[Congressional Record Volume 140, Number 44 (Wednesday, April 20, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]
[Congressional Record: April 20, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
THE EDUCATION INFRASTRUCTURE ACT OF 1994
Ms. MOSELEY-BRAUN. Madam President, I send to the desk a bill, The
Education Infrastructure Act of 1994.
The PRESIDING OFFICER. The legislation will be referred to at
appropriate committee.
(The remarks of Ms. Moseley-Braun pertaining to the introduction of
S. 2034 are printed in today's Record under ``Statements on Introduced
Bills and Joint Resolutions.'')
Ms. MOSELEY-BRAUN. Thank you very much. I yield the floor and I thank
Senator Heflin and Senator Grassley for their indulgence in allowing me
this time on the floor.
The PRESIDING OFFICER. Who seeks recognition?
Mr. HEFLIN. I am under the impression Senator Cochran has an
amendment.
Mr. COCHRAN. Madam President, I do have an amendment, and I hope to
be able to offer it soon.
I was told the managers would like me to offer the amendment as soon
as the distinguished Senator from Illinois completed her remarks. I was
here on the floor for that purpose.
I understand now, though, the Senator from Ohio has some questions
that he wants answered about the amendment. He is trying to get the
answers, and I will be back about 5 o'clock to offer the amendment.
The PRESIDING OFFICER. The Senator from Ohio.
Mr. METZENBAUM. Madam President, as I indicated to my friend from
Mississippi, I do not know enough about his amendment. I do not think I
have any objections to it. I am not trying to stall him in going
forward with it.
There are numbers of amendments that are kicking around right at the
moment. And by 5 o'clock we will be able to see if we can work it out.
If we can do it earlier, I will call him at his office and urge him to
come back to the floor if he would.
The PRESIDING OFFICER. The Senator from Alabama.
Mr. HEFLIN. Madam President, I would like to proceed with this bill
and get this bill moving.
There are a number of amendments that we have that have been cleared
by both sides, the Democratic amendments, Republican amendments, and
all of this.
I am afraid we are getting caught up in playing games. I think each
amendment ought to be like a barrel and stand on its bottom and on its
own merits.
I would hope that as to both sides that indicated some matter
pertaining to this we could proceed with the amendments that have been
cleared by both sides. For example, there is an amendment by the
Senator from California, who is presiding right now. There is no
objection to it.
But we are getting into a situation of where because of an amendment
that is controversial and may have to be voted on everything else is
being held up. It is sort of a leverage situation.
I would hope that we could start proceeding on this and the
amendments that are agreed to and go ahead with them.
Mr. COCHRAN. Madam President, will the Senator yield for a question?
Mr. HEFLIN. Yes.
Mr. COCHRAN. Is it my understanding from the remarks of the manager
of the bill that the managers would like Senators to proceed to offer
their amendments? Is that the understanding?
Mr. HEFLIN. Yes, we would like to do it. The Senator's amendment, I
understood, was cleared by both sides.
If there are objections to it, do it, but I would like to proceed
here and move forward and try to get as many of these amendments either
adopted or withdrawn or voted on or in one way or the other if we
could.
Mr. COCHRAN. If the Senator would yield further, I sympathize with
the situation, and I am perfectly happy and prepared to send an
amendment to the desk and lay it before the Senate. If there are
discussions or questions, I will be happy to try to respond to them.
So, if that is the view of the managers of the bill, I am certainly
happy to oblige and hope that we can answer whatever questions the
Senator from Ohio or any other Senator may have about the amendment.
Mr. METZENBAUM addressed the Chair.
The PRESIDING OFFICER. The Senator from Ohio.
Mr. METZENBAUM. Madam President, I want to say to my colleague--and
all three of us have been around here a long time--all three of us know
the procedures of the Senate are such that it is not too difficult, if
you stay on the floor, to delay consideration of a matter. I do not
intend to do that and I have no desire to do that.
But it is my understanding that certain amendments of the Senator
from Ohio had been cleared. I now understand one of them may be in some
controversy or some difficulty.
I came over to the floor in order to try to work out that amendment.
Once that amendment is given a green light--and I do not believe it to
be controversial--then it seems to me we might be able to pass about 15
or 20 amendments, including the amendment of the Senator from
Mississippi, a number of the amendments of the Senator from Ohio, and a
number of amendments of other Members of this body.
So if I have to stay here on the floor with reference to the
amendment of the Senator from Mississippi, protecting the floor in
order to get this--I am not at liberty and I am not in a position to
try to work out the one more controversial amendment that seems to be
creating the problem at the moment.
I am frank to say to both the Senator from Mississippi and the
Senator from Alabama that I do not know why the amendment of the
Senator from Ohio, which has to do with retiree benefits, is at issue
or is a problem. I thought the matter had been worked out. As a matter
of fact, the Senator from Ohio has retreated from an earlier position
that he had taken with respect to the same matter, and an earlier
position that this body adopted.
But I think that, if given a little time in order to try to work it
out, I think that, hopefully, I will be able to do so. I am not sure
where the stumbling block is. I do not mean to suggest either the
Senator from Mississippi or the Senator from Alabama is the stumbling
block, but I do not know that answer. I am waiting to discuss the
subject with my staff, whom, I might say, I do not see on the floor at
this very moment. They may be in the cloakroom.
I just urge both of my colleagues to just give me a little time, and
I will be glad to get back in here. I do not have any really basic
opposition to the amendment of the Senator from Mississippi.
Mr. COCHRAN. Will the Senator yield for a question?
Mr. METZENBAUM. Of course.
