November 21, 2007

RE: FEDERAL UPDATE - For period ending November 16, 2007

Dear Mayor:

This is a special Thanksgiving recess update on action in our Nation’s Capital from the National League of Cities (NLC).

House Passes Mortgage Reform Bill with NLC Support
Last week, the House approved H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007, by a bi-partisan vote of 291-127. The bill is the first major piece of federal legislation to pass this session that directly addresses the mortgage lending and investment practices central to the current home foreclosure crisis. Earlier this year, NLC’s leadership identified this issue as a top legislative priority for Congressional attention, and NLC was among the first organizations to endorse the bill. The bill will create a licensing system for residential mortgage loan originators, establish a minimum standard requiring that borrowers have a reasonable ability to repay a loan, and attach limited liability to secondary market securitizers. The bill also will expand and enhance consumer protections for those taking out certain high-cost loans, include protections for renters of foreclosed homes, and establish an Office of Housing Counseling through the Department of Housing and Urban Development. During last week’s action on the bill, the House also adopted an amendment, sponsored by Rep. Paul Kanjorski (D-PA) that requires all subprime borrowers to have escrow accounts to protect against unpaid taxes and insurance premiums. Although the bill now heads to the Senate, Sen. Chris Dodd (D-CT), Chairman of the Senate Banking, Housing, and Urban Affairs Committee, has said he is writing a different mortgage reform bill to be introduced sometime next year.  The Administration, meanwhile, has indicated concerns that the House bill might make it more difficult for homebuyers to qualify for a loan, but stopped short of threatening to veto it.

Gridlock Over Spending Bills Continues
Before beginning the Thanksgiving holiday recess, Congress transmitted the first two of 12 fiscal 2008 annual spending bills to the President for his signature. One of those bills became law, and the President made good on his threat and vetoed the other bill because the funding called for by it exceeded his budget request. On Nov. 13, President Bush signed into law the fiscal 2008 appropriations bill that provides $459.3 billion in funding for the Department of Defense. The spending level called for in the bill is $3 billion less than the President proposed. On the same day, the President vetoed, as expected, the bill to fund the Departments of Labor, Health and Human Services, and Education. That bill provided $150.7 billion in funding for domestic programs, which is $9.8 billion above the President's request for these programs. On Nov. 15, the House's attempt to override the President's veto fell two votes shy of the two-thirds majority needed. House and Senate leaders continue to discuss various strategies to finish the fiscal 2008 appropriations process in the face of veto threats from the President who insists upon a lower spending total than Congress has set. The President proposes spending $933 billion on the 12 appropriations bills, while the Democratic leadership wants $23 billion more. With the latest stopgap spending measure set to expire on Dec. 14, Congress may be forced to consider spending levels closer to the President's requests when the session resumes on Dec. 3.

Mandatory Collective Bargaining Bill Still Being Considered
S. 2123, the mandatory collective bargaining bill that Sen. Judd Gregg (R-NH) introduced in September, is still under consideration in the Senate. NLC and other organizations representing local governments continue to oppose the bill because it interferes with states rights, violates federalism principles, and may be unconstitutional. Contrary to what some bill supporters are claiming, the bill would require all states to comply with the federal proposal’s requirements. In other words, in addition to imposing federal collective bargaining requirements on states and local governments that do not currently permit collective bargaining, the bill may impose the federal requirements on those states that already permit collective bargaining. Under the bill, a federal agency, the Federal Labor Relations Authority, is required to review each state’s collective bargaining law and make a determination that the particular law is in compliance with the federal requirements; if it is not, the state law must be amended. A similar version of the bill (H.R. 980) passed the House in early summer.

