the President’s policy in Iraq, Senators Carl Levin (D-MI) and Jack Reed (D-RI) are proposing that a supplemental provide for less than a year’s worth of funding and include language requiring withdrawal of troops from Iraq. Chairman of the House Appropriations Committee David Obey (D-WI) has echoed these sentiments and, earli-er this month, vowed that he will not allow any war

funding bill to clear his committee without a change in direction of the administration’s Iraq policy.

In an effort to challenge the president before the debate has formally begun, House and Senate Democratic leaders are making no effort to consider the supplemental this session. Representatives Obey and John Murtha (D-PA) have stated they do not intend to draft a supplemental bill until next year. Senate Majority Leader Harry Reid made similar comments and, according to a CQ article on October 29, 2007, stated, “We’re going to get to the supplemen-tal appropriations bill, but we’re not going to be in a rush to do that. We think that the Defense appropriations bill that we hope to send [the President] very quickly, which has $450 billion in it, should be enough to tide them over for a while.” While it is likely that Congress will not consider the supplemental during the cur-rent session, a dramatic conflict with the White House is all but certain when the matter is taken up in 2008.

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TELECOMMUNICATIONS AND TECHNOLOGY

Internet Tax Moratorium Extended for Seven More Years

After much debate on Capitol Hill, the Internet Tax Freedom Act

Amendments Act of 2007 (H.R. 3678) passed the House 402-0 on

October 30. The bill had returned to the House with amendments after Senate passage on October 25.

The House originally passed the bill on October 16, and it called for a four-year extension of the current ban. The Senate’s comparable bill, the Internet Tax Freedom Act Extension of 2007 (S. 1453), stalled in the Senate Commerce, Science and Transportation Committee on September 27 when it became apparent it would not pass the committee.

Sen. John Sununu (R-NH) forced a vote on H.R. 3678 by adding an amendment on Wednesday, October 24, to the Passenger Rail Investment and

Improvement Act of 2007 (S. 294) to make the ban on internet taxes

permanent. Sen. Thomas Caper (D-DE) countered that amend-ment with one of his own, bringing it back to a four year extension.

Neither amendment received a vote because the Senate decid-ed to bring up the House-passdecid-ed bill instead. The Senate did make some changes. They added language, at the request of Sen. Ron Wyden (D-OR), which specifically prohibited taxation on e-mail and instant messaging services that are provided independently or are not packaged with Internet access. They also added language to phase out some “grandfather” provisions for states that were taxing Internet access prior to the original moratorium. The Senate then extended the ban’s length to seven years, making it the longest ban enacted so far.

While it was debated whether or not the House would pass the amended bill, the majority who had called for a permanent ban were pacified by the altered legislation. Rep. Anna Eshoo (D-CA) who had introduced the Permanent Internet Tax

Freedom Act of 2007 (H.R. 743), which had 240 cosponsors,

was pleased to back legislation that nearly doubled the four-year extension originally introduced.

Congress sent the bill to the White House for President Bush’s signature just under the wire. President Bush signed the legislation on October 31. The previous ban ended on November 1.

TRANSPORTATION

Amtrak Reauthorization

The Senate passed the Passenger Rail

Investment and Improvement Act of 2007 (S.

294) on October 30 by a vote of 70-22. The legislation would reauthorize Amtrak until fiscal year 2012 and would provide $11.4 billion in funding over six years. It would also authorize $3.3 billion in operating subsidies and $4.9 billion for capital grants, which includes $1.4 billion to states for intercity passenger rail upgrades. Additionally, the bill seeks to improve the security and the operation of Amtrak.

The authorization bill is largely a result of compromises made by Senators Frank Lautenberg (D-NJ) and Trent Lott (R-MS). Sen. Lott has stated that though the bill is not perfect, he believes it offers the neces-sary reforms that would allow Amtrak to improve its operation. In order to obtain the support of the administration, which prefers the privatization of Amtrak, a pro-vision was included that would allow states and private sector freight firms to bid and take over certain rail routes. In an effort to extend this provision, an amendment that would have removed the limit on the num-ber of routes that may be privatized was proposed by Sen. John Sununu (R-NH) but was roundly rejected by a vote of 27-64. Several other Republican Senators, includ-(continued on page 4)

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ing Tom Coburn (R-OK) and Jim DeMint (R-SC) proposed amend-ments designed to decrease Amtrak’s services and federal funding, though these were rejected as well.