Mr. COCHRAN. If I understand what the Senator has said, he is going
to obstruct or would be prepared to obstruct the passage of my
amendment, which may be meritorious and to which there is no objection
on either side for any reason, in an effort to try to get leverage to
pass his amendment, which is controversial and with which many Senators
may disagree on the merits? I do not know what the Senator's amendment
is.
But is my understanding of what the Senator is stating to the Senate
correct?
Mr. HEFLIN. Might I intervene here as a referee?
The PRESIDING OFFICER. The Senator from Alabama.
Mr. HEFLIN. No. 1, Madam President, there are two amendments that I
know of which Senator Metzenbaum has offered that are agreeable, but
they are being held hostage. There are, on the other hand, because of
that, or maybe for other reasons, Senator Cochran's amendment and
several other amendments on that side of the aisle which are being held
hostage.
Now, what I am saying is, let us quit this leverage and hostage
holding. Let us go ahead and pass all amendments, and the amendment
that is causing all the fire and creating all the controversy, either
work it out or vote it up or down.
I do not think we ought to hold hostage these other amendments on
either side. And, in effect, maybe Senator Metzenbaum is wrong; but, on
the other hand, it started out that they were refusing to allow Senator
Metzenbaum's amendment, on which there had been no controversy, to be
passed.
So it is a matter of, again, Newton's third law of motion, that there
is a corresponding force that is affected. It comes in one side, then
the force comes back from the other side.
So let us try to get it done. I am trying to get the bill passed and
to do it as harmoniously as I can. But there are a lot of leverages and
there is a lot of hostage holding and that sort of thing. Let us not
play games. Let us proceed with the bill.
Mr. METZENBAUM addressed the Chair.
The PRESIDING OFFICER. The Senator from Ohio.
Mr. METZENBAUM. Madam President, there is sometimes a time to fight;
sometimes a time to agree; and sometimes a time to suggest the absence
of a quorum, which I do.
The PRESIDING OFFICER. The absence of a quorum has been suggested.
The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. BIDEN. Madam President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BIDEN. Madam President, I do not know how many hours, days,
months, and years, my friend from Alabama has been on this legislation,
or its antecedent legislation. It seems as though every time he gets
close, very few people have any disagreement with the underlying
substance of what he is attempting to do, and what needs to be done is
obvious. And yet he always seems to get himself caught in a crossfire
on matters that do not directly relate to the legislation he brings out
of the Judiciary Committee, out of his subcommittee, and to the floor.
I hope that whatever ancillary issues there are, unrelated issues
there are, could be resolved in another context, because we really
should be moving ahead with this legislation.
As I said, he has worked tirelessly on it. No one knows more about
the issue than the distinguished senior Senator from Alabama.
And, besides, I do not want it back in the Judiciary Committee again.
I would like very much for him to succeed in seeing this moved.
But I never underestimate the tenacity and the ability of my friend
from Ohio and those on the Republican side who tend to be his nemesis,
or he theirs.
I hope that sooner, rather than later, order will prevail and our
friend from Alabama, the manager of this legislation, will be able to
move it off his plate, off the Senate floor, to the House, to a
conference, and to the President. I suspect that is his desire.
I hope that is what we can do, because I ask the Senator from Alabama
a question. How long has this been going on, trying to resolve the
underlying issues here?
Mr. HEFLIN. Well, it has been going on about two Congresses, I would
say. The Senate passed it before, unanimously, 97 to zero. We passed
the conference report. The House failed to pass the conference report
in the last session of the last Congress.
We are moving ahead this time, and hopefully the House can move on
it.
Of course, tactics are part of the game in the parliamentary
proceedings, and somebody holds something hostage. But I think we ought
to try to determine these things on the merits of each and every
individual amendment.
I appreciate the kind remarks of the distinguished chairman of the
Judiciary Committee. He has been very tolerant of all of our activities
on various and sundry bills. He has to face, many times, filibusters in
his own committee--the only committee that I belong to where usually
you will have a filibuster in a committee--but he always comes through.
Somehow or another, we will come through. We will persevere in the long
run. But it takes time, and it is a little frustrating.
Mr. BIDEN. My mother used an expression that she heard used somewhere
else. I think it comes out of some work of literature. When I say,
``Mom, in the long run--'' she says, ``Honey, in the long run, we'll
all be dead.''
In the long run, we will be here 2 years later still working on this
legislation. I hope we can move it.
As I said, no one has worked any more tirelessly producing a solid
piece of legislation, badly needed, than the Senator from Alabama. I
think we should reward his hours and, in this case, years in the
vineyard by moving on it quickly.
Again, the vast majority of the Congress is for this. The courts are
looking for it, and I believe the President is, as well.
So I thank him and again implore my colleagues to let us move on to
the merits of the legislation, if we can.
Mr. HEFLIN. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER (Mr. Wellstone). The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. HEFLIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. HEFLIN. Mr. President, I ask unanimous consent that the vote
ordered for 5:30 p.m. be moved to 5:45 p.m., with all other provisions
of the previous agreement remaining in effect.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. HEFLIN. The reason for that is I understand there have been
several Senators called to the White House and therefore they will be
back by that time.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. HEFLIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 1638
(Purpose: Committee amendments)
Mr. HEFLIN. Mr. President, I send to the desk an amendment.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:
The Senator from Alabama [Mr. Heflin] proposes an amendment
numbered 1638.
Mr. HEFLIN. Mr. President, I ask unanimous consent that the reading
of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The text of the amendment is located in today's Record under
``Amendments Submitted.'')
Mr. HEFLIN. Mr. President, this is a managers' amendment by which we
try to make a lot of technical changes. There are some issue changes
that have come to the attention of the Subcommittee on Courts after the
markup of the bill by the Judiciary Committee. The issues which are
included in this amendment are related directly to concerns in
bankruptcy that should be addressed in this bill.
