Federal Relations Update

July 6, 2012
Federal Relations Update is a member service from the National League of Cities.
Period Ending July 6, 2012

Transportation Bill Set to Become Law

Supreme Court Strikes Down Portions of Arizona’s Immigration Law

House Passes FY 2013 Transportation and Housing Spending Bill

House Committee Moves to Cut Water Infrastructure Funding

Flood Insurance Reform, Long-Term Extension Passes

GASB Issues New Pension Accounting and Reporting Standards

Transportation Bill Set to Become Law
Leslie Wollack,wollack@nlc.org, 202.626.3029

Late last week, the House and Senate passed an agreement to authorize federal transportation programs through September 2014 at current spending levels. President Obama is set to sign the measure this afternoon in a ceremony at the White House. The long-overdue agreement includes several important victories for local governments, including:

  • The off-system bridge set-aside for local bridges not on the federal-aid system;

  • The population threshold for Metropolitan Planning Organizations will remain at the current level of 50,000 rather than increase to 200,000, which the Senate supported;

  • New authority for rural regions in the planning process;

  • The Transportation Enhancement program, which the House wanted to eliminate, is preserved with the current 10 percent set-aside, directing 50 percent of it to local governments (important for cities in states that do not share that funding now) and allowing states the discretion on how to allocate the remaining 50 percent;

  • Changes to project delivery, increasing the threshold for “categorical exemptions” and redefining certain activities as categorical exclusions under NEPA; and

  • Streamlining the approval process for transit programs to accelerate project delivery.

For more information on the bill, go to NLC’s website.

Supreme Court Strikes Down Portions of Arizona’s Immigration Law
Lars Etzkorn, etzkorn@nlc.org, 202.626.3173 

In the same week it upheld the controversial provision requiring those who could afford it to purchase health care insurance or pay a fine, the U.S. Supreme Court struck down three provisions of S.B. 1070, Arizona’s anti-immigration law but upheld a fourth.

Specifically, the Court ruled that the following provisions were preempted:

  • Section 3, which makes failure to comply with federal alien registration requirements a misdemeanor.

  • Section 5, which makes it a misdemeanor for an unauthorized alien to work in Arizona.

  • Section 6, which allows officers to arrest without a warrant a person “the officer has probable cause to believe . . . has committed any public offense that makes the person removable form the United States.”

However, with reservation the Court allowed a fourth provision, and arguably the most controversial, to go into effect. Section 2(B) of the Arizona law requires police officers to make a “reasonable attempt . . . to determine the immigration status” of any person they stop, detain, or arrest on some other legitimate basis if “reasonable suspicion exists that the person is an alien and is unlawfully present in the United States.” The Court held 8-0 that before this provision goes into effect “it would be inappropriate to assume [it] will be construed in a way that creates conflict with federal law,” but warned that “[t]his opinion does not foreclose other preemption and constitutional challenges to the law as interpreted and applied after it goes into effect.”

In a statement regarding the Court’s action, NLC Executive Director Don Borut called on Congress to take action to fix the nation’s broken immigration system.

House Passes FY 2013 Transportation and Housing Spending Bill
Michael Wallace, wallace@nlc.org, 202.626.3025; Leslie Wollack, wollack@nlc.org, 202.626.3029

Last Friday, the House passed H.R. 5972, the FY 2013 Transportation-Housing and Urban Development (T-HUD) spending bill by a vote of 261-163. Overall, the House T-HUD bill calls for $51.6 billion for discretionary programs administered by the Departments of Housing and Urban Development and Transportation, which is nearly $3.9 billion less than provided in the current fiscal year. It is also less than the $53.4 billion proposed in the Senate T-HUD bill. Despite overall differences, the House bill allocates more funding for formula grants to cities and towns, including CDBG, than appropriated in the current fiscal year and proposed in the Senate’s FY 2013 version of the bill.

At the program level, the House bill would increase funding for CDBG to $3.4 billion, which is more than the $2.9 billion requested by the President and the $3.1 billion proposed in the Senate T-HUD bill. It also allocates more funding for HOME grants at $1.2 billion, compared to the $1 billion requested by the President and proposed in the Senate bill. During floor debate, the House defeated amendments to gut CDBG and HOME funds by comfortable bipartisan margins.

While the actions to increase CDBG and HOME are welcome, they come with significant trade-offs elsewhere in the bill. The Choice Neighborhoods and Sustainable Communities grant programs and TIGER grants would all be eliminated in the House bill. This is in contrast to the Senate bill, which provides $120 million for Choice Neighborhoods, $50 million for Sustainable Communities, and $500 million for TIGER.

