An $80 billion pension relief program has hit a snag once moving to conference: House and Senate negotiators have sparred over funding relief for multi-employer plans. Rep. John A. Boehner, (R-Ohio), chairman of the conference, was quoted by CQ as saying, "These talks are in serious danger. This bill is in serious jeopardy." The dispute stems from the ongoing problem of roughly 31,000 companies with defined-benefit pension plans. Current law mandates a certain amount of contributions to their plans, and these companies are seeking a change in the formula which would allow them to contribute less over the next two years. Work on the conference stopped this morning due to the dispute, with Senate leaders seeking a greater effort to aid the multi-employer plans, which number around 1,600.

We've got several tables showing the funding allocations in the TEA-LU legislation recently moving through the House. Head over to the analysis side for further details.

The House Committee on Transportation & Infrastructure on March 24 approved for floor consideration "TEA-LU," the six-year re-authorization of Federal highway, highway safety, transit and transportation research programs. The total price tag for the measure is $275 billion -- fully $100 billion below the amount originally proposed by committee leadership.

The bill includes $51 billion for transit programs and $225 billion for highways. It includes a provision -- called a "re-opener" -- which would require Congress to come back to the legislation next calendar year to re-visit funding levels. The bill makes clear that any change in the highway formula to address the "donor/donee" problem is contingent upon additional resources for these programs being found. During the mark-up, numerous members indicated they had amendments to the bill they would like to see included in a committee amendment to be offered by committee leadership when the bill reaches the floor. Chairman Don Young (R-Alaska) made commitments to include perhaps a dozen such amendments in his package.

The bill is slated for action by the full House as early as March 31. Rumors abound that Majority Leader Tom DeLay (R-Texas) is developing an amendment for consideration on the floor which would ensure each state recovers from the Highway Trust Fund at least 95% of what it puts in. Such an amendment could roil the waters considerably and produce opposing votes on both sides of the aisle.

Peyser Associates clients saw a 27 page summary of the bill before the mark-up and received updates on the legislation immediately after the markup. We will keep our friends and clients posted on developments as they occur. The final version is available here on the analysis side of our website.

Medicare’s financial condition has been slowly deteriorating partly because of rising health care costs and also from the new Medicare law. The Medicare board of trustees reports that the program’s hospital insurance trust fund could run out of money before the end of the next decade.

This report comes shortly after the Medicare actuary asserted that the administration ordered him to withhold higher cost estimates for the Medicare legislation last year. The trustees reported that: Medicare’s hospital insurance trust fund, which pays for inpatient hospital care, will be exhausted in seven years; Medicare will grow much faster than the economy as a whole; and, projected Medicare costs will exceed those for Social Security in 2024.

The public trustees said that rapidly rising Medicare costs, combined with the new drug benefit, raise doubt about the sustainability of Medicare under current financing arrangements. Moreover, the fiscal outlook may be worse than the official projections indicate, because the estimates are based on the assumption that the average Medicare fee for doctors’ services will be cut about 5% each year from 2006 to 2012, as required under current rules. Doctors are saying that they will lobby Congress to prevent such cuts.

The trustees report that total Medicare spending on the drug benefit would start at $85 billion a year in 2006 and then would grow an average of 9.6% a year, to $161.8 billion in 2013.

Beginning this year, tax receipts alone will no longer cover hospital payments. By 2019, Medicare’s reserves will be depleted and the program will go broke.

Officials are estimating that the new Medicare prescription drug law will accelerate the trust fund’s insolvency by two years through increased payments to private insurers who accept Medicare recipients and higher reimbursements for rural hospitals.

Payments for seniors’ drugs were not reflected in the trustees’ solvency calculations because these costs will be covered by general tax revenues, not by a dedicated Medicare trust fund.

The forecasts angered many fiscal conservatives because of the way it would increase mandatory spending, providing new ammunition for Democrats. Democrats have claimed that the law directs too much money to health plans and not enough to seniors who need it the most.

The long-term projections, if true, could trigger cost-containment measures that fiscal conservatives included in the law. The law requires the president to submit legislation to Congress to curtail spending if general revenue contributions account for more than 45% of total Medicare expenditures for two consecutive years.

We've managed to procure an advance copy of the summary of the version of "TEA-LU" that Chairman Don Young (R-Alaska) will put before the House Committee on Transportation and Infrastructure tomorrow, March 24. To see the full summary, our clients can visit the analysis side of the website.

On Thursday, the House Select Committee on Homeland Security will approve a bill (H.R. 3266) that will alter the way first-responder funds are distributed to communities. The measure, sponsored by Committee Chairman Christopher Cox (R-California), would change grant formulas so that money bequeathed is done so based solely on terrorism threats faced by communities.

The new allocation formula would provide larger cities like New York and Los Angeles with more first-responder money, while smaller communities and rural towns would see less. The current allocation formula is primarily based on population, with each state receiving a minimum guaranteed funding level. To determine threat levels that various communities face, Homeland Security officials would analyze the vulnerability of critical infrastructure and juxtapose such data with intelligence on terrorism threats.