We have included a number of changes which are in response to the
letter which the Department of Justice sent to the committee. This
letter was a review of S. 540, as well as their suggestions as to form
and substance of some of the provisions in the bill.
First, in response to the Department of Justice concern, the effect
of S. 540 regarding curing mortgage arrearage under section 1322 of the
code, we offered the suggested changes by adding specific language to
the amendment in section 301 of S. 540 to ensure that there is finality
to the time period in which a debtor may cure residential mortgage
arrearage under chapter 13 plans. Without this language, the present
provision could have a detrimental effect on residential mortgage
markets in over 17 States.
To ensure maximum price at sale for the debtor and to give the
purchaser of foreclosed property, as well as the mortgage holder, some
sense of finality, we have amended section 301 to include the words
``prior to the consummation of a foreclosure sale'' after the word
``judgment'' in paragraph C.
Second, we have added additional language to the provision which
encourages the circuits to set up bankruptcy appellate panels to hear
appeals from bankruptcy courts. The Department of Justice voiced
concern in its letter over whether the amendments in S. 540 were too
restrictive on the circuits.
To address this concern, we have added an additional standard for the
circuit council to consider when determining whether or not to adopt a
bankruptcy appellate panel service.
Third, we offer in this amendment some other changes suggested by the
Department of Justice:
To amend section 105 by replacing the word ``subsection'' with
``section'' in the two places it appears in subsection (D);
To amend subsection 204 of S. 540 to list the correct subsection,
365(D)(3), which is being amended;
To correct the reference to the subparagraph in section 216 of S.
540;
To amend section 302 of S. 540, to avoid confusion with an existing
statute, 18 U.S.C. section 3613(F), which provides no fine imposed
under the Sentencing Reform Act is dischargeable in bankruptcy. Thus,
we offer the additional language ``unless otherwise provided by 18
U.S.C. section 3613(F),'' be inserted after the words ``extent such
fine exceeds $500.''
A significant part of this amendment is the deletion of the entire
chapter 10 provisions in S. 540. We still firmly believe there is a
need in the code to allow small business to reorganize cheaply and
expeditiously. After much time and discussion with interested parties,
we have crafted amendments to chapter 11 which will accomplish much of
what we set out to accomplish in chapter 10.
The next addition that we have included in the managers' amendment
standardizes the treatment of residential home mortgages throughout the
code. A debtor is not allowed to cram down such a mortgage in
proceedings under chapter 13 and 7. This same protection of the home
mortgage industry is not provided under chapter 11 of the code.
We propose to extend to chapter 11 the same language that is included
in section 306 of S. 540. By extending this same language to apply to
home mortgages under chapter 11, we make sure the congressional intent
that a debtor not be allowed to modify the contract on their home
mortgage is sustained throughout the code.
Next, we have introduced substitute language to amend section 207 of
S. 540 which deals with antialienation of retirement plans. This
language makes clear Congress's intent to protect and provide fair
treatment for pension plans and their members. In this substitute
amendment, we have included the teachers and public employees
retirement systems which provide retirement disability and other
benefits to nearly 9 million active retired teachers and other public
employees.
The amendment to section 110 of this bill, premerger notification, is
an accepted compromise of all parties concerned. The changes in this
section are designed to put bankrupt mergers on the same fast track
that cash tender offers have outside of bankruptcy. As you know, time
is an important factor in the sale or reorganization of a bankrupt
company, and this amendment will make sure that sales of these
companies move swiftly.
There is also a provision in this amendment which will assure the
court that it has the power to issue an injunction and create a trust
which is used for the payment of claims and demands pursuant to a
reorganization plan.
The amendment contains a modification of section 113, service of
process, in the bill. The new language addresses the need to serve by
certified mail federally insured deposit institutions. This will ensure
that the cost of administering the estate will be kept at a minimum.
We have also extended for bankruptcy and other nonlife-tenured judges
similar life insurance benefits now available to all article III
judges. This provision was included in S. 1673 and passed as a part of
S. 1569 but was deleted by the House for jurisdictional reasons. It
allows these judges the option of continuing to pay premiums throughout
their retirement and thus maintain the value of their life insurance
and provide security for their families.
The amendment will address needed changes in section 365 of the code.
This provision will protect the leasehold mortgagee as well as the
tenants in the development of a ground lease property. The language is
to simply make clear the intent of the section to protect the rights of
lessees and mortgage lenders.
The amendment contains noncontroversial provisions that have been
crafted with input from bankruptcy experts. I am confident that the
inclusion of these provisions in the bill will help to create a bill
that will address many important bankruptcy issues.
Mr. GRASSLEY addressed the Chair.
The PRESIDING OFFICER. The Senator from Iowa is recognized.
Mr. GRASSLEY. If I could, and I cannot do better than the chairman
has done on the explanation of this amendment, I would take just a
little bit of time to stress a couple of points within it that I think
need to be explained because these are things, at least one of them on
the original amendment coming out of committee, where some concerns
were expressed and probably the way they have been addressed here in
the rewrite makes the final product even better than when it came out
of committee because, as passed by the committee, the bill would have
created a separate chapter 10 pilot program relating to the bankruptcy
procedures for small business.
The managers' amendment deletes those provisions. Instead, the
managers' amendment will modify chapter 11 and streamline the process
of small business bankruptcies. At the same time, these changes will
take effect on a nationwide basis immediately upon enactment.
There were concerns raised during the time that this bill came out of
committee and the present about the constitutional requirement for
uniformity of bankruptcy laws around the United States. Obviously, the
pilot programs would not be uniform, and so we felt we had to satisfy
the constitutional requirements that they be uniform, and we should
particularly express our appreciation to Senator Hatch for his
cooperation in working on this issue as well as Senator Heflin's
efforts.
