Congressional Record, Volume 145 Issue 19 (Wednesday, February 3, 1999)

[Congressional Record Volume 145, Number 19 (Wednesday, February 3, 1999)]
[Senate]
[Pages S1145-S1179]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

By Mr. LEAHY (for himself, Mr. Torricelli, Mr. DeWine, Mr.
Jeffords, Mr. Kennedy, Mr. Harkin, Ms. Mikulski, Mr. Levin, Mr.
Kerry, Mrs. Murray, Mrs. Boxer, and Mr. Sarbanes):
S. 333. A bill to amend the Federal Agriculture Improvement and
Reform Act of 1996 to improve the farmland protection program; to the
Committee on Agriculture, Nutrition, and Forestry.

federal agriculture improvement and reform act amendments

Mr. LEAHY. Mr. President, I am pleased to have Senators Torricelli,
DeWine, Jeffords, Kennedy, Harkin, Mikulski, Levin, Kerry, Murray and
Boxer join me today to reauthorize a program that has helped hundreds
of farmers across the country save their farms and stay in the business
of farming. Today, we are introducing a bill to reauthorize the
Farmland Protection Program at a funding level of $55 million a year.
This new authorization supports the efforts of President Clinton to
restart the program with $50 million in Fiscal Year 2000.
Since its creation in the 1996 Farm Bill, the Farmland Protection
Program has been instrumental in curbing the loss of some of our
nation's most productive farmland to urban sprawl. The Farmland
Protection Program help shield farmers from development pressures by
providing federal matching grants to state and local conservation
organizations to purchase easements on farms.
We have all seen the impact of urban sprawl in our home states,
whether it be large, multi-tract housing or mega-malls that bring
national superstores and nation-sized parking lots. We are losing
farmland across the country at an alarming rate. This bill will step up
our efforts to halt this disturbing trend before too many of America's
farms are permanently transformed into asphalt jungles.
In Vermont, we are also seeing the impact of development on our
farmland. Increasing land prices and development pressure have forced
too many Vermont farmers to sell to developers instead of passing on
their farms to the next generation. With the former Farms for the
Future program and the Farmland Protection Program, farmers now have a
fighting chance against development. Since its inception in Vermont,
these programs have helped conserve 78,000 acres of land on more than
220 Vermont farms.
The success of the program should not just be measured in acres
though. The program also has helped farmers expand and re-invest in
farm facilities and equipment. Some of the farm projects have also led
to construction of affordable housing and preservation of wildlife
habitat. There are now success stories all over Vermont. One is the
story of Paul and Marian Connor of Bridport, Vermont. Working with the
Vermont Land Trust they were able to conserve their 221-acre farm while
continuing their dairy operation, raising seven children and retire
their mortgage.
Although Vermont is making great progress, across the nation we
continue to lose as much as one million acres of prime farmland
annually. This land is critically important to agriculture. For
example, nearly three-quarters of America's dairy products, fruits and
vegetables are grown in counties affected by urban growth.
For American farmers and ranchers, farmland protection is an issue of
the survival of both family farms and agricultural regions. When urban
pressure pushes up the value of agricultural land above its
agricultural value, it threatens the end of family farms because the
next generation simply cannot afford to farm land valued at development
prices. As some farmers sell their land for development, it places
increasing pressure on their neighbors to sell as well.
The 1996 Farm Bill recognized this problem by directly providing $35
million for farmland protection matching funds that have leveraged
million more from local and private programs. The Farmland Protection
Program is a model of what new federal conservation programs ought to
be, enjoying the unanimous support of the National Governors
Association. It preserves the private property rights of farmers.
It offers the Congress a way to demonstrate a realistic and
meaningful commitment to the conservation of America's natural heritage
without expanding the role of the federal government, and it encourages
local communities and states to contribute their own efforts. The
program's overwhelming success though has led to increased demand for
the program--applicants requested a federal match of more than $130
million.
Our bill will help address some of this demand and encourage more
state governments, local communities and private groups to start new
matching programs. This modest federal investment will maintain our
commitment to the protection of our rural heritage and working
landscape.
______

By Ms. COLLINS (for herself, Mr. Cochran, Mr. Levin, Mr. Durbin,
and Mr. Burns):
S. 335. A bill to amend chapter 30 of title 39, United States Code,
to provide for the nonmailability of certain deceptive matter relating
to games of chance, administrative procedures, orders, and civil
penalties relating to such matter, and for other purposes; to the
Committee on Governmental Affairs.

DECEPTIVE MAIL PREVENTION AND ENFORCEMENT IMPROVEMENT ACT

Ms. COLLINS. Mr. President, today, during National Consumer
Protection Week, I am introducing the Deceptive Mail Prevention and
Enforcement Act, a comprehensive bill designed to stem the rising tide
of deceptive mailings that are flooding the mailboxes of the people of
Maine and people throughout the country.
I am very pleased to have the cosponsorship of a trio of
distinguished Senators in this regard: Senator Cochran, the chairman of
the subcommittee with legislative jurisdiction over these types of
mailings, who has been a leader in the effort to curtail deceptive
mailings and sweepstakes fraud; Senator Levin, who serves as the
ranking minority member of the Permanent Subcommittee on
Investigations, and who has played an active role not only in the
hearings held last year, but also in introducing his own legislation on
this issue, which I am pleased to cosponsor. He has a longstanding
interest in curtailing deceptive mailings. I am also pleased to have
the support of Senator Durbin, with whom I have worked very closely on
many consumer issues.
Mr. President, several months ago, prompted by complaints that I have
received from my constituents in Maine, I initiated an investigation
into sweepstakes fraud and deceptive mailings. Over the course of this
investigation, I have seen countless examples of mailings that
deceptively promise extravagant prizes in order to entice consumers to
make unnecessary and unneeded purchases. Unfortunately, this calculated
confusion works far too often. In one particularly egregious example,
one deceptive mailing prompted some of its victims to fly to Florida,
believing that they then would be the first to claim the grand prize
promised in a major sweepstakes.
Deceptive mailings take many forms. One such form that I find
particularly offensive is ``Government look-alike mailings,'' which
appear deceptively like a mailing from a Federal agency or other
official entity. An example of such a deceptive mailing was recently
sent to me by a woman from Machiasport, ME. The postcard that she
received was marked ``Urgent Delivery, a Special Notification of Cash
Currently Being Held by the U.S. Government is ready for shipment to
you.'' I have blown up a copy of the postcard she received so you can
see just how deceptive this mailing was. On the back of the postcard,
the consumer was asked to send $9.97 to learn how to receive this cash.
Of course, this was not a legitimate mailing from the Federal

[[Page S1146]]

Government, but simply a ploy used by an unscrupulous individual to
trick an unsuspecting consumer into sending money.
Mr. President, millions of Americans have received sweepstakes
letters that use deceptive marketing ploys to encourage the purchase of
magazines and other products. A common tactic is a ``promise'' of
winning printed in large type, such as this example: ``You Were
Declared One of Our Latest Sweepstakes Winners and You're About to be
Paid $833,337 in Cash.'' A constituent of mine from Portland, ME,
received this mailing, but, of course, he wasn't really a winner. It
takes an awfully sharp eye and very careful scrutiny to notice the very
fine print that states that the money is won only ``if you have and
return the grand prize-winning number in time.''
Mr. President, thousands of consumers have made very frequent
purchases, often of more than $1,000 a year, in response to deceptive
sweepstakes mailings. I have heard sad stories from many people who
have described personal horror stories caused by these deceptive
mailings. Some people have told me of their elderly parents spending
$10,000, $20,000, even as much as $60,000 in one case, hoping that
their next purchase would result in a large prize. Senior citizens are
particularly vulnerable, as they generally trust the statements made by
these marketing appeals, particularly if they are pitched by
celebrities, or if the mailing appears to be connected or in some way
sanctioned by the Federal Government.
To increase consumer protections, and to punish those who use such
deceptive mailings to prey on our senior citizens, the bill that I am
introducing today, along with Senators Cochran, Levin and Durbin, will
attack sweepstakes fraud and deceptive mailings on four fronts.
First, the bill will prevent fraud and deception by requiring
companies to be more honest with the American people when using
sweepstakes and other promotional mailings. My legislation would
establish new standards for sweepstakes, including clear disclosure. In
addition, my legislation would strengthen the law against mailings that
mimic Government documents. Mailings could not use any language or
device that gives the appearance that the mailing is connected,
approved, or endorsed by the Federal Government.
Second, this bill provides strong new financial penalties for sending
mail that does not comply with these and existing standards. Civil
penalties include fines ranging from $50,000 to $2 million would be
allowed depending on the number of mailings sent.
Third, the bill strengthens Federal law enforcement efforts and makes
them more effective by giving the U.S. Postal Inspection Service
additional tools to combat these deceptive practices.
Fourth, my legislation would preserve the important role the States
play in fighting this type of fraud and deception. Our bill would not
preempt States and local laws protecting consumers from fraudulent and
deceptive mailings.
Mr. President, hundreds of millions of these promotional materials
are sent out each year to consumers across the country. By design, they
are meant to confuse their recipients and to trick them into spending
money needlessly under the false pretense that doing so will earn them
huge rewards.
As the chairman of the Permanent Subcommittee on Investigations, I
will shortly be holding hearings on this issue in the coming months to
document the nature and extent of the problem and how these deceptive
mailings affect Americans, particularly our senior citizens.
I look forward to working with my colleagues, particularly the
subcommittee's ranking member, Senator Levin, who has been such a
leader in this area. It is my hope that Congress will enact the
Deceptive Mail Prevention and Enforcement Improvement Act to increase
consumer protections, to improve law enforcement efforts, and to
provide effective penalties for those who deceive American consumers.
Mr. President, I yield any remaining time to the Senator from
Michigan, Senator Levin.
The PRESIDING OFFICER. The Senator from Michigan is recognized.
Mr. LEVIN. Mr. President, I thank my good friend from Maine for her
leadership, her kind words, and for her bill, which I am proud to
cosponsor. The bill I am introducing today, with her support and the
support of Senator Durbin, addresses the same kinds of practices. These
two bills together, if adopted, would go a long way toward addressing
the deceptive mailing practices that we see under the general heading
of ``sweepstakes.''
The bill that I am introducing, with the cosponsorship of Senator
Collins and Senator Durbin, will help eliminate the deceptive practices
in mailings that use games of chance, like sweepstakes, to induce
consumers to purchase a product that they may not need and to play a
game that they will not win.
I originally introduced this bill last year. It was not enacted. It
was introduced late in the session. I am very hopeful that this bill
and Senator Collins' bill will be enacted this year following the
hearings that she has just described--important hearings which I
commend our chairman of the subcommittee for scheduling, for
initiating.
The bill that I am introducing--this part of the remedy for the
current abuses--will stiffen the penalties for deceptive mailings, will
give the Postal Service administrative subpoena power, will restrict
the use of misleading language and symbols, and require better
disclosure about chances of winning and statements that no purchase is
necessary to win.
The elderly are easy prey for the gimmicks used in these kinds of
contests, such as a large notice declaring the recipient a winner--
oftentimes a ``guaranteed'' winner or one of two final competitors for
a large cash prize--and these gimmicks have proliferated to the point
that American consumers are being duped into purchasing products they
don't want or need because they think they have won or will win a big
prize if they do so. Complaints about these mailings are one of the top
ten consumer complaints in the nation. I have received numerous
complaints from my constituents in Michigan asking that something be
done to provide relief from these very misleading mailings.
In early September 1998, we held a hearing in our Governmental
Affairs Committee federal services subcommittee on the problem of
deceptive sweepstakes and other mailings involving games of chance. We
learned from three of our witnesses, the Florida Attorney General, the
Michigan Assistant Attorney General and the Postal Inspection Service,
that senior citizens are particular targets of these deceptive
solicitations, because they are the most vulnerable. State Attorneys
General have taken action against many of the companies that use
deceptive mailings. The states have entered into agreements to stop the
most egregious practices, but the agreements apply only to the states
that enter into the agreements. This allows companies to continue their
deceptive practices in other states. That's one reason why federal
legislation in this area is needed. The bill I'm introducing today will
help eliminate deceptive practices by prohibiting misleading
statements, requiring more disclosure, imposing a $10,000 civil penalty
for each deceptive mailing, and providing the Postal Service with
additional tools to pursue deceptive and fraudulent offenders.
Sweepstakes solicitations are put together by teams of clever
marketers who package their sweepstakes offers in such a way so as to
get people to purchase a product by implying that the chances of
winning are enhanced if the product being offered is purchased.
That is not allowed. You cannot require that a purchase be made in
order to win a prize. But these deceptive practices are such and they
are so finely honed that, no matter what the fine print says about no
purchase being necessary, the recipient of the mailing often is led to
believe, by the nature of the mailing, that a purchase indeed will
enhance the opportunity to win the prize. Senator Collins addresses the
sum of those issues in her bill.
Rules and important disclaimers are written in fine print and hidden
away in obscure sections of the solicitation or on the back of the
envelope that is frequently tossed away. Even when one can find and
read the rules, it frequently takes a law degree to understand them.

[[Page S1147]]

The bill I am introducing will help to protect consumers from
deceptive practices by directing the Postal Service to develop and
issue regulations that restrict the use of misleading language and
symbols in direct mail game of chance solicitations, including
sweepstakes. The bill also requires additional disclosure about chances
of winning and the statement that no purchase is necessary. Any mail
that is designated by the Postal Service as being deceptive will not be
delivered. This will significantly reduce the deceptive practices being
used in the direct mail industry to dupe unsuspecting consumers into
thinking they are grand prize winners. The direct mail industry also
would benefit, in that the adverse publicity recently aimed at the
industry because of ``You Have Won a Prize'' campaigns has maligned the
industry as a whole. Cleaning up deceptive advertising could improve
the industry's image.
For those entities that continue to use deceptive mailings, my bill
imposes a civil penalty of $10,000 for each piece of mail that violates
Postal Service regulations. Currently the Postal Service can impose a
fine for noncompliance with a Postal Service order. My bill imposes a
fine whether or not the order actually has been issued. This has the
effect of applying the penalty to the deceptive offense, not for
noncompliance with the order.
My bill also allows the Postal Service to quickly respond to changes
in deceptive marketing practices by giving the Postal Service the
authority to draft regulations that will be effective against the
``scheme du jour.'' A deceptive practice used today, may not be used
tomorrow. As soon as the Post Office learns about one scheme, it
changes. If legislation is passed that requires a specific notice, it
can take just a short time before another deceptive practice pops up to
by-pass the legislation. My bill gives the Postal Service the authority
to evaluate what regulatory changes will be required to keep pace with
the ever changing deceptive practices. This will help weed out
deceptive practices in a timely manner.
The bill also gives the Postal Service administrative subpoena power
to respond more quickly to deceptive and fraudulent mail schemes.
Currently the Postal Service must go through a lengthy administrative
procedure before it can get evidence to shut down illegal
operations. Currently the $10,000 fine--and civil penalty which
exists--can only be imposed for noncompliance with a Postal Service
order. There has to be an order issued which is violated before there
can even be a civil fine. Our bill would impose a fine for violating
the law, a penalty for perpetrating the deceptive offense or practice,
and it would not require that there be an order previously entered. By
the time the Postal Service gets through all the administrative hoops,
the sweepstakes promoter may have folded up operations and disappeared,
or has destroyed all the evidence. By granting the Postal Service
limited subpoena authority to obtain relevant material records for an
investigation, the Postal Service will be able to act more efficiently
against illegal activities. Subpoena authority will make the Postal
Service more effective and efficient in its pursuit of justice.

The Deceptive Sweepstakes Mailings Elimination Act of 1999 takes a
tough approach to dealing with sweepstakes solicitations and other
games of chance offerings that are sent through the mail. If you use
sweepstakes or a game of chance to promote the sale of a legitimate
product, provide adequate disclosure, and abide with Postal Service
regulations, then the Postal Service will deliver that solicitation. If
deceptive practices are used in a sweepstakes or a game of chance
solicitation, the Postal Service will be able to stop the solicitation
and impose a significant penalty.
So we are going to take a tough approach, both through Senator
Collins' bill which I have cosponsored, through my bill which she has
cosponsored, along with others, and this tough approach that is
absolutely essential if we are going to protect seniors and others from
the kind of deceptive practices which cost them so much money by
encouraging them, through these practices, to buy items that they
really do not want in order to win prizes that truly are unlikely or
impossible to win.
______

By Mr. LEVIN (for himself, Mr. Durbin and Mr. Collins):
S. 336. A bill to curb deceptive and misleading games of chance
mailings, to provide Federal agencies with additional investigative
tools to police such mailings, to establish additional penalties for
such mailings, and for other purposes; to the Committee on Governmental
Affairs.

deceptive games of chance mailings elimination act of 1999

Mr. DURBIN. Mr. President, I am pleased to join my distinguished
colleagues, Senators Levin and Collins, today in introducing the
Deceptive Games of Chance Mailing Elimination Act of 1999.
It's rare that any American household has escaped receipt of a flurry
of envelopes boldly proclaiming ``You're our next million-dollar
winner!'' or similar claim of impending good fortune. Most of us
recognize these prominent lines as the special language of direct mail
sweepstakes. While many companies have used sweepstakes responsibly,
others have bilked consumers out of millions of dollars by falsely
suggesting a purchase is necessary to qualify for the sweepstakes or to
increase the odds of winning a prize. Some of these operators promise
fame and fortune, but they deliver fraud and false promises.
As Senator Levin has outlined, this bill sharpens the teeth of the
current postal statutes by directing the Postal Service to develop and
issue rules that restrict the use of misleading language and symbols on
direct mail games of chance such as sweepstakes that mislead the
recipient into believing they've already won or will win a prize. This
rulemaking authority will allow the Postal Service to respond more
rapidly to emerging deceptive practices. The bill also requires that
additional disclosures be given to recipients of mailed solicitations
involving sweepstakes giveaways about their chances of winning and that
no purchase is necessary to enter the contest. Furthermore, the bill
gives the Postal Service administrative subpoena power so it can react
and respond more rapidly to deceptive and fraudulent mail schemes.
Under our bill, civil fines can be imposed upon the issuance of an
enforcement order, or alternatively, in lieu of an enforcement order,
rather than awaiting a violation of that order.
By giving the Postal Service these additional tools and authority,
this legislation will help combat the growing problem of consumer fraud
in the form of deceptive or misleading mailings that use games of
chance or sweepstakes contests to solicit the purchase of a product.
Other deceptions have included packaging sweepstakes solicitations to
closely resemble government documents and promising recipients that
they have already won, even though the fine print reveals minuscule
odds of winning.
The elderly are particularly vulnerable to sweepstakes fraud. Some
senior citizen sweepstakes recipients have traveled thousands of miles
to claim prizes they thought they had been assured of winning. Others
spend thousands of dollars on magazines and other merchandise because
they are convinced it will boost their chances of winning.
Like Senators Levin and Collins, I have heard from numerous
constituents about how some crafty purveyors prey on the public, often
persons on fixed or limited incomes, through these deceptive envelopes
and packaging techniques. Recently, one constituent related how her
elderly mother has become ``hooked'' on sweepstakes. She shared with me
a bulky stack of envelopes, representing just a sample of the mailings.
She remarked how her mother is convinced that the company will think
better of her if she orders lots of merchandise, and that buying more
products will accord her special consideration and improve her chances
to win a lucrative prize. She noted that some companies, by using
clever typefaces, sophisticated and official-looking symbols, gimmicky
labels, and personalization, lead people to believe the company is
writing to them personally, and that the odds of winning are high. Her
story is but one example of what we have heard, and why it is so
important to ensure that strong laws are enacted to address deceptive
practices.
I am pleased that the United States Postal Inspector, the National
Fraud

[[Page S1148]]

Information Center, the Direct Marketing Association, the American
Association of Retired Persons, and a special committee of the
Association of Attorneys General are among those who are actively
seeking ways to ensure that consumers are informed and protected from
dishonest marketing ploys.
I look forward to the hearings planned by Senator Collins in the
Permanent Subcommittee on Investigations to examine the problem of
deceptive mailings and legislative solutions. I urge my colleagues to
join me in supporting enactment of legislation to promote more honesty
by product marketers, clearer disclosure for consumers, tighter
penalties for violators, and quicker and more effective enforcement
tools for more rapid response to unscrupulous practices.
______

By Mr. HUTCHINSON (for himself, Mr. Lott, Mr. Nickles, Mr. Mack,
Mr. Craig, Mr. Coverdell, Mr. Warner, Mr. Hatch, Ms. Collins,
Mr. Cochran, Mr. Bunning, Mr. Ashcroft, Mr. Helms. Mr.
Grassley, Mr. Enzi, Mr. Inhofe, Mr. Bond, Mr. Gorton, Mr.
Frist, Mr. Thurmond, Mr. Hagel, Mr. Allard, Mr. Grams, Mr. Kyl,
Mr. Roberts, Mr. Sessions, and Mr. Shelby):
S. 337. A bill to preserve the balance of rights between employers,
employees, and labor organizations which is fundamental to our system
of collective bargaining while preserving the rights of workers to
organize, or otherwise engage in concerted activities protected under
the National Labor Relations Act; to the Committee on Health,
Education, Labor, and Pensions.

