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State & Local News Vol. 23, No. 1, Fall 1999
Washington's Labyrinthine WaysOtto J. HetzelThe Proposed Tax Cut-Politics at Play. Congress has passed a ten year tax cut of $792 billion dollars based on a rosy projected decade of annual surpluses on essentially a party-line vote. They deferred sending the bill to the President until September when they return from their August recess. The bill faces a certain veto and has badly flawed underpinnings. The incongruity of reducing taxes on the basis of a projected surplus created only because of unreasonably low spending caps that will impose draconian reductions in domestic expenditures exposes the invalidity of the exercise. As an indication of the severity, the White House claims that cuts in domestic programs of up to 50 percent would be required if the tax cut became law. What's worse, everyone recognizes that most of the spending caps will have to be lifted. The only question is who will blink first and make a proposal. If the current spending caps are not selectively lifted, Republicans have little chance to retain their house majority, given the impact on domestic programs. So, why pass the tax cut now? Why not try to negotiate a compromise in the beginning? The answer is positioning for the 2000 election, with Republicans trying to shore up their party faithful for whom cutting taxes has been a philosophical tenet for many years. While home for the recess, members of Congress have been assessing the public's interest in tax cuts that will guide them in a strategy that is likely to send a successive series of slightly less significant tax cuts to the President with the hope that he ultimately will compromise as he did with the welfare legislation in 1998. Of course, he has no reelection incentive to do so this time, and he has staked out a quite defensible position of using the surplus to save Social Security and Medicare first, then reduce the national debt, and only thereafter to cut taxes by correcting such provisions as the marriage tax penalty. Democrats are covered by at least espousing some tax cuts, reputedly not to exceed $250 billion over the next decade, given other desired uses for the possible surplus. Never to mind, of course, that increases in spending for other matters has almost used up any surplus that did not come from social security revenues. The two real issues underlying much of the posturing are who benefits and how much of the surplus will be available for domestic programs after what both parties have conceded is the need to put aside sufficient funds for shoring up Social Security and Medicare, and expanding coverage to provide some limited reimbursement of prescription drugs, an issue important to seniors, most of whom vote. Once Republican commitments to preserve the long-term viability of Social Security by preserving in a "lockbox" the portion of the surplus generated by Social Security taxes, the surplus will have significantly dwindled, but it is from this remainder that Republicans hope to fashion savings for a tax cut and by reducing other expenditures. It is still a zero sum game. Paying down the national debt with the remaining surplus also appears to be a favored strategy and payments can be adjusted annually depending upon whether the current economic boom continues. The cuts broken down by who benefits also undercut the Republican plan. Most workers would realize a cut of under $140 while the top 1 percent with incomes in excess of $300,000, according to Citizens for Tax Justice, would save $46,000 each. Republicans have also failed to sufficiently allay concerns by some commentators that this size of a tax cut would feed inflationary pressures by providing extra money to spend that could overheat the economy. What Is a Real Budget Emergency? In an effort to avoid having to confront lifting the caps on domestic programs, Congress has resorted to dubious justifications, by characterizing $3 billion for veteran's benefit and $2.5 billion for future disaster assistance as emergencies to justify not attributing the expenditures against the spending caps. What was worse in this case was that part of the funding authority used was borrowing power of TVA, the federal power agency. But, the power to borrow is not reducing expenditures. Similarly, the 2000 census costs of $4.5 billion that had been planned for many years were also characterized as an emergency expenditure. If a solution is not found by September 30, 1999, Congress faces a confrontation again with the White House or another shutdown of government that left Congress looking bad. Clawing Back State Welfare Surpluses Proposed in Congress. Another alternative in the search for funds to replace revenues because of tax cuts has led the Republican House leadership to propose that states remit some $6 billion in federal welfare payments they received in excess of current needs, given reductions states achieved in welfare loads. Congress had committed to the states with welfare reform that current payment levels would be maintained for five years. Republican governors complained that they undertook the changes in reliance on receiving the federal payments. Sometimes it doesn't even pay to get it written in the law, itself. Rethinking Allowing Substantive Legislation in Appropriation Bills. Four years ago, when they took over the House, Republicans voted to allow senators to write policy into