The managers' amendment will also prohibit cramdowns of residential
mortgages in chapter 11. The bill was always designed to prevent these
cramdowns and was originally drafted to prohibit individual residential
cramdowns in all chapters open to individual debtors. However, the
Supreme Court unexpectedly ruled that chapter 11 filings could be
brought by individuals as well as by business debtors. To ensure that a
loophole that would otherwise exist be closed, this managers' amendment
includes provisions extending the same cramdown language to Chapter 11
as well.
So I fully support this amendment and feel it is a good addition to
the original legislation.
I yield the floor.
Mr. HEFLIN. Mr. President, the manager's amendment also includes a
provision passed by the Senate last Congress to rectify a serious
inequity in the current retirement system for Federal judges. This
provision was included in S. 1673, and passed as part of S. 1569, last
Congress, but delete by the other body for jurisdictional reasons. I
believe it is crucial to correct this injustice.
In 1984, Congress sought to compensate Federal judges in some way for
the fact that they, unlike all other Federal employees, may not retire
at age 55, but must wait until 65. At age 65, life insurance options
are fairly limited and expensive. Thus we granted Federal judges the
option of maintaining their optional life insurance, at cost to them.
Unfortunately, article I judges were not included. This amendment
provides these valuable members of the Federal judiciary the same
opportunity as article III judges currently enjoy.
Under the current system all Federal employees receive basic life
insurance in an amount equal to their annual salary. All employees may
opt to pay for additional life insurance at a value equivalent to one
to five times their annual salary. The monthly insurance premiums vary
depending on the level of coverage they choose and their age. Upon
retirement article I judges no longer pay life insurance premiums, but
they witness a decrease in their policy value by 2 percent per month.
The security they have built up for their family and the substantial
premiums they have paid for years of dedicated service essentially
dwindles to nothing within 4 years. This amendment would give
bankruptcy and other non-life-tenured judges the option of continuing
to pay premiums throughout their retirement, and thus maintaining the
value of their life insurance and providing security for their family.
Upon the death of a judge, the full value of the life insurance policy
would be available for his or her survivor.
This amendment would eliminate the discrepancy between retiring
article III judges and retiring article I judges, at little, if any,
cost to the Government. The Congressional Budget Office has done an
initial analysis on the cost of this program and concluded that if
there is low participation by article I retirees, there could be a net
savings to the Government of $1 to $5 million. At worst, there would be
a cost of $1 to $5 million. Despite our extending this option to
article III judges in 1984, rates have gone down over the past decade
and the Office of Personnel Management reports a current significant
surplus in the fund.
The men and women who choose to serve as U.S. bankruptcy, magistrate
and claims court judges are dedicated, intelligent, and talented
individuals. They represent 45 percent of the Federal judiciary. Most
have given up lucrative careers in the private sector to devote their
lives to public service--improving the administration of justice
throughout the United States. We need to maintain this level of
excellence by providing programs that continue to attract strong
candidates to the Federal bench. I hope that you join Senator Sasser
and myself in support of this mission and its goal of providing
retiring article I judges with a fair and cost-effective life insurance
program.
Mr. SASSER. Mr. President, I would like to thank my distinguished
colleague from Alabama for including in his substitute amendment a
provision passed by the Senate during the last Congress to rectify a
serious inequity in the current retirement system for Federal judges.
As a member of the Subcommittee on Civil Service, I am acutely aware of
the need to maintain an equitable benefits package for all Federal
employees.
Currently, Federal judges are alone among Federal employees unable to
retire at age 55, under the so-called rule of 80. We sought to offset
this inequity by enacting, in 1984, the Bankruptcy Amendments and
Federal Judgeship Act. This legislation allowed federal judges to
maintain their optional additional life insurance after retirement,
recognizing the limited availability of insurance options--and the
costliness of them--to 65-year-old retirees.
Unfortunately, article I judges--non-life-tenured judges were not
included. Today we will redress this oversight.
The current system provides article III judges with a valuable
option--to continue their optional additional life insurance upon
retirement. Article I judges--and those article III's who do not take
advantage of this option--cease to pay premiums upon retirement, but
see the value of their policy drop two percent per month. Thus, by age
69, despite their years of service and payments in the FEGLI fund,
these retired judges are left without this valuable financial
protection for their spouse.
The provision that the chairman has included in S. 540 would
eliminate the discrepancy between retiring article III judges and
retiring article I judges, at little, if any, cost to the government.
As Chairman Heflin has indicated, there could even be a net savings to
the Government. As a member of Civil Service Subcommittee, I believe
there is a need for this legislation and that it is essential to
maintaining a fair life insurance and retirement package for Federal
employees.
I want to tell you all about a distinguished constituent of mine,
Judge Ralph Kelley, of Chattanooga. He began his career at age 14 as a
page to one of the greatest men to ever serve in Congress, Sam Rayburn.
He went on to serve as assistant Attorney General for Hamilton County,
TN, as a member of the Tennessee House of Representatives, and was
elected mayor of Chattanooga in 1962. He was a mayor of Chattanooga
during the time that the civil rights movement reached its peak, and
guided that city wisely through some very rough times.
In 1969, Ralph Kelley went on to serve eastern Tennessee as a
bankruptcy judge, a position he had held now for 25 years. He has
dedicated his career to public service. He has enjoyed a successful
career, the respect of his colleagues, and the appreciation of his
fellow Tennesseans.
I tell my colleagues this because Judge Kelley is an example of the
kind of dedicated and compassionate public servants who are
disadvantaged by the current system. He has opted to protect his wife
and family by investing--for 25 years--in a life insurance policy with
the Federal Government.
