House and Senate conferees are moving toward providing drug coverage under Medicare, not Medicaid, for beneficiaries who qualify for both programs. Still unresolved is how much the states and the federal government would pay under such a plan.

The House bill would phase in Medicare coverage for the elderly who qualify for both Medicare and Medicaid. Under the House measure, the government would assume state responsibility for those beneficiaries. The Senate version would keep that coverage for those beneficiaries, known as dual eligibles, under Medicaid, but would provide more generous subsidies to help low income seniors afford coverage.

Under current law, Medicaid fills the coverage gaps for low-income Medicare recipients by paying a portion of their outpatient drug costs. The administration wants to keep that approach, but the nation's governors have urged conferees to have Medicare cover dual eligibles.

Covering dual eligibles under Medicare may also help win Democratic suport for the conference package. Proponents of the House plan argue that excluding dual eligibles from a prescription drug benefit would create a two-tiered system under which low-income Medicaid recipients would receive less comprehensive coverage than their more affluent peers.

The Senate is trying to force the hand of House Republicans to accept the Senate’s plan to expand payments to low-income parents under the child tax credit.

Republican leaders have agreed to permit supporters of the Senate version of the child tax credit bill to attach the measure to another bill that would provide new tax incentives for charitable donations. Then the charitable giving bill, which is the remainder of the President “faith-based initiative” would then be sent to conference with the House.

Senator Olympia Snowe (R-Maine), a leading proponent of the child tax credit expansion has been blocking a Senate vote to go to conference on the charitable giving bill in order to try to force movement on the child credit issue.

It is unclear whether the child credit provision will make it in the final version of the chartable giving bill.

On Wednesday, the American Association of State Highway and Transportation Officials (AASHTO) held a news conference on the reauthorization of TEA-21. Earlier in the week, President Bush signed a bill extending surface transportaion programs for five months, while transportation authorizers attempt to draft a long-term bill.

Lawmakers might find it difficult to pass a long-term reathorization bill in the next five months because of time constraints and other legislative priorities. Congress will likely adjourn in mid-late November, which leaves little time left in this session for lawmakers to consider a long-term bill. Congress still has to act on appropriations bills, the President's supplemental funding request for Iraq, the Medicare bill and energy legislation. In January and February, Congress has only 10 legislative days scheduled, so there is scant time to conider a long-term extension bill. However, state transportation departments continue to stress the need for immediate action on a long-term bill, especially in light of state budgetary constraints and increasing congestion on highways.

AASHTO President John Njord commented, "we haven't got five months to create a bill here, folks, we've got a very short period of time." Njord also talked about how crucial it was for the federal government to provide a stable and predictable stream of funding to state transportation departments, who must prepare long in advance for construction projects. With continuous short-term extensions, it will be more cumbersome for states to compare future federal funding of projects with required expenditures. Without definitve knowledge of federal funding for a specific program over a long period, states and regional transit agencies have more trouble estimating how much transportation money must be raised through other means. "When there is uncertainty on the state side.....it really dampens our ability to plan long-term," said Njord.

With the Congressional impasse, AASHTO has recently stepped up its lobbying efforts on Capitol Hill. Even as State DOTs have been hampstrung by state buget woes, the need for more transportation investment has not diminished and Njord wants lawmakers not to lose interest in passing a long-term bill over the next five months. If Congress fails to act before the end of February, another temporary extension will have to be approved so transportation funds continue flowing to the states.

AASHTO wnats Congress to have a bill ready for consideration by Thanksgiving.

On Tuesday, David Gunn, President and CEO of Amtrak, spoke before a packed house at the National Press Club. His speech was titled "The End of Trains or a New Beginning?”

David Gunn has been praised by Amtrak supporters and detractors alike for his year and a half stewardship of the railroad. Even while Congress is still negotiating Amtrak’s appropriation for FY 2004, Gunn continues to implement reform aimed at increasing efficiency and transparency. In the last year, Gunn has testified before some hostile congressional committees, but his candid commentary on Amtrak’s state of affairs and unabashed critique of past failures has earned Gunn the respect of many lawmakers, even those inimical to the plight of Amtrak.