appropriations bills on the floor of the Senate. While Republicans will still permit appropriation committees to insert substantive policy measures into their bills, they now intend to prevent floor insertion of such policy measures. The reason is that Democrats have used these bills to force votes on their agenda items, providing greater grist for next year's election campaigns and forcing Republicans to take positions publicly that they might want to avoid, such as on a minimum wage increase and managed care. Democrats are also threatening to press for a measure that would prevent matters not contained in either House's bill from being included in the Conference Bill that resolves differences in the two Houses. It is an interesting turnaround in position, but where you stand on it obviously depends on where you are now. Legal Assault on Lead Paint Poisoning Damages Planned. A new growth legal area involving lead poisoning litigation may be coming into fashion. States and local governments may move to hold industry liable for medical costs incurred in dealing with lead poisoning. Rhode Island, Maryland, and D.C. are reported as among those considering law suits modeled on the tobacco litigation with suits against industry using market shares to allocate costs later. A New York trial court used that model recently in holding against the paint companies. Paint and pigment manufacturers, however, point out they ceased using lead paint in the 1960s and supported federal bans enacted in 1978. The continuing problem is the need to eliminate older lead paint, not simply painting over it. HUD Discretion Upheld on Whether to Take Enforcement Actions. HUD's administrative discretion whether to take enforcement action was recently affirmed in a Third Circuit decision, American Disabled for Attendant Programs Today v. HUD. Several organizations representing persons with disabilities sued HUD, claiming that it was failing to carry out its investigative and enforcement responsibilities under the Fair Housing Act Amendments and the Rehabilitation Act of 1973. The court applied a deferential review to agency decisions not to enforce and concluded that because the statute at issue did not provide guidelines concerning when an investigation should be conducted, and the regulations did not provide sufficient substantive standards, there was inadequate law for the court to apply as to whether HUD should have conducted more investigations. In affirming the lower court's dismissal of the claim, the federal circuit court also found an alternative ground for affirmance: that the Fair Housing Act Amendments provided another avenue of judicial review that invalidated Administrative Procedures Act review which is available when "there is no other adequate remedy in a court." Since the claims could be pursued against individual recipients of federal funding, those remedies, even if less effective overall than a broad-based challenge to HUD policy, foreclosed APA review. Government Destruction of Electronic Records Sustained. The National Archivist, as part of extensive litigation regarding what records should be retained and available to the public, had approved agency destruction of such records as electronic mail and computer records so long as copies of the material are kept in some form: paper, microfilm, or backup computer systems. In a suit by Public Citizen, the D.C. Circuit Court of Appeals reversed a trial court ruling. The district court had invalidated the Archivist's General Records Schedule 20, on the basis that "electronic records are rarely identical to their paper counterparts." During the extended litigation, the government came up with the new policy that is supposed to allow agencies to move forward "in an orderly way to develop practical, workable strategies and methods for managing and preserving records in the electronic age and ensuring ready access to them." The Archivist is to work with agencies to avoid system overload and ensure effective records management. For those who have had to pursue Freedom of Information Act litigation in an attempt to obtain relevant documents, there is a fear that with 75 percent of government record keeping going on computers, retention of alternative records will be insufficient and access often infeasible because of the state of the records maintained. Subpoena Authority of HUD Inspector General Given Broad Scope. An Illinois federal district court gave a broad reading of the authority of HUD's Office of Inspector General in the recent case of Inspector General v. Banner Plumbing Supply Co. Banner provided plumbing and heating related supplies to the Chicago Housing Authority. Although it receives considerable federal grant funding, it paid Banner out of its general operating revenues. When the Authority's own inspector general obtained information suggesting that Banner was supplying inferior products, it issued a subpoena to the company for documents. Banner partially complied and then obtained an order from state court quashing the balance of the subpoena. HUD's Inspector General took over and issued its subpoena co-extensive with that previously issued. The court denied a motion to quash, finding that, because some HUD grant money had been commingled in the Authority's accounts with its general operating revenues, the HUD investigation was authorized. Windstar Doctrine, Permitting Claims on Legislative Override of Government Contractual Obligations, Distinguished