Though the White House has not issued a veto threat, the administration opposes the legislation because of substantial reforms that they believe would increase the rail carrier’s profitabil-ity have not been included. Due to time constraints, the House will not pass an Amtrak reauthorization bill this session and will likely consider the legislation in early 2008.

HEALTHCARE

HHS Secretary Announces Electronic Health Records Initiative

On Tuesday, October 30 U.S. Department of Health and Human Services (HHS) Secretary Mike Leavitt announced a five year demonstration project aimed at encouraging small and medium-sized physician practices to adopt electronic health records (EHRs). With oversight from the Centers for Medicare and Medicaid Services (CMS), the project would provide financial incentives to physician practices that utilize certified EHR technol-ogy to meet specific clinical quality measures beginning in the spring of 2008. Bonuses will be awarded on an annual basis to physician practices that receive a high score on a standardized assessment. In turn, the assessment would give the Department a better idea of the different EHR functions medical practices employ to advance the standards of patient care.

“This demonstration is designed to show that streamlining healthcare management with electronic health records will reduce medical errors and improve quality of care for 3.6 million Americans,” Secretary Leavitt stated at the HHS press briefing.

In an effort to obtain support from additional healthcare stake-holders, CMS will also encourage the private health insurance community to offer similar incentives for adoption of EHR. “We believe that encouraging higher quality care through the use of EHRs benefits every health care stakeholder. That is why we are asking private insurers to help accelerate certified EHR adoption by offering incentives similar to those in this demonstration,” Acting Administrator Kerry Weems stated at the HHS press conference.

Lawmakers Still Trying for Deal on SCHIP

House and Senate members still continue to craft a revised version of the Children’s Health Insurance Program Reauthorization Act of 2007 (H.R. 3963), but contention in the Senate has put the fate of an agreement in doubt. Sen. Charles E. Grassley (R-IA), an original author of the initial State Children’s Health Insurance Plan (SCHIP) reauthorization bill, is working with House Republicans

on identifying bill provisions that need to be ratified to produce a veto-proof majority in the House chamber. If a compromise is reached between the supporters and oppo-nents of H.R. 3963, it has been speculated that the Senator and his Senate Finance Committee counterparts will offer an amendment on the floor that is reflective of the interests of those House members who voted against the bill.

Senate Finance Committee leaders have asked Senate Majority Leader Harry Reid (D-NV) to delay a vote on the measure so that members can draft an amendment that would garner more support in the House, where there are still not enough votes to override the pres-ident’s veto.

The most recent House vote on the bill took place on October 25 and passed by a vote of 265-142. Unlike the Senate which passed H.R. 3963 by a veto-proof margin, the House failed to garner enough votes for a veto override, as opponents of the legisla-tion claimed they were not given ample time to review the bill before it was brought to the House floor.

H.R. 3963 is almost identical to the most recently vetoed measure and would provide an additional $35 billion over five years for children’s health insurance. The bill would raise tobacco taxes, including a 61 cent increase in the cigarette tax, to $1 per pack.

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EUROPEAN UNION

EU Reform Treaty

The European Council established the final text for a Reform Treaty on October 18 and 19 in Lisbon. The Treaty was written after a European Constitution failed to pass in 2005. At that time, both France and the Netherlands voted against the Constitution. All European Union (EU) members must approve a treaty for it to take effect so these votes effectively stopped the Constitution.

One of the key authors of the last European Constitution, former French President Valery Giscard d’Estaing, says the Reform Treaty includes the same elements as the prior constitution. The Treaty aims to simplify the framework of the EU, improve the dem-ocratic accountability and rule of law in the EU, establish a double majority vote (55 percent of the States representing and 65 percent of the population must vote in favor), add an additional seat for Italy to the European Parliament, and create a permanent President of the European Council instead of making it a revolving position.

The Member States are set to sign the Reform Treaty December 13, 2007. The Treaty will then undergo ratification in all 27 member states. If it passes, the Treaty is expected to be enacted prior to the upcoming European Parliament elections in June 2009. Each Member State can ratify the Treaty with its government or call for a referendum where the entire country is asked to vote in favor or against the Treaty with the exception of Ireland and Germany. Ireland’s constitution requires the country to hold a public vote on the issue; while Germany requires the government to undertake the vote. The remaining 25 Member States are debating their method of ratification.