TRUTH IN EMPLOYMENT ACT OF 1999

Mr. HUTCHINSON. Mr. President, I am honored to have the opportunity
to introduce today an important piece of legislation which will provide
thousands of businesses in my home state of Arkansas and across the
nation with a defense against an unscrupulous practice which is
literally crippling them. The Truth in Employment will protect these
businesses and curtail the destructive abuse of the union tactic known
as salting.
``Salting abuse'' is the calculated practice of placing trained union
professional organizers and agents in the non-union workplace whose
sole purpose is to harass or disrupt company operation, apply economic
pressure, increase operating and legal costs, and ultimately put a
company out of business. The objectives of these union agents are
accomplished through filing frivolous and unfair labor practice
complaints or discrimination charges against the employer with the
National Labor Relations Board (NLRB), the Occupational Safety and
Health Administration (OSHA), and the Equal Employment Opportunity
Commission (EEOC). Salting campaigns have been used successfully to
cause economic harm to construction companies and are quickly expanding
into other industries across the country. It can cost employers
anywhere from $5,000 to hundreds of thousands of dollars to defend him
or herself against this practice.
Salting is not merely a union organizing tool. It has become an
instrument of economic destruction aimed at non-union companies. Union
send their agents into non-union workplaces under the guise of seeking
employment. Hiding behind the shield of the National Labor Relations
Act, these ``salts'' use its provisions offensively to bring hardship
on their employers. They deliberately increase the operating costs of
their employers through actions such as sabotage and frivolous
discrimination complaints.
In the 1995 Town & Country decision, the U.S. Supreme Court held that
paid union organizers are ``employees'' within the meaning of the
National Labor Relations Act. Because of their broad interpretation of
this Act, employers who refuse to hire paid union employees or their
agents violate the Act if they are shown to have discriminated against
the union salts.
This leaves employers in a precarious position. If employers refuse
to hire union salts, they will file frivolous charges and accuse the
employer of discrimination. Yet, if salts are employed, they will
create internal disruption through a pattern of dissension and
harassment. They are not there to work--only to disrupt. In a classic
example of salting abuse, John Gaylor of Gaylor Electric had to fire
one employee after this refusal to wear his hard hat on his head. This
employee would strap the hard hat to his knee and then dare Gaylor to
fire him because he said the employee manual stated only that he had to
wear the hard hat, it didn't state where he had to wear it.
As a result of the salting abuse, whenever many small businesses make
hiring decisions, the future of the company, and its very existence,
may be at stake. A wrong decision can mean frivolous charges, legal
fees, and lost time, which may threaten the very existence of their
business.

I have received many accounts from across the nation of how salting
abuse is affecting small businesses. The following examples were
received as testimony in Congressional hearings. In my home state of
Arkansas, Little Rock Electrical Contractors, Inc. incurred in excess
of $80,000 in legal fees over the course of one year to fight 72 unfair
labor practice charges, of which 20 were dismissed, 45 were set for
trial, and 7 were appealed. In Cape Elizabeth, Maine, over a period of
four years, Bay Electric incurred $100,000 in legal fees plus lost time
to defend itself against 14 unfair labor practices, all of which were
dismissed. In Delano, Minnesota, Wright Electric incurred $150,000 in
legal fees and lost between $200,000 and $300,000 in lost time to win
the dismissal of 14 of 15 unfair labor practices charges. And, in
Clearfield, Pennsylvania, R.D. Goss incurred $75,000 battling
approximately 20 unfair labor practices; while all but one of the
charges were dismissed, the company was forced to close its doors after
doing business for thirty-eight years. Finally, in Union, Missouri, it
cost the Companies $150,000 to win the dismissal of 47 unfair labor
practices charges and to achieve one settlement for $200.
Another common salting abuse is for salts to actually create
Occupational Safety and Health Administration (OSHA) violations and
then report those violations to OSHA. When the employer terminates
these individuals, they file frivolous unfair labor practices against
the employer. This results in wasted time and money, as well as bad
publicity for the company.
These are just a few of the many examples of how devastating salting
abuse can be to small businesses. What makes this practice even more
appalling is how organized labor openly advocates its use. According to
the group, the ``Coalition For Fairness For Small Businesses And
Employees,'' the labor unions are even advocating this practice in
their manuals.
The Union Organizing Manual of the International Brotherhood of
Electrical Workers explains why salts are used. Their purpose is to
gather information that will ``. . . shape the strategy the organizer
will use later in the campaign to threaten or actually apply the
economic pressure necessary to cause the employer to . . . raise his
prices to recoup additional costs, scale back his business, leave the
union's jurisdiction, go out of business, and so on. . .''
Thomas J. Cook, a former ``salt,'' explained the ultimate goal of
salting abuse. Mr. Cook said, ``Salting has become a method to stifle
competition in the marketplace, steal away employees, and to inflict
financial harm on the competition.'' Mr. Cook concluded by stating that
``[i]n a country where free enterprise and independence is so highly
valued, I find these activities nothing more than legalized
extortion.''
The balance of rights must be restored between employers, employees
and labor organizations. The Truth in Employment Act seeks to do this
by inserting a provision in the National Labor Relations Act
establishing that an employer is not required to employ any person who
is not a bona fide employee applicant, in that such person is seeking
employment for the primary purpose of furthering interests unrelated to
those of that employer. Furthermore, this legislation will continue to
allow employees to organize and engage in activities designed to be
protected by the National Labor Relations Act.
This measure is not intended to undermine those legitimate rights or
protections. Employers will gain no ability to discriminate against
union membership or activities. This bill only seeks to stop the
destructive results of

[[Page S1149]]

salting abuse. Salting abuse must be curtailed if we are to protect the
small business owners and employees of this nation. This legislation
will insure these protections are possible.
It is for these reasons that I am introducing the Truth in Employment
Act. I ask that my colleagues support this bill and restore fairness to
the American workplace.
______

By Mr. CAMPBELL:
S. 338. A bill to provide for the collection of fees for the making
of motion pictures, television productions, and sound tracks in units
of the Department of the Interior, and for other purposes; to the
Committee on Energy and Natural Resources.

National Park Service Commercial Filming Permit Fee Act of 1999

Mr. CAMPBELL. Mr. President, today I introduce the National Park
Service Commercial Filming Permit Fee Act of 1999. This bill gives the
National Park Service (NPS) and the National Wildlife Refuge System
(NWRS) the authority to require fee-based permits for the use of Park
Service and National Wildlife Reserve lands in the production of motion
pictures, television programs, advertisements or other similar
commercial purposes. This bill is based on legislation which I
introduced in the 105th Congress, S. 1614.
Our National Parks are among our nation's most valuable resources.
The National Park Service Commercial Filming Permit Fee Act of 1999
would help us to protect them and ensure that future generations will
be able to enjoy their beauty by making sure the parks are reimbursed
for their commercial use.
The Bureau of Land Management and the Forest Service already have a
similar permit and fee system for commercial filming on public lands.
It doesn't make sense that our National Parks, which have been deemed
to be even more precious by their designation, should be used
commercially for free. This is especially important now when taxpayers
are facing increased fees to enter the national parks and more people
are enjoying our natural wonders every year in record numbers.
My bill allows the National Park Service to collect a fair return fee
when the American peoples' parks are used in these commercial media
ventures and then devotes those fees to the preservation of our
National Parks. Common sense directs us to do this, and I believe this
bill is fair for the commercial users of our National Parks, and more
importantly, for the American taxpayers.
This bill builds upon progress made through hearings, conferences,
and other valuable input received during the 105th Congress. The
revised legislative language reflects input from the administration,
industry groups--including the Motion Picture Association of America--
and public interest groups such as the National Parks and Conservation
Association. This bill is similar to legislation that my friend and
colleague from Colorado, Congressman Hefley, introduced in the 105th
and reintroduced in the 106th Congress as H.R. 154.
Mr. President, I have letters from two key interested associations in
support of my bill's goals. I ask unanimous consent that these letters
of support from the Motion Picture Association of America and the
National Parks and Conservation Association and my bill be printed in
the Record. I urge my colleagues to support passage of this bill.
There being no objection, the material was ordered to be printed in
the Record, as follows:

S. 338

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,

SECTION 1. USE OF LAND; FEE AUTHORITY.

(a) Authority.--
(1) In general.--The Secretary of the Interior (referred to
in this Act as the ``Secretary'') may permit the use of land
and facilities in units administered by the Secretary for--
(A) motion picture production;
(B) television production;
(C) soundtrack production;
(D) the production of an advertisement using a prop or a
model; or
(E) any similar commercial project.
(2) Exception.--The Secretary shall not permit a use of
land or a facility described in paragraph (1) if the
Secretary determines that a proposed use--
(A) is not appropriate; or
(B) will impair the value or resources of the land or
facility.
(3) Bonding and insurance.--The Secretary may require a
bond, insurance, or such other means as is necessary to
protect the interests of the United States in connection with
an activity conducted under a permit issued under this Act.
(b) Fees.--
(1) In general.--For any use of land or a facility in a
unit described in subsection (a), the Secretary shall
assess--
(A) a reimbursement fee; and
(B) a special use fee.
(2) Reimbursement fee.--
(A) In general.--The Secretary shall require the payment of
a reimbursement fee in an amount that is not less than the
amount of any direct and indirect costs to the Government
incurred--
(i) in processing the application for a permit for a use of
land or facilities; and
(ii) as a result of the use of land and facilities under
the permit, including any necessary costs of cleanup and
restoration.
(B) Funds collected.--An amount equal to the amount of a
reimbursement fee collected under this subparagraph shall--
(i) be retained by the Secretary; and
(ii) be available for use by the Secretary, without further
Act of appropriation, in the unit in which the reimbursement
fee is collected.
(3) Special use fee.--
(A) Factors in determining special use fee.--To determine
the amount of a special use fee, the Secretary shall
establish a schedule of rates sufficient to provide a fair
return to the Government, based on factors such as--
(i) the number of people on site under a permit;
(ii) the duration of activities under a permit;
(iii) the conduct of activities under a permit in any area
designated by a statute or regulation as a special use area,
including a wilderness or research natural area;
(iv) the amount of equipment on site under a permit; and
(v) any disruption of normal park function or
accessibility, including temporary closure of land or a
facility to the public.
(B) Funds collected.--A special use fee under this
subparagraph shall be distributed as follows:
(i) 80 percent shall be deposited in a special account in
the Treasury, and shall be available, without further Act of
appropriation, for use by the supervisors of units where the
fee was collected.
(ii) 20 percent shall be deposited in a special account in
the Treasury, and shall be available, without further Act of
appropriation, for use by supervisors of units in the region
where the fee was collected.
(4) Exceptions.--
(A) Fee waiver or reduction.--The Secretary may waive a
special use fee or charge a reduced special use fee if the
activity for which the fee is charged provides clear
educational or interpretive benefits for the Department of
the Interior or the public.
(B) Regular visitor entrance fee.--Nothing in this
subsection affects the requirement that, in addition to fees
under in subparagraph (A), each individual entering a unit
for purposes described in subsection (a) shall pay any
regular visitor entrance fee charged to visitors to the unit.
(c) Regulations.--
(1) In general.--Not later than 180 days after the date of
enactment of this Act, the Secretary shall promulgate
regulations that establish a schedule of rates for fees
collected under subsection (b) based on factors listed in
subsection (b)(2)(C)(ii).
(2) Review of regulations.--
(A) Initial review.--Not later than 3 years after the date
of enactment of this Act, the Secretary shall review and, as
appropriate, revise the regulations promulgated under this
subsection.
(B) Continuing review.--After the date of promulgation of
regulations under subparagraph (A), the Secretary shall
periodically review the regulations and make necessary
revisions.
(d) Applicability of Regulations.--
(1) Prohibition on certain fees.--The prohibition on fees
set forth in section 5.1(b)(1) of title 43, Code of Federal
Regulations, shall cease to apply beginning on the effective
date of regulations promulgated under this Act.
(2) Effect on other regulations.--Nothing in this Act,
other than paragraph (1), affects the regulations set forth
in part 5 of title 43, Code of Federal Regulations.
(e) Civil Penalty.--
(1) In general.--A person that violates any regulation
promulgated under this Act, or conducts or attempts to
conduct an activity under subsection (a)(1) without obtaining
a permit or paying a fee, shall be assessed a civil penalty--
(A) for the first violation, in the amount that is equal to
twice the amount of the fees charged (or fees that would have
been charged) under subsection (b)(2);
(B) for the second violation, in the amount that is equal
to 5 times the amount of the fees charged (or fees that would
have been charged) under subsection (b)(2); and
(C) for the third and each subsequent violation, in the
amount that is equal to 10 times the amount of the fees
charged (or fees that would have been charged) under
subsection (b)(2).
(2) Costs.--A person that violates this Act or any
regulation promulgated under this Act shall be required to
pay all costs of any

[[Page S1150]]

proceedings instituted to enforce this subsection.
(f) Effective Date.--
(1) In general.--Except as provided in paragraph (2), this
Act and the regulations promulgated under this Act take
effect 180 days after the date of enactment of this Act.
(2) Exception.--This subsection and the authority of the
Secretary to promulgate regulations under subsection (c) take
effect on the date of enactment of this Act.
____

Motion Picture Association

of America, Inc.,

Washington, DC, February 2, 1999.
Hon. Ben Nighthorse Campbell,
U.S. Senate, Russell Senate Office Building, Washington, DC.
Dear Ben: I am writing to you today about your legislation
dealing with the filming of motion pictures in national park
and public lands. I would like to lend my support for the aim
of this bill and pledge to work with you on some areas of
concern to our industry.
Right now, the National Parks Service cannot charge fees
for filming. Although the parks can be reimbursed for costs
of filming, these reimbursements do not provide real
financial support to the parks. As a result, park
administrators can become indifferent to filming, or even
hostile because their efforts to promote movie making in the
park don't produce for them any direct return.
Your legislation provides a reasonable solution by setting
forth a fee schedule that is predictable. We think the fee
schedule approach is an improvement over the ``fair market
value'' approach from previous legislation. The fee schedule
provides a more simple, clear and predictable way of
collecting fees. Furthermore, we urge you to limit the
factors as much as possible to the number of people in the
crew and the number of days in the shoot.
As the bill moves through the legislative process, we hope
to work with you further. A particular area of concern is the
provision related to regular visitor entrance fees.
All in all, I applaud your efforts. I know that you,
Senator are one who particularly appreciates the treasure of
our national park system and public lands. I am pleased that
the American movie, exhibited in over 150 countries,
advertises to the world the unduplicatable beauties of our
national parks, irreplaceable treasures which belong to the
American citizenry.
I look forward to working with you and your staff.
With great affection,
Jack Valenti.
____

National Parks

and Conservation Association,

Washington, DC, February 2, 1999.
Hon. Ben Nighthorse Campbell,
U.S. Senate, Washington, DC.
Dear Senator Campbell: The National Parks and Conservation
Association appreciates your efforts to close the ``equity
gap'' between visitors to the National Park System and those
in Hollywood and on Madison Avenue who have profited from
their commercial use of the national parks.
For the past five decades, the National Park Service has
been prohibited from collecting anything but a nominal
permitting fee and a modest amount of cost recovery
(associated with monitoring filming activity and any
necessary site remediation) from those who undertake
commercial filming projects in our national parks. Yet, the
individuals and institutions using the parks as a backdrop
for their films, commercials, television programs, etc. have
profited handsomely.
It is grossly unfair to allow a few businesses to profit
from the parks while the visiting public is being asked to
pay more in entrance and use fees, and while the parks suffer
from a significant and ongoing budgetary shortfall.
We are optimistic that your legislation will help generate
the debate necessary to result in the remedying of this
inequity. Thank you for taking this first and positive step
towards solving this problem.
Sincerely,
William J. Chandler,
Vice President for Conservation Policy.
______

By Mr. McCAIN (for himself and Mr. Inouye):
S. 339. A bill to amend the Indian Gaming Regulatory Act, and for
other purposes; to the Committee on Indian Affairs.

INDIAN GAMING REGULATORY ACT AMENDMENTS OF 1999

Mr. McCAIN. Mr. President, I rise today, along with my distinguished
colleague, Senator Inouye, to propose the Indian Gaming Regulatory Act
Amendments of 1999. The good Senator and I have sponsored this bill for
the past four years because of our continuing belief that we must
strengthen the Indian gaming law and protect the authority of tribal
governments to engage in gaming activities.
Senator Inouye and I have sat through hundreds of hours of
discussions with Indian tribes, the States and interested parties over
the expansion of Indian gaming. While the interest grows stronger in
amending IGRA, a proposal has not been endorsed by either the Tribes or
the States. Our intention in forwarding this bill is to once again set
forth a balanced and fair discussion over necessary changes to the
Indian gaming law.
The bill we are introducing today will provide for minimum federal
standards in the regulation and licensing of class II and III gaming as
well as all of the contractors, suppliers, and industries associated
with such gaming. This will be accomplished through the Federal Indian
Gaming Regulatory Commission which will be funded through assessments
on Indian gaming revenues and fees imposed on license applicants.
In addition, this bill is consistent with the 1987 decision of the
U.S. Supreme Court in the case of California v. Cabazon Band of Mission
Indians in that it neither expands or further restricts the scope of
Indian gaming. The laws of each State would continue to be the basis
for determining what gaming activities may be available to an Indian
tribe located in that State.
Under the Indian Gaming Regulatory Act of 1988, Indian tribes are
required to expend the profits from gaming activities to fund tribal
government operations or programs and to promote tribal economic
development. Profits may only be distributed directly to the members of
an Indian tribe under a plan which has been approved by the Secretary
of Interior. Virtually all of the proceeds from Indian gaming
activities are used to fund the social welfare, education, and health
needs of the Indian tribes. Schools, health facilities, roads, and
other vital infrastructure are being built by the Indian tribes with
the proceeds from Indian gaming.
In the years before the enactment of the Indian Gaming Regulatory Act
and in the years since its enactment, we have heard concerns about the
possibility for organized criminal elements to penetrate Indian gaming.
I believe the Act provides for a very substantial regulatory role and
law enforcement role by the States and Indian tribes in class III
gaming and by the Federal government in Class II gaming. The record
clearly shows that in the few instances of known criminal activity in
class III gaming, the Indian tribes have discovered the activity and
have sought Federal assistance in law enforcement.
Indian gaming will continue to be scrutinized because of its
increasing prominence in our nation's economy and political spectrum. I
believe that any proposal to amend the Indian gaming law should respect
both the rights of the Indian tribes and the States, while recognizing
the benefits of well-regulated gaming to both Indian and non-Indian
communities. I look forward to working with my colleagues and all
affected entities on a continuing dialogue to protect the integrity of
Indian gaming.
I ask unanimous consent that a section-by-section analysis be printed
in the Record.
There being no objection, the item was ordered to be printed in the
Record, as follows:

Section-by-Section Analysis

Sections 1-3 set forth the title, findings and purpose of
the Act.
Section 4 amends the Indian Gaming Regulatory Act to revise
definitions.
Section 5 establishes (in lieu of the National Indian
Gaming Commission) the Federal Indian Gaming Regulatory
Commission as an independent U.S. agency. It directs the
Commission to establish minimum Federal standards for
background investigations, internal control systems, and
licensing. The Commission is granted investigatory authority.
Section 6 sets forth the powers of the Chairperson of the
Federal Indian Gaming Regulatory Commission.
Section 7 sets forth the powers and authority of the
Commission.
Section 8 sets forth the regulatory framework for class II
and III gaming.
Section 9 directs the President to establish the Advisory
Committee on Minimum Regulatory Requirements and Licensing
Standards.
Sections 10, 11, 12, 13 and 14 set forth requirements for:
(1) licensing; (2) conduct of class I, II, and III gaming on
Indian lands; and (3) contract review.
Sections 15 and 16 set forth civil penalty and judicial
review provisions.
Sections 17 and 18 fund the Commission from authorized
appropriations and class II and III gaming fees.
Section 19 applies specified tax withholding and bank
reporting requirements to Indian gaming operations. Requires
the Commission to make certain law enforcement information
available to State and tribal authorities.