for Claims on HUD Insurance Endorsements. Some 600 claims against HUD were affected by the Federal Circuit's decision in Cienega Gardens v. United States, where the court considered whether two statutes preventing owners of low-income housing from exercising their rights under contracts with HUD to prepay and thereby relieve it of the obligation to maintain the low-income nature of units violated the property owners' contracts with HUD under the Windstar Doctrine. Property owners who had obtained below market interest rates under a HUD insured program were required to enter into a regulatory agreement with HUD and a deed of trust note with a lender. The regulatory agreements were silent on the subject, but a deed of trust addendum provided that owners had the absolute right to prepay after twenty years. Congress, however, decided that unrestricted prepayment would diminish the availability of too many units of low-income rental housing, and in 1987 and 1990, it restricted owner prepayment by placing a two year moratorium on unapproved prepayment in the former case and required HUD approval, even after twenty years, in the latter. The Court of Federal Claims ruled these statutes violated HUD's contractual commitments. A group of four "model plaintiffs" were awarded damages of more than $3 million. The Federal Circuit reversed, finding that the only agreement between HUD and the owners-the regulatory agreement-did not include the provision alleged to have been breached, and thus no privity existed between HUD and the owners with regard to the clause providing for prepayment without HUD approval. It decided HUD's role as endorser of the insurance of the mortgage loans did not bind HUD contractually to observe the right to prepay without approval after twenty years. In dissent, Senior Judge Archer noted that HUD had required all transaction documents to approve any. A petition for certiorari has been filed. Congressional Holds on Nominations Misused. Only recently were senators who had put a "hold" on proposed White House appointments subject to Senate approval required even to reveal their actions. The abuse of this informal power was recently highlighted by a hold on approval of Richard Holbrooke for U.S. Ambassador to the U.N. even after the Foreign Relations Committee approved him for the position. Three "anonymous holds" were used in an effort to pressure the President on other issues, including an unrelated candidate for another position. Finally, the existence of the "holds" was acknowledged, and who had asserted them. Allowing one senator such power to hold up the approval of the body has been widely criticized. When it relates to the agency in which the position will be held, but has nothing to do with the merits of the candidate, that is bad enough. Where the grounds are unrelated whatsoever to the position, it has been characterized as an abuse of power. Term Limits for House Chair. It was almost five years ago that Republicans took over control of the House. One of the revisions they instituted was to impose three term (six year) limits on chairs of committees and subcommittees forcing current chairs to step down and join the rank and file members by the end of 2000. It is not easy, however, to give up the power and perks available to a chair. While some have already announced their plans to retire next term, others were threatening to rebel. A compromise has been agreed to: musical chairs without reducing the chairs. The Speaker has agreed that current chairs can use their seniority to take over another committee as chair or even to assume control of a subcommittee on the panel for which they currently serve as chair. Of course, none of this will matter if the Democrats retake control of the House. It was a self-imposed restriction by Republicans, so there is little interest on the part of Democrats who are not used to voluntarily relinquishing power. Forest Service Proposes to Freeze Current $220 Million Allocation of National Forest Revenues to Counties. Currently, payments are made to counties in forty-one states representing 25 percent of their share of federal revenues from logging and recreational fees in national forests. The payments are provided to offset costs of roads and schools near or in national forests, since federal property cannot be taxed by local governments. The Forest Service wants to free payments that are currently dependent upon the number of logs sold. Cut levels and market conditions can affect allocations; for instance, 1989 payments were $140 million lower than last year's. Payments would be stabilized at current levels under the new proposal. The Forest Service approach would remove an incentive for counties to support more intense use of forest resources to increase their share of fees. Federal timber sales amounted to $577 million in 1997. Louisiana and Georgia Legislatures Try to Stop City Suits Against Gun Manufacturers. New Orleans and Atlanta filed suits against gun manufacturers just before provisions of their state legislatures were to go into effect that would have prohibited such claims for the costs of gun-related violence. The city actions will force courts to determine the validity of retroactively applying the legislative restrictions to pending legislation. Otto J. Hetzel is a Professor of Law Emeritus at Wayne State University and practices law in Washington, D.C.
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