However, as soon as he retires, the value of his life insurance will
decrease by 2 percent per month, and in 4 years, he will have nothing
to leave his wife in the way of financial security. This provision will
not affect a lot of people, but it will dramatically affect a few, such
as Ralph Kelley, who have devoted their lives to public service.
I thank the chairman for including this valuable provision and I urge
my colleagues to support it.
Mr. HEFLIN. Mr. President, I urge adoption of this amendment.
The PRESIDING OFFICER. If there is no further debate, the question is
on agreeing to the amendment.
The amendment (No. 1638) was agreed to.
Mr. HEFLIN. Mr. President, I move to reconsider the vote.
Mr. GRASSLEY. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. HEFLIN. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. HEFLIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. HEFLIN. Mr. President, I ask unanimous consent that Senator
Campbell of Colorado be added as a cosponsor to the amendment offered
previously today by Senator Brown of Colorado dealing with the
supplemental injunction.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. HEFLIN. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. HEFLIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. HEFLIN. Mr. President, I will ask unanimous consent that a letter
from the Congressional Budget Office, dated February 2, 1994, be
printed in the Record, along with the attachments therein. This
basically shows that the savings over the year for 1994 will amount to
about $52 million savings by the adoption of this bill.
I ask unanimous consent that this material be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Congressional Budget Office,
Washington, DC, February 2, 1994.
Hon. Howell Heflin,
Chairman, Subcommittee on Courts and Administrative
Practices, Committee on the Judiciary, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed revised cost estimate for S. 540, the
Bankruptcy Amendments Act of 1993. This estimate supersedes
our transmittal of October 12, 1993, and incorporates
information that we have recently received from the Joint
Committee on Taxation regarding the revenue impact of section
115 of the bill.
Enactment of S. 540 would affect direct spending and
receipts. Therefore, pay-as-you-go procedures, as required by
section 252 of the Balanced Budget and Emergency Deficit
Control Act of 1985, would apply to the bill.
If you wish further details on this estimate, we will be
pleased to provide them.
Sincerely,
Robert D. Reischauer,
Director.
Congressional Budget Office Cost Estimate
1. Bill number: S. 540.
2. Bill title: Bankruptcy Amendments Act of 1993.
3. Bill status: As reported by the Senate Committee on the
Judiciary on October 28, 1993.
4. Bill purpose: S. 540 would:
Authorize the appropriation of $1.5 million to establish a
National Bankruptcy Review Commission to investigate and
study issues relating to the Bankruptcy Code;
Establish a new bankruptcy chapter (chapter 10) for small
businesses with debts less than $2.5 million, to be tested in
eight districts for a three-year period;
Prohibit small business investment companies (SBICs) from
filing for bankruptcy under chapter 7;
Increase the debt limit for filing a chapter 13 case from
$350,000 to $1,000,000 and remove the limit altogether in
certain cases;
Require that bankruptcy trustees, at meetings of creditors,
ask debtors a series of questions regarding the consequences
of filing for bankruptcy;
Expand the list of cases for which the filing of a
bankruptcy petition does not operate as a stay;
Establish civil and criminal penalties for persons who
negligently or fraudulently prepare bankruptcy petitions;
Amend current law with respect to a debtor's pension fund
obligations; and
Make many other changes and additions to the federal laws
relating to bankruptcy.
5. ESTIMATED COST TO THE FEDERAL GOVERNMENT:
[By fiscal year, in millions of dollars]
------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
------------------------------------------------------------------------
Revenues: Estimated revenues.. 6 27 17 -1 (\1\) (\1\)
Direct spending:
Estimated budget authority -52 0 (\1\) (\1\) (\1\) (\1\)
Estimated outlays......... -52 0 (\1\) (\1\) (\1\) (\1\)
Authorizations:
Estimated authorization of
appropriations........... -1 2 0 0 -1 -1
Estimated outlays......... -1 1 (\1\) (\1\) -1 -1
------------------------------------------------------------------------
\1\Less than $500,000.
Note: Negative revenue numbers indicate a loss of revenues and an
increase in the deficit.
The spending effects of this bill fall within budget
functions 370 and 750.
Basis of Estimate: Revenues. CBO expects that the federal
government would lose revenues because of bankruptcy cases
filed under chapter 10. Under current law, such cases would
be filed under chapter 11 and quarterly fees would be paid,
with 60 percent of the fees recorded as governmental receipts
and the remainder as offsetting collections. Under S. 540, no
quarterly fees would be required for cases filed under
chapter 10. CBO estimates that, net of income and payroll tax
offsets, the resulting revenue loss would likely be about $1
million annually over the three-year test period, beginning
in fiscal year 1995. This estimate assumes that quarterly
fees would average about $2,000 per case per year, and that
about 1,000 such cases would be filed annually under current
law. This estimate also assumes that the eight districts
selected will be average in terms of the number and size of
bankruptcy filings. If the districts chosen are above average
in terms of the number and size of bankruptcy filings, the
revenue loss would be larger.
Section 115 of the bill would expand the list of cases for
which the filing of a bankruptcy petition does not operate as
a stay. This change would result in the earlier collection of
taxes in certain situations. The Joint Committee on
Taxation estimates that this provision would generate
additional revenue of $52 million over the fiscal years
1994-1996 and small amounts in subsequent years.
A number of other provisions could affect revenues, but we
expect that the budgetary impact would be insignificant. The
government would lose revenues to the extent that small
business investment companies would no longer file for
bankruptcy under chapter 7, and thus would no longer pay the
bankruptcy filing fee. Because there would be few such cases,
CBO does not expect this loss to be significant.
S. 540 also would increase the debt limit for filing a
chapter 13 case from $350,000 to $1,000,000 and would
eliminate the limit altogether in certain cases. These
changes could result in a shifting of cases from chapter 7 to
chapter 13. To the extent that additional cases are filed
under chapter 13, revenues would increase by $45 per case.