[[Page S1151]]

By Mr. ALLARD:
S. 340. A bill to amend the Cache La Poudre River Corridor Act to
make technical corrections, and for other purposes; to the Committee on
Energy and Natural Resources.

technical corrections to the cache la poudre river corridor act

Mr. ALLARD. Mr. President, today I am introducing a bill to amend the
Cache La Poudre River Corridor Act to make technical corrections.
This Act became Public Law on October 19, 1996 thanks to the
diligence and hard work of Senator Brown, my predecessor. The purpose
of this Act is to designate the Cache La Poudre Corridor with the Cache
La Poudre River Basin. The Poudre Corridor provides an educational and
inspirational benefit to both present and future generations, as well
as unique and significant contributions to our national heritage of
cultural and historical lands, waterways, and structures within the
Corridor.
It is important that the following technical corrections be made to
ensure that this act is interpreted and implemented correctly.
______

By Mr. FRIST (for himself, Mr. McCain, and Mr. Burns):
S. 342. A bill to authorize appropriations for the National
Aeronautics and Space Administration for fiscal years 2000, 2001, and
2002, and for other purposes; to the Committee on Commerce, Science,
and Transportation.

the national aeronautics and space administration authorization act for
fy 2000, 2001, and 2002

Mr. FRIST. Mr. President, I rise to introduce the authorization bill
for the National Aeronautics and Space Administration for fiscal years
2000, 2001, and 2002.
NASA's unique mission of exploration, discovery, and innovation has
preserved America's role as both a world leader in aviation and the
preeminent spacefaring nation. It is NASA's mission to:
Explore, use, and enable the development of space for human
enterprise;
Advance scientific knowledge and understanding of the Earth, the
Solar System, and the Universe and utilize the environment of space for
research; and
Research, develop, verify and transfer advanced aeronautics, space
and related technologies.
This bill is essentially the same as reported by the Commerce
Committee last year. It contains provisions that had bi-partisan
support and would have been included in a manager's amendment had the
bill been brought up for discussion on the Senate floor.
The bill, which authorizes $13.4 billion for NASA in FY 2000, $13.8
billion for FY 2001, and $13.9 billion for FY 2002, provides for the
continued development of the International Space Station, Space Shuttle
operations and safety and performance upgrades, space science, life and
micro gravity sciences and applications, the Earth Science program,
aeronautics and space transportation technology, mission
communications, academic programs, mission support and the Office of
the Inspector General.
The FY 2000 levels are consistent with the President's request with
the exception of a reduction of $200 million for the International
Space Station account. This reduction eliminates the funding requested
for the Russian Program Assurance activities. I feel that it is only
appropriate to withhold judgement on providing additional funding to
assist Russia with their financial problems until NASA provides
additional explanation on how these funds will be used. The situation
in Russia is changing daily and we must fully understand the impact on
the Station schedule and overall cost before committing more funds.
The FY 2001 and FY 2002 levels represent a 3 percent increase over
the previous year's amount with the exception of the Space Station. The
Space Station has been authorized in accordance with NASA outyear
projections for FY 2001 and FY 2002.
The bill contains a price cap on the development costs of the
International Space Station. The price cap language provides NASA with
additional funding Space Station development and allows for additional
Space Shuttle flights by exempting certain activities at the point when
research, operating and crew return vehicles activities' costs comprise
more than 95 percent of the annual funding for the Station. At this
point, the majority of the activities are truly beyond the development
phase of the project.
The bill provides for liability cross-waivers for the Space Station.
The provision authorizes, but does not require NASA to enter into
agreements with any cooperating party participating in the Space
Station program, whereby all involved parties agree to take the risk of
damage to their own assets, and agrees not to sue other entities. These
cross waivers would not apply in the case of sabotage or other
deliberate and willful acts.
NASA has indicated that these liability cross-waivers will be needed
to fully commercialize the Space Station. I support the
commercialization of the Station as a means of achieving a return on
investment for the public through the creation of new industries and
jobs for the Nation.
I am concerned with the cost and schedule delays in other programs as
well. The X-33 test vehicle and the Advanced X-ray Astrophysics
Facility programs represents major investments of public funds and
therefore should be managed such that program requirements are met in a
timely manner.
The balance between manned and unmanned flight, as well as the
balance between fundamental science and development activities, is in
need of review. I intend to pursue these balances further when the
Commerce Committee holds hearings on the NASA budget and associated
activities in the upcoming weeks.
Therefore, I, along with my co-sponsors, urge the Members of this
body to support this bill and allow NASA to continue its mission of
support for all space flight, for technological progress in
aeronautics, and for space science.
Mr. McCAIN. Mr. President, I rise today as a cosponsor of the
National Aeronautics and Space Administration (NASA) authorization bill
for fiscal years 2000, 2001, and 2002. As Chairman of the Committee on
Commerce, Science, and Transportation, I am able to work closely with
NASA and to review the agency's achievements on a continual basis. I am
proud of NASA's accomplishments and want to applaud its sustained
dominance throughout the world as the premier leader in basic
aeronautics and space research.
Yet leadership has a price. All one has to do is open the newspaper
to learn about NASA's endless difficulties with the International Space
Station, the agency's most comprehensive and complex endeavor to date.
This one-of-a-kind research facility bears a lifetime price tag of
approximately $100 billion dollars to the American taxpayers. Although
this program is a long-term investment which will bring discoveries
unimaginable to scientists today, it is our duty to protect the
American people from the repeated inconsistent performance of the
participating foreign partners, prime contractor, and program managers.
During the 105th Congress, I offered an important amendment to this
legislation that would impose a price cap on the development costs of
the International Space Station. The language would ensure maximum
program flexibility by providing NASA additional funding for Space
Shuttle flights to service the Station, and by exempting specific
activities when development costs are 5 percent or less of the
Station's annual budget. I will again personally encourage my
Congressional colleagues to enact a cost-cap measure this year to
impose some semblance of fiscal restraint, however, it is up to NASA to
prove that it is a responsible steward of public resources.
The recent political and economic uncertainty in Russia has only
exacerbated the development delay of the Russian components. Congress
must pledge to work with NASA to bring further accountability to the
Space Station if the United States is going to continue its leadership,
both financially and managerially.
NASA is not, and should not become a one mission agency. Congress
must ensure that the Space Station does not impede progress on NASA's
other important programs such as the Reusable Launch Vehicle, commonly
referred to as the RLV.
During the past year Congress has expressed its grave concerns about
the alleged illegal transfers of U.S. missile technology to China and
other nondemocratic nations. Yet, neither the

[[Page S1152]]

transferring of licensing control from the Commerce Department back to
State, nor an embargo on foreign launches will solve the underlying
issues which result in American companies choosing foreign launch
sites. Additional work is needed to substantially change the current
environment for the domestic commercial launch industry.
What the community needs is cheaper access to space including less
expensive vehicles, launching costs, and insurance. The X-33, a joint
venture between NASA and private industry, and X-34 programs are
examples of promising flight demonstrators which will lead the path to
stimulating the industry.
Mr. President, we are at a unique juncture in the history of space
discovery. I urge my colleagues to support this legislation, and to
help restore Congressional confidence in NASA and the Nation's valuable
space program.
______

By Mr. CRAIG:
S. 341. A bill to amend the Internal Revenue Code of 1986 to increase
the amount allowable for qualified adoption expenses, to permanently
extend the credit for adoption expenses, and to adjust the limitations
on such credit for inflation, and for other purposes; to the Committee
on Finance.

HOPE FOR CHILDREN ACT

Mr. CRAIG. Mr. President, I rise to introduce the Hope for Children
Act, which is also being introduced today in the House of
Representatives by Congressman Tom Bliley of Virginia.
I think all of us--no matter what party or philosophy--share the hope
that every child in the world has a loving, permanent home. The Hope
for Children Act is aimed at making that hope a reality for more
children, by making it possible for more families to open their homes
and hearts to a child through adoption.
In the past few years, Congress has taken a number of steps to
promote adoption in this country. I commend my colleagues on both sides
of the aisle and in both chambers for their dedication to this effort.
As an adoptive father myself, and co-chair of the bipartisan, bicameral
Congressional Coalition on Adoption, I've been pleased to see more and
more American families formed through adoption, and I sincerely believe
the work of Congress has been a contributing factor.
However, we have some unfinished business to take care of, and that's
what I'm here to talk about today.
Many of my colleagues will remember back in 1996, we succeeded in
enacting a tax credit for adoption expenses. We did so, because we
realized that adopting families face extraordinary challenges: not only
must they forge a new family unit while navigating a labyrinth of legal
or regulatory requirements, but they also have financial challenges
above and beyond the usual expenses of caring for and raising children.
The cost of adoption can easily push into the tens of thousands of
dollars, counting legal fees, travel, medical bills and other expenses.
All too often, it is the financial challenge that becomes an
insurmountable obstacle to bringing a child who is alone in the world
together with a loving family.
We knew the adoption tax credit wouldn't eliminate the expense of
adoption outright, but would only allow eligible adoptive families to
keep a bit more of their own hard-earned income to devote to those
expenses. As a result, adoptive parents may be eligible to receive a
tax credit of $5000 to help cover out-of-pocket expenses related to
each adoption, or a $6000 tax credit for the adoption of a ``special
needs'' child.
If the comments I've been hearing from families across the nation are
any gauge, the credit has helped make adoption a reality for a lot of
children. As more individuals explore the adoption option, they are
finding the credit a small but significant cushion against the
financial impact. Even so, I've received a number of constructive
suggestions from families as to how the adoption tax credit could be
improved, to make it more effective in promoting adoption in the United
States.
Furthermore, back in 1996 when we originally debated this matter,
there were political and fiscal considerations that caused Congress to
include a sunset provision for the adoption tax credit. Unless we act
soon to extend this enormously helpful tool, it will expire.
For all of those reasons, I am introducing the Hope for Children Act.
It builds on the work done by our previous Congress, to improve and
extend the adoption tax credit.
Specifically, it would make the tax credit permanent, and adjust it
for inflation. It would also exclude the credit from calculation of the
alternative minimum tax. The full credit would be available for
taxpayers with adjusted gross incomes under $150,000; those with
adjusted gross incomes between $150,000 and $190,000 would be able to
take a reduced credit. No credit would be available to those with
adjusted gross incomes of more than $190,000.
I should say at this point that I do not think this bill is the final
word on the subject. I intend to work with interested groups and
individuals on additional legislation that will promote adoption--
perhaps most important, that will do more to promote the adoption of
children with special needs.
There are so many children in the United States and the world who can
only hope for the loving, permanent home that should be their
birthright--I invite all Senators to join me in supporting the Hope for
Children Act to help make their dreams a reality.
Mr. President, I ask unanimous consent that a copy of the bill be
printed in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:

S. 341

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Hope for Children Act''.

SEC. 2. ADOPTION EXPENSES.

(a) Increase in Amounts Allowed.--
(1) Dollar amount of allowed expenses.--Paragraph (1) of
section 23(b) of the Internal Revenue Code of 1986 (relating
to dollar limitation) is amended by striking ``$5,000'' and
all that follows and inserting ``$10,000.''.
(2) Phase-out limitation.--Clause (i) of section
23(b)(2)(A) of such Code (relating to income limitation) is
amended by striking ``$75,000'' and inserting ``$150,000''.
(b) Repeal of Sunset on Children Without Special Needs.--
(1) In general.--Paragraph (2) of section 23(d) of such
Code (relating to definition of eligible child) is amended to
read as follows:
``(2) Eligible child.--The term `eligible child' means any
individual who--
``(A) has not attained age 18, or
``(B) is physically or mentally incapable of caring for
himself.''.
(2) Conforming amendment.--Subsection (d) of section 23 of
such Code (relating to definitions) is amended by striking
paragraph (3).
(c) Adjustment of Dollar and Income Limitations For
Inflation.--Section 23 of such Code is amended by
redesignating subsection (h) as subsection (i) and by
inserting after subsection (g) the following new subsection:
``(h) Adjustments for Inflation.--In the case of a taxable
year beginning after December 31, 2000, each of the dollar
amounts in paragraphs (1) and (2)(A)(i) of subsection (b)
shall be increased by an amount equal to--
``(1) such dollar amount, multiplied by
``(2) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 1999'
for `calendar year 1992' in subparagraph (B) thereof.''.
(d) Limitation Based on Amount of Tax.--
(1) In general.--Subsection (c) of section 23 of such Code
is amended by striking ``the limitation imposed'' and all
that follows through ``1400C)'' and inserting ``the
applicable tax limitation''.
(2) Applicable tax limitation.--Subsection (d) of section
23 of such Code (as amended by subsection (b)) is further
amended adding at the end the following new paragraph:
``(3) Applicable tax limitation.--The term `applicable tax
limitation' means the sum of--
``(A) the taxpayer's regular tax liability for the taxable
year, reduced (but not below zero) by the sum of the credits
allowed by sections 21, 22, 24 (other than the amount of the
increase under subsection (d) thereof), 25, and 25A, and
``(B) the tax imposed by section 55 for such taxable
year.''.
(3) Conforming amendments.--
(A) Subsection (a) of section 26 of such Code (relating to
limitation based on amount of tax) is amended by inserting
``(other than section 23)'' after ``allowed by this
subpart''.
(B) Paragraph (1) of section 53(b) of such Code (relating
to minimum tax credit) is amended by inserting ``reduced by
the aggregate amount taken into account under section
23(d)(3)(B) for all such prior taxable years,'' after
``1986,''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1998.

[[Page S1153]]

______

By Mr. BOND (for himself, Mr. Burns, Ms. Snowe, Mr. Enzi, Mr.
Coverdell, Mr. Hagel, Mr. Kyl, Mr. Craig, Mr. Inhofe, Mr.
Helms, Ms. Collins, Mr. Specter, Mr. Jeffords, Mr. Roberts, and
Mr. Hutchinson):
S. 343. A bill to amend the Internal Revenue Code of 1986 to allow a
deduction for 100 percent of the health insurance costs of self-
employed individuals; to the Committee on Finance.

self-employed health insurance fairness act of 1999

______

By Mr. BOND (for himself, Mr. Nickles, Ms. Snowe, Mr. Coverdell,
Mr. Bennett, and Mr. Cochran):
S. 344. A bill to amend the Internal Revenue Code of 1986 to provide
a safe harbor for determining that certain individuals are not
employees; to the Committee on Finance.

independent contractor simplification and relief act of 1999

Mr. BOND. Mr. President, small businesses today face enormous burdens
when it comes to taxes. Each year they pay a growing portion of their
revenues on income, employment, and excise taxes. Yet even before they
write the tax check, they spend more than 5% of their revenues just to
comply with the tax laws. These revenues are spent on accountants,
bookkeepers, and lawyers to sort out the countless pages of tax laws,
regulations, forms, instructions, rulings, and other guidance published
by the IRS. In addition, small business owners must dedicate valuable
time and energy on day-to-day recordkeeping and other compliance
requirements, all of which keep them from doing what they do best--
running their business.

As the Chairman of the Committee on Small Business, I have heard from
small business owners in Missouri and across this country that they are
more than willing to pay their fair share of taxes. But what they
object to is paying high tax bills and vast amounts for professional
tax assistance only to end up the victim of an unfair tax code.
Mr. President, I rise today to introduce legislation that will
eliminate two major sources of that unfairness and provide a level
playing field for the millions of men and women who work exceedingly
hard to make their small enterprises a success. These bills are common-
sense measures that respond to the calls from small businesses for tax
fairness and simplicity.
My first bill, the ``Self-Employed Health Insurance Fairness Act of
1999,'' will end one of the most glaring inequities that has existed in
our tax law--the deductibility of health-insurance costs for the self-
employed. For nearly five years, I have been working to see that the
self-employed receive equal treatment when it comes to the
deductibility of health insurance.
During the 105th Congress, we made substantial progress. First, in
the Taxpayer Relief Act of 1997, we broke through the long-standing cap
on the deduction to provide 100% deductibility. Then, last Fall, we
passed legislation that will speed up the date that self-employed
persons can fully deduct their health-insurance costs to 2003. We also
significantly increased the deductible amounts in the intervening years
over the prior law. While I strongly supported these improvements, the
self-employed still cannot wait four more years for 100% deductibility
when their large corporate competitors have long been able to deduct
such costs in full.
With the self-employed able to deduct only 60% of their health-
insurance costs today, it comes as no surprise that nearly a quarter of
the self-employed still do not have health insurance. In fact, five
million Americans live in families headed by a self-employed individual
and have no health insurance. And those families include 1.3 million
children who lack adequate health-insurance coverage.
Mr. President, it is time to finish the job once and for all in this
Congress. My bill will increase the deductibility of health insurance
for the self-employed to 100% beginning this year. A full deduction
will make health insurance more affordable to the self-employed and
help them and their families get the health insurance coverage that
they need and deserve.
The ``Self-Employed Health Insurance Fairness Act'' also corrects
another inequity in the tax law affecting the self-employed who try to
provide health insurance for themselves, their families, and their
employees. Under current law, the self-employed lose all of the health-
insurance deduction if they are eligible to participate in another
health-insurance plan--whether or not they actually participate.
This provision affects self-employed individuals like Steve Hagan in
my hometown of Mexico, Missouri. Mr. Hagan is a financial planner who
runs his own small business. Although he has a group medical plan for
his employees, Mr. Hagan cannot deduct the cost of covering himself or
his family simply because his wife is eligible for health insurance
through her employer. The inequity is clear. Why should he be able to
deduct the insurance costs for his employees but not for himself and
his family? What if the insurance available through his wife's employer
does not meet the needs of their family?
Besides being patently unfair, this is also an enormous trap for the
unwary. Imagine the small business owner who learns that she can now
deduct 60% of her health-insurance costs this year, and with the extra
deduction, she can finally afford a group medical plan for herself and
her employees. Then later in the year, her husband gets a new job that
offers health insurance. Suddenly, her self-employed health-insurance
deduction is gone, and she is left with two choices. She can bear the
entire cost of her family's coverage, or terminate the insurance
coverage for all her employees. The tax code should not force small
business owners into this kind of ``no win'' situation when they try to
provide insurance coverage for their employees and themselves.
My bill eliminates this problem by clarifying that the self-employed
health-insurance deduction is limited only if the self-employed person
actually participates in a subsidized health insurance plan offered by
a spouse's employer or through a second job. It's simply a matter of
fairness, and a step we need to take now.
The second bill that I introduce today is the ``Independent
Contractor Simplification and Relief Act of 1999.'' This bill will
provide clear rules and relief for entrepreneurs seeking to be treated
as independent contractors and for businesses needing to use
independent contractors. As the Chairman of the Small Business
Committee, I have heard from countless small business owners who are
caught in the environment of fear and confusion that now surrounds the
classification of workers. This situation is stifling the
entrepreneurial spirit of many small business owners who find that they
do not have the flexibility to conduct their businesses in a manner
that makes the best economic sense and that serves their personal and
family goals.
The root of this problem is found in the IRS' test for determining
whether a worker is an independent contractor or an employee. Over the
past three decades, the IRS has relied on a 20-factor test based on the
common law to make this determination. On first blush, a 20-factor test
sounds like a reasonable approach--if a taxpayer demonstrates a
majority of the factors, he is an independent contractor. Not
surprisingly, the IRS' test is not that simple. It is a complex set of
extremely subjective criteria with no clear weight assigned to any of
the factors. As a result, small business taxpayers are not able to
predict which of the 20 factors will be most important to a particular
IRS agent, and finding a certain number of these factors in any given
case does not guarantee the outcome.
To make matters worse, the IRS' determination inevitably occurs two
or three years after the parties have determined in good faith that
they have an independent-contractor relationship. And the consequences
can be devastating. The business recipient of the services is forced to
reclassify the independent contractor as an employee and must pay the
payroll taxes the IRS says should have been collected in the prior
years. Interest and penalties are also piled on. The result for many
small businesses is a tax bill that bankrupts the company. But that's
not the end of the story. The IRS then goes after the service provider,
who is now classified as an employee, and disallows a portion of her
business expenses--again resulting in additional taxes, interest and
penalties.
Mr. President, all of us in this body recognize that the IRS is
charged with

[[Page S1154]]

the duty of collecting Federal revenues and enforcing the tax laws. The
problem in this case is that the IRS is using a procedure that is
patently unfair and subjective. And the result is that businesses must
spend thousands of dollars on lawyers and accountants to try to satisfy
the IRS' procedures, but with no certainty that the conclusions will be
respected. That's no way for businesses to operate in today's rapidly
changing economy.
For its part, the IRS has adopted a worker classification training
manual, which according to the agency is an ``attempt to identify,
simplify, and clarify the relevant facts that should be evaluated in
order to accurately determine worker classification * * *.'' There can
be no more compelling reason for immediate action on this issue. The
IRS' training manual is more than 150 pages. If it takes that many
pages to teach revenue agents how to ``simplify and clarify'' this
small business tax issue, I think we can be sure how simple and clear
it is going to seem to taxpayers who try to figure it out on their own.
The ``Independent Contractor Simplification and Relief Act'' is based
on the provisions of my Home-Based Business Fairness Act, which I
introduced at the start of the 105th Congress. My bill removes the need
for so many pages of instruction on the 20-factor test by establishing
clear rules for classifying workers based on objective criteria. Under
these criteria, if there is a written agreement between the parties,
and if an individual demonstrates economic independence and
independence with respect to the workplace, he will be treated as an
independent contractor rather than an employee. And the service
recipient will not be treated as an employer. In addition, individuals
who perform services through their own corporation or limited
liability company will also qualify as independent contractors as long
as there is a written agreement and the individuals provide for their
own benefits.

The safe harbor is simple, straightforward, and final. To take
advantage of it, payments above $600 per year to an individual service
provider must be reported to the IRS, just as is required under current
law. This will help ensure that taxes properly due to the Treasury will
continue to be collected.
Mr. President, the IRS contends that there are millions of
independent contractors who should be classified as employees, which
costs the Federal government billions of dollars a year. This assertion
is plainly incorrect. Classification of a worker has no cost to the
government. What costs the government are taxpayers who do not pay
their taxes. My bill has three requirements that I believe will improve
compliance among independent contractors using the new rules I propose.
First, there must be a written agreement between the parties--this will
put the independent contractor on notice at the beginning that he is
responsible for his own tax payments. Second, the new rules will not
apply if the service recipient does not comply with the reporting
requirements and issue 1099s to individuals who perform services.
Third, an independent contractor operating through his own corporation
or limited liability company must file all required income and
employment tax returns in order to be protected under the bill.
In the last Congress, concerns were raised that permitting
individuals who provide their services through their own corporation or
limited liability company to qualify as independent contractors would
lead to abusive situations at the expense of workers who should be
treated as employees. To prevent this option from being abused, I have
added language that limits the number of former employees that a
service recipient may engage as independent contractors under the
incorporation option. This limit will protect against misuse of the
incorporation option while still allowing individuals to start their
own businesses and have a former employer as one of their initial
clients.
Another major concern of many businesses and independent contractors
is the issue of reclassification. My bill provides relief to these
taxpayers when the IRS determines that a worker was misclassified.
Under my bill, if the business and the independent contractor have a
written agreement, if the applicable reporting requirements were met,
and if there was a reasonable basis for the parties to believe that the
worker is an independent contractor, then an IRS reclassification will
only apply prospectively. This provision gives important peace of mind
to small businesses that act in good faith by removing the
unpredictable threat of retroactive reclassification and substantial
interest and penalties.
A final provision of this legislation, Mr. President, is the repeal
of section 1706 of the 1986 Tax Reform Act. This section affects
businesses that engage technical service providers, such as engineers,
designers, drafters, computer programmers, and systems analysts. In
certain cases, Section 1706 precludes these businesses from applying
the reclassification protections under section 530 of the Revenue Act
of 1978. When section 1706 was enacted, its proponents argued that
technical service workers were less compliant in paying their taxes.
Later examination of this issue by the Treasury Department found that
technical service workers are in fact more likely to pay their taxes
than most other types of independent contractors. This revelation
underscores the need to repeal section 1706 and level the playing field
for individuals in these professions.