Gunn began his speech by conveying a sense of optimism and then enumerating some of his recent accomplishments at Amtrak. Upon reaching the podium, Gunn stated that he was “optimistic about the future of Amtrak.” According to Gunn, FY 2003 was the first year in which Amtrak had not borrowed money since 1995. Additionally, he stated that Amtrak will likely set a record in ridership this year. Gunn also said that Amtrak’s revenue is starting to improve. In August, revenue and ridership, compared to the same period last year, were 4.8% and 7.3% higher, respectively.

Gunn, who had previous stints at Washington Metro, Philadelphia’s SEPTA and New York’s MTA, told the crowd that “we have begun to address the deferred maintenance problem.” Under the aegis of Gunn, 21 motors and 20 wrecked cars were rebuilt along the Northeast corridor, an inspection facility was re-opened in Chicago, the inspection cycle on equipment and infrastructure was reduced from 120 days to 90 days, and there are plans to replace track this year.

While Gunn conveyed a sense of optimism, he was careful to point out that “we’re making progress, but are not out of the woods yet.” For example, Gunn said that 200 miles of track along the Northeast corridor still needs to be replaced in the near future. However, Gunn maintained that even with such obstacles, he believes that “Amtrak can be effective and work.”

When asked about the privatization of intercity passenger rail, Gunn retorted that those who desire opening the system up to competition have no defined objectives or a transition plan. Gunn elaborated, saying that “in order to privatize an industry, the industry has to be profitable and passenger rail cannot be profitable.”

Commenting on freight railroads, Gunn said that the freight railroad industry is in a period of decline, which presents a problem for Amtrak. Gunn feels the stiff competition in the freight railroad industry has depressed profits, making it more difficult for freight rail operators to invest in new infrastructure. [

Gunn was the most adamant about the need for a stable and predictable source of funding for rail service. Gunn was quite stark in his dismissal of the notion that passenger rail service could be profitable. Gunn then briefly addressed Amtrak’s annual appropriation for FY 2004, which has not yet been determined. If Amtrak receives $900 million, as recommended by the House and Bush Administration, Gunn said that there would be a shutdown of the system. Gunn still maintains that Amtrak needs the full $1.82 billion in federal subsidies that they had originally requested. However, Gunn did agree with the Administration on two important points. First, Gunn agrees that states should pick up the operating deficit on routes they request. Second, Gunn feels that the federal government should provide a capital match for new projects. When asked if he ultimately feels that Amtrak will receive enough money for FY 2004, Gunn replied, “the more we can demonstrate we are stewards of a tight ship, I think we have a good chance of getting adequate funds.”

Gunn concluded his remarks by commenting briefly on high speed rail. “Improvements to passenger rail service must be incremental”, said Gunn. Gunn said that we must look at higher speed rail before looking at high speed rail. Gunn highlighted the TGV high speed rail train in France as an example. “You can’t just look at the TGV in France and say I want that…that was the mistake with Acela,” Gunn stated. Gunn added that high speed rail in Japan and Europe was “evolutionary and not revolutionary.” Gunn went on to candidly state that the Aclela service, Amtrak’s fastest train, will never meet the promises that were made by Amtrak management when the train first debuted. For the time being, Gunn stated, “there will be little change in the speeds of trains that run along the Northeast corridor.”

Speaking concisely on the proposed labor walkout to occur this Friday, Gunn appeared confident that a one-day work stoppage would not happen. A few weeks ago, some unions representing Amtrak workers threatened to shut down the railroad for a day to protest “chronic underfunding of Amtrak by the government.” Gunn said such a move would be unwise and illegal. Amtrak filed a motion with the U.S. District Court in D.C. seeking an injunction to prevent such a work stoppage.

Last week, House Transportation and Infrastrcuture Committee ranking member Rep. James Obertstar (D-Minnesota) and Rep. Tom Petri (R-Wisconsin), chairman of the Subcommittee on Highways, Pipelines and Transit spoke about transportation issues before a Capitol Hill breakfast sponsored by The Hill newspaper. Both Obertsar and Petri supported raising the federal gas tax to increase funding for highway and transit programs over the next six years. The two lawmakers, along with Committee Chairman Don Young (R-Alaska) could not come to an agreeement with the House leadership on raising or indexing the federal gas tax. Because authorizers could not complete work on a long-term TEA-21 reathorization bill, Congress had to pass a short-term five-month extension bill, allowing vigorous debate on reauthoirzation to continue. Congressman Obertsar and Petri made these remarks at the breakfast last week.

