Week Ending February 11, 2011
House Republicans Pledge to "Go Deep" on Funding Cuts
This week, House Republicans released further plans to decimate the FY11 budget, which is currently operating under a temporary measure that expires March 4. They had initially proposed cutting $74 billion in spending, which they just increased to $100 billion. An initial list of 70 proposed cuts released before the steeper reduction included massive cuts to job training programs, local law enforcement, WIC, community health centers and more. Details are expected shortly, with a vote on the House floor expected next week. AFSCME is strongly opposing these cuts.
Call (202) 224-3121 NOW!!!!
Urge your Representative to oppose the House Republican leadership’s temporary budget (known as the CR) that could slash over $100 billion from the federal budget, devastate programs that Americans rely on and result in over one million job losses.
House Republicans Continue Attacks on State and Local Government Workers’ Pensions and Wages: Exaggerate State and Local Pension Costs & Unfunded Liabilities
House Republicans convened a February 9 Oversight Subcommittee hearing entitled, "State and Municipal Debt: The Coming Crisis?" amidst their continued attacks on state and local government workers’ pensions and wages as well as their proposed federal budget cuts to defund vital state and local public services. House Oversight Subcommittee Chairman Patrick McHenry (R-NC) exaggerated the spending of states and localities on public pensions and their unfunded public pension liabilities.
Rep. Elijah Cummings (D-MD), Ranking Member of the Oversight Committee, forcefully disputed the Republicans’ exaggerations. He stressed that states and localities pay very little – only 3.8% of their spending on pensions and the main cause of pension problems is the recent recession and stock market decline, which he said likely also affected Congress members, hearing attendees, and most Americans. Testimony from Iris Lav of the Center on Budget and Policy Priorities (CBPP) also strongly refuted the myths underlying conservatives’ claims. Her testimony and CBPP’s recent report are available here: http://oversight.house.gov/images/stories/Lav_2-9-11_Testimony.pdf; http://www.cbpp.org/files/1-20-11sfp.pdf
House Republicans have scheduled another similar hearing in a Judiciary subcommittee on February 14, entitled, “The Role of Public Employee Pensions in Contributing to State Insolvency and the Possibility of a State Bankruptcy Chapter.
In related action, the House Oversight Committee Chairman Darrell Issa (R-CA), House Budget Committee Chairman Paul Ryan (R-WI), and Rep. Devin Nunes (R-CA), re-introduced their Public Employee Pension Transparency Act (PEPTA) (H.R. 567) which mandates new costly and inappropriate federal reporting requirements on state and local pension plans. If retirement systems do not file these reports, PEPTA would then penalize states and/or localities with these systems by taking away their authority to issue bonds with federal tax exempt status. Sens. Richard Burr (R-NC) and John Thune (R-SD) are likely to introduce the companion Senate bill as soon as next week.
Amendment to Block Funding for Health Reform to be Debated
During the debate on the continuing resolution (CR) that is funding the federal government, Republicans will offer an amendment to eliminate any spending this year to implement the health reform law. While we have not seen the amendment, it could have a significant impact on reform. For example, we presume that it would eliminate subsidies to employer-sponsored plans that cover retirees in the public and private sectors. It would slow down the process of drafting implementation regulations, including guidance to states on how to design their health care exchanges. It could also eliminate funding for the states to carry out their exchange planning. We anticipate that the amendment will be adopted with the full support of the Republican caucus.
House Democrats Introduce America Bonds Legislation
House Democrats introduced the Build America Bonds to Create Jobs Now Act (H.R. 11), which would reduce state and local governments’ borrowing costs incurred to finance building and modernizing public schools, hospitals, water systems, transit projects, and other vital infrastructure. H.R. 11 would reinstate Build America Bonds (BABs) for two years. Despite their success, BABs expired at the end of 2010 due to Republican congressional opposition. AFSCME supports Build America Bonds and this legislation.
House Leadership Pulls Extension of the Trade Adjustment Assistance Program
Opposition from far right conservatives in the House Republican caucus forced House Republican leadership to back off a floor vote on a bill extending the 2009 enhancements of the Trade Adjustment Assistance Act (TAA). The expansions, which were adopted as part of the Recovery Act, will expire on February 12. They had been extended for six weeks at the end of the last Congress, and this bill would have continued the program for another four and a half months.
While traditionally the TAA program has had bipartisan support, efforts in the House to extend the program have been complicated because of opposition to spending by a group of ideologically driven Republican freshmen and concern among some senior Democrats over the Republican leadership’s plan to pay for the extension by cutting a part of the TAA program that funds educational services at community colleges.
Under the expanded program – which extended TAA unemployment benefits and services to service and public sector workers, increased training funds, and created a new case management program – an estimated 400,000 workers have been certified for services since 2009. The Labor Department has issued guidance to the states regarding the implications of a failure to extend the program, noting that, while the expansions would expire, the smaller program that existed before 2009 would continue.
Both the Administration and worker advocates have been urging Congress to extend the 2009 expansions for 18 months. However, Senate Republicans are insisting on a much shorter extension in order to increase their leverage to move free trade agreements opposed by organized labor and many Democrats. Meanwhile, efforts continue in the House to find a way to pass a bill extending the TAA expansions.
State Unemployment Insurance Trust Fund Debt Gains Greater Attention
This week, the national press reported that the Administration’s budget for fiscal year 2012 will propose debt relief to states with substantial federal loans for their unemployment insurance trust funds. The majority of state unemployment insurance trust funds are broke because most states entered the unusually severe and protracted recession after allowing the employer tax system that finances their trust funds to decline to historically low levels.
A total of 30 states have outstanding loans that totaled approximately $41 billion at the end of 2010 and will reach $65 billion by 2013. States must repay their loans within two years. If they fail to do so, the federal unemployment tax on their employers will start to increase until the loan is repaid. States also have to pay interest on their loans, and their interest obligations are expected to total $1.4 billion by September 30 and another $2.2 billion in 2012.
According to press reports, the Administration will propose deferring the interest payments and postponing the automatic increases in the federal unemployment employer tax to recover the loan amounts through 2013. Then, the Administration proposes to begin to improve the solvency of state trust funds by increasing the federal taxable wage base to which the federal unemployment tax on employers is applied from the first $7,000 of wages to the first $15,000 wages. Since states must have a taxable wage base at least as high as the federal one, some will have to raise their taxable wage base. This means that unless they lower their tax rate, their employers will pay more unemployment insurance taxes.
Additional aspects of the Administration’s taxable wage base plan will be in the budget that it will release next week, but congressional Republicans already have attacked it as a tax increase on employers even though the overall proposal will save employers very substantial amounts of money. AFSCME strongly supports the Administration’s plan. While most of the relief in the President’s plan will go directly to employers in the form of suspended loan repayments, deferring interest payments that states owe will relieve pressure on them to increase their own employer taxes or use general operating funds for their interest payments. In addition, suspending the increase in the federal employer tax could open up possible revenue opportunities for states seeking new revenue to close their budget gaps.
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