Federal Relations Update

April 27, 2012
Federal Relations Update is a member service from the National League of Cities.
Period Ending April 27, 2012

FY 2013 Spending Bills: House, Senate Taking Different Approaches

NLC Joins Cities in Immigration Brief Filed in U.S. Supreme Court

House, Senate Prepare for Conference Committee on Transportation

Senate Holds Hearing on State and Local Taxes, Fiscal Policy

NLC Supports Rural Development, Local Foods in 2012 Farm Bill

NLC, Allies Urge FEMA to Work with Stakeholders on Grant Reform

NLC Opposes Existing DATA Act Legislation

IRS Issues Notice on Governmental Pension Plan Retirement Age Rules

Supreme Court Agrees Contract Lawyers are Entitled to Governmental Immunity


FY 2013 Spending Bills: House, Senate Taking Different Approaches
Carolyn Coleman, coleman@nlc.org, 202.626.3023


As expected, the House and Senate are, so far, taking different paths to the FY 2013 spending bills, with the House already drawing talk of veto threats that could likely set up another high-stakes showdown over spending cuts just before the election. Last week, in a positive sign, Senate leaders in both parties were united in approving an overall spending level of $1.047 trillion for FY2013, representing the total amount available under the 2011 debt limit agreement.

On Wednesday, House Appropriators went a different direction and voted along party lines to adopt lower spending limits as outlined in the Ryan Budget at $1.028 trillion. The House, unlike the Senate, also chose to spare the defense budget of any cuts, which means non-defense spending (which includes federal programs that are local priorities) would bear the brunt of the cuts.

In a call with NLC last week, the White House indicated the President would veto any spending bill that contained cuts below the amounts agreed to in the debt limit agreement.

The looming battle over budget sequestration is also making it difficult for Congress to bargain over FY 2013 spending. Although both sides want to avoid the automatic cuts called for in the debt agreement of $50 billion in non-defense spending and $50 billion in defense spending over the next 10 years, which is automatically set to begin in January 2013, there is little common ground on how to get there.

As appropriations sub-committee hearings get underway on the individual appropriations bills, NLC will continue to advocate for local priorities.

NLC Joins Cities in Immigration Brief Filed in U.S. Supreme Court
Carolyn Coleman, coleman@nlc.org, 202.626.3023


Last Wednesday, the U.S. Supreme Court heard oral arguments in State of Arizona v. United States. In what may be a landmark case involving principles of federalism, the United States is challenging the authority of the state of Arizona to enact its own immigration law (SB 1070). NLC, the U.S. Conference of Mayors, and more than 40 municipalities submitted an amicus brief arguing that immigration policy is a federal responsibility and that the Arizona law's enforcement scheme will detract from local public safety priorities and stretch already limited resources.

Click here to view NLC’s statement regarding the case and to learn more about NLC’s Municipal Action for Immigration Integration project.

House, Senate Prepare for Conference Committee on Transportation
Leslie Wollack, wollack@nlc.org, 202.626.3029


After failing to find the votes to adopt a transportation bill, the House earlier this week passed a bill to extend current programs another 90 days beyond the current deadline of June 30. This bill also includes language that would mandate a decision on the controversial Keystone XL pipeline and creates a vehicle for the House to conference with the Senate. Earlier this year, the Senate passed a two-year $109 billion bill, known as MAP-21 and twice voted down the pipeline project.

The Senate Democratic conferees are: Barbara Boxer (CA), Richard Durbin (IL), Charles Schumer (NY), John Rockefeller (WV), Tim Johnson (SD), Bill Nelson (FL), and Robert Menendez (NJ). The Senate Republican conferees are: David Vitter (LA), Orrin Hatch (UT), Richard Shelby (AL), Kay Bailey Hutchison (TX), and John Hoeven (ND).

The House Democratic conferees are: Nick Rahall (WV), Peter DeFazio (OR), Jerry Costello (IL), Jerrold Nadler (NY), Corrine Brown (FL), Elijah Cummings (MD), Leonard Boswell (IA), Tim Bishop (NY), Henry Waxman (CA), Ed Markey (MA), Eddie Bernice Johnson (TX), Earl Blumenauer (OR) and Del. Eleanor Holmes Norton (DC).

The House Republicans conferees are: John Mica (FL), Don Young (AK), John Duncan (TN), Bill Shuster (PA), Shelley Moore Capito (WV), Rick Crawford (AR), Jaime Herrera Beutler (WA), Larry Buschon (IN), Richard Hanna (NY), Steve Southerland (FL), James Lankford (OK), Reid Ribble (WI), Fred Upton (MI), Ed Whitfield (KY), Doc Hastings (WA), Rob Bishop (UT), Ralph Hall (TX), Chip Cravaack (MN), Dave Camp (MI) and Patrick Tiberi (OH).

Transportation advocates are pessimistic that House and Senate conferees will be able to reach agreement on a long term bill, since the Senate is unlikely to agree to a bill with the Keystone in it, and the House is unlikely to accept a bill without it.

Senate Holds Hearing on State and Local Taxes, Fiscal Policy
Lars Etzkorn, etzkorn@nlc.org, 202.626.3173


On Wednesday, the Senate Finance Committee held a hearing to examine the effects of federal tax reform on state and local tax and fiscal policy. Witnesses, including representatives of think tanks, academia, the accounting industry, and the Congressional Budget Office, testified on federal tax provisions that provide financial benefits to states and local governments—such as tax-exempt bonds or state and local income and sales tax deductions. In addition, the witnesses spoke on any benefits to the economy if the federal government pre-empted state and local authority to make taxing decisions (such as a tax on cell phones) and indirect impacts of federal tax reform on state and local tax policy. For example, because many state tax policies piggyback on federal tax rules, they would therefore change automatically if the federal rules were changed.