On September 25th, Representatives Ernest Istook (R-Oklahoma) and William Delahunt (D-Massachusetts) held a press conference with state lawmakers and city leaders on the introduction of legislation giving states the authority to collect state sales and use tax from out-of-state sellers. Also present at the press conference were organizations representing retailers, small businesses, counties, cities and state legislators.

The legislation, which has bi-partisan support in both chambers of Congress, has not yet been formally introduced. Many states and localities have long clamored for legislation permitting states to collect sales and use taxes from remote sellers. Currently, states lack the authority to collect such taxes from out-of-state sellers. Upon passage of this legislation, all states that simplify their sales tax system and comply with the ‘Streamline and Use Tax Agreement’ adopted in November of 2002, would be able to require remote sellers to collect and remit sales and use taxes. States that want to join the multi-state compact would have to implement uniform simplification standards and a uniform sales tax code that is the same for both Internet and non-Internet retailers.

The followed organizations have endorsed the proposal: the E-Fairness Coalition, National Governors Association, National League of Cities, National Council of State Legislators, National Association of County Officials, National Association of Real Estate Investment Trusts, International Council of Shopping Centers, National Retail Federation and the International Mass Retail Association.

Representative Istook commented that the bill will help local communities solve their own problems by allowing them to boost revenues. To placate small business advocates, Istook maintained that the bill would exempt businesses with total gross sales of under $5 million from having to collect sales tax. Also, retailers will be compensated for costs related to collection of out-of-state sales taxes.

Congressman Delahunt, who emphasized the bi-partisan support for the legislation, stated that the bill is not a tax increase, but rather a simplification and streamlining of our current tax system. Delahunt stated, “the bill treats remote sellers like Main Street sellers by removing the inequities and unfair advantages that remote sellers currently have.” Additionally, Delahunt feels the legislation will allow states, most of whom need fiscal relief, to better rely on sales tax for a source of revenue. Delahunt mentioned that his home state of Massachusetts lost $271 million in sales tax revenue in 2001 because remote sellers failed to collect and remit Massachusetts state sales tax.

Pennsylvania State Representative David Steil (R-31), speaking on behalf of the National Council of State Legislators, asserted that state sales tax revenues are decreasing because of changes in our economy. Steil added, “Congress has the chance to provide fiscal relief to the states without actually affecting the federal treasury.”

Spearheading the effort in the Senate are Senators Byron Dorgan (D-North Dakota) and Mike Enzi (R-Wyoming), both of whom were unable to attend the press conference. However, in a statement sent out before the press conference, Dorgan said “this bill has two goals – first it encourages state and local governments to pursue sales and use tax simplification. Secondly, once they’ve done that, it authorizes them to collect taxes already due.” Enzi also made some comments before the press conference. The Wyoming Republican stated that “this bill would help spur economic growth in communities across the country because sales tax revenue helps pay for our schools, police officers, firefighters and more. Streamlining the sales and use tax system should make it easier for both online and Main Street businesses to comply with the complicated tax system. The resources that are now spent on compliance could then be used, among other things, to hire new people and buy new equipment.”

Commenting on the prospect of bill action before Congress adjourns this year, Ernest Istook told reporters that consideration of the bill would most likely have to wait until early next year. However, Istook thinks the bill has the requisite votes for passage and is convinced that there are plenty of Republicans in the House who will support the legislation. Istook also said that the White House has yet to outline a position on the bill, though, the Oklahoma Congressman is in talks with the President’s staff on this issue.

The House passed legislation to extend cash assistance programs and child care grants to states for six months in order to get lawmakers more time to reauthorize the 1996 welfare law.

Lawmakers passed the measure by voice vote, extending the program through March 31, 2004. Congress has extended the law four times within the past year as lawmakers struggled to rewrite the program. The Senate is expected to clear the legislation later this week.

The legislation would also extend payments for six months to certain low income Medicare beneficiaries who also are covered under state Medicaid programs. The premiums - $58.70 a month - pay for doctor visits and other outpatient services.

A House reauthorization bill (HR 4) tracks with a Bush administration proposal that would eventually increase the work requirements to 40 hours a week. The bill was later amended by the Senate. The Senate changes would alter the work requirement to 34 hours a week, with a mandate of 24 hours a week for parents with children under age 6.