In the last two Congresses, proposals to repeal section 1706 enjoyed
wide bipartisan support. The bill I introduce today is designed to
level the playing field for individuals in these professions by
providing the businesses that engage them with the same protections
that businesses using other types of independent contractors have
enjoyed for more than 20 years.
Mr. President, the bills I introduce today are common-sense measures
that answer small business' urgent plea for fairness and simplicity in
the tax law. As we work toward the day when the entire tax law is based
on these principles, we can make a difference today by enacting these
two bills. Entrepreneurs have waited too long--let's get the job done!
Mr. President, I ask unanimous consent to include in the Record a
copy of each bill and a description of its provisions.
There being no objection, the items were ordered to be printed in the
Record, as follows:

S. 343

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Self-Employed Health
Insurance Fairness Act of 1999''.

SEC. 2. DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED
INDIVIDUALS INCREASED.

(a) In General.--Section 162(l)(1) of the Internal Revenue
Code of 1986 (relating to special rules for health insurance
costs of self-employed individuals) is amended to read as
follows:
``(1) Allowance of deduction.--In the case of an individual
who is an employee within the meaning of section 401(c)(1),
there shall be allowed as a deduction under this section an
amount equal to the amount paid during the taxable year for
insurance which constitutes medical care for the taxpayer,
the taxpayer's spouse, and dependents.''
(b) Clarification of Limitations on Other Coverage.--The
first sentence of section 162(l)(2)(B) of the Internal
Revenue Code of 1986 is amended to read as follows:
``Paragraph (1) shall not apply to any taxpayer for any
calendar month for which the taxpayer participates in any
subsidized health plan maintained by any employer (other than
an employer described in section 401(c)(4)) of the taxpayer
or the spouse of the taxpayer.''
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1998.
____

Self-Employed Health Insurance Fairness Act of 1999--Description of
Provisions

The bill amends section 162(l)(1) of the Internal Revenue
Code to increase the deduction for health-insurance costs for
self-employed individuals to 100% beginning on January 1,
1999. Currently the self-employed can only deduct 60% percent
of these costs. The deduction is not scheduled to reach 100%
until 2003, under the provisions of the Omnibus Consolidated
and Emergency Supplemental Appropriations Act of 1998, which
was signed into law in October 1998. The bill is designed to
place self-employed individuals on an equal footing with
large businesses, which can currently deduct 100% of the
health-insurance costs for all of their employees.
The bill also corrects a disparity under current law that
bars a self-employed individual from deducting any of his or
her health-insurance costs if the individual is eligible to
participate in another health-insurance plan. This provision
affects self-employed individuals who are eligible for, but

[[Page S1155]]

do not participate in, a health-insurance plan offered
through a second job or through a spouse's employer. That
insurance plan may not be adequate for the self-employed
business owner, and this provision prevents the self-employed
from deducting the costs of insurance policies that do meet
the specific needs of their families. In addition, this
provision provides a significant disincentive for self-
employed business owners to provide group health insurance
for their employees. The bill ends this disparity by
clarifying that a self-employed person loses the deduction
only if he or she actually participates in another health-
insurance plan.
____

S. 344

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Independent Contractor
Simplification and Relief Act of 1999''.

SEC. 2. SAFE HARBOR FOR DETERMINING THAT CERTAIN INDIVIDUALS
ARE NOT EMPLOYEES.

(a) In General.--Chapter 25 (relating to general provisions
relating to employment taxes) is amended by adding after
section 3510 the following new section:

``SEC. 3511. SAFE HARBOR FOR DETERMINING THAT CERTAIN
INDIVIDUALS ARE NOT EMPLOYEES.

``(a) Safe Harbor.--
``(1) In general.--For purposes of this title, if the
requirements of subsections (b), (c), and (d), or the
requirements of subsections (d) and (e), are met with respect
to any service performed by any individual, then with respect
to such service--
``(A) the service provider shall not be treated as an
employee,
``(B) the service recipient shall not be treated as an
employer,
``(C) the payor shall not be treated as an employer, and
``(D) compensation paid or received for such service shall
not be treated as paid or received with respect to
employment.
``(2) Availability of safe harbor not to limit application
of other laws.--Nothing in this section shall be construed--
``(A) as limiting the ability of a service provider,
service recipient, or payor to apply other provisions of this
title, section 530 of the Revenue Act of 1978, or the common
law in determining whether an individual is not an employee,
or
``(B) as a prerequisite for the application of any
provision of law described in subparagraph (A).
``(b) Service Provider Requirements With Regard to the
Service Recipient.--For purposes of subsection (a), the
requirements of this subsection are met if the service
provider, in connection with performing the service--
``(1) has the ability to realize a profit or loss,
``(2) agrees to perform services for a particular amount of
time or to complete a specific result or task, and
``(3) either--
``(A) incurs unreimbursed expenses which are ordinary and
necessary to the service provider's industry and which
represent an amount equal to at least 2 percent of the
service provider's adjusted gross income attributable to
services performed pursuant to 1 or more contracts described
in subsection (d), or
``(B) has a significant investment in assets.
``(c) Additional Service Provider Requirements With Regard
to Others.--For the purposes of subsection (a), the
requirements of this subsection are met if the service
provider--
``(1) has a principal place of business,
``(2) does not primarily provide the service at a single
service recipient's facilities,
``(3) pays a fair market rent for use of the service
recipient's facilities, or
``(4) operates primarily from equipment not supplied by the
service recipient.
``(d) Written Document Requirements.--For purposes of
subsection (a), the requirements of this subsection are met
if the services performed by the service provider are
performed pursuant to a written contract between such service
provider and the service recipient, or the payor, and such
contract provides that the service provider will not be
treated as an employee with respect to such services for
Federal tax purposes and that the service provider is
responsible for the provider's own Federal, State, and local
income taxes, including self-employment taxes and any other
taxes.
``(e) Business Structure and Benefits Requirements.--For
purposes of subsection (a), the requirements of this
subsection are met if the service provider--
``(1) conducts business as a properly constituted
corporation or limited liability company under applicable
State laws, and
``(2) does not receive from the service recipient or payor
any benefits that are provided to employees of the service
recipient.
``(f) Special Rules.--For purposes of this section--
``(1) Failure to meet reporting requirements.--If for any
taxable year any service recipient or payor fails to meet the
applicable reporting requirements of section 6041(a) or
6041A(a) with respect to a service provider, then, unless the
failure is due to reasonable cause and not willful neglect,
the safe harbor provided by this section for determining
whether individuals are not employees shall not apply to such
service recipient or payor with respect to that service
provider.
``(2) Corporation and limited liability company service
providers.--
``(A) Returns required.--If, for any taxable year, any
corporation or limited liability company fails to file all
Federal income and employment tax returns required under this
title, unless the failure is due to reasonable cause and not
willful neglect, subsection (e) shall not apply to such
corporation or limited liability company.
``(B) Reliance by service recipient or payor.--If a service
recipient or a payor--
``(i) obtains a written statement from a service provider
which states that the service provider is a properly
constituted corporation or limited liability company,
provides the State (or in the case of a foreign entity, the
country), and year of, incorporation or formation, provides a
mailing address, and includes the service provider's employer
identification number, and
``(ii) makes all payments attributable to services
performed pursuant to 1 or more contracts described in
subsection (d) to such corporation or limited liability
company,
then the requirements of subsection (e)(1) shall be deemed to
have been satisfied.
``(C) Availability of safe harbor.--
``(i) In general.--For purposes of this section, unless
otherwise established to the satisfaction of the Secretary,
the number of covered workers which are not treated as
employees by reason of subsection (e) for any calendar year
shall not exceed the threshold number for the calendar year.
``(ii) Threshold number.--For purposes of this paragraph,
the term `threshold number' means, for any calendar year, the
greater of (I) 10 covered workers, or (II) a number equal to
3 percent of covered workers.
``(iii) Covered worker.--For purposes of this paragraph,
the term `covered worker' means an individual for whom the
service recipient or payor paid employment taxes under
subtitle C in all 4 quarters of the preceding calendar year.
``(3) Burden of proof.--For purposes of subsection (a),
if--
``(A) a service provider, service recipient, or payor
establishes a prima facie case that it was reasonable not to
treat a service provider as an employee for purposes of this
section, and
``(B) the service provider, service recipient, or payor has
fully cooperated with reasonable requests from the Secretary
or his delegate,

then the burden of proof with respect to such treatment shall
be on the Secretary.
``(4) Related entities.--If the service provider is
performing services through an entity owned in whole or in
part by such service provider, the references to service
provider in subsections (b) through (e) shall include such
entity if the written contract referred to in subsection (d)
is with such entity.
``(g) Determinations by the Secretary.--For purposes of
this title--
``(1) In general.--
``(A) Determinations with respect to a service recipient or
a payor.--A determination by the Secretary that a service
recipient or a payor should have treated a service provider
as an employee shall be effective no earlier than the notice
date if--
``(i) the service recipient or the payor entered into a
written contract satisfying the requirements of subsection
(d),
``(ii) the service recipient or the payor satisfied the
applicable reporting requirements of section 6041(a) or
6041A(a) for all taxable years covered by the contract
described in clause (i), and
``(iii) the service recipient or the payor demonstrates a
reasonable basis for determining that the service provider is
not an employee and that such determination was made in good
faith.
``(B) Determinations with respect to a service provider.--A
determination by the Secretary that a service provider should
have been treated as an employee shall be effective no
earlier than the notice date if--
``(i) the service provider entered into a contract
satisfying the requirements of subsection (d),
``(ii) the service provider satisfied the applicable
reporting requirements of sections 6012(a) and 6017 for all
taxable years covered by the contract described in clause
(i), and
``(iii) the service provider demonstrates a reasonable
basis for determining that the service provider is not an
employee and that such determination was made in good faith.
``(C) Reasonable cause exception.--The requirements of
subparagraph (A)(ii) or (B)(ii) shall be treated as being met
if the failure to satisfy the applicable reporting
requirements is due to reasonable cause and not willful
neglect.
``(2) Construction.--Nothing in this subsection shall be
construed as limiting any provision of law that provides an
opportunity for administrative or judicial review of a
determination by the Secretary.
``(3) Notice date.--For purposes of this subsection, the
notice date is the 30th day after the earlier of--
``(A) the date on which the first letter of proposed
deficiency that allows the service provider, the service
recipient, or the payor an opportunity for administrative
review in the Internal Revenue Service Office of Appeals is
sent, or
``(B) the date on which the deficiency notice under section
6212 is sent.
``(h) Definitions.--For the purposes of this section--

[[Page S1156]]

``(1) Service provider.--The term `service provider' means
any individual who performs a service for another person.
``(2) Service recipient.--Except as provided in paragraph
(4), the term `service recipient' means the person for whom
the service provider performs such service.
``(3) Payor.--Except as provided in paragraph (4), the term
`payor' means the person who pays the service provider for
the performance of such service in the event that the service
recipient does not pay the service provider.
``(4) Exceptions.--The terms `service recipient' and
`payor' do not include any entity in which the service
provider owns in excess of 5 percent of--
``(A) in the case of a corporation, the total combined
voting power of stock in the corporation, or
``(B) in the case of an entity other than a corporation,
the profits or beneficial interests in the entity.
``(5) In connection with performing the service.--The term
`in connection with performing the service' means in
connection or related to the operation of the service
provider's trade or business.
``(6) Principal place of business.--For purposes of
subsection (c), the term `principal place of business' has
the same meaning as under section 280A(c)(1) (as in effect
for taxable years beginning after December 31, 1998).
``(7) Fair market rent.--The term `fair market rent' means
a periodic, fixed minimum rental fee which is based on the
fair rental value of the facilities and is established
pursuant to a written contract with terms similar to those
offered to unrelated persons for facilities of similar type
and quality.''
(b) Repeal of Section 530(d) of the Revenue Act of 1978.--
Section 530(d) of the Revenue Act of 1978 (as added by
section 1706 of the Tax Reform Act of 1986) is repealed.
(c) Clerical Amendment.--The table of sections for chapter
25 of the Internal Revenue Code of 1986 is amended by adding
at the end the following new item:

``Sec. 3511. Safe harbor for determining that certain individuals are
not employees.''

(d) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to services performed after the date of the enactment
of this Act.
(2) Determinations by the secretary.--Section 3511(g) of
the Internal Revenue Code of 1986 (as added by subsection
(a)) shall apply to determinations after the date of the
enactment of this Act.
(3) Section 530(d).--The amendment made by subsection (b)
shall apply to periods ending after the date of the enactment
of this Act.
____

Independent Contractor Simplification and Relief Act of 1999--
Description of Provisions

The bill addresses the worker-classification issue (e.g.,
whether a worker is an employee or an independent contractor)
by creating a new section 3511 of the Internal Revenue Code.
The new section will provide straightforward rules for
classifying workers and provide relief from the IRS'
reclassification of an independent contractor in certain
circumstances. The bill is designed to provide certainty for
businesses that enter into independent-contractor
relationships and minimize the risk of huge tax bills for
back taxes, interest, and penalties if a worker is
misclassified after the parties have entered into an
independent-contractor relationship in good faith.

Clear Rules for Worker Classification

Under the bill's new worker-classification rules, an
individual will be treated as an independent contractor and
the service recipient will not be treated as an employer if
either of two tests is met--the ``general test'' or the
``incorporation test.''
General Test: The general test requires that the
independent contractor demonstrate economic independence and
workplace independence and have a written contract with the
service recipient.
Economic independence exists if the independent contractor
has the ability to realize a profit or loss and agrees to
perform services for a particular amount of time or to
complete a specific result or task. In addition, the
independent contractor must either incur unreimbursed
expenses that are consistent with industry practice and that
equal at least 2% of the independent contractor's adjusted
gross income from the performance of services during the
taxable year, or have a significant investment in the assets
of his or her business.
Workplace independence exists if one of the following
applies: the independent contractor has a principal place of
business (including a ``home office'' as expanded by the
Taxpayer Relief Act of 1997); he or she performs services at
more than one service recipient's facilities; he or she pays
a fair-market rent for the use of the service recipient's
facilities; or the independent contractor uses his or her own
equipment.
The written contract between the independent contractor and
the service recipient must provide that the independent
contractor will not be treated as an employee and is
responsible for his or her own taxes.
Incorporation Test: Under this test, an individual will be
treated as an independent contractor if he or she conducts
business through a corporation or a limited liability
company. In addition, the independent contractor must be
responsible for his or her own benefits, instead of receiving
benefits from the service recipient. The independent
contractor must also have a written contract with the service
provider stating that the independent contractor will not be
treated as an employee and is responsible for his or her own
taxes.
To prevent the incorporation test from being abused, the
bill limits the number of former employees that a service
recipient may engage as independent contractors under this
test. The limitation is based on the number of people
employed by the service recipient in the preceding year and
is equal to the greater of 10 persons or 3% of the service
recipient's employees in the preceding year. For example,
Business X has 500 employees in 1998. In 1999 up to 15
employees (the greater of 3% of Business X's 1998 employees
or 10 individuals) could incorporate their own businesses and
still have Business X as one of their initial clients. This
limitation would not affect the number of incorporated
independent contractors who were not former employees of the
service recipient or independent contractors meeting the
general test.
Additional Provisions: The new worker-classification rules
also apply to three-party situations in which the independent
contractor is paid by a third party, such as a payroll
company, rather than directly by the service recipient. The
new worker-classification rules, however, will not apply to a
service recipient or a third-party payor if they do not
comply with the existing reporting requirements and file
1099s for individuals who work as independent contractors. A
limited exception is provided for cases in which the failure
to file a 1099 is due to reasonable cause and not willful
neglect.
New Worker-Classification Rules Do Not Replace Other
Options: In the event that the new worker-classification
rules do not apply, the bill makes clear that the independent
contractor or service recipient can still rely on the 20-
factor common law test or other provisions of the Internal
Revenue Code applicable in determining whether an individual
is an independent contractor or employee. In addition, the
bill does not limit any relief to which a taxpayer may be
entitled under Section 530 of the Revenue Act of 1978. The
bill also makes clear that the new rules will not be
construed as a prerequisite for these other provisions of the
law.

Relief From Reclassification

The bill provides relief from reclassification by the IRS
of an independent contractor as an employee. For many service
recipients who make a good-faith effort to classify the
worker correctly, this event can result in extensive
liability for back employment taxes, interest, and penalties.
Relief Under the New Worker-Classification Rules: The bill
provides relief for cases in which a worker is treated as an
independent contractor under the new worker-classification
rules and the IRS later contends that the new rules do not
apply. In that case, the burden of proof will fall on the
IRS, rather than the taxpayer, to prove that the new worker-
classification rules do not apply. To qualify for this relief
the taxpayer must demonstrate a credible argument that it was
reasonable to treat the service provider as an independent
contractor under the new rules, and the taxpayer must fully
cooperate with reasonable requests from the IRS.
Protection Against Retroactive Reclassification: If the IRS
notifies a service recipient that an independent contractor
should have been classified as an employee (under the new or
old rules), the bill provides that the IRS' determination can
become effective only 30 days after the date that the IRS
sends the notification. To qualify for this provision, the
service recipient must show that:
there was a written agreement between the parties;
the service recipient satisfied the applicable reporting
requirements for all taxable years covered by the contract;
and
there was a reasonable basis for determining that the
independent contractor was not an employee and the service
provider made the determination in good faith.
The bill provides similar protection for independent
contractors who are notified by the IRS that they should have
been treated as an employee.
The protection against retroactive reclassification is
intended to remove some of the uncertainty for businesses
contracting with independent contractors, especially those
who must use the IRS's 20-factor common law test. While the
bill would prevent the IRS from forcing a service recipient
to treat an independent contractor as an employee for past
years, the bill makes clear that a service recipient or an
independent contractor can still challenge the IRS's
prospective reclassification of an independent contractor
through administrative or judicial proceedings.

Repeal of Section 1706 of the Revenue Act of 1978

The bill repeals section 530(d) of the Revenue Act of 1978,
which was added by section 1706 of the Tax Reform Act of
1986. This provision precludes businesses that engage
technical service providers (e.g., engineers, designers,
drafters, computer programmers, systems analysts, and other
similarly qualified individuals) in certain cases from
applying the reclassification protections under section 530.
The bill is designed to level the

[[Page S1157]]

playing field for individuals in these professions by
providing the businesses that engage them with the same
protections that businesses using other types of independent
contractors have enjoyed for more than 20 years.

Effective Dates

In general, the independent-contractor provisions of the
bill, including the new worker- classification rules, will be
effective for services performed after the date of enactment
of the bill. The protection against retroactive
reclassification will be effective for IRS determinations
after the date of enactment, and the repeal of section 530(d)
will be effective for periods ending after the date of
enactment of the bill.
______

By Mr. ALLARD:
S. 345. A bill to amend the Animal Welfare Act to remove the
limitation that permits interstate movement of live birds, for the
purpose of fighting, to States in which animal fighting is lawful; to
the Committee on Agriculture, Nutrition, and Forestry.

amendment to animal welfare act

Mr. ALLARD. Mr. President, today I am introducing a bill to amend the
Animal Welfare Act to remove the limitation that permits interstate
movement of live birds for the purpose of fighting to States in which
animal fighting is lawful.
Currently, the Animal Welfare Act makes it unlawful for any person to
knowingly sponsor or exhibit an animal in any animal fighting venture
to which the animal was moved in interstate or foreign commerce. This
means that if an animal crosses state lines and then fights in a state
where cockfighting is not legal, that is a crime. However, the law
further states, ``the activities prohibited by such subsections shall
be unlawful with respect to fighting ventures involving live birds only
if the fight is to take place in a State where it would be in violation
of the laws thereof.'' This means that the law applies to all animals
involved in all types of fighting--except for birds being transported
for cockfighting purposes to a state where cockfighting is still legal.
Because of the loophole, law enforcement officers have a more difficult
time prosecuting under their state cockfighting bans.
As introduced this legislation will close the loophole on
cockfighting, and prohibit interstate movement of birds for the purpose
of fighting from states where cockfighting is illegal to states where
cockfighting is legal. This legislation will clarify that possession of
fighting birds in any of the 47 states would then be illegal, as
shipping them out for cockfighting purposes would be illegal.
I believe that my colleague from states where cockfighting is illegal
will benefit from this change because it will make law enforcement
easier. I also believe that my colleagues from states or territories
where cockfighting is currently legal should not oppose this change as
it merely confines cockfighting to within that state's borders.
______

By Mrs. HUTCHISON (for herself, Mr. Graham, Mr. Voinovich, Mr.
Abraham, Mr. McConnell, Mr. McCain, Mr. Lott, Mr. Leahy, Mr.
Smith of Oregon, Mr. Gorton, Mrs. Murray, Mr. Allard, Mr.
Burns, Mr. Frist, Mr. Cochran, Mr. Craig, Mr. Bunning, Mr. Kyl,
Mr. Lugar, Mr. Inhofe, Mr. Hutchinson, Mr. Mack, Mrs. Lincoln,
Mr. Torricelli, Mr. Bayh, Mr. Murkowski, Mr. Gramm, and Mr.
Thompson):
S. 346. A bill to amend title XIX of the Social Security Act to
prohibit the recoupment of funds recovered by States from one or more
tobacco manufacturers; to the Committee on Finance.

states rights protection act of 1999

Mrs. HUTCHISON. Mr. President, I am pleased to introduce this bill,
along with 27 other cosponsors. The prime one is Senator Bob Graham of
Florida, who has worked very hard with me over the last year to make
sure that the State tobacco settlements which our States have worked so
hard to achieve will remain in control of the States because, in fact,
the President's budget which was just released this week assumes that
it will still seize $18.9 billion of the State tobacco settlement funds
for Medicaid recoupment. Mr. President, that is just not right, and the
bill I am introducing with Senator Graham of Florida, Senator Gorton,
and 26 others, on a bipartisan basis, will keep that from happening.
The bill is strongly supported by the National Governors'
Association, the National Association of Attorneys General, the
National Conference of State Legislators, and several other groups.
I ask unanimous consent that letters of support from these groups be
printed in the Record.
There being no objection, the letters were ordered to be printed in
the Record, as follows:

National Governors Association,

Washington, DC, February 3, 1999.
Hon. Kay Bailey Hutchison,
U.S. Senate, Washington, DC.