While no state or local government witnesses were invited to testify, NLC and a coalition of local government associations submitted a statement for the record that touches on many long-standing issues of interest to cities and towns, including sales taxes for purchases made over the internet. In addition, NLC signed a letter with 24 organizations representing debt issuers that underscored the importance of tax-exempt financing.

NLC Supports Rural Development, Local Foods in 2012 Farm Bill
Stephanie Crandall, crandall@nlc.org, 202.626.3030


On Thursday, by a vote of 16 to 5, the Senate Committee on Agriculture, Nutrition and Forestry passed the Agriculture Reform, Food and Jobs Act, pertaining to federal farm, food and rural policy programs, for which the current authorization expires September 30. Important to cities and towns are the portions of the bill dealing with rural development, water infrastructure and conservation, and nutrition. NLC and its partners in the Campaign for Renewed Rural Development sent a letter to Committee members requesting the restoration of mandatory funding for rural development programs, much of which went to the backlog of water and wastewater applications from local governments in the 2008 Farm Bill, however the Committee failed to consider this change.

On the House side, the Agriculture Committee has begun a series of hearings, including two this week on rural development and conservation. Donald Larson, commissioner of Brookings County, South Dakota, testifying on behalf of the National Association of Counties (NACo), called attention to the success of regional approaches by counties and cities in the areas of rural development and improving access to healthy, local foods. Commissioner Larson also highlighted his county’s collaboration with NLC member city Brookings, South Dakota, as an example of support for NACo and NLC’s policies advancing regional and multijurisdictional approaches to planning and development. As the House drafts its own version of the farm bill, NLC will continue to work to ensure that the House Agriculture Committee considers the need to preserve and support investments in rural cities, towns and villages.

NLC, Allies Urge FEMA to Work with Stakeholders on Grant Reform
Mitchel Herckis, herckis@nlc.org, 202.626.3124


In the President’s FY 2013 Budget, FEMA proposed consolidating 16 homeland security grant programs that primarily benefit local communities into a single state-administered grant called the National Preparedness Grant Program (NPGP). Details of the NPGP are still sketchy, but it is clear that the proposal calls for the elimination of existing requirements that states pass through the vast majority of funds to local entities. NLC, as part of a coalition of organizations representing emergency response and local government officials, opposes the Administration’s plan and is urging the U.S. Department of Homeland Security and FEMA not to implement changes to the programs and to collaborate with stakeholders to reform the programs.

NLC Opposes Existing DATA Act Legislation
Lars Etzkorn, etzkorn@nlc.org, 202.626.3173


This week, House Oversight Committee Chairman Darrell Issa (R-CA) introduced The DATA Act (H.R. 2146), which would require enhanced reporting on all federal grants, as was required under the American Recovery and Reinvestment Act (ARRA). It also turns the Recovery Accountability and Transparency Board—charged with providing transparency of ARRA-related funds and with detecting and preventing fraud, waste, and mismanagement—into a permanent five-member commission similar to the Securities and Exchange Commission with broad powers over standardization and reporting for all federal grants.

NLC supports the long term purpose of the Act to consolidate and streamline the reporting of federal funds but has raised concerns with the Chairman over the costs and burdens the bill in its current form would have on fiscally strained state and local governments and other federal grant recipients.

IRS Issues Notice on Governmental Pension Plan Retirement Age Rules
Neil Bomberg, bomberg@nlc.org, 202.626.3042


Last week, the Internal Revenue Service (IRS) and the U.S. Department of Treasury issued Notice 2012-29, which announced the agencies’ plans to amend a final regulation on pension plan distributions that was originally issued in the May 22, 2007 Federal Register. In that regulation, IRS and Treasury applied non-governmental pension plan normal retirement age rules to public pension plans. Since that time, NLC and other public sector organizations have argued that the 2007 regulation violates Section 411 of the tax code, which exempts Section 414 governmental pension plans from the normal retirement age requirements applied to private sector pensions.

According to the notice, the proposed amendment would modify the IRS original position and acknowledge that the private sector normal retirement age provisions do not apply to governmental pension plans established under section 414 of the tax code; however, those governmental pension plans that provide in-service distributions before age 62 would be subject to the normal retirement age definition and be required to adjust their plans accordingly. The "age-50 safe harbor rule" would be updated to allow governmental pension plans in which substantially all of the participants are qualified public safety employees to have a normal retirement age of 50 or older, which would still leave vulnerable to the normal retirement age provision those plans that cover a wide range of public employees. An additional modification would change the effective date of the regulation to January 1, 2015.

The modifications themselves are a victory; however, it remains to be seen whether the proposed changes will go far enough. NLC plans to submit comments prior to the agencies’ July 30, 2012 deadline. Instructions on how local governments may also submit comments are available at the end of the linked Notice.

Supreme Court Agrees Contract Lawyers are Entitled to Governmental Immunity
Lars Etzkorn, etzkorn@nlc.org, 202.626.3173

In a win for local governments, the U.S. Supreme Court unanimously held this week that “[a] private individual temporarily retained by the government to carry out its work is entitled to seek qualified immunity from lawsuits [alleging constitutional rights violations] under §1983.”

The case, Filarsky v. Delia, involved a firefighter on medical leave who sued a city’s contract lawyer investigating his claim. By previously settled law, had the investigating lawyer been a municipal employee he would have had immunity from such suit. As many local governments rely on outside counsel to provide cost-effective legal services, limiting immunity would have increased the costs to local government and limited the availability of high-quality legal services.

NLC filed an amicus brief supporting the applicability of qualified immunity.