The Senate bill contains the $200 million for marriage promotion programs, a priority for the White House. Like the House measure, the Senate bill would require states to have 70 percnet of their welfare client base working by 2008.

The Senate is not expected to take up the measure until next year, when Democrats are likely to offer an array of amendments, including an attempt to boost child care funding by a much higher figure than what Senator Snowe is prposing this year. Sen. Snowe is proposing to increase child care funding by an additional $5 billion to $6 billion during floor debate.

Republican leaders put new pressure on the Medicare conferees imposing an Oct. 17 deadline for producing a conference report. President Bush is also expected to weigh in the conferees as well. The Oct. 17 deadline suggests where the Republican leadership senses the cutoff point is for getting anything done before the end of the session.

Conferees will be expected to reach accord in several contentious areas, including how many private health plans will be allowed to offer drug coverage and the size of envisioned payment increases for physicians, hospitals and other Medicare providers. They also will be asked to reach an agreement on whether to link some Medicare benefits to beneficiaries' incomes - a concept known as "income regulating".

The deadline leaves relatively few legislative days on the congressional calendar to resolve differences between the bills.

Talks this week in conference have focused on health plan competition, including how Medicare administrators would divide the country into geographic regions and the number of plans that could compete to offer benefits to Medicare recipients in those regions. Next week the conferees are discussing how to handle dual eligibles, the some 6 million elderly who qualify for both Medicare and Medicaid.

On Wednesday, September 17, the Senate Finance Committee approved by voice vote the Chairman's mark extending the government's authority to spend money from the Highway Trust Fund under the Transportation Equity Act for the 21st Century (TEA-21) for 5 months. The Chairman's mark also included language repealing the reduced tax rate on sales of fuel for blending with alcohol and gasohol, and imposing the full rate of excise tax on alcohol-blended fuels.

The controversial proposal is Sen. Grassley’s bill, S. 1548, the Volumetric Ethanol Excise Tax Credit (VEETC) Act of 2003 and replaces the reduced rates with per-gallon excise tax credits for alcohol and biodiesel fuel mixtures and provides for outlay payments to producers of alcohol and biodiesel fuel mixtures and users of 100 percent alcohol and 100 percent biodiesel fuels. The tax break was established to encourage the use of gasohol, but some lawmakers have long complained that the Highway Trust Fund loses an estimated $2 billion a year in potential revenues because of the tax break.

The Finance Committee’s bill would repeal the tax break — putting more revenue into the dedicated trust fund — and replace it with a tax credit for ethanol producers, in essence shifting the cost to the general Treasury.

While the tax change is expected to win support in the conference on the omnibus energy bill (HR 6), lawmakers concerned that the conference could be bogged down decided to attach it to the short-term highway bill. House Ways and Means Committee Chairman Bill Thomas (R-California) does not like the ethanol provision because of the added cost to the Treasury and the White House is also opposed, though it has not issued a veto threat over the matter.

The Senate Environment and Public Works Committee is scheduled to mark-up the extension legislation on Tuesday, September 23.

In the House, Transportation and Infrastructure (T&I) Committee Chairman Don Young (R-Alaska) introduced two pieces of legislation that would extend TEA-21's surface transportation programs beyond the act's September 30, 2003 expiration date. The only difference between the bills is the length of the extension: H.R. 3088, the Surface Transportation Extension Act (STEA), would extend TEA-21 for an additional 6 months; H.R. 3087 would extend the program authority by only 5 months.

Both bills provide continued funding for federal highway, transit, and highway safety programs using current program structures. Funding levels are tied to the fiscal year 2004 budget resolution.

A major difference between the House and Senate short-term highway extension bills is expected to be a provision (sec. 2(e) (3) of the House bills) that would make the February 29 (or March 31) expiration of the extension bill a little less meaningful. Sec. 2(e)(3) section of the House bill (proposed TEA-21 extension), which House staff refer to as the “dimmer switch” provision, would allow State DOTs to be reimbursed for previously committed federal funds through June 1, 2004 (5-month extension) or July 1, 2004 (6-month extension). This will allow States to continue current construction programs without fearing a hard cut-off of funds as the 2004 construction season begins. The Senate version does not include a similar provision.