CBO does not expect this additional revenue to be
significant, because the number of additional chapter 13
cases would be small.
Finally, section 304 would impose civil and criminal
penalties for persons who negligently or fraudulently prepare
bankruptcy petitions. Both criminal and civil fines increase
receipts to the federal government. Criminal fines would be
deposited in the Crime Victims Fund and would be spent in the
follwing year. CBO does not expect this additional revenue or
direct spending to be significant, however, because the
proposed penalties are expected to deter such activity, which
is not widespread.
Direct Spending. Under current law, SBICs may self-
liquidate, file for bankruptcy under chapter 7 or
reorganization under chapter 11, or liquidate pursuant to
receivership laws under the aegis of the Small Business
Administration (SBA). Under S. 540, SBICs would be prohibited
from filing for bankruptcy under chapter 7. As a result, more
SBICs would be liquidated using the receivership laws under
the supervision of the SBA. This change would result in
additional collections by the SBA from SBIC loans that have
already been made and guaranteed. Since 1990, roughly 50
percent of liquidating SBICs have chosen to use chapter 7.
When a SBIC seeks protection under chapter 7, the SBA
recovers little or nothing, as the SBA's claim is unsecured
and subordinated to the SBIC's other debts. When the SBA has
acted as receiver, it has recovered up to 100 percent of its
guarantee. In addition, a SBIC's liquidation by a court-
appointed receiver can be substantially more costly than a
similar liquidation with the SBA acting as receiver.
CBO estimates that these changes would result in increased
collections to the federal government totaling $39 million
over the 1994-1998 period and additional amounts thereafter,
resulting from guarantee authority that has already been
provided. Under credit reform, such changes in receipts are
recorded in the budget on a present value basis. We estimate
the resulting budgetary impact over the life of the
guarantees to be a decrease in outlays of $52 million in
fiscal year 1994.
Section 207 would clarify current law to protect pension
plans and would restrict a bankruptcy court's ability to
require a pension plan to disburse pension funds to a
creditor. This amendment could result in savings to the
federal government by reducing the Pension Benefit Guaranty
Corporation's (PBGC's) liability in the event that a pension
plan is terminated and underfunded. Because of the
uncertainty of future claims to the PBGC, a precise estimate
of the potential savings is not possible at this time.
Spending Dependent on Appropriation Action. CBO assumes
that the $1.5 million authorized to be appropriated for the
National Bankruptcy Review Commission would be appropriated
for fiscal year 1995 and spent in fiscal years 1995-1997.
CBO expects that recoveries from liquidating SBICs would
increase for guarantee authority provided after 1992 as well
as for that already provided. The latter has a direct
spending impact, as discussed above, and the former would
affect future appropriation actions. As a result of credit
reform, the Congress must annually appropriate subsidy budget
authority for credit programs. This subsidy budget authority
is essentially the amount a credit program is expected to
lose, on a net present value basis, on loans or guarantees
made during that fiscal year. Increased recoveries would
decrease the amount the program would be expected to lose,
and thus decrease the subsidy budget authority the Congress
would have to appropriate for a given level of loan
guarantees. CBO estimates that prohibiting SBICs from seeking
protection under chapter 7 would decrease the necessary
subsidy appropriation for the SBIC program from 15.4 percent
of the face value of loan guarantees to 14.9 percent. The
subsidy rate for minority enterprise SBIC direct loans would
decline from 38.1 percent to 37.6 percent, and the subsidy
rate for minority investment company loan guarantees would
decline from 28.9 percent to 28.4 percent. Because of these
declines in subsidy rates, CBO estimates that the SBA would
need $1 million less in annual subsidy appropriations to
maintain these programs at the baseline levels of activity.
CBO estimates that the government would lose offsetting
collections--about $1 million annually in fiscal years 1995
through 1997--associated with cases that would be filed under
chapter 10. Under current law, such cases would be filed
under chapter 11 and quarterly fees would be paid. Forty
percent of the fees are recorded as offsetting collections to
the U.S. trustee system fund and are available for spending
from that account. The loss of fees would reduce the amount
available for spending by the trustee system from offsetting
collections and thus would necessitate an increase in
appropriations if the same level of activity is to be
maintained. This estimate therefore includes $1 million a
year in additional appropriated spending for the three years
of the test program.
The requirement that bankruptcy trustees ask debtors a
series of questions at meetings of creditors would probably
not impose a significant burden on the U.S. trustees.
Currently, private trustees attend meetings of creditors,
but U.S. trustee program personnel generally do not. To
the extent that private trustees would be able to fulfill
this requirement, any additional costs to the federal
government would probably not be significant. However, if
this provision were interpreted to require that U.S.
trustee program personnel attend all meetings of creditors
and ask debtors the series of questions, the additional
staffing costs associated with this requirement would be
$10 million to $20 million annually.
Other provisions of the bill would not result in
significant costs to the federal government.
6. Pay-as-you-go considerations: Section 252 of the
Balanced Budget and Emergency Deficit Control Act of 1985
sets up pay-as-you-go procedures for legislation affecting
direct spending or receipts through 1998. CBO estimates that
enactment of S. 540 would affect direct spending and
receipts; therefore, pay-as-you-go procedures would apply to
this bill. The following table summarizes the estimated pay-
as-you-go impact of S. 540.