Hon. Bob Graham,
U.S. Senate, Washington, DC.
Dear Senators Hutchison and Graham: A major priority for
the nation's Governors during the 106th Congress is ensuring
that state tobacco settlement funds are protected from
unwarranted seizure by the federal government. The Governors
believe it is critical that access to full, unencumbered
recoupment protection be afforded to all states. We are
pleased that you have introduced legislation to accomplish
this goal. Your legislation would prohibit the federal
government from attempting to recover a staggering 57% of the
entire settlement amount.
Our states' Attorneys General carefully crafted the tobacco
agreement to reflect only state costs. Medicaid costs were
not a major issue in negotiating the settlement. In fact, the
final agreement reached by the Attorneys General on November
23, 1998 does not mention Medicaid. Therefore, there is no
legitimate federal claim on the settlement.
Without the states' leadership and years of commitment to
initiating state lawsuits, the nation would not have achieved
one of its major goals--a comprehensive settlement with the
tobacco industry. After bearing all of the risks and expenses
in the arduous negotiations and litigation necessary to have
proceeded with their lawsuit, states are now entitled to all
of the funds awarded to them in the tobacco settlement
agreement without federal seizure.
We look forward to working with you and other Members of
Congress to enact this legislation and prevent federal
seizure of state tobacco settlement funds.
Sincerely,
Thomas R. Carper.
Michael O. Leavitt.
____

National Conference of

State Legislatures,

Washington, DC, February 1, 1999.
Hon. Kay Bailey Hutchison,
Russell Senate Office Building, Washington, DC.
Dear Senator Hutchison: On behalf of the National
Conference of State Legislatures (NCSL), I write in support
of bipartisan legislation that Senator Bob Graham and you
will soon introduce to ensure that states retain all of their
tobacco settlement funds. NCSL has made this legislation its
top priority for 1999. NCSL is very appreciative of the
leadership you provided on this issue during the 105th
Congress. I am grateful for your willingness to lead the way
again in 1999. The nation's state legislators will work
steadfastly with you and all of your Senate colleagues to
ensure that this legislature is enacted.
It is through the sole efforts of states that the historic
settlement of November 23, 1998 and four prior individual
state settlements were finalized. States initiated the suits
that led to the settlements without any assistance from the
federal government. States consumed their own resources and
accepted all of the risks with their suits. Additionally, the
November 23, 1998 agreement makes no mention of Medicaid,
which is the program cited by those who want to establish a
basis for seizing state tobacco settlement funds. It is clear
to me that the federal government has no claim to these
funds. I fully appreciate, however, the need for
clarification that federal legislation would provide.
As you well know, states are no finalizing the settlement,
carrying out the terms of the accord and making final fiscal
determinations about how to most responsibly apply settlement
funds to public health and other needs. Threats of recoupment
and related uncertainties only compromise our ability to
progress with finalizing the settlement and working to reduce
youth smoking, abating youth access to tobacco products and
addressing the economic impact of anticipated reduced demand
for tobacco products. Enactment of your federal legislation
would eliminate these threats and permit states to move
forward.
I look forward to working closely with you to a successful
and mutually acceptable resolution of this issue.
Sincerely,
Dan Blue,
President, North Carolina House of Representatives.
____

National Association of

Attorneys General,

Washington, DC, February 1, 1999.
Hon. Kay Bliley Hutchison,
U.S. Senate, Washington, DC.
Dear Senator Hutchison: Your support at the recent press
conference for protecting the state tobacco settlements from
seizure by the federal government was much appreciated. On
behalf of the Association, thank you for your leadership
early in the new session on this issue.

[[Page S1158]]

Building on the strong bipartisan support evidenced on
January 21, we want to continue to work with you and your
colleagues on legislation that will ensure that the states
retain all of their tobacco settlement funds. We hope this
legislation will be enacted as early as possible in the 106th
Congress.
Sincerely yours,
Christine O. Gregoire,
Attorney General of Washington.
Betty Montgomery,
Attorney General of Ohio.
____

National Association of Counties,

Washington, DC, January 27, 1999.
Hon. Kay Bailey Hutchison,
Russell Building, Washington, DC.
Dear Senator Hutchison: I am writing to let you know that
the National Association of Counties (NACo) strongly endorses
the bill to be introduced by you and Senator Bob Graham (D-
FL) that would prevent the federal recoupment of states'
tobacco settlement funds. NACo is adamantly opposed to any
attempt by the federal government to go after these funds and
applauds the introduction of this straightforward, bipartisan
legislation.
The $206 billion settlement agreed to on November 23, 1998
by the state Attorneys General and the major United States
tobacco companies settles more than 40 pending lawsuits.
These lawsuits, which were initiated by state and local
governments with no assistance, in any form, from the federal
government, were based on a variety of claims, including
consumer fraud, antitrust protections, conspiracy, and
racketeering. In addition, the state Attorneys General
negotiated the settlement to reflect only state costs and
damages. Therefore, the federal government's claim that these
settlement monies represent Medicaid funds and should be
returned to federal coffers is simply not an accurate
portrayal of the settlement agreement. The agreement does not
claim to or intend to recover Medicaid costs. Attempts by the
federal government to claim these funds would likely result
in lengthy and costly legal battles between the states and
the federal government and would not be a wise use of
government resources.
NACo applauds your efforts and those of Senator Graham to
protect these funds. We will continue to work to prevent the
federal recoupment of the states' tobacco settlement monies,
and we support this legislation.
Sincerely,
Betty Lou Ward,
President.
____

National League of Cities,

Washington, DC, February 3, 1999.
Hon. Kay Bailey Hutchison,
U.S. Senate, Washington, DC.
Dear Senator Hutchison: On behalf of 135,000 cities and
towns, I would like to express the National League of Cities'
support for the legislation you are introducing today along
with Senator Bob Graham that would prevent the federal
government from taking a portion of state tobacco settlement
revenues.
If the federal government were able to take a portion of
state settlement funds, cities and towns would bear the brunt
of this loss. This could mean that local tobacco cessation
programs and teenage smoking prevention programs would not be
funded and indigent care costs would not be compensated.
Cities and towns are often the last means of defense in
covering health care costs, particularly indigent care costs.
For example, California's cities and counties stand to
receive half of the state's share of the settlement. This
money will directly assist cities and towns in helping to pay
for health care programs and costs. Other local governments
are currently working with their state legislatures to
address uncompensated costs related to tobacco illnesses and
to address local health care needs with settlement funds.
The National League of Cities adopted a resolution at the
December 1998 Congress of Cities in Kansas City, Missouri,
that addresses municipal interests in the tobacco settlement.
A provision in the resolution states that any revenues
received by states or municipalities from any settlement with
the tobacco industry should not be required to be paid to the
federal government for Medicaid/Medicare or any other
program.
We support the legislation introduced today, and your
continued effort to protect the interest of our nation's
cities and towns.
Sincerely,
Clarence E. Anthony,
NLC President and Mayor, South Bay, FL.

Mrs. HUTCHISON. Mr. President, 46 States reached a settlement last
November which added them to the other States that already had settled
with the tobacco companies, making every State in America now in a
settlement with the tobacco companies. These States have not just
chosen to put the money that is coming in from the tobacco settlement
on Medicaid and health care issues. There are myriad State issues that
this money is going to be used for. But that is in limbo today because
the President has given notice that he is going to seize this money
from them. So everything is going to be held in abeyance until we
settle this issue once and for all.
That is what our bill will do. There is no reason--no reason
whatsoever--that we should take money from the Medicaid funds that go
to the States which provide a safety net for the millions of low-income
and disabled Americans who depend on Medicaid for their health care
needs. We cannot allow that to happen, and we will not.
I intend to work with the cosponsors of this bill to find the first
available vehicle to attach it so that we can make sure that this money
that our States have worked alone to achieve, with no help from the
Federal Government, will remain in their sole jurisdiction; that they
will be able to make the choices on what their States need and not have
dictated to them by the Federal Government what they will spend this
money for.
Many States--I was talking to Senator Abraham from the State of
Michigan, and they are going to create scholarship funds for low-income
students in Michigan, a very worthy cause. Other States are going to be
doing education to try to encourage teenagers not to smoke. We don't
want to substitute our judgment for the judgment that the States are
making for their best and most important priorities.
So I am pleased to have the 28 cosponsors of this bill. I think we
will pass it. I hope that we can do it quickly so that these States
will have the freedom to spend this money on the much needed programs
in those States.
I am happy to yield to Senator Gorton.
The PRESIDING OFFICER. The Senator from Washington.
Mr. GORTON. Mr. President, the federal government has done quite
enough to impede states efforts to recover damages from and change the
practices of tobacco manufacturers. Though they asked, the state
Attorneys General received no help from the federal government in their
litigation. When, despite this, the states in mid-1997 proposed to
settle their claims for almost $400 billion and asked the
Administration and Congress to codify the agreement, the federal
government instead blew it up by spending the states' money, and then
some, on this Administration's pet social projects. It was only through
the ingenuity, hard work, and unwavering perseverance of people like
Washington state Attorney General Christine Gregoire that states were
able to take the tobacco manufacturers back to the table in late 1998
and obtain a settlement agreement for $206 billion.
Though it did none of the work, the Administration now wants to share
in the reward. Using an old provision in the Social Security Act, a
provision that I understand was intended to permit federal Medicaid
recoupment in cases of fraud or over billing, the federal government is
now claiming over 50% of the states' settlement money. To exact what it
claims is its share, the Administration intends to withhold Medicaid
payments, payments that go to the neediest residents of Washington and
other states.
This is no idle threat: three days ago, the President sent us a
budget in which he spent $16 billion of the states' settlement money in
the next five years. The President did indicate, however, that he would
relinquish this claim to the money for one year if states agree to
spend the money as he and other Washington, D.C. bureaucrats see fit.
This is just wrong.
The bill that we are introducing today rights this wrong. It allows
states to keep the monies they fought for. No strings attached. The
federal government has not earned this money, and does not know better
than states how it should be spent. I urge my colleagues to join me and
my friends from Texas and Florida in seeing that this bill is passed
this session.
Mrs. LINCOLN. Mr. President, I rise to join my colleagues in support
of the ``States Rights Protection Act of 1999.'' I believe that states
are entitled to retain the tobacco funds that were agreed upon under
their settlement agreements.
These funds result from an historic accord reached in November 1998
between 46 states, U.S. Territories and commonwealths, the District of
Columbia, and tobacco industry representatives. State Attorneys General
worked diligently to initiate and negotiate a settlement with the
tobacco industry. States are now in the midst of finalizing the
settlement, carrying out the

[[Page S1159]]

terms of the settlement agreement and making fiscal decisions about how
to apply settlement funds to public health and other needs.
Although the U.S. Department of Health and Human Services initially
notified states in the fall of 1997 of its intention to recoup the
federal match from funds states received through the suits, citing a
provision in existing Medicaid law, it has suspended recoupment
activities. For this reason, I join my Senate colleagues in introducing
this legislation to prohibit the federal government from trying to
recoup any funds from state governments recovered from tobacco
companies as part of their tobacco settlement or from determining how
these funds should be spent.
I strongly believe that each state should have the right to determine
where this money is needed and how it is best spent. In my own state of
Arkansas, Governor Mike Huckabee has reached an agreement with the
Speaker of the Arkansas House of Representatives, Bob Johnson, the
President Pro Tempore of the Arkansas Senate, Jay Bradford, and the
Arkansas Attorney General, Mark Pryor, regarding the use of this money
solely for health-related purposes. Specifically, the settlement funds
will be used to prevent smoking by young people, to treat tobacco
related illnesses, and to establish a foundation to provide for
continued funding of these programs even when the tobacco settlement
money expires. I'm proud that my home state of Arkansas will use these
funds towards such valuable programs.
I support the Arkansas state government and all other state
governments in retaining their tobacco settlement funds and exercising
their authority to determine how the funds are spent.
Mr. GRAHAM addressed the Chair.
The PRESIDING OFFICER. The Senator from Florida.

Privilege of the Floor

Mr. GRAHAM. Mr. President, I ask unanimous consent that Mr. Matt
Barry of our staff be given floor privileges for the remainder of the
consideration of this issue during this session of the Senate.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GRAHAM. Thank you Mr. President.
Mr. President, I rise today along with Senator Hutchison and 21
original cosponsors--Republicans and Democrats--to introduce
legislation designed to prevent the federal government from seizing the
State settlement proceeds negotiated with the tobacco industry.
Just over 1 year has passed since the State of Florida received an
ominous warning from the federal government which said in essence:
``Prepare to hand over half of your money or we will be prepared to
withhold your Medicaid funds.''
This action was a slap in the face to States like Florida--a State
which spent countless hours and millions of dollars preparing to wage
war against the tobacco industry in court--with no guarantee of success
and with no assistance from anyone--including the federal
government. The State of Florida specifically asked the Federal
Government to assist us, to join in a joint lawsuit. We the States will
assume the responsibility of suing the tobacco industry for the
Medicaid and other nonspecific medical program costs. The Federal
Government will assume the responsibility for Medicare, the Veterans
Administration, and other Federal health program costs. What was the
response to that request for joint action? ``Not interested.''

In fact, only after it became clear that States were going to be
successful in their lawsuits did the federal government become
interested in the State settlements.
And so the Health Care Financing Administration sent collection
notices to States based on a twisted reading of an obscure provision in
Medicaid law--section 1903(D) of the Social Security Act.
Mr. President, I ask unanimous consent that a copy of a letter dated
November 3, 1997, from Ms. Sally K. Richardson, Director, Center for
Medicaid and State Operations to the State Medicaid director of each of
the 50 States be printed in the Record immediately after my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. GRAHAM. Mr. President, the federal government is attempting to
collect almost $19 billion over 5 years, and, presumably almost $100
billion over the 25 year settlement agreement period, based on a little
known provision in Medicaid which was never intended to apply to a
lawsuit of this magnitude or character.
The regulations interpreting the Statutory language of 1903(D) read
as follows:

Subpart F--Refunding of Federal Share of Medicaid Overpayments to
Providers

This Subpart Implements Section 1903(d)(2) (C) and (D) of
the Act, which provides that a State has 60 days from
discovery of an overpayment for Medicaid services to recover
or attempt to recover the overpayment from the provider.

The regulation then goes on to define ``overpayment'': Overpayment
means the amount paid by a Medicaid agency to a provider which is in
excess of the amount that is allowable for services furnished under
section 1902 of the act.
Mr. President, applying the provisions of this statute which was
designed to collect overpayments paid by a Medicaid State agency to a
provider, to attempt to apply this provision to the State tobacco
lawsuits is absurd. This provision was intended and has been used to
apply to billing errors made by providers.
As an example, if a State finds that a provider has over billed
Medicaid, the State collects the overpayment, then remits the
commensurate share back to the federal government.
Essentially, the federal government is stating that the revenues from
the lawsuits should be interpreted as ``overpayments'' made to medical
providers by state Medicaid agencies--that the services rendered by
these providers to Medicaid beneficiaries should not have been rendered
under the statute.
This logic is twisted and absurd.
The State lawsuits were not premised on a technical collections
process--providers overbilling Medicaid. Rather, they were premised on
the fact that the tobacco industry defrauded the taxpayer, violated the
State civil racketeering statutes, and subjected the taxpayers to
enormous smoking-related illness costs.
Further, as an example, Mr. President, the suit of the State of Iowa,
which was premised on Medicaid, was thrown out of court, but Iowa is
still 1 of the 46 States which will receive their share of the proceeds
under the nationwide settlement.
How could the Federal Government lay any claim to Iowa's proceeds
based on the overpayment provision in Medicaid since the court had
specifically thrown out its suit based on Medicaid? The answer is, it
cannot.
The legislation that Senator Hutchison and my colleagues are
introducing today is simple. It clarifies that the overpayment
provision does not apply to either the comprehensive settlement agreed
to in November of 1998, nor does it apply to any of the State
settlements agreed to prior to the comprehensive settlement.
Here is what the bill will do. It will prevent the Federal Government
from stifling important bipartisan public health initiatives which will
be paid for through the settlements.
In my State of Florida, for instance, our former colleague and good
friend, Democratic Governor Lawton Chiles, provided health insurance to
over 250,000 previously uninsured poor children. Just 2 weeks ago,
Florida's new Governor, Republican Jeb Bush, announced the
establishment of a $2 billion endowment fund which will be named in
honor of Governor Chiles. This fund will assure that the tobacco funds
will be used exclusively for children's health, child welfare, and
seniors' health programs.
Mr. President, as you know, Florida is not unique. Other States will
be just as innovative and be held to just as high standards of
accountability by their citizens for the use of these tobacco
settlement funds. It is important that States be given the green light
to move forward on important public health initiatives and to do so as
soon as possible. If we do not pass this legislation, funds that could
otherwise be spent on improving America's health will be tied up in
litigation between States and the Federal Government for the
foreseeable future.
So I urge my colleagues to join us in this effort, to support this
legislation,

[[Page S1160]]

and I urge that it be adopted by this Senate and by the Congress and
signed by the President of the United States at the earliest possible
date.

Exhibit 1

Center for Medicaid and

State Operations,

November 3, 1997.
Dear State Medicaid Director: A number of States have
settled suits against one or more tobacco companies to recoup
costs incurred in treating tobacco-related illnesses. This
letter describes the proper accounting and reporting for
Federal Medicaid purposes of amounts received from such
settlements that are subject to Section 1903(d) of the Social
Security Act.
As described in the statute, States must allocate from the
amount of any Medicaid-related expenditure recovery ``the
pro-rata share to which the United States (Federal
government) is equitably entitled.'' As with any recovery
related to a Medicaid expenditure, payments received should
be reported on the Quarterly Statement of Expenditures for
the Medicaid Assistance Program (HCFA-64) for the quarter in
which they are received. Specifically, these receipts should
be reported on the Form HCFA-64 Summary Sheet, Line 9E. This
line is reserved for special collections. The Federal share
should be calculated using the current Federal Medicaid
Assistance Percentage. Please note that settlement payments
represent a credit applicable to the Medicaid program whether
or not the monies are received directly by the State Medicaid
agency. States that have previously reported receipts from
tobacco litigation settlements must continue to report
settlement payments as they are received.
State administrative costs incurred in pursuit of Medicaid
cost recoveries from tobacco firms qualify for the normal 50
percent Federal financial participation (FFP). They should be
reported on the Form HCFA-64.10, Line 14 (Other Financial
Participation).
Only Medicaid-related expenditure recoveries are subject to
the Federal share requirement. To the extent that some non-
Medicaid expenditures and/or recoveries were also included in
the underlying lawsuits, HCFA will accept a justifiable
allocation reflecting the Medicaid portion of the recovery,
as long as the State provides necessary documentation to
support a proposed allocation.
Under current law, tobacco settlement recoveries must be
treated like any other Medicaid recoveries. We recognize that
Congress will consider the treatment of tobacco settlements
in the context of any comprehensive tobacco legislation next
year. Given the States' role in initiating tobacco lawsuits
and in financing Medicaid programs, States will, of course,
have an important voice in the development of such
legislation, including the allocation of any resulting
revenues. The Administration will work closely with States
during this legislative process as these issues are decided.
If you would like to discuss the appropriate reporting of
recoveries with HCFA, please call David McNally of my staff
at (410) 786-3292 to arrange for a meeting or conversation.
We look forward to providing any assistance needed in meeting
a State's Medicaid obligation.
Sincerely,
Sally K. Richardson,
Director.

