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Week Ending December 18, 2015

Congress Finalizes Funding for Rest of Fiscal Year

Just a week before Christmas, Congress finally agreed on an “omnibus” funding bill that bundles together all twelve spending bills for fiscal year (FY) 2016, which began on October 1. The House passed the package on a vote of 316 to 113. The Senate vote was 65 to 33.  The $1.15 trillion package includes increased funding levels agreed to in October’s budget deal.

The package also includes extremely important provisions that extend the James Zadroga 9-11 Health and Compensation Act, and delayed for two years – until 2020 -- the 40% tax on workers’ health insurance, which was part of the Affordable Care Act. On the negative side, the omnibus fails to provide needed debt relief or federal fiscal relief to Puerto Rico. 

The additional spending provided in the budget deal allowed increases for many federal programs that benefit working families, but AFSCME was disappointed that the bill funding labor, health, human services and education programs was $5 billion less than expected.

AFSCME supported the bill (to view our letters online, go to:  http://afscme.org/issues/omnibus-senate and http://afscme.org/issues/omnibus-house), which avoided the need for another costly government shutdown or a full year “continuing resolution” that would have largely frozen funding levels.  The omnibus provides important investments for FY 2016 in labor, health, human services, education, transportation, and housing programs as compared with FY 2015:

Education, Human Services and Labor

Title I education for disadvantaged students in K-12 received $14.9 billion, an increase of 3.5%; special education received $11.9 billion, an increase of 3.6%; Head Start received $9.2 billion – which includes $141 million for staff cost-of-living raises – a 6.6% increase; the Child Care and Development Block Grant (CCDBG) received $2.76 billion, an increase of 13.4%; the maximum Pell grant will increase to $5,915; preschool development grants, which had received no funding in earlier bills, were restored to their previous level of $250 million; the Employment Service received $680 million, an increase of 2.4%.

Housing

The Public Housing Operating Fund received $4.5 billion, which is a 1% increase from last year. The Public Housing Capital Fund received $1.9 billion, a 1% increase. Community Development Block Grants (CDBG) were funded at last year’s level.

State and Local Law Enforcement

The budget agreement includes a total of $2.57 billion for state and local law enforcement assistance, a $246 million increase compared to FY 2015. Most notably, the omnibus provides $187 million for Community Oriented Policing Services (COPS) Hiring Grants, which the previous House bill had defunded.  This funding level is $7 million more than FY 2015, representing a 1.9% increase.  

Funding for Byrne-Justice Assistance Grants (JAG) also increased in the budget agreement to $347 million, a $14 million increase over FY 2015. Importantly, negotiators rejected a specific grant that would have paid for security at the 2016 presidential conventions out of the Byrne-JAG account and will instead provide a separate budget line. Also excluded from the final agreement was a harmful policy “rider” pushed by anti-immigrant members of Congress that would have denied federal law enforcement grants to so-called “sanctuary cities” that have opted for community policing policies.

Transportation

The budget agreement adopts policies and funding levels from the FAST Act, the five-year reauthorization of surface transportation programs signed into law last month. This resulted in a boost to federal-aid highway and transit programs: the Federal Transit Administration received $11.8 billion and spending for the Highway Trust Fund increased by $2 billion, to $42.4 billion.

Federal Aviation Administration (FAA) programs also received additional funding. The omnibus package provides $16.3 billion for the FAA to maintain full funding for air traffic control and safety, a $564 million increase.  The bill also increases funding for NextGen by $255 million to $2.9 billion and funds Contract Towers at $154 million, where AFSCME represents weather observers. The FAA funding increases, and specifically the NextGen navigation system, will lessen privatization threats to air traffic control.

Policy Riders

AFSCME and other public interest groups were successful in our efforts to keep many of the “poison pill” policy riders out of the omnibus:

Fiduciary Rule

Labor unions, consumer groups, and financial reform advocates succeeded in blocking any rider that would delay, defund, or otherwise weaken the Department of Labor’s (DOL) forthcoming final Fiduciary Rule, which would ensure investment advisors provide investment advice in their clients’ best interest. The current proposed rule would protect individuals saving for retirement by prohibiting conflicts of interest that has led advisors to profit on the backs of investors, and which reduce investment returns by an estimated $17 billion per year. DOL is expected to issue its final rule in early 2016. AFSCME strongly supports DOL’s proposed rule and encourages DOL to issue its final rule as quickly as practical.

Joint-Employer

The bill did not defund the National Labor Relations Board from implementing its new joint employer standard, which designated parent companies like McDonald’s just as responsible for violations of the National Labor Relations Act as their franchisees.

Overtime Protections

The bill did not roll back DOL’s increase in the salary threshold from $23,660 per year to $50,440 per year for eligibility to receive overtime pay.