------------------------------------------------------------------------
1994 1995 1996 1997 1998
------------------------------------------------------------------------
Change in outlays.................... -52 0 0 0 0
Change in receipts................... 6 27 17 -1 0
------------------------------------------------------------------------
7. Estimated cost to State and local governments: None.
8. Estimated comparison: None.
9. Previous CBO estimate: CBO prepared a cost estimate for
S. 540 on October 12, 1993, which did not include any revenue
effects of section 115. This estimate supersedes the previous
one and incorporates an estimate of the budgetary impact of
section 115 recently provided by the Joint Committee on
Taxation. It also projects the budgetary impact of the bill
through fiscal year 1999.
10. Estimate prepared by: Mark Grabowicz, Susanne Mehlman,
and John Webb (226-2860); Wayne Boyington (226-2820); Melissa
Sampson (226-2720).
11. Estimate approved by: C.G. Nuckols, Assistant Director
for Budget Analysis.
Mr. HEFLIN. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. COCHRAN. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Conrad). Without objection, it is so
ordered.
Amendment No. 1639
(Purpose: To amend section 507(a)3 of title 11, United States Code, to
give priority to certain claims of independent sales representatives)
Mr. COCHRAN. Mr. President, I send an amendment to the desk and ask
that it be reported.
The PRESIDING OFFICER. The clerk will report the amendment.
The bill clerk read as follows:
The Senator from Mississippi [Mr. Cochran], proposes an
amendment numbered 1639.
Mr. COCHRAN. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection it is so ordered.
The amendment is as follows:
At the end of title II add the following:
SEC. 222. PRIORITY FOR INDEPENDENT SALES REPRESENTATIVES.
Section 507(a)(3) of title 11, United States Code, is
amended to read as follows:
``(3) Third, allowed unsecured claims, but only to the
extent of $2,000 for each individual or corporation, as the
case may be, earned within 90 days before the date of the
filing of the petition or the date of the cessation of the
debtor's business, whichever occurs first, for--
``(A) wages, salaries, or commissions, including vacation,
severance, and sick leave pay earned by an individual; or
``(B) sales commissions earned by an individual or by a
corporation with only 1 employee, acting as an independent
contractor in the sale of goods or services for the debtor in
the ordinary course of the debtor's business if, and only if,
during the 12 months preceding that date, at least 75 percent
of the amount that the individual or corporation earned by
acting as an independent contractor in the sale of goods or
services was earned from the debtor;''.
Mr. COCHRAN. Mr. President, this amendment establishes the priority
for expenses and claims of bankruptcy as it relates to independent
sales representatives.
Section 507 of title 11 of the Bankruptcy Code provides for the
priority order for expenses and claims in bankruptcy. The third
priority set out in this section, specifically section 507(a)3, is for
unsecured claims up to $2,000 for wages, salaries or commissions,
including vacation, severance and sick leave pay earned by individuals
within 90 days before the bankruptcy petition was filed or the date of
cessation of the debtor's business, whichever comes first.
The purpose of this priority is to ensure that employees, including
those who work on commission, are provided a minimum degree of
protection when their employer files for bankruptcy.
Under current law, other individuals who derive their income as
independent sales representatives by selling products or goods for the
debtor firm are not provided any protection for their loss of income
when the firm files for bankruptcy.
My amendment would amend this section to include the independent
sales representatives and permit them to enjoy the same status as a
commissioned sales employee of a debtor firm which goes into
bankruptcy. In some instances, corporations exist in the name of one
employee truly acting as an independent contractor for the debtor firm
in the sale of goods and services, and in those instances the
corporation would be included under the terms of my amendment.
The intent and the effect of the amendment is to provide equitable
treatment--we consider it equitable--tantamount to that which is
provided for employees of a firm, even though they may be called
independent sales representatives and they may not technically be
considered a direct employee.
To ensure that that is the only class that would be described by the
amendment, the amendment provides that the employee or the sales
representative would have to earn at least 75 percent of his income
during the previous year from the debtor firm.
Only upon meeting that threshold of 75 percent for the previous 12
months would an independent sales representative share in the
bankruptcy estate in this priority order and, of course, then only up
to the amount of $2,000, as provided for others in this same class,
which would have been earned in the 90-day period prior to the
bankruptcy filing.
We have submitted this amendment for comment and consideration to the
National Bankruptcy Conference, and we have received a favorable
report. I am reading from a memorandum now, addressed to Members of the
U.S. Senate, and included here is the amendment offered by this
Senator, priority for independent sales representatives. The comment of
the National Bankruptcy Conference is; ``Senator Cochran's language is
an excellent clarification of existing law.''
The independent sales representatives amendment will allow certain
independent sales agents or independent contractors to enjoy the same
priority in the bankruptcy estate as the employees of the bankrupt
debtor.
Until recently, section 507(a)(3), which gives employees of a
bankrupt firm priority for a limited amount of wages and benefits they
have earned was narrowly interpreted to only be available to employees
of the bankrupt debtor and not to independent sales representatives.
This interpretation is unfair in many circumstances and has led to
inequitable results where independent contractors who make their living
as independent contractors--particularly as sales agents have been
unable to recover lost income from the bankruptcy estate.
Typically, the work performed by an independent sales representative
is similar to, and in many cases identical to, the work performed by an
employee of a firm, but such an individual may be excluded under the
Bankruptcy Code for no other reason than the characterization of his or
her work status.
While some independent sales representatives may derive their income
from a number of firms which limits the effect of a single firm's
bankruptcy, those who derive most of their earnings from a single firm
are not so fortunate, as they cannot recover even the limited amount
that is currently available to firm employees.
The Cochran amendment is intended to address the latter circumstance
where an independent sales representative stands to lose a significant
amount of income due to the bankruptcy of a single firm.
The amendment requires that the independent sales representative must
have derived at least 75 percent of his or her income during the
previous 12-month period from the single firm filing a bankruptcy
petition.