Mr. McCONNELL. Mr. President, I rise today to join my esteemed
colleagues--Senators Hutchison, Graham, Voinovich, Abraham, and
others--in sponsoring legislation to protect the States' tobacco
settlement funds from the Clinton Administration's spurious recoupment
claims.
Members of the U.S. Senate will recall quite vividly that this
chamber engaged in a lengthy, detailed debate on a national tobacco
settlement bill last year. While those discussions proved inconclusive,
the States--on their own--achieved much of what Congress and the White
House identified as priorities through direct settlement agreements
with the tobacco companies.
As part of the comprehensive settlement with 46 states and the prior
individual State agreements, the tobacco companies are required to take
specific action to address public health concerns regarding teen
smoking. First, they must fund a major anti-smoking advertising
campaign to prevent youth smoking and to educate consumers about
tobacco-related illnesses. Second, they must establish a charitable
foundation to support the study of programs to reduce teen smoking and
substance abuse. Third, the settlement prohibits tobacco advertising
that may target youth, like the commercial use of cartoon characters
like ``Joe Camel'' and outdoor advertising such as billboard, stadium
and transit ads as well as tobacco sponsorship of sporting and cultural
events. In addition, the States have plans to spend their tobacco
settlement funds for advancing the public health and welfare.
Much to the dismay of the nation's governors and state legislators,
instead of receiving a commendation from the President for a job well
done, they got a multi-billion dollar collection notice. Despite the
fact that the States filed lawsuits asserting a number of non-Medicaid
claims, the Clinton Administration argues that every state who agreed
to the $206 billion settlement should fork over from 50 to 79 percent
of their share to the federal government--including states like
Kentucky who didn't even file a lawsuit but joined the settlement. As
such, the President's FY 2000 budget states that the federal government
has the right to withhold at least $16 billion Medicaid dollars from
the States over the next five years.
Simply put, Mr. President, this bogus claim will deny Kentucky's most
needy citizens over $2.4 billion in Medicaid funds over the term of the
settlement agreement. I cannot excuse the fundamental conflict created
by an Administration that claims it is fighting for the health of our
children while it gobbles up the money specifically designated for
them. This effort to hold state Medicaid programs hostage in exchange
for federal strings on how the States spend their own money is
intolerable and unacceptable.
Unlike the Administration, I believe all wisdom does not reside in
Washington. It's clear to me that our state's elected officials are in
a better position to determine Kentucky's needs than a federal
bureaucrat sitting 600 miles away in Washington. I am proud to serve as
an original sponsor to this legislation which makes clear that the
federal government has no claim to the tobacco settlement funds
attained by the States. I commend my fellow sponsors for their
commitment to preserving common-sense in government, and urge my
colleagues to approve this legislation expediently and without
compromise.
Mr. McCAIN. Mr. President, I am pleased to be a co-sponsor of the
States' Rights Protection Act. This bill will ensure that the states
retain the use of the settlement proceeds from the tobacco litigation
settlement announced in November, 1998, as well as the prior
settlements with Mississippi, Texas, Florida, and Minnesota. The bill
will entitle the states to keep all of the money from the settlement,
without federal recoupment of a Medicaid share.
I believe this is the right thing to do for several reasons. First,
and foremost, the settlement was of litigation initiated and pursued by
the states. The President announced in his State of the Union address
that the Department of Justice will be filing an action on behalf of
the United States against the tobacco companies. This is the right way
for federal claims to be addressed, rather than taking this hard-
fought, negotiated money from the states.
Second, not all of the states raised Medicaid claims in their
lawsuits. The courts dismissed the Medicaid claims in other cases.
Thus, in some states, the federal government is not truly entitled to
share in the settlement proceeds. Allowing recoupment from some of the
states, but not all of the states, will lead to disparate and unfair
results.
Finally, federal and state governments alike share in the goal of
addressing public health needs. It is not necessary that this goal only
be accomplished through federally mandated programs. The states'
settlement also includes funding for counter-advertising and cessation
efforts. These efforts may be complemented by federal programs, but do
not need to be duplicated simply to give the federal government an
excuse to spend money. In addition, many states have other existing
public health programs related to tobacco use or children's health on
the books. The federal government does not need to attempt to duplicate
those programs through federal mandates. Most importantly, I am
confident that the state will spend their settlement money wisely and
in the best interests of their citizens. These decisions are best
reached through discussion and consensus reached at the state and local
levels.
I regret that Congress was unwilling to accept the opportunity
presented to us with the 1997 proposed settlement agreement.
Comprehensive legislation would have benefited the nation by addressing
kids smoking and limiting the excessive attorney's fees paid in these
cases. Nevertheless, I applaud the Attorneys General for reaching
settlement of their litigation and for the

[[Page S1161]]

public health advances they have made in the settlement agreement. They
have ensured a win for every state, without years of litigation and
varied results. They have ensured an end to Joe Camel on billbroads
throughout the country. They have established a mechanism to police
advertising. They have achieved more in this joint settlement than any
one state could have achieved alone with a court verdict.
I thank my colleague, Senator Hutchison, for introducing this bill,
and am pleased to join with so many other distinguished friends in
sponsoring this important piece of states' rights legislation.
Mr. LEAHY. Mr. President, I am pleased to join Senator Hutchison and
Senator Graham and a bipartisan group of my colleagues to introduce
legislation to prohibit the Federal government from recouping any part
of the multi-state settlement between the tobacco industry and the
State Attorneys General.
To the surprise of many state officials, the Health Care Financing
Administration has threatened to seek reimbursement for its share of
Medicaid costs for treating tobacco-related diseases from the multi-
state tobacco settlement. In other words, the Federal government may
want to take more than half of the total multi-state settlement based
on the federal share of Medicaid, which is approximately 60 percent of
total Medicaid costs.
For my home State of Vermont, that means the Federal government may
try to take more than $15 million annually out of Vermont's share of
the settlement. Vermont Attorney General William Sorrell settled with
the tobacco industry for more than $800 million to be distributed over
the next 25 years. But now the Federal government may seek more than
$400 million of Vermont's tobacco settlement for its own use.
Washington State Attorney General Christine Gregoire, one of the lead
attorneys generals in the settlement negotiations with the tobacco
industry, recently stated: ``These lawsuits were brought by the States
based on violations by the industry of state laws. The settlement was
won by the states without any assistance from Congress or the
Administration. As far as we are concerned the States did all the work
and are entitled to every dollar of their allocated share to invest in
the future health care of their citizens.'' I could not agree more with
General Gregoire.
The States, not the Federal government, deserve the full amount of
their settlements because the States and their Attorneys General took
the risks in bringing the novel lawsuits against Big Tobacco. Without
the willingness of the State Attorneys General acting on behalf of the
citizens of their states and taking significant financial and
professional risks and pursuing these matters so diligently, we would
not have any legal settlements by the tobacco industry. These State
Attorneys General deserve our gratitude and our respect for their
extraordinary efforts. I commend them all for their diligence on behalf
of the public.
When tobacco companies were fighting any and all lawsuits against
them, the State Attorneys General pursued their legal challenges
against great odds. Men and women whose lives were cut short by cancer
and other adverse health consequences from tobacco deserved better
treatment than the years of obstruction and denial by the tobacco
industry. Only now as the internal documents are being disclosed and
the legal tide is beginning to turn have tobacco companies decided to
change their strategy and pursue settlements. The tobacco industry did
not agreed to these settlements out of some new found sense of public
duty. The truth is that giant tobacco corporations came to the
bargaining table only after they realized that they might lose in
court.
In my home state, General Sorrell took the financial and legal risks
in bringing suit against the tobacco industry on behalf of the people
of Vermont. General Sorrell and his legal team put together a powerful
case in support of the public health of all Vermonters. General Sorrell
did this without any assistance from the Federal government. As a
result, the people of Vermont deserve the full amount of their tobacco
settlement.
If the Federal government wants to recover its costs for tobacco-
related diseases, the appropriate avenue to do that is a Federal
lawsuit. Indeed, President Clinton announced during the recent State Of
The Union address that the Department of Justice is planning litigation
against the tobacco industry. I applaud the President and Attorney
General Reno for pursuing legal action against the tobacco industry so
that the Federal government may recoup its costs for tobacco-related
diseases. That is the proper approach for the Federal government.
The multi-state tobacco settlement provides an historic opportunity
to improve the public health in Vermont and across the nation. I
believe that the States, not the Federal government, are in the best
position to determine their public health needs. Our bipartisan bill
grants the States that flexibility by permitting each state to use its
settlement payments in whatever way that state deems best.
That is why the National Governors Association, National Association
of Attorneys General, National Conference of State Legislatures,
National Association of Counties, National League of Cities, and U.S.
Conference of Mayors support our bipartisan legislation. In my home
state, our bipartisan bill is supported by Governor Dean, Attorney
General Sorrell, the Vermont Health Access Oversight Committee, and the
Vermont Association of Hospitals and Health Systems.
I want Governor Dean and the Vermont legislature to have the
flexibility to use Vermont's settlement funds in whatever way they deem
is best for the public health of Vermonters. It is only fair for the
other 49 Governors and state legislatures to have that same flexibility
to use their settlement funds in whatever way they deem is best for
their citizens.
In the final analysis, I trust the people of Vermont and the other 49
States to determine how best to use their tobacco settlement funds. I
look forward to working with my colleagues as Congress moves forward on
legislation to ensure that the interests of Vermont and the other
States are protected in the multi-state tobacco settlement.
Mr. BAYH. Mr. President, I rise today as an original cosponsor of the
State tobacco settlement protection bill, a bill to protect state
tobacco settlement funds from seizure by the federal government. I want
to thank Senators Hutchison and Graham for their leadership on this
issue. I stand today for fiscal responsibility, local control and
fairness. I stand today to protect our children's health, to assist
those who have become addicted to tobacco.
This is really about fairness. Is it fair for the federal government,
having sat on the sidelines during this uphill battle against Big
Tobacco, to come in after the fact and claim a large share of the
victory? If nothing else, this proves the old adage that victory has
many parents, while defeat is an orphan.
I have said repeatedly that the federal government does not have all
the answers. Much of what has gone right in this country in the last
several years is a direct result of moving decisions and power out of
this city and into small towns and communities. I came to Washington to
stand up for what is right, to protect Indiana's values, and to speak
up when the federal government oversteps its bounds.
Does the federal government have a right to take more than 60% of
Indiana's tobacco settlement to spend on federal priorities? Absolutely
not. Indiana's share of the settlement is $4 billion over 25 years, but
the federal government's claim could take two and a half billion away.
While the President's budget acknowledges the difficulty in collecting
this money in the coming fiscal year, I am disappointed they have laid
claim to a substantial share of state settlement funds in their budget
for use on federal discretionary programs in years to come. The
fiscally responsible approach is to ensure this money is spent wisely
at the local level, not to allow it to be dumped into the black pit of
the federal bureaucracy in Washington.
Indiana began this fight to protect our kids from the dangers of an
addictive, life-threatening habit. The State fought a lonely battle,
without any federal assistance and invested considerable resources in
prosecuting this case.
The Governor of Indiana, Frank O'Bannon, is in the planning stages
for using this money to improve public health, promote teen smoking
cessation programs and children's health

[[Page S1162]]

care, the purposes originally outlined in the lawsuit. But with more
than 60% of the funds at risk it is hard to sketch out a reliable plan.
The confrontation between states and the federal government that
would result from an attempt by the Health Care Financing
Administration to take these state settlement funds would only hurt the
people in each of our states. It would tie us up in needless court
actions over who has the legal right to these funds. That is wasted
time. While the courts decide what to do with the funds, we lose the
opportunity to cover uninsured children, start anti-smoking campaigns
and improve the lives of Hoosiers and the people in all our states.
Mr. President, I hope all my colleagues become a part of this
bipartisan coalition. I hope we can all--Democrats and Republicans,
States and the federal government--work together to ensure these funds
are used in the states to improve health, deter smoking and educate
kids about the dangers of this addiction. I look forward to working to
pass this very important legislation this year.
______

By Mr. GRAMS:
S. 347. A bill to redesignate the Boundary Waters Canoe Area
Wilderness, Minnesota, as the ``Hubert H. Humphrey Boundary Waters
Canoe Area Wilderness''; to the Committee on Energy and Natural
Resources.

hubert h. humphrey boundary waters canoe area wilderness

Mr. GRAMS. Mr. President, I rise today to introduce legislation to
rename the Boundary Waters Canoe Area Wilderness (BWCA) in Minnesota
and in doing so, salute the father of our Nation's wilderness system,
the late Senator from Minnesota and Vice President, Hubert H. Humphrey.
My bill would redesignate the BWCA as ``The Hubert Humphrey Boundary
Waters Canoe Area Wilderness.''
Mr. President, my home state is known for a number of things uniquely
Minnesotan. If you've seen the movie ``Grumpy Old Men'' you're aware of
our love of ice fishing. If you've flown into Minneapolis, you've seen
the Mall of America. If you watched the national weather maps, you've
seen our bonechilling winter temperatures. And our new Governor--well,
we are proud to say that he is uniquely Minnesotan as well. But if
you've ever visited one of our Nation's wilderness areas, you would not
necessarily have realized that its creation was due in large part to
another uniquely Minnesotan individual, Senator Hubert H. Humphrey.
In the early 1960s, right here in these halls and in this Chamber,
then-Senator Humphrey lead the charge in helping Congress recognize the
wisdom of creating a wilderness preservation system in the United
States. Senator Humphrey, as a member of the Senate Committee on
Agriculture and Forestry, authored the 1964 Wilderness Preservation
Act, and by doing so, created the BWCA. Many in our state feel that if
it weren't for Senator Humphrey's tireless commitment, there would be
no wilderness system and no BWCA. Senator Humphrey worked closely with
the people of Northern Minnesota to win their trust and gain their
acceptance of a federally designated wilderness area--one that would
surely change the way they recreated and the way they lived. In fact,
Senator Humphrey's legislation was very controversial and took several
years to complete. Last year's passage of legislation to restore two
motorized portages in the BWCA was consistent with both Senator
Humphrey's vision for the BWCA and his promises to the people of
northern Minnesota. Through his dedication and willingness to address
the concerns of everyone, we now have a wilderness system that is the
envy of the world.
Through Senator Humphrey's hard work and dedication to the National
Wilderness Preservation System, Americans today have countless
protected wilderness areas throughout this country in which they can
experience nature as it was 50, 75, or 100 years ago, knowing with
certainty that these precious areas will be left intact for generations
to come.
Senator Humphrey's vision endures to this very day, and Minnesotans
are proud to claim the BWCA, one of the nation's true national
treasures, as our own. Boy Scouts wait every year for their trip into
the Boundary Waters. Families know that every summer they can get away
from their jobs, their studies, their cars and their phone, and enjoy
at least a few days of peace and quiet. And elderly folks know that
their favorite fishing hole is still a fishing hole and still
accessible for them and their grandchildren.
Like Paul Bunyan, lutefisk, and our State Fair, the Boundary Waters
is something uniquely Minnesotan and uniquely identifiable as our own
across the country. It is for that reason that I believe it should bear
the name of the father of the Wilderness system and be redesignated,
``The Hubert H. Humphrey Boundary Waters Canoe Area Wilderness.''
______

By Mr. HAGEL (for himself and Mr. Reed):
S. 349. A bill to allow depository institutions to offer negotiable
order of withdrawal accounts to all businesses, to repeal the
prohibition on the payment of interest on demand deposits, and for
other purposes, to the Committee on Banking, Housing, and Urban
Affairs.

the small business banking act of 1999

Mr. HAGEL. Mr. President, I rise today to introduce the Small
Business Banking Act of 1999. I am again joined in the effort by my
distinguished colleague Senator Reed of Rhode Island, who is the
principal cosponsor of this important legislation.
We originally introduced this legislation during the last Congress.
This legislation was incorporated into a more comprehensive financial
regulatory relief bill that was unanimously reported out of the Senate
Committee on Banking, Housing, and Urban Affairs. We fully expect it
will be enacted into law during this Congress.
Passage of this bill will remove one of the last vestiges of an
obsolete interest rate control system. Abolishing the statutory
requirement that prohibits incorporated businesses from owning interest
bearing checking accounts will provide America's small business owners,
farmers, and farm cooperatives with a funds management tool that is
long overdue.
Passage of this bill will ensure America's entrepreneurs can compete
effectively with larger businesses. My experience as a businessman has
shown me, firsthand, that it's extremely important for anyone trying to
maximize profits to be able to invest funds wisely for maximum
efficiencies. Let me quote from a December, 1997 letter I received from
a constituent, Mary Jo Bousek. Mary Jo owns a commercial property
company. She writes:

``I was very pleased to see that you sponsored a bill to
allow banks to pay interest on checking accounts for
partnerships and corporations. When we changed our rental
properties from a sole proprietorship to a Limited Liability
Company, we suddenly began losing about $1500 a year in
interest on our bank account. This seems totally unreasonable
and unfair.''

Mary Jo is right. It is unfair.
During President Ronald Reagan's first term, one of his early actions
was to abolish many provisions of the antiquated interest rate control
system the banking system was required to use. With this change to the
laws, Americans were finally able to earn interest on their checking
accounts deposited in banks. Unfortunately, one aspect of the old
system left untouched by the change in law was not allowing America's
businesses to share in the good fortune.
Complicating matters is the growing impact of nonbanking institutions
that offer deposit-like money accounts to individuals and corporations
alike. Large brokerage firms have long offered interest on deposit
accounts they maintain for their customers. This places these firms at
an advantage over community banks that can't offer their corporate
customers interest on their checking accounts.
While I support business innovation, I don't believe it's fair when
any business gains a competitive edge over another due to government
interference through overregulation. This is exactly the case we have
with banking laws that stifle bankers, especially America's small
community bankers, and give an edge to another segment of the financial
community. The Small Business Banking Act of 1999 seeks to correct this
imbalance and allow community banks to compete fairly with brokerage
firms.
I'm pleased to say our bill has the strong support of America's
Community Bankers, the National Federation

[[Page S1163]]

of Independent Businesses, the U.S. Chamber of Commerce, and the
American Farm Bureau Federation. This bill has the support of many of
the banks, thrifts, and small businesses in my home state of Nebraska.
These important organizations represent a crosscurrent of the type of
support Senator Reed and I have for our bill. Senator Reed and I also
have the support of the Federal banking regulators. In their 1996 Joint
Report, ``Streamlining of Regulatory Requirements'', the Board of
Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, the Office of the Comptroller of the Currency, and the
Office of Thrift Supervision, stated they believe the statutory
prohibition against payment of interest on business checking accounts
no longer serves a public purpose. I heartily agree.
Mr. President, this is a straightforward bill that will do away with
an unnecessary regulation that burdens American business. I urge my
colleagues to support it.
Mr. REED. Mr. President, I am pleased to join my colleague Senator
Hagel in introducing the Small Business Banking Act of 1999,
legislation that eliminates a Depression-era federal law prohibiting
banks from paying interest on commercial checking accounts. Last year,
I cosponsored a similar bill with Senator Hagel that was incorporated
into a financial institutions regulatory relief bill which passed the
Banking Committee.
The prohibition against the payment of interest on commercial
accounts was originally part of a broad prohibition on the payment of
interest on any deposit account. At the time of enactment in 1933, it
was the popular view that payment of interest on deposits created an
incentive for rural banks to shift excess deposits to urban money
center banks which made loans that fueled speculation. Moreover, it was
believed that such transfers created liquidity crises in rural
communities. However, a number of changes in the banking system since
enactment of the prohibition have called into question its usefulness.
First, with the passage of the Depository Institutions Deregulatory
and Monetary Control Act of 1980, Congress allowed financial
institutions to offer interest-bearing accounts to individuals--a
change which has not adversely affected safety and soundness. Second,
many banks have developed complex mechanisms called sweep accounts to
circumvent the interest rate prohibition. Because of the costs
associated with developing sweep accounts, large banks have become the
primary offerors of these accounts. As a result, many smaller banks are
at a competitive disadvantage with larger banks which can offer their
commercial depositors interest-bearing accounts. Most importantly, the
vast majority of small businesses cannot afford to utilize sweep
accounts because the cost of opening these accounts is relatively high
and most small businesses do not have a large enough deposit base to
justify the administrative costs.
In light of these developments, it has become clear that the
prohibition on interest-bearing commercial accounts is nothing more
than a relic of the Depression-era that has effectively disadvantaged
small businesses and small banks, and led large banks to dedicate
significant resources to circumventing the prohibition. I am,
therefore, pleased to cosponsor this legislation that will eliminate
this prohibition and level the playing field for small banks and small
business.
Mr. President, as we move into a new millennium, I think it
appropriate that we eliminate this vestige of the early twentieth
century that is no longer useful and is indeed burdensome.
______

By Mrs. HUTCHISON:
S. 350. A bill to amend title 10, United States Code, to improve the
health care benefits under the TRICARE program and otherwise improve
that program, and for other purposes; to the Committee on Armed
Services.

the military health care improvement act of 1999

Mrs. HUTCHISON. Mr. President, today I am introducing the Military
Health Care Improvement Act of 1999. This bill is a first step to
reform the military health care system known as TRICARE. We are trying
to recruit and retain the best people for our nation's military. To do
this, we must pay them better, maintain good retirement benefits and
improve the health care we provide them and their families.
Mr. President, there is a growing perception among active duty
military, their dependents and military retirees that the military
health care benefit is no longer much of a benefit. We have not done a
very good job of keeping the promise the government made to military
personnel: That in return for their service and sacrifices, the
government will provide health care to active-duty members and their
families even after they retire. In the past 10 years, the military has
downsized by over one-third, and the military health care system has
downsized by one-third as well. While hospitals have been closed as a
result of BRAC or downsized in the past decade, the number of personnel
that rely on the military and the military health care system has
remained constant. Today, our armed forces have more married service
members with families than ever before. In addition, those who have
served and are now retired were promised quality health care as well.
In place of the promise, these individuals and families have been
given, instead, a system called ``TRICARE.'' TRICARE is not health care
coverage, but a health care delivery system that provides varying
levels of benefits depending largely on where a member of the military
or a retiree lives.
Unfortunately, what we find is that the TRICARE program often
provides spotty coverage. My offices and those offices of my colleagues
in the Senate no doubt have received thousands of complaints regarding
access to care, unpaid bills, inadequate providers and difficulties
with claims.
For their part, the doctors who participate in TRICARE complain about
a host of administrative problems including delayed payments and a very
cumbersome claims process. Many doctors have simply left the program,
and in some locations, there are simply no providers at all in certain
specialties. This is unacceptable.
Mr. President, I am introducing this bill to improve the health care
benefits under the TRICARE program by ensuring that the health care and
dental coverage available under TRICARE is substantially similar to the
health care coverage and dental care coverage available under the
Federal Employees Health Benefits program. This bill will:
Raise reimbursement levels for TRICARE, the military health-care
delivery system, to attract and retain more participating doctors to
the program.
Expedite and reduce the costs of TRICARE claims processing, which has
been a thorn in the side of both beneficiaries and providers.
Require portability of benefits between regions. This would make it
easier for military personnel and their families to receive health care
benefits when they travel to different regions.
Minimize the cumbersome pre-authorization requirements for access to
care.
Mr. President. This bill will help break down the bureaucracy that
exists in the current system. There is no single solution to this
problem, but we must begin now to ensure we honor our commitments. This
is a critical issue to recruiting and retaining qualified people in the
military--which is critical to the security of our country.
I am pleased to be joined in this effort by Senators Allard and Hagel
and look forward to working with my colleagues to keep the promise and
improve the military health care system.
______

By Mr. GRAMS (for himself, Mr. Johnson, Mr. Sessions, and Mr.
Bennett):
S. 351. A bill to provide that certain Federal property shall be made
available to States for State and local organization use before being
made available to other entities, and for other purposes; to the
Committee on the Judiciary.

taxpayer oversight of surplus property act

Mr. GRAMS. Mr. President, I rise today to introduce the Taxpayer
Oversight of Surplus Property Act. I am pleased that Congressman John
Peterson of Pennsylvania will soon introduce companion legislation in
the House of Representatives.
Among the many programs administered by hundreds of federal agencies,
there are some initiatives that depend

[[Page S1164]]

upon the active involvement of both the federal government and the
states in order to ensure the wisest use of taxpayer dollars and meet
the needs of the American people. One such effective partnership
involves the distribution of federal surplus personal property to
states and local organizations.
In 1976, President Ford signed legislation which established the
current system for the fair and equitable donation of federal surplus
personal property. Personal property declared ``surplus'' consists of
items other than land or real property, naval vessels, and records of
the federal government. This includes office supplies, furniture,
medical supplies, hardware, motor vehicles, boats, airplanes, and
construction equipment.
Under the federal personal property utilization and donation program,
the General Services Administration is responsible for the transfer of
federal surplus personal property to the states. Each state agency for
surplus property receives the transfer of property and distributes
these items to eligible recipients. Property that is not selected by
the states is offered for sale to the general public. Importantly, the
interests of the American taxpayers guide this entire process.
Mr. President, there are close to 70,000 recipients of federal
surplus property located throughout the United States. Each day,
cities, counties, Indian tribes, hospitals, schools, and public safety
agencies are among the public and nonprofit organizations that look
toward the state agencies for surplus property to help meet their
needs.
Last April, I had the opportunity to visit the Minnesota surplus
property agency, where I was joined by the lieutenant governor, the
executive director of the Minnesota Sheriffs Association, and the
commissioner of the state Department of Corrections. While there, I
quickly became more familiar with the success of the donation program
throughout Minnesota. I am very confident that my Senate colleagues
will find that the donation program has achieved a comparable level of
success in each of their states.
In fiscal year 1997, the Minnesota surplus property agency donated
equipment and supplies with an original federal acquisition cost of
$7.7 million to 1,700 eligible recipients, saving precious tax dollars
if these items had been purchased new or on the open market. I was
impressed to learn that 414 cities, 80 medical institutions, 19
museums, 237 public schools, 110 county entities, 160 State agencies,
and 353 townships are among the active participants in the donation
program.