The United Kingdom is establishing a committee, the House of Lords European Union Committee, to hold hearings on the issues covered by the Treaty. With seven subcommittees, the committee will provide a detailed analysis of the changes the Treaty makes and how they will affect Britain. The Treaty includes several “opt-out” clauses for Great Britain that were included to help assure its pas-sage there. The Prime Minister, Gordon Brown, is hoping to avoid a referendum on the Treaty and is calling for Members of Parliament to make the decision on ratifying the Treaty. Conservatives there are calling for a referendum anyway.

The lower chamber of the Czech Republic voted on October 30 to ratify the Treaty by parliamentary vote. France’s President, Nicolas Sarkozy, is expected to ask parliament to ratify the treaty as well. A new poll published in Le Parisien daily said 61 percent of French people thought the treaty should be put to a referendum

and 31 percent thought parliamentary ratification would be sufficient. The poll also mentioned that 68 percent would support the Treaty and 32 percent would vote no if it were brought to a public vote.

ENERGY AND ENVIRONMENT

Water Resources Legislation Sent to

President Bush

As expected, on Friday, November 2, President Bush vetoed the FY08 Water

Resources Development Act (H.R. 1495)

(WRDA). The bill, which Congress com-pleted work on in September, would authorize $23.2 billion in funding for hun-dreds of Army Corps of Engineers projects across the country, many of which are high priority projects to members on both sides of the aisle. President Bush has called the legislation “fiscally irresponsible” because of its high funding levels.

Reports are that the House is expected to vote on the measure on Tuesday, November 6. If the House is successful at overriding the veto, the Senate will vote on the measure next week as well.

Many observers anticipate that efforts to override the president’s veto will not be difficult since the bill has strong bipartisan support in both chambers. In fact, CQ recently reported that many fiscal conser-vatives support the measure because the (continued on page 6)

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bill “would only authorize funding, not actually spend money.” Amongst these self-proclaimed fiscal-conservative supporters is Sen. James M. Inhofe (R-OK), the ranking member of the Senate Environment and Public Works Committee, who has repeatedly stated that he would work to override a veto.

Google’s Effort to Influence Energy and

Climate Change Legislation

Google, the largest search engine of the Web, has little direct financial stake in going “green,” yet the company has proven its commitment to influencing energy and climate change legislation in Washington. Earlier this year, Google not only invested $10 million to identify transport solutions that will help global warm-ing, but also the company recently hired Dan Reicher, an assistant energy secretary in the for-mer Clinton administra-tion. Reicher has not only testified before the Senate Energy and Finance Committees in support of renewable energy legisla-tion, but also recently he has helped with a contro-versial provision which requires 15 percent of the nation’s electricity to come from renewable sources.

According to CQ, Washington energy insid-ers also say that Google is likely to get a receptive hearing on these issues because its home state con-gressional delegation is keenly attuned to them as well. Reicher has stated that Google is just getting started; with global warming being the “big show in Washington,” Google wants to get involved.

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ON THE MOVE

The following are members of the House and Senate who have announced they will retire at the end of the 110th Congress or seek other offices:

SENATE

Wayne Allard (R-CO) Larry E. Craig (R-ID) Pete V. Domenici (R-NM) Chuck Hagel (R-NB) John W. Warner (R-VA) HOUSE

Tom Allen (D-ME-1) * Terry Everett (R-AL-2) J. Dennis Hastert (R-IL-14) David L. Hobson (R-OH-7) Duncan Hunter (R-CA-52) † Bobby Jindal (R-LA-1) ‡ Ray LaHood (R-IL-18) Michael R. McNulty (D-NY-21) Steve Pearce (R-NM-2) *

Charles W. “Chip” Pickering Jr. (R-MS-3) Deborah Pryce (R-OH-15)

Jim Ramstad (R-MN-3) Ralph Regula (R-OH-16) Rick Renzi (R-AZ-1) Tom Tancredo (R-CO-6) † Mark Udall (D-CO-2) * Jerry Weller (R-IL-11) Heather A. Wilson (R-NM-1) * * Running for Senate

† Running for President

‡ Elected Governor of Louisiana on 10/23/2007

BUDGET AND APPROPRIATIONS