Even after meeting that significant income threshold, an independent
sales representative would not receive any windfall from the provision,
and in fact, could receive no more than an employee currently
receives--priority for a claim of up to $2,000 that may have been
earned during the 90-day period prior to the bankruptcy filing.
Every year, thousands of sales agents lose money owed to them because
they do not fit into the priority classification's definition of
employee.
The unfairness of this situation is amplified because independent
contractors work without the security of many employee benefits such as
health insurance, profit sharing plans, life insurance, and other
benefits available to employees, but not to independent sales
representatives.
The amendment would codify the inclusion of independent contractors
in the priority section 507(a)(3) that has historically been limited to
employees.
The amendment would also eliminate another inequitable result of the
current exclusion of independent contractors under the priority section
of the Bankruptcy Code.
Under current interpretations of section 507(a)(3), an individual or
mom-and-pop business incorporated to limit potential liability, but run
as an unincorporated sole-proprietorship is excluded from coverage.
The judicial interpretation that this section is an exclusive remedy
for natural persons, excluding all corporations, has the effect of
putting form over substance.
Individuals who are incorporated or incorporated mom-and-pop
businesses are being shut out from the priority due to the form in
which they run their business not as a result of the way the business
is actually run.
The amendment is narrowly drawn to provide an exception for only
those corporations which are in fact individuals conducting business
and would exclude from the priority all businesses with more than one
employee.
The amendment will establish a fair priority in the Bankruptcy Code
for those independent sales representatives who, like employees, derive
all or most of their income from a single firm in bankruptcy.
This amendment will be especially helpful to the most vulnerable
manufacturers agent who is on his own and can least afford to have his
manufacturer declare bankruptcy.
Mr. HEFLIN addressed the Chair.
The PRESIDING OFFICER. The Senator from Alabama.
Mr. HEFLIN. Mr. President, I believe that the services that are
provided by independent sales representatives of this country are
equally as important to the survival of a company as is the work
performed by the employees at the factories of those companies. It is
in that same vein that I support the idea behind this amendment to give
priority to certain claims of the independent sales representative.
Senator Cochran's amendment would make the claim of the independent
sales representative equal to the claim presently allowed, under the
Bankruptcy Code, for an employee.
The Bankruptcy Code specifies the kinds of claims that are entitled
to priority in distribution, as well as the order of priority. This
system was designed to address special circumstances or special needs
which warrant certain exceptions. In particular, wages, salaries, or
commissions of employees, which without the priority exception would be
unsecured claims, are accorded a third priority in distribution of the
estate.
The purpose behind this third place in priority is, in part, to
insure that employees will not abandon a failing business for fear of
not being paid; thus, they will contribute to the rehabilitation of the
company. This same rationale also holds true for the independent sales
representatives. He or she plays a major part in the rehabilitation of
a company by making sure that company's goods are marketed throughout
the country and that the orders for those goods continue.
I support this amendment and the provisions which limit its
applicability to independent sales representatives who derive at least
75 percent of their previous year's income from the debtor corporation.
By limiting the applicability of the amendment, we assure that those
people who can really affect the rehabilitation of the debtor company
are rewarded for their perseverance.
The independent sales representatives who will be greatly affected by
the bankruptcy of a company are the type of employees which the
drafters of the code intended to benefit from the special priority
employees are granted in section 507 of the code.
For these reasons I support this amendment with the provision with
the limitation language.
The impasse we have been in with regard to the submission of other
amendments is present. But Senator Metzenbaum has agreed that Senator
Cochran lay down his amendment, and that we not vote on it at this
time, or not pass it.
I do not think there are any objections to his amendment. The
amendment was submitted. There have been a lot of negotiations going
on. Senator Cochran has been amenable to working out an amendment that
meets the agreement of both Senator Grassley and myself and our staffs,
as well as interested parties like the National Bankruptcy Conference,
and I think maybe the American Bankruptcy Institute. They have helped
in regard to looking at some of these matters.
We appreciate very much Senator Cochran's working with us and working
out an agreement. I think it is a good amendment. Basically, it applies
where a sales representative derives at least--I believe--75 percent of
his income from one employer, and therefore he really is almost in the
position of being an employee. It does not allow for those sales
representatives who maybe have 6 or 7, and maybe get 10 percent here
and that sort of thing. That would certainly be an abuse if that were
to be allowed. But I think this limits it and limits it properly.
It is a good amendment, and I think we ought to adopt it. But at this
time, I ask unanimous consent that further proceedings on this
amendment be set aside, subject to it being called back before the
floor with the agreement of Senator Cochran, Senator Grassley, and
myself.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. HEFLIN. I further ask unanimous consent that no second-degree
amendment be in order to the Cochran amendment, No. 1639.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. HEFLIN. I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. HEFLIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. HEFLIN. Mr. President, I ask unanimous consent that the vote
ordered for 5:45 be moved to 6 p.m., with all other provisions of the
previous agreement remaining in effect.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. HEFLIN. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. HEFLIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 1639
Mr. HEFLIN. Mr. President, in regard to the Cochran amendment which
we laid aside and delayed, Senator Cochran is now agreeable to passing
it. My understanding is Senator Grassley is agreeable, and I am
agreeable. Senator Metzenbaum has no objection to it.
So I ask unanimous consent that the Cochran amendment dealing with
independent sales representatives now be in order to be considered.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. HEFLIN. Mr. President, I urge adoption of the Cochran amendment.
The PRESIDING OFFICER. Is there further debate on the amendment? If
not, the question is on agreeing to the amendment of the Senator from
Mississippi.
The amendment (No. 1639) was agreed to.
Mr. HEFLIN. Mr. President, I move to reconsider the vote by which the
amendment was agreed to.
Mr. GRASSLEY. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. HEFLIN. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. DOLE. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
____________________