Some harmful riders did make it into the bill:

Internet Taxes

The spending package does include a temporary extension of the harmful “Internet Tax Freedom Act” (PITFA), which prohibits state and local governments from imposing new sales taxes on internet access. Although this is not a permanent prohibition, it will limit revenues state and local governments are able to collect. 

The omnibus spending package also failed to include a recently finalized bipartisan, bicameral legislative agreement that would authorize state and local governments to require vendors to collect sales tax on internet and remote purchases. This “internet sales tax” legislation is supported by public sector labor unions, state and local governments, brick and mortar retailers, and other key stakeholders because it creates a level playing field between internet vendor and main street retailers.  It is estimated to generate up to $23 billion in annual sales tax revenue for state and local governments. Unfortunately, conservative anti-tax proponents blocked this provision.

H-2B Guest Workers

The omnibus includes a rider that prohibits the DOL from using its funds to implement important worker protections in the H-2B low-wage guest worker program.  The rider prevents DOL from requiring more effective recruitment of U.S. workers; prevents audits of the H-2B program; eliminates the guarantee of at least ¾ of the hours promised before a guest worker comes to the U.S.; requires DOL to accept private wage surveys; and substantially increases the number of H-2B workers by excluding from the cap those who came to the U.S. starting in FY 2013.  This rider will only add to the rife abuse in the H-2B guest worker program.  AFSCME continues to call for comprehensive immigration reform that would include strengthened labor protections in employment visa programs and a path to citizenship for the 11 million undocumented immigrants living and working in the U.S.

Minimum Wage for Federal Contractors

Another harmful rider included in the omnibus prohibits the DOL from using funds to implement, administer or enforce its regulation establishing a $10.10 an hour minimum wage for federal contractors.  This regulation was set to be issued on January 1, 2016. 

Congress Includes Extension of James Zadroga 9/11 Health and Compensation Act

Two months after letting its authorization expire, Congress renewed the James Zadroga 9/11 Health and Compensation programs as part of the year-end FY 2016 omnibus spending package. The extension closely resembles the stand-alone legislation (H.R. 1786; S. 928) that AFSCME and our coalition partners have been supporting since the beginning of the year.  The omnibus bill provides $8.1 billion for the James Zadroga 9/11 Health and Compensation Act, with $3.5 billion for the World Trade Center Health Program and $4.6 billion for the 9/11 Victims Compensation Fund. This is effectively a permanent extension of the health program, providing funds and access to treatment through 2090 for more than 72,000 known responders and survivors, as well as those who become ill in the future. The compensation fund, however, is only extended through 2020.  The extension comes after an intensive lobbying effort that included multiple rallies and lobby days on Capitol Hill, including dozens of AFSCME DC 37 members, and former Daily Show host Jon Stewart, who devoted significant time and energy to the renewal effort.

40% Tax on Worker Health Benefits: Delayed to 2020

The omnibus spending package contains a two-pronged fix designed to lessen the harmful impacts of the 40% tax on worker health benefits.   Most importantly, the starting date for the 40% tax is delayed two years – from 2018 to 2020.  This will reduce some pressure on employers and insurers to cut health benefits immediately.  It also improves AFSCME members’ negotiating position to avoid cuts to health benefits.  And, it allows affected entities to deduct their 40% tax payments from income taxes.   This two-pronged partial fix is projected to reduce federal revenue from the 40% tax by 22%, or $20 billion over the next decade.

AFSCME remains concerned that this partial fix, while very welcome, is inadequate because the downward pressure on health benefits will continue until 2020, as affected entities still seek to avoid paying the 40% tax in 2020.  Overall, while AFSCME, allied labor unions, businesses, medical providers, patient groups and state and local governments have long supported a full repeal the 40% tax on worker health benefits, the two-year delay is a positive first step.  AFSCME will continue advocating to fully repeal this harmful 40% tax.

Debt Relief for Puerto Rico Largely Left Out of Funding Bill

The omnibus spending bill provides very little financial relief for Puerto Rico. While it includes modest improvements in Medicare payments to Puerto Rico’s hospitals, it does not raise federal Medicaid payments to the Commonwealth to provide parity with payments to states.  Although, Puerto Rico has more poverty than any state, federal Medicaid payments to fund health care for the poor are far below state levels, and its low-income residents do not have the same access to the Earned Income Tax Credit or the Child Tax Credit.

As a result of a decade-long recession, Puerto Rico faces more than $70 billion in debt and is perilously close to default.  While AFSCME and many allies have been advocating for legislation to restructure Puerto Rico’s debt, this was not included in the omnibus despite House Minority Leader Nancy Pelosi’s (D-CA) steadfast efforts to get it included.  Her strong advocacy for Puerto Rico did result in House Speaker Paul Ryan (R-WI) promising action on the island’s debt early in 2016.