Another provision in the bill would mandate that the Homeland Security Department set minimum standards for emergency preparedness that states and cities would have to comply with before receiving anti-terrorism money. Also, the measure would change the rules for the nation’s color-coded terrorist alert system so that future warnings are more specific in terms of which region or sector of the economy faces the threat.

First-responder money is expected to total $2.7 billion in FY 2005.

Cox’s legislation will not affect the police and firefighter grants that were around before September 11, 2001.

House Transportation and Infrastructure Chairman Don Young (R-Alaska) has accepted a $275 billion, six year transportation reauthorization package, according to CQ Today. That figure is lower than the $279.5 billion number reached two weeks by House leaders and far below the $375 billion Young originally sought. The White House had threatened to veto any figure above $275 billion, and members have been less then enthusiastic about pushing a one year reauthorization at current levels, because new projects could not be started unless a full package was passed.

A plan to create the most extensive toll lane network in Virginia was proposed yesterday by engineering firm Fluor Virginia. The plan would allow single and double passenger vehicles to purchase their way out of traffic and into "high-occupancy toll" (HOT) lanes. Service would run from the 14th Street Bridge to south of the Rappahannock River, with HOT lanes being dedicated to high occupancy vehicles, toll paying customers, and a bus rapid transit system.

A full look at the history of HOT lanes can be found in this December piece in the Washington Post.

On Friday, Senator Ernest Fritz Hollings (D-South Carolina) introduced a bill (S 2216) authorizing $515 million for rail security, in the wake of last Thursday's train-bombing in Madrid. The terrorist act has refocused lawmakers looking at the safety of the railway system in the United States, including metropolitan commuter systems. The Hollings measure has been introduced twice before, but failed to move. It contains several measures aimed at improving current screening measures for passenger rail, which currently don't exist.

House Ways and Means Chairman Bill Thomas (R-California), according to CQ, has decided to abandon his effort to ban leasing arrangements used by municipalities to provide tax breaks to investors in return for infrastructure and transit improvements. Opponents of the ban argued that any revenues generated from the measure should be redirected back into spending on infrastrucutre, and House Democrats promised to offer a slew of amendments to do just that should the measure reach the floor. An aide to Thomas indicated he would only mark up $15 billion worth of highway provisions, including a proposal to change an low excise tax on ethanol into a tax credit.

Congress is facing increased pressure on two fronts to reconsider the recently passed Medicare prescription drug law. First, because of rising drug costs, lawmakers are being asked to take a second look at allowing the importation of drugs from other countries into the United States. Secondly, lawmakers are demanding answers from the administration over reports that the administration purposefully withheld the true costs of the prescription drug benefit to Medicare.

Senate Finance Chairman Charles Grassley (R- Iowa) and Senator Edward Kennedy (D-Massachusetts) have said they will introduce legislation that would allow consumers to import U.S. approved prescription drugs from other countries. Still undecided is whether to allow imports from Canada only. This measure is expected to be introduced within the next several weeks.

Senate Majority Leader Frist (R-Tennessee) has also said that the Senate would begin a process for developing proposals to permit the safe importation of drugs if they were approved by the Food and Drug Administration.

Importing drugs from countries where they are often sold for less than in the United States was among the most contentious issues Congress debated during the drafting of last year’s Medicare drug law.

Governors across the United States also are saying that buying cheaper drugs from other countries is the only way states can afford to provide prescription drug coverage to state employees.

Under current law, importing drugs is legal only if the HHS secretary certifies that the drugs being imported are safe. Last year, the House passed legislation that would permit importation of FDA-approved drugs from FDA-approved plants in 25 industrialized countries. The Senate did not act on its version of the bill.

Democratic lawmakers are also upset over a recent revelation that an administration actuary’s job was threatened if he revealed the estimates of the costs of adding a prescription drug benefit to Medicare. Last week Minority Leader Tom Daschle (D-South Dakota) and Ted Kennedy sent a letter to President Bush asking what information he had about the costs of the bill before Congress voted. In addition, five House Democrats sent a letter to the HHS inspector general requesting an investigation into the claims.

The cost of the Medicare bill – estimated originally by the Congressional Budget Office at $400 billion over 10 years when it passed - sparked an outcry from Democrats and conservative Republicans when the administration released new estimates that the overhaul would cost $139 billion more than congressional estimates.

The Corporate Tax Bill (HR 2896), which has stalled in the House, will receive $36 billion in new provisions when it is marked up on March 17 or 18. Chairman of the House Ways and Means Commitee Bill Thomas (R-California), has proposed removing tax benefits for the ethanol industry as well as benefits to insitutions who lease infrastructure from municipalities for the purpose of deducting for depreciation on tax returns. The ethanol change would convert an existing reduced gasoline excise tax to an equivalent income tax benefit, which would generate $9 billion during the years from 2007-2010. (The current tax break expires in 2007.) Cancelling the current municipal leasing arrangement could raise $16 billion in revenue, which many Democrats wish to invest back into state and local infrastructure projects.

Both tax measures, if approved, are likely to help HR 2896 cut at least $60 billion in costs. The measure will also resolve a current dispute between the European Union and the United States, currently resulting in a 5 percent duty imposed on U.S. products.

The Senate takes up its version of the bill (S 1637) on March 22.