Sen. Biden Introduces Comprehensive Crime Bill
Sen. Joseph Biden (D-DE), chairman of the Senate Judiciary Subcommittee on Crime and Drugs, has introduced a comprehensive crime bill calling for investment in prevention programs, funding for community oriented policing, and in recognition of the new homeland security challenges that local law enforcement faces, restoration of 1,000 FBI agents to fighting crime. The bill, S. 2237, the Crime Control and Prevention Act of 2007, also would establish a national commission on crime intervention and prevention strategies, increases enforcement against gangs and authorizes new grant  programs aimed at enforcement, prevention and education to combat the rise in drug abuse. In introducing S. 2237, Sen. Biden noted that since 9/11, the federal government is “asking law enforcement to do more with less…We need to meet this problem head-on, with a comprehensive approach that blends traditional crime-fighting tools with 2007 technology.” No further action has been scheduled on the bill

Senate Conducts Hearings on Climate Change Bill
Last week, the Senate Environment and Public Works Committee held two hearings on climate change legislation that would curb emissions of greenhouse gases thought to contribute to global warming. America’s Climate Security Act, S. 2191, sponsored by Sen. Joseph Lieberman (I-CT) and Sen. John Warner (R-VA), would cap emissions from the electric power, transportation and manufacturing sectors of the economy and would allow businesses to trade emissions allowances in order to meet the cap. The bill also would limit emissions from covered sources at 1990 levels by 2015 and would require them to be 65 percent below 1990 levels by 2050. Additionally, the bill would establish a Carbon Market Efficiency Board, modeled after the Federal Reserve, to manage the carbon trading market if the price of emissions credits exceeded expectations. A markup and vote on the bill is expected to occur after the Thanksgiving break, and it could reach the Senate floor in early 2008. 

Alternative Minimum Tax Legislation Advances
Last week, the House passed the Temporary Tax Relief Act of 2007, H.R. 3996, to provide a one-year patch to the alternative minimum tax (AMT) and extend expiring tax provisions for one year. Without the one-year patch, the AMT, which is not indexed for inflation, will reach 21 million more Americans in 2007 than it did in 2006. The bill would also extend certain expiring tax credits and deductions, such as the deduction allowed to residents of states with no income tax for payment of state and local sales taxes. To comply with pay-as-you-go budget rules, House Ways and Means Chairman, Rep. Charles Rangel (D-NY), included in the legislation offset mechanisms to pay for the $82.5 billion dollar impact the AMT relief and expiring tax provision extensions would create. The offsets are primarily raised by taxing the income of private equity managers, venture capitalists, and certain real estate investors at ordinary income rates, instead of at the lower capital gains rate. The Administration issued a veto threat against the legislation because “imposing a tax increase on one group of taxpayers is not the appropriate way to protect 21 million additional taxpayers from the reach of the AMT.” Senate leadership disagrees with the need for any offset since the AMT was never intended to reach so many Americans. Adding urgency to the situation is a warning from the Internal Revenue Service (IRS) that any delays in enacting an AMT patch could delay refunds for up to 50 million Americans. In addition to the AMT patch and extending tax credits and deductions, H.R. 3996 includes a provision that would delay for one year to 2012 the implementation of a new requirement that federal, state, and local government spending more than $100 million per year on purchases of goods and services withhold three percent from their payments to contractors and vendors and remit those funds to the IRS. The bill would also provide relief for struggling homeowners by not counting as taxable income any debt forgiven through foreclosure or mortgage debt restructuring.

Senate Approves Terrorism Risk Insurance Extension
Last week, the Senate passed a seven-year extension of the Terrorism Risk Insurance Act (TRIA), which is set to expire at the end of this year. Congress first passed TRIA in 2002 following the September 11th terrorist attacks to provide insurance coverage for terrorism events, which private policies widely exclude from coverage. There are key differences between the Senate and House-passed versions of the bill. The Senate extension is eight years shorter than the 15-year extension approved by the House earlier this fall. Also, the Senate rejected the House’s expansion of the program to nuclear, biological, chemical, and radiological attacks and retained the current $100 million trigger for coverage. The House bill will reduce the threshold triggering coverage from $100 to $50 million. The two chambers also provide different finance mechanisms for complying with pay-as-you-go budget rules. Both versions of the legislation would extend coverage to domestic, as well as foreign, acts of terrorism. The Administration has issued a veto threat against the House version of the legislation, asserting that a lengthy extension and expansion of the program would discourage the development of a private market for terrorist insurance. House and Senate leaders will begin compromise discussions soon to resolve differences between the two versions of the legislation.

Congress will be in recess for the remainder of the month of November. The next edition of the Federal Relations Update will be published around December 14, 2007.

For more information, contact Jon Moran at 609-695-3481, ext. 121 or jmoran@njslom.com.

Very truly yours,

William G. Dressel, Jr.
Executive Director

WGD:jm/sc