Congress Repeals Popular Meat Labeling Law

A measure tucked into the omnibus package highlights how trade agreements can force changes in U.S. laws.  The bill includes a provision repealing a U.S. law requiring that meatpackers and retailers provide labels on beef and pork products that identify the country where the livestock was raised.  The law, known as the COOL Act, was implemented in 2009 to provide consumers with more information about the food they purchase.  However, the law was challenged by Canada and Mexico as a violation of the North American Free Trade Agreement (NAFTA).  The World Trade Organization agreed and authorized Canada and Mexico to impose $1 billion in trade sanctions against the U.S. unless the policy was ended.  As a consequence, a provision to repeal the popular COOL Act was included in the omnibus package.

Labor unions, consumer groups and others have argued that the Trans-Pacific Partnership (TPP) will open up many U.S. laws to similar challenges, threatening the regulations that keep us safe at work, at home and in the marketplace.  The TPP is scheduled to be signed by President Obama and the leaders of eleven other nations in February.  The trade agreement must then be ratified by the House and Senate – votes that could occur as early as late May. 

Congress’ Tax Package: $622 Billion Compromise

After a year of posturing and several weeks of intensive negotiations among Congressional leaders and the White House, $622 billion compromise tax legislation passed the House 381 to 109 and the Senate 65 to 33.  This so-called “tax extenders” package extends the duration of more than 50 tax provisions, including some individual tax benefits targeting very low-income and middle class families along with many tax loopholes for large profitable corporations.  The package permanently extends key tax benefits for both corporations and working families.  Recognizing that for more than 20 years Congress has extended expiring tax breaks that mostly benefit businesses, congressional Democrats fought to trade some tax breaks for corporations for some tax breaks benefiting working families.  Without this agreement, Congress would have likely passed a 2-year extension benefiting corporations only.  In this compromise, the added provisions – above and beyond the smaller basic package of two year extenders – provides about 60% of its benefits to businesses and about 40% to low-income and working families and state and local governments.

Most of the corporate tax provisions expired on December 31, 2014 but the tax bill renews them retroactively in time for the 2015 filing season.  To address different interest groups and varied costs of different provisions, this package renews some provisions permanently, some for five years, others for two years.

The tax provisions below are of particular importance to AFSCME members:

State and Local Sales Tax Federal Deduction ($42.4 billion)

Permanently extends individuals’ federal tax deductions for their state and local general sales taxes.  By reducing the taxpayer’s real cost of state and local sales taxes, this federal tax subsidy makes it easier for state and local governments to retain their sales taxes and collect the revenues needed to invest in vital public services and infrastructure.  This provision is particularly important for states without an income tax, which rely significantly on sales tax revenue. 

Employer-Provided Commuter Mass Transit Benefits ($1.7 billion)

Permanently extends employees’ ability to exclude from their income their employer-provided commuter mass transit benefits at parity with employer-provided parking benefits.

Child Tax Credits (CTC): Enhanced Benefits  ($87.8 billion)

Permanently extends child tax credit enhancements enacted in 2009 Recovery Act, which temporarily increased tax benefits for low-income and working families.  The bill retains the CTC’s income exclusion (i.e. “refundability threshold”) after 2017 at the 2015-2017 level of $3,000.  Without this change, the threshold in 2018 would increase significantly to around $16,000, thus reducing tax benefits to those with incomes of $3,000-$16,000.

Earned Income Tax Credit (EITC): Enhanced Benefits  ($30.4 billion)

Permanently extends earned income tax credit enhancements enacted in 2009 Recovery Act, which temporarily increased EITC tax benefits for low-income and working families with three or more children, and increased the income phase-out range by $5,000 for married joint filers (the so called “marriage penalty”).

American Opportunity Tax Credit (AOTC) ($79.8 billion)

Permanently extends AOTC, which helps working and middle class Americans with college costs.

Immigrant Impacts

Unfortunately, the tax deal  includes tax provisions that are unfair to newly-legalized immigrants, preventing domestic violence survivors, Deferred Action for Childhood Arrivals (DACA) recipients and others from receiving full EITC and CTC benefits as compared with other tax filers with identical economic circumstances.  It also erects additional barriers for immigrants who file their taxes using an Individual Taxpayer Identification Number, making tax compliance and access to tax benefits more difficult for these immigrant working families. 

AFSCME strongly opposed several very costly corporate tax breaks that were made permanent, including the Active Financing Exception ($78 billion); Section 179 Expensing ($77 billion); and the Research and Development tax credit ($113 billion).  AFSCME also opposed the Bonus Depreciation provision ($30 billion), which is phased out over five years. 

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