With respect to transportation programs, the House T-HUD bill assumes the Highway Trust Fund could maintain current levels of spending for the federal-aid highway program, as well as the transit formula and bus grants. However, that assumption was made before the transportation agreement was reached. (See above) Now that a new transportation bill is in place, House appropriators are working to determine if their spending assumptions will need to be adjusted. Any adjustment could necessitate additional cuts for HUD and DOT programs when differences in the House and Senate bills are resolved.

As with the other spending bills advancing in the House, the President has threatened to veto the House T-HUD bill for providing less overall funding than was authorized under the spending deal agreed to in the Budget Control Act of 2011. In a statement, the President did offer one point of agreement with the House bill: "[T]he Administration appreciates the Committee's support for the CDBG program, which provides critical funding to state and local governments to address infrastructure, affordable housing, and economic development needs in their communities."

House Committee Moves to Cut Water Infrastructure Funding
Carolyn Berndt, berndt@nlc.org, 202.626.3101

In other spending bill action, the House Appropriations Committee approved the FY 2013 Interior-Environment spending bill, which funds the U.S. Department of Interior and the U.S. Environmental Protection Agency (EPA), last week by a vote of 26-19. The bill includes significant cuts to the Clean Water and Drinking Water State Revolving Loan Fund (SRF) programs, which local governments rely on to help finance upgrades to wastewater and drinking water systems.

Specifically, the bill provides $689 million for the Clean Water SRF, a $778 million reduction from FY 2012, and $829 million for the Drinking Water SRF, $89 million below FY 2012. Additionally, the bill provides $1.164 billion for the superfund program, a slight decrease from FY 2012, and $60 million for the brownfields program, nearly $35 million below FY 2012. Finally, the bill reduces spending for the Land and Water Conservation Fund, which pays for public lands acquisitions, to $66 million, an 80 percent cut from last year and the program’s lowest funding level since its creation in 1965. Overall, the bill reduces funding for EPA by 17 percent over the current fiscal year, the lowest level since 1998.

The bill includes a number of policy riders, including prohibiting EPA from developing regulations or guidance pertaining to stormwater discharges for post-construction and residential properties, as well as developing guidance pertaining to whether a waterway, water body or wetland would be jurisdictional under the Clean Water Act. Perhaps in response to the D.C. Circuit Court’s recent decision upholding EPA’s authority to regulate greenhouse gas emissions under the Clean Air Act, the committee also adopted amendments aimed at prohibiting EPA from imposing new greenhouse gas emission standards for cars after model year 2017 and on electric utility plants.

The Senate has yet to take action on a companion bill, and similar to the T-HUD bill, the White House has threatened to veto this bill because the proposed funding levels are inconsistent with the Budget Control Act.

Flood Insurance Reform, Long-Term Extension Passes
Mitch Herckis, herckis@nlc.org, 202.626.3124

As part of the transportation bill (see above) and in action NLC supported, lawmakers also voted to reauthorize and reform the National Flood Insurance Program (NFIP) through 2017. In an effort to ensure the long-term fiscal solvency of the program, the bill expands the type of homes and buildings that are ineligible for federally subsidized flood insurance, as well as the rate at which premiums can be increased. The final measure did not include a provision that would have expanded mandatory purchase requirements to those who own homes behind or near levees (in what are known as “residual risk” areas).

For years now, the NFIP had been surviving on short term stopgap extensions that created uncertainty in the housing market, while subjecting FEMA to the challenges of trying to administer the program without the assurance of consistent federal investment. Historically self-funded based on user premiums, the devastating 2005 hurricane season left the program in billions of dollars of debt and in need of transfers from the general fund to sustain it.

GASB Issues New Pension Accounting and Reporting Standards
Neil Bomberg, bomberg@nlc.org, 202.626.3042

Despite concerns raised by NLC and other state and local government national organizations that they would confuse and mislead taxpayers when it comes to pensions and public sector budgets, the Governmental Accounting Standards Board (GASB) recently issued two new reporting standards for state and local public pensions. The first, Statement No. 67, Financial Reporting for Pension Plans, revises existing guidance for the financial reports of most pension plans. Statement 67 requires pension plans to immediately account for expenses, changes in benefit terms, and other costs that in the past were amortized over the lifetime of the plan. The second, Statement No. 68, Accounting and Financial Reporting for Pensions, establishes new financial reporting requirements for state and local governments that provide their employees with defined benefit pensions. Statement 68 requires cities and towns and other governmental entities to report their “net pension liability,” that is the present value of projected benefit payments (total pension liability) minus the present market value of investments (assets on hand) that have been set aside in a trust for the benefit of employees and retirees.

The provisions in Statement 67 are effective for financial statements beginning after June 15, 2013. The provisions in Statement 68 are effective for fiscal years beginning after June 15, 2014. GASB, however, is encouraging earlier implementation of both Statements.