Equally impressive is how effectively the state agencies for surplus
property and the GSA have worked together to respond quickly and
efficiently during times of natural disasters. Together they have
successfully identified and transported sandbags, blankets, cots,
tools, trucks and other items to disaster sites. I know that
Minnesotans who suffered through the 1997 Midwest floods are gratified
to have received over $3.7 million worth of federal surplus property to
assist flood relief efforts during that horrible time.
Quite simply, the donation program has provided taxpayers with the
equipment, supplies and material used to educate our children, maintain
roads and streets, keep utility rates reasonable, train the workers of
tomorrow, protect families from crime, provide needed relief during
natural disasters, and treat the health of our nation's sick and needy.
In fact, the original acquisition value of property distributed through
the state agencies for surplus property totaled over $1.5 billion
between fiscal years 1995 through 1997.
Because of the importance my constituents place upon the availability
of this property, I am very concerned about current programs which
limit the donation of property to the states. My concern is based in
part upon comments expressed to me by constituents such as Mayor
Richard Nelson of Warren, Minnesota.
Mayor Nelson recently wrote,

When we inquired about the shortage of heavy equipment we
were told that a large majority of that equipment is shipped
overseas to other countries for humanitarian aid. I feel that
our taxes paid for this equipment and it seems only fair that
we should have the first opportunity to benefit from it.
Being the mayor of a community that has suffered from four
floods within two years, I believe that we have unmet needs
in this country that need to be addressed before we can look
at any outside interests.

Mr. President, Mayor Nelson's concerns go to the heart of the
legislation that I am introducing today. I believe that the volume of
distributed federal surplus property would increase if the intent of
Congress when it passed the 1976 reforms was more closely followed.
If Congress continues to allow surplus federal property to go abroad,
or not make its way through proper channels to eligible recipients,
taxpayers such as those in the community of Warren will stand to lose.
As someone who has always worked to ensure the wisest possible use of
taxpayer dollars, this gives me great concern. The legislation I am
introducing will help to address these concerns through the following
provisions.

First, this measure would ensure that when distributing surplus
federal personal property, domestic needs are met before we consider
foreign interests. It would, however, grant the President the authority
to make supplies available for humanitarian relief purposes before
going to the states, in the case of emergencies or natural disasters.
Under the Humanitarian Assistance Program (HAP), the Secretary of
Defense is permitted to make nonlethal Department of Defense supplies
available by the State Department to foreign countries as part of
humanitarian relief activities. I was disturbed to learn that over $1
billion worth of excess supplies was made available to the State
Department between fiscal years 1987 through 1997 before GSA had been
given an opportunity to review the property and make it available for
donation to the states.
Mr. President, I understand that some officials may argue that the
Humanitarian Assistance Program is an important part of our nation's
foreign assistance efforts. Many foreign countries and organizations
clearly have benefited from nonlethal Department of Defense excess
property finance by American taxpayers. Although I have serious
concerns about this initiative, my legislation does not eliminate the
Humanitarian Assistance Program.
However, I believe we must prioritize the needs of disaster victims
in Minnesota, rural hospitals in Arkansas, police departments in
Washington state, school districts in Idaho, homeless assistance
providers in Florida, and other communities and organizations which
have invested their tax dollars in government property and the donation
program. For these reasons, I oppose the continued priority status
granted to foreign recipients under programs such as the Humanitarian
Assistance Program.
Second, my bill would amend the Foreign Assistance Act of 1961 to
prohibit the transfer of Government-owned excess property to foreign
countries or international organizations for environmental protection
activities in foreign countries unless GSA determined that there is no
federal or state use for the property.
Third, this legislation would require GSA to report to Congress on
the effectiveness of all statutes relating to the disposal and donation
of personal property and recommend any changes that would further
improve the Donation Program.
Mr. President, my bill is based on the principle that eligible
recipients should be able to maximize their tax dollars through
expendable federal property that meets their needs. It takes an
important step toward stopping publicly-owned property from being
shipped abroad and given to other organizations before it is
distributed through each state agency for surplus property.
My legislation will fulfill the public's right to know how and where
their tax dollars are being spent. In many ways, it will serve as the
second phase of the reforms overwhelmingly passed by Congress in 1976,
by preserving the active role of states in the handling and
distribution of surplus federal property.
Members of Congress and state and local officials all have an
obligation to see that the government distributes this property fairly
and equitably, ensuring accountability to the taxpayers. Too often,
federal agencies forget that the owners of this property are the
American people--the federal government is merely its public custodian.
Mr. President, the best interests of America's taxpayers have always
been at the top of my agenda. I look forward to improving Congressional
oversight

[[Page S1165]]

of government property and securing passage of this legislation during
the 106th Congress.
______

By Mr. THOMAS (for himself, Mr. Nickles, Mr. Craig, Mr. Helms,
Mr. Crapo, Mr. Grams, and Mr. Enzi):
S. 352. A bill to amend the National Environmental Policy Act of 1969
to require that Federal agencies consult with State agencies and county
and local governments on environmental impact statements; to the
Committee on Environmental and Public Works.

state and local government participation act of 1999

Mr. THOMAS. Mr. President, I rise today, along with Senators Nickles,
Craig, Helms, Crapo, Grams, and Enzi, to introduce the State and Local
Government Participation Act of 1999 which would amend the National
Environmental Policy Act (NEPA). This bill is designed to guarantee
that federal agencies identify state, county and local governments as
cooperating agencies when fulfilling their environmental planning
responsibilities under NEPA.
NEPA was designed to ensure that the environmental impacts of a
proposed federal action are considered and minimized by the federal
agency taking that action. It was supposed to provide for adequate
public participation in the decision making process on these federal
activities and document an agency's final conclusions with respect to
the proposed action.
Although this sounds simple and quite reasonable, NEPA has become a
real problem in Wyoming and many states throughout the nation. A
statute that was supposed to provide for additional public input in the
federal land management process has instead become an unworkable and
cumbersome law. Instead of clarifying and expediting the public
planning process on federal lands, NEPA now serves to delay action and
shut-out local governments that depend on the proper use of these
federal lands for their existence.
The State and Local Government Participation Act is designed to
provide for greater input from state and local governments in the NEPA
process. This measure would simply guarantee that state, county and
local agencies be identified as cooperating entities when preparing
land management plans under NEPA. Although the law already provides for
voluntary inclusion of state and local entities in the planning
process, to often, the federal agencies choose to ignore local
governments when preparing planning documents under NEPA.
Unfortunately, many federal agencies have become so engrossed in
examining every environmental aspect of a proposed action on federal
land, they have forgotten to consult with the folks who actually live
near and depend on these areas for their economic survival.
Mr. President, states and local communities must be consulted and
included when proposed actions are being taken on federal lands in
their state. Too often, federal land managers are more concerned about
the comments of environmental organizations located in Washington, D.C.
or New York City than the people who actually live in the state where
the proposed action will take place. This is wrong. The concerns,
comments and input of state and local communities is vital for the
proper management of federal lands in the West. The State and Local
Government Participation Act of 1999 will begin to address this
troubling problem and guarantee that local folks will be involved in
proposed decision that will affect their lives.
Mr. CRAIG. Mr. President, I join my colleagues today in introducing
the State and Local Government Participation Act.
This legislation would amend the National Environmental Policy Act
(NEPA) to provide the opportunity for State, local, and county agencies
to participate in land management decisions by identifying them as
cooperating agencies in the NEPA process.
NEPA was passed in 1969 to, among other things, ``declare a national
policy which will encourage harmony between man and his environment.''
I support the intent of NEPA, to protect our public resources from
environmental degradation. However, in the last twenty years, the NEPA
process has become a very time consuming and cumbersome public process.
In almost every instance, an Environmental Impact Statement or
Environmental Assessment must be completed under NEPA before any action
can take place on the public lands.
My state, Idaho, is 63 percent federal land, and management of those
lands is of vital importance, especially to the communities that are
economically dependent on the public lands. In far too many instances,
land management decisions are being made without allowing those most
affected by a land management decision or in many cases, those most
knowledgeable about the resource, to play a meaningful role in the NEPA
process.
In the Pacific Northwest, the Forest Service and the Bureau of Land
Management are currently working on a comprehensive ecosystem
management plan for the Columbia River Basin, the Interior Columbia
Basin Ecosystem Management Plan (ICBEMP). This plan, in the form of a
draft EIS, has been in the works for four years at an expense of more
than $40 Million. County governments and state officials in my state
feel alienated by the process to date. The situation has gotten so bad
that in last year's omnibus appropriations act, I worked to have report
language encouraging the administration to include affected state and
county governments in this process as cooperating agencies.
I would submit that every western Senator has at least one horror
story involving a public land managing agency that ran roughshod over
the local government in the NEPA process. Rather than legislating that
Federal agencies must work with the local governments on a case-by-case
basis, this bill would provide the opportunity to fix a problem that
has arisen with the original NEPA legislation.
Mr. GRAMS. Mr. President, I rise today in support of the State and
Local Government Participation Act of 1999. I would like to thank
Senator Thomas for introducing this simple, but very important piece of
legislation.
As Senator Thomas said in his introductory remarks, this legislation
would make state and county governments ``cooperating agencies'' in the
National Environmental Policy Act process. For example, when the Forest
Service decides to undertake a timber sale, it will have to by law
consult and obtain the input of state and county governments during the
NEPA process. Current law, however, only requires the federal
government to consult with other federal agencies.
The underlying concept of this legislation is something most people
would assume already takes place. Average Americans assume that the
federal government considers state and local governments partners in
all land-use and environmental decisions. After all, it is an
established fact that local citizens and officials can best meet local
problems with local solutions. And in those matters, people expect the
federal government to help out where needed and take the lead where
appropriate. But average Americans, unfortunately, often aren't aware
of the complete picture.
Too often, the federal government adopts its ``I know best''
philosophy and ignores the input of local officials or even excludes
them from the decision making process. One of the first things locally
elected officials in the northern part of my state--an area which deals
with the National Environmental Policy Act regularly--say to me when we
sit down to talk is that the federal government doesn't care about
their needs. They feel the federal government, be it the Forest
Service, Park Service, or EPA, just doesn't seem to realize that
counties are having a tough time making ends meet and providing basic
services to its residents in an era of increased land-regulation and
decreased logging, mining, and access. And when they show you the
numbers and make their case, it is impossible to disagree with them.
There are a number of counties in northern Minnesota which are
predominantly federally owned. St. Louis County is 62 percent federally
owned, Cook County is 82 percent federally owned, and Lake County is 92
percent federally owned. They are home to the Superior National Forest
and the Boundary Waters Canoe Area Wilderness. Not far away is
Voyageurs National Park and not far from that is the Chippewa National
Forest. Not surprisingly, they are often placed in the

[[Page S1166]]

middle of many disputes over land-uses. They continue to see their PILT
payments funded at barely 50 percent of authorized amounts. They
continue to witness more and more restrictions on the use of lands
within their counties and the Forest Services declining timber sales.
And they continue to see their populations declining as a result of
lost economic opportunities. They deserve to be heard when the federal
government is going to take actions in their communities.
Mr. President, it is clear that in the last half of this century
power has shifted from our nation's cities and states to Washington,
DC. No one disputes that. And while many of us would like to see that
shift back the other way, it may take some time to get it done. But
what we should all be able to agree upon, is that locally elected
officials should have a seat at the table and should be treated as
equals and as partners by federal agencies. They know what is happening
on their land and they know the people who will be impacted by changes
in the law. They also know what the impact will be on a county or state
budget. But most importantly, Mr. President, county and state officials
are closer to the people. Their phone numbers are actually in the phone
book and they aren't a long distance call away. They answer their door
when someone comes knocking. And they aren't a bureaucrat hidden away
in Washington, DC, making one size fits all policy decisions.
As I stated earlier, I think those people deserve a role in the NEPA
process and I think the American people would agree. I urge my
colleagues to protect their state and local government's right to
participate by supporting this important piece of legislation.
______

By Mr. GRASSLEY (for himself, Mr. Kohl, and Mr. Thurmond):

S. 353. A bill to provide for class action reform, and for other
purposes; to the Committee on the Judiciary.

The Class Action Fairness Act of 1999

Mr. GRASSLEY. Mr. President, I rise today to introduce, along with
Senators Kohl and Thurmond, the Class Action Fairness Act of 1999, a
bill that will help curb class action lawsuit abuse. Last year, Senator
Kohl and I introduced the Class Action Fairness Act of 1998, S. 2083.
That bill was marked up in the Administrative Oversight and the Courts
Subcommittee on September 10, 1998, and we favorably voted out of
subcommittee a substitute amendment to the bill. Unfortunately, this
legislation was not considered further by the Senate because of the
press of other legislative business scheduled before the full Judiciary
Committee.
We are now reintroducing the substitute amendment to last year's
class action bill, with minor modifications, as the Class Action
Fairness Act of 1999. This modest bill will go a long way toward ending
class action lawsuit abuses where the plaintiffs receive very little
and their lawyers receive a whole lot. This bill will preserve class
action lawsuits as an important tool that brings representation to the
unrepresented and result in important discrimination and consumer
decisions.
In October 1997, my Judiciary Subcommittee held a hearing on the
problem of certain class action lawsuit settlements. I found one
example of class action lawsuit abuse to be particularly disturbing. In
an antitrust case settled in the Northern District of Illinois in 1993,
the plaintiff class alleged that multiple domestic airlines
participated in price-fixing, which resulted in plaintiffs paying more
for airline tickets than they otherwise would have had to pay.
In the settlement, all of the class plaintiffs were awarded a book of
coupons which could be used toward the purchase of future airline
tickets. These coupons varied in amount and number, based on how many
plane tickets a particular plaintiff had purchased. The catch was that
the plaintiff still had to pay for most of any new airline ticket out
of his or her own pocket. This meant that only $10 worth of coupons
could be used toward the purchase of a $100 ticket; up to $25 worth of
coupons for a $250 ticket; up to $50 worth of coupons for a $500
ticket, and so on. In addition, these coupons could not be used on
certain blackout dates, which appeared to include all holidays and peak
travel times.
Interestingly enough, the attorneys did not get paid with these
coupon books. Rather, the attorneys were paid cash--$16 million in
cash. Now, if the coupons were good enough for their clients--the
people that actually got ripped off--I wonder why those same coupons
were not good enough for their lawyers.
Another example of an egregious class action lawsuit settlement was
highlighted at the subcommittee hearing. Mrs. Martha Preston was a
member of the plaintiff class in the case Hoffman versus Banc Boston,
where some plaintiffs received under $10 each in compensation for their
injuries, yet were docked from $75 to $90 for attorneys' fees. This
means that attorneys who were supposed to be representing these
people's best interests, agreed to a settlement that cost some of the
plaintiffs more money than they received in compensation for being
wronged.

These class action lawsuit abuses happen for a number of reasons. One
reasons is that plaintiffs' lawyers negotiate their own fees as part of
the settlement. This can result in distracting lawyers from focusing on
their client's needs, and settling or refusing to settle based on the
amount of their own compensation.
During our hearing, evidence was presented that at least one group of
plaintiffs' lawyers meets on a regular basis to discuss initiating
class action lawsuits. They scan the Federal Register and other
publications to get ideas for lawsuits, and only after they have
identified a wrong, do they find clients for their lawsuits. Instead of
having clients who complain of harms going to hire attorneys, these
attorneys find the harms first and then recruit potential clients with
the promise of compensation.
On the other hand, the defendants do not always have clean hands.
Plaintiffs' lawyers say that they are approached by lawyers from large
corporations who urge them to find a class and sue the corporation. The
corporations may use the class action lawsuit as a tool to limit their
liability. Once a lawsuit is initiated and settled, no member of the
class may sue based on that claim. In other words, if a corporation
settle a class action lawsuit by paying all class members $10 as
compensation for a faulty product, the plaintiffs can no longer sue for
any harm caused by the faulty product. This is one way of buying
immunity for liability.
A Rand study on class action litigation stated that,

It is generally agreed that fees drive plaintiffs'
attorney's filing behavior, that defendants' risk aversion in
the face of large aggregate exposures drives their settlement
behavior. . . . In other words, the problems with class
actions flow from incentives that are embedded in the process
itself.

The Rand study also found that the number of class actions is rising
significantly, with most of the increase concentrated in State courts.
State courts often are used in nationwide class actions to the
detriment of class members and sometimes defendants. In fact, State
courts are more likely to certify class actions without adequately
considering whether a class action would be fair to all class members.
In addition, class lawyers sometimes manipulate pleadings to avoid
removal of the lawsuit to the Federal courts, even to the extent that
they minimize their client's potential claims. Class lawyers also
sometimes defeat the complete diversity requirement by ensuring that at
least one named class member is from the same State as a defendant,
even if every other class member is from a different State.

The Class Action Fairness Act of 1999 does a number of things. First,
it requires that notice of proposed settlements in all class actions,
as well as all class notices, must be in clear, easily understood
English and must include all material settlement terms, including the
amount and source of attorneys' fees. The notices most plaintiffs
receive are written in small print and confusing legal jargon. In fact,
a lawyer testified before my subcommittee that even he could not
understand the notice he received as a plaintiff in a class action
lawsuit. Since plaintiffs are giving up their right to sue, it is
imperative that they understand what they are doing and the
ramifications of their actions.
Second, our bill requires that State attorneys general be notified of
any

[[Page S1167]]

proposed class settlement that would affect residents of their States.
The notice would give a State attorney general the opportunity to
object if the settlement terms are unfair.
Third, our bill requires that attorneys' fees in class actions are to
be based on a reasonable percentage of damages actually paid to class
members, the actual costs of complying with the terms of a settlement
agreement, as well as any future financial benefits. In the
alternative, the bill provides that, to the extent the law permits,
fees may be based on a reasonable hourly (lodestar) rate. This
provision would discourage settlements that give attorneys exorbitant
fees based on hypothetical overvaluation of coupon settlements, yet
allows for reasonable fees in all kinds of cases, including cases that
primarily involve injunctive relief.
Fourth, our bill allows more class action lawsuits to be removed from
State court to Federal court, either by a defendant or an unnamed class
member. A class action would qualify for Federal jurisdiction if the
total damages exceed $75,000 and parties include citizens from multiple
States. Currently, class lawyers can avoid removal if individual claims
are for just less than $75,000--even if hundreds of millions of dollars
in total are at stake--or if just one class member is from the same
State as a defendant. However, the bill provides that cases remain in
State court where the substantial majority of class and primary
defendants are from the same State and that State's law would govern,
or the primary defendants are States and a Federal court would be
unable to order the relief requested.
Fifth, our bill will reduce frivolous lawsuits by requiring that a
violation of rule 11 of the Federal rules of civil procedure, which
penalizes frivolous lawsuits, will require the imposition of sanctions.
However, the nature and extent of sanctions will remain discretionary.
We need class action reform badly. Both plaintiffs and defendants are
calling for change in this area. The Class Action Fairness Act of 1999
is not just procedural reform, it is substantive reform of our court
system. This bill will remove the conflict of interest that lawyers
face in class action lawsuits, and will ensure the fair settlement of
these cases. This bill will preserve the process, but put a stop to the
more egregious abuses. I urge all my colleagues to join Senators Kohl,
Thurmond, and me and support this important piece of legislation.
Mr. President, I ask unanimous consent that the text of the bill be
printed in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:

S. 353

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Class Action Fairness Act of
1999''.

SEC. 2. NOTIFICATION REQUIREMENT OF CLASS ACTION
CERTIFICATION OR SETTLEMENT.

(a) In General.--Part V of title 28, United States Code, is
amended by inserting after chapter 113 the following new
chapter:

``CHAPTER 114--CLASS ACTIONS

``Sec.
``1711. Definitions.
``1712. Application.
``1713. Notification of class action certifications and settlements.
``1714. Limitation on attorney's fees in class actions.

``Sec. 1711. Definitions

``In this chapter the term--
``(1) `class' means a group of persons that comprise
parties to a civil action brought by 1 or more representative
persons;
``(2) `class action' means a civil action filed pursuant to
rule 23 of the Federal Rules of Civil Procedure or similar
State rules of procedure authorizing an action to be brought
by 1 or more representative persons on behalf of a class;
``(3) `class certification order' means an order issued by
a court approving the treatment of a civil action as a class
action;
``(4) `class member' means a person that falls within the
definition of the class;
``(5) `class counsel' means the attorneys representing the
class in a class action;
``(6) `plaintiff class action' means a class action in
which class members are plaintiffs; and
``(7) `proposed settlement' means a settlement agreement
between or among the parties in a class action that is
subject to court approval before the settlement becomes
binding on the parties.

``Sec. 1712. Application

``This chapter shall apply to--
``(1) all plaintiff class actions filed in Federal court;
and
``(2) all plaintiff class actions filed in State court in
which--
``(A) any class member resides outside the State in which
the action is filed; and
``(B) the transaction or occurrence that gave rise to the
class action occurred in more than 1 State.

``Sec. 1713. Notification of class action certifications and
settlements

``(a) Not later than 10 days after a proposed settlement in
a class action is filed in court, class counsel shall serve
the State attorney general of each State in which a class
member resides and the Attorney General of the United States
as if such attorneys general and the Department of Justice
were parties in the class action with--
``(1) a copy of the complaint and any materials filed with
the complaint and any amended complaints (except such
materials shall not be required to be served if such
materials are made electronically available through the
Internet and such service includes notice of how to
electronically access such material);
``(2) notice of any scheduled judicial hearing in the class
action;
``(3) any proposed or final notification to class members
of--
``(A)(i) the members' rights to request exclusion from the
class action; or
``(ii) if no right to request exclusion exists, a statement
that no such right exists; and
``(B) a proposed settlement of a class action;
``(4) any proposed or final class action settlement;
``(5) any settlement or other agreement contemporaneously
made between class counsel and counsel for the defendants;
``(6) any final judgment or notice of dismissal;
``(7)(A) if feasible the names of class members who reside
in each State attorney general's respective State and the
estimated proportionate claim of such members to the entire
settlement; or
``(B) if the provision of information under subparagraph
(A) is not feasible, a reasonable estimate of the number of
class members residing in each attorney general's State and
the estimated proportionate claim of such members to the
entire settlement; and
``(8) any written judicial opinion relating to the
materials described under paragraphs (3) through (6).
``(b) A hearing to consider final approval of a proposed
settlement may not be held earlier than 120 days after the
date on which the State attorneys general and the Attorney
General of the United States are served notice under
subsection (a).
``(c) Any court with jurisdiction over a plaintiff class
action shall require that--
``(1) any written notice provided to the class through the
mail or publication in printed media contain a short summary
written in plain, easily understood language, describing--
``(A) the subject matter of the class action;
``(B) the legal consequences of being a member of the class
action;
``(C) the ability of a class member to seek removal of the
class action to Federal court if--
``(i) the action is filed in a State court; and
``(ii) Federal jurisdiction would apply to such action
under section 1332(d);
``(D) if the notice is informing class members of a
proposed settlement agreement--
``(i) the benefits that will accrue to the class due to the
settlement;
``(ii) the rights that class members will lose or waive
through the settlement;
``(iii) obligations that will be imposed on the defendants
by the settlement;
``(iv) the dollar amount of any attorney's fee class
counsel will be seeking, or if not possible, a good faith
estimate of the dollar amount of any attorney's fee class
counsel will be seeking; and
``(v) an explanation of how any attorney's fee will be
calculated and funded; and
``(E) any other material matter; and
``(2) any notice provided through television or radio to
inform the class members of the right of each member to be
excluded from a class action or a proposed settlement, if
such right exists, shall, in plain, easily understood
language--
``(A) describe the persons who may potentially become class
members in the class action; and
``(B) explain that the failure of a person falling within
the definition of the class to exercise such person's right
to be excluded from a class action will result in the
person's inclusion in the class action.
``(d) Compliance with this section shall not provide
immunity to any party from any legal action under Federal or
State law, including actions for malpractice or fraud.
``(e)(1) A class member may refuse to comply with and may
choose not to be bound by a settlement agreement or consent
decree in a class action if the class member resides in a
State where the State attorney general has not been provided
notice and materials under subsection (a).
``(2) The rights created by this subsection shall apply
only to class members or any person acting on a class
member's behalf, and shall not be construed to limit any
other rights affecting a class member's participation in the
settlement.
``(f) Nothing in this section shall be construed to impose
any obligations, duties, or

[[Page S1168]]

responsibilities upon State attorneys general or the Attorney
General of the United States.

``Sec. 1714. Limitation on attorney's fees in class actions

``(a) In any class action, the total attorney's fees and
expenses awarded by the court to counsel for the plaintiff
class may not exceed a reasonable percentage of the amount
of--
``(1) any damages and prejudgment interest actually paid to
the class;
``(2) any future financial benefits to the class based on
the cessation of alleged improper conduct by the defendants;
and
``(3) costs actually incurred by all defendants in
complying with the terms of an injunctive order or settlement
agreement.
``(b) Notwithstanding subsection (a), to the extent that
the law permits, the court may award attorney's fees and
expenses to counsel for the plaintiff class based on a
reasonable lodestar calculation.''.
(b) Technical and Conforming Amendment.--The table of
chapters for part V of title 28, United States Code, is
amended by inserting after the item relating to chapter 113
the following:

``114. Class Actions............................................1711''.

SEC. 3. DIVERSITY JURISDICTION FOR CLASS ACTIONS.

Section 1332 of title 28, United States Code, is amended--
(1) by redesignating subsection (d) as subsection (e); and
(2) by inserting after subsection (c) the following:
``(d)(1) In this subsection, the terms `class', `class
action', and `class certification order' have the meanings
given such terms under section 1711.
``(2) The district courts shall have original jurisdiction
of any civil action where the matter in controversy exceeds
the sum or value of $75,000, exclusive of interest and costs,
and is a class action in which--
``(A) any member of a class of plaintiffs is a citizen of a
State different from any defendant;
``(B) any member of a class of plaintiffs is a foreign
state or a citizen or subject of a foreign state and any
defendant is a citizen of a State; or
``(C) any member of a class of plaintiffs is a citizen of a
State and any defendant is a foreign state or a citizen or
subject of a foreign state.
``(3) The district court shall abstain from hearing a civil
action described under paragraph (2) if--
``(A)(i) the substantial majority of the members of the
proposed plaintiff class are citizens of a single State of
which the primary defendants are also citizens; and
``(ii) the claims asserted will be governed primarily by
the laws of that State; or
``(B) the primary defendants are States, State officials,
or other governmental entities against whom the district
court may be foreclosed from ordering relief.
``(4) In any class action, the claims of the individual
members of any class shall be aggregated to determine whether
the matter in controversy exceeds the sum or value of
$75,000, exclusive of interest and costs.
``(5) This subsection shall apply to any class action
before or after the entry of a class certification order by
the court.
``(6)(A) A district court shall dismiss, or, if after
removal, strike the class allegations and remand, any civil
action if--
``(i) the action is subject to the jurisdiction of the
court solely under this subsection; and
``(ii) the court determines the action may not proceed as a
class action based on a failure to satisfy the conditions of
rule 23 of the Federal Rules of Civil Procedure.
``(B) Nothing in subparagraph (A) shall prohibit plaintiffs
from filing an amended class action in Federal or State
court.
``(C) Upon dismissal or remand, the period of limitations
for any claim that was asserted in an action on behalf of any
named or unnamed member of any proposed class shall be deemed
tolled to the full extent provided under Federal law.
``(7) Paragraph (2) shall not apply to any class action,
regardless of which forum any such action may be filed in,
involving any claim relating to--
``(A) the internal affairs or governance of a corporation
or other form of entity or business association arising under
or by virtue of the statutory, common, or other laws of the
State in which such corporation, entity, or business
association is incorporated (in the case of a corporation) or
organized (in the case of any other entity); or
``(B) the rights, duties (including fiduciary duties), and
obligations relating to or created by or pursuant to any
security (as defined under section 2(a)(1) of the Securities
Act of 1933 or the rules and regulations adopted under such
Act).''.

SEC. 4. REMOVAL OF CLASS ACTIONS TO FEDERAL COURT.

(a) In General.--Chapter 89 of title 28, United States
Code, is amended by adding after section 1452 the following:

``Sec. 1453. Removal of class actions

``(a) In this section, the terms `class', `class action',
and `class member' have the meanings given such terms under
section 1711.
``(b) A class action may be removed to a district court of
the United States in accordance with this chapter, except
that such action may be removed--
``(1) by any defendant without the consent of all
defendants; or
``(2) by any plaintiff class member who is not a named or
representative class member without the consent of all
members of such class.
``(c) This section shall apply to any class action before
or after the entry of any order certifying a class.
``(d) The provisions of section 1446 relating to a
defendant removing a case shall apply to a plaintiff removing
a case under this section, except that in the application of
subsection (b) of such section the requirement relating to
the 30-day filing period shall be met if a plaintiff class
member files notice of removal within 30 days after receipt
by such class member, through service or otherwise, of the
initial written notice of the class action.
``(e) This section shall not apply to any class action,
regardless of which forum any such action may be filed in,
involving any claim relating to--
``(1) the internal affairs or governance of a corporation
or other form of entity or business association arising under
or by virtue of the statutory, common, or other laws of the
State in which such corporation, entity, or business
association is incorporated (in the case of a corporation) or
organized (in the case of any other entity); or
``(2) the rights, duties (including fiduciary duties), and
obligations relating to or created by or pursuant to any
security (as defined under section 2(a)(1) of the Securities
Act of 1933 or the rules and regulations adopted under such
Act).''.
(b) Removal Limitation.--Section 1446(b) of title 28,
United States Code, is amended in the second sentence by
inserting ``(a)'' after ``section 1332''.
(c) Technical and Conforming Amendments.--The table of
sections for chapter 89 of title 28, United States Code, is
amended by adding after the item relating to section 1452 the
following:

``1453. Removal of class actions.''.

SEC. 5. REPRESENTATIONS AND SANCTIONS UNDER RULE 11 OF THE
FEDERAL RULES OF CIVIL PROCEDURE.

Rule 11(c) of the Federal Rules of Civil Procedure is
amended--
(1) in the first sentence by striking ``may, subject to the
conditions stated below,'' and inserting ``shall'';
(2) in paragraph (2) by striking the first and second
sentences and inserting ``A sanction imposed for violation of
this rule may consist of reasonable attorneys' fees and other
expenses incurred as a result of the violation, directives of
a nonmonetary nature, or an order to pay penalty into court
or to a party.''; and
(3) in paragraph (2)(A) by inserting before the period ``,
although such sanctions may be awarded against a party's
attorneys''.

SEC. 6. EFFECTIVE DATE.

The amendments made by this Act shall apply to any civil
action commenced on or after the date of enactment of this
Act.

Mr. KOHL. Mr. President, Senator Grassley and I today introduce the
Class Action Fairness Act of 1999. This legislation addresses growing
problems in class action litigation, particularly unfair and abusive
settlements that shortchange class members while class lawyers line
their pockets with high fees.
Let me share with you just a few disturbing examples.
First, one of my constituents, Martha Preston of Baraboo, Wisconsin,
was an unnamed member of a class action lawsuit against her mortgage
company that ended in a settlement. While at first she got $4 and
change in compensation, a few months later her lawyers surreptitiously
took $80--twenty times her compensation--from her escrow account to pay
their fees. In total, her lawyers managed to pocket over $8 million in
fees, but never explained that the class--not the defendant--would pay
the attorneys' fees. Naturally outraged, she and others sued the class
lawyers. Her lawyers turned around and sued her in Alabama--a state she
had never visited--and demanded an unbelievable $25 million. So not
only did she lose $75, she was forced to defend herself from a $25
million lawsuit.
Second, class lawyers and defendants often engineer settlements that
leave plaintiffs with small discounts or coupons unlikely ever to be
used. Meanwhile, class lawyers reap big fees based on unduly optimistic
valuations. For example, in a settlement of a class action against
major airlines, most plaintiffs received less than $80 in coupons while
class attorneys received $14 million in fees based on a projection that
the discounts were worth hundreds of millions. In a suit over faulty
computer monitors, class members got $13 coupons, while class lawyers
pocketed $6 million. And in a class action against Nintendo, plaintiffs
received $5 coupons, while attorneys took almost $2 million in fees.
Third, competing federal and state class actions engage in a race to
settlement, where the best interests of the class lose out. For
example, in one state class action the class lawyers negotiated a small
settlement precluding

[[Page S1169]]

all other suits, and even agreed to settle federal claims that were not
at issue in state court. Meanwhile, a federal court found that the
federal claims could have been worth more than $1 billion, while
accusing the state class lawyers of ``hostile representation'' that
``surpassed inadequacy and sank to the level of subversion'' and
pursuit of self-interest in ``getting a fee'' that was ``more in line
with the interests of [defendants] than those of their clients.''
Fourth, class actions are often filed in state courts that are more
likely to give inadequate consideration to class certification and
class settlements. On several occasions, a state court has certified a
class action although federal courts rejected certification of the same
case. And in several Alabama state courts, 38 out of 43 classes
certified in a three-year period were certified on an ex parte basis,
without notice and hearing. One Alabama judge acting ex parte certified
11 class actions in 1997 alone. Comparably, only an estimated 38 class
actions were certified in federal court that year (excluding suits
against the U.S. and suits brought under federal law). This lack of
close scrutiny appears to create a big incentive to file in state
court, especially given the recent findings of a Rand study that class
actions are increasingly concentrated in state courts.
Fifth, in nationwide class actions filed in state court, class
lawyers often manipulate the pleadings to avoid removal to federal
court, even by minimizing the potential claims of class members. For
example, state class actions often seek just over $74,000 in damages
per plaintiff, and forsake punitive damage claims, to avoid the $75,000
floor that qualifies for federal diversity jurisdiction. Or they defeat
the federal requirement of complete diversity by naming one class
member who is from the same state as a defendant, even if all other
class members are from different states.
Finally, out-of-state defendants are often hauled into state court to
address nationwide class claims, although federal courts are a more
appropriate and more efficient forum. For example, an Alabama court is
now considering a class action--and could establish a national policy--
in a suit brought against the big three automakers on behalf of every
American who bought a dual-equipped air bags over an eight-year period.
The defendants failed in their attempt to remove to federal court based
on an application of current diversity laws. And, unlike federal
courts, states are unable to consolidate multiple class actions that
involve the same underlying facts.
These examples show that abuse of the class action system is not only
possible, but real. And the incentives and realities of the current
system are a big part of the problem.
A class action is a lawsuit in which an attorney not only represents
an individual plaintiff, but, in addition, seeks relief for all those
individuals who suffered a similar injury. Prospective class members
are usually sent notice about the class action, and are presumed to
join it, unless they specifically ask to be left out. When these suits
are settled, all class members are notified of the terms of the
settlement and given the chance to object if they don't think the
settlement is fair. A court must ultimately approve a settlement
agreement.
The vast majority of these suits are brought and settled fairly and
in good faith. Unfortunately, the class action system does not
adequately protect class members from the few unscrupulous lawyers who
are more interested in big attorneys' fees than compensation for their
clients, the victims. The primary problem is that the client in a class
action is a diffuse group of thousands of individuals scattered across
the country, which is incapable of exercising meaningful control over
the litigation. As a result, while in theory the class lawyers must be
responsive to their clients, the lawyers control all aspects of the
litigation.
Moreover, during a class action settlement, the amount of the
attorney fee is negotiated between plaintiffs' lawyers and the
defendants, just like other terms of the settlement. But in most cases
the fees come at the expense of class members--the only party that does
not have a seat at the bargaining table.
In addition, defendants may use class action settlements to advance
their own interests. Paying a small settlement generally precludes all
future claims by class members. So defendants have ample motivation to
give class lawyers the fees they want as the price for settling all
future liabilities.
As a result, it is easy to see how class members are left out in the
cold. Although the judge is supposed to determine whether the
settlement is fair before approving it, class lawyers and defendants
``may even put one over on the court, a staged performance. The lawyers
support the settlement to get fees; the defendants support it to evade
liability; the court can't vindicate the class's rights because the
friendly presentation means that it lacks essential information,''
Kamilewicz v. Bank of Boston Corp., 100 F.3d 1348, 1352 (Easterbrook,
J., dissenting) (7th Cir. 1996).
Although class members get settlement notices and have the
opportunity to object, they rarely do so, especially if they have
little at stake. Not only is it expensive to get representation, but
also it can be extremely difficult to actually understand what the
settlement really does. Settlements are often written in long, finely
printed letters with incomprehensible legalese, which even well-trained
attorneys are hard pressed to understand. And settlements often omit
basic information like how much money will go toward attorneys' fees
and where that money will come from. In Martha Preston's case, one
prominent federal judge found that ``the notice not only didn't alert
the absent class members to the pending loss but also pulled the wool
over the state judge's eyes,'' id.

We all know that class actions can result in significant and
important benefits for class members and society, and that most class
lawyers and most state courts are acting responsibly. Class actions
have been used to desegregate racially divided schools, to obtain
redress for victims of employment discrimination, and to compensate
individuals exposed to toxic chemicals or defective products. Class
actions increase access to our civil justice system because they enable
people to pursuant claims collectively that would otherwise be too
expensive to litigate.
The difficulty in any effort to improve a basically good system is
weeding out the abuses without causing undue damage. The legislation we
propose attempts to do this. It does not limit anyone's ability to file
or settle a class action. It seeks to address the problem in several
ways. First, it requires that State attorneys general be notified about
proposed class action settlements that would affect residents of their
states. With notice, the attorneys general can intervene in cases where
they think the settlements are unfair.
Second, the legislation requires that class members be notified of a
potential settlement in clear, easily understood English--not legal
jargon.
Third, it limits class attorneys' fees to a reasonable percentage of
the actual damages received by plaintiffs or to reasonable hourly fees.
This will deter class lawyers from using inflated values of coupon
settlements to reap big fees. Some courts have already embraced this
standard, which parallels the recent securities reform law.
Fourth, it permits removal to federal court of certain class actions
involving citizens of multiple states, at the request of unnamed class
members or defendants. This provision eliminates gaming by class
lawyers to keep cases in state court and, through consolidation of
related cases in federal court, helps prevent a race to settlement
between competing class actions.
Finally, it amends Rule 11 of the Federal Rules of Civil Procedures
to require the imposition of sanctions for filing frivolous lawsuits,
although the nature and extent of sanctions remains discretionary. This
provision will deter the filing of frivolous class actions.
Let me emphasize the limited scope of this legislation. We do not
close the courthouse door to any class action. We do not require that
State attorneys general do anything with the notice they receive. We do
not deny reasonable fees for class lawyers. And we do not mandate that
every class action be brought in federal court. Instead, we simply
promote closer and fairer scrutiny of class actions and class
settlements.

[[Page S1170]]

These proposals have earned a broad range of support. Even Judge Paul
Niemeyer, the Chair of the Judicial Conference's Advisory Committee on
Civil Rules, who has studied class actions closely and testified before
Congress on this issue, expressed his support for this ``modest''
measure, noting in particular that increasing federal jurisdiction over
class actions will be a positive ``meaningful step.'' Last year, our
bill passed the Judiciary Administrative Oversight and the Courts
Subcommittee.
Mr. President, right now, people across the country can be dragged
into lawsuits unaware of their rights and unarmed on the legal
battlefield. What our bill does is give regular people back their
rights and representation. This measure may not stop all abuses, but it
moves use forward. It will help ensure that good people like Martha
Preston don't get ripped off.
Mr. President, Senator Grassley and I believe this is a moderate
approach to correct the worst abuses, while preserving the benefits of
class actions. It is both pro-consumer and pro-defendant. We believe it
will make a difference.
______

By Mr. THOMAS (for himself, Mr. McCain, Mr. Kerry, Mr. Smith of
Oregon, and Mr. Robb):
S. 354. A bill to authorize the extension of nondiscriminatory trade
status to the products of Mongolia; to the Committee on Foreign
Relations.

Mongolia Most-Favored-Nation Status

Mr. THOMAS. Mr. President, I rise as chairman of the Subcommittee on
East Asian and Pacific Affairs to introduce S. 354, a bill to authorize
the extension of nondiscriminatory treatment--formerly known as ``most-
favored nation status''--to the products of Mongolia. I am pleased to
be joined by Senator McCain, chairman of the Commerce Committee;
Senator Kerry, the ranking minority member of my subcommittee; and
Senator Robb and Senator Smith or Oregon as original cosponsors.
Mongolia has undergone a series of remarkable and dramatic changes
over the last few years. Sandwiched between the former Soviet Union and
China, it was one of the first countries in the world to become
communist after the Russian Revolution. After 70 years of communist
rule, though, the Mongolian people have recently made great progress in
establishing a democratic political system and creating a free-market
economy. Since that time, there have been successive successful
national and regional elections.
Mongolia has demonstrated a strong desire to build a friendly and
cooperative relationship with the United States on trade and related
matters since its turn towards democracy. We concluded a bilateral
trade treaty with that country in 1991, and a bilateral investment
treaty in 1994. Mongolia has received nondiscriminatory trading status
since 1991, and has been found to be in full compliance with the
freedom of emigration requirements of Title IV of the Trade Act of
1974. In additions, it has acceded to the Agreement Establishing of the
World Trade Organization.
Mr. President, Mongolia has clearly demonstrated that it is fully
deserving of joining the ranks of those countries to which we extend
nondiscriminatory trade status. The extension of that status would not
only serve to commend the Mongolians on their impressive progress, but
would also enable the U.S. to avail itself of all its rights under the
WTO with respect to Mongolia.
I have another, more parochial, reason for being interested in MFN
status for Mongolia. Mongolia and my home state of Wyoming are sister
states; a strong relationship between the two has developed over the
last four years. Many of Mongolia's provincial governors have visited
the state, and the two governments have established partnerships in
education, agriculture, and livestock management. Like Wyoming,
Mongolia is a high plateau with mountains on the northwest border,
where many of the residents make their living by raising livestock. I
am pleased to see the development of this mutually beneficial
relationship, and am sure that the extension of nondiscriminatory trade
status will serve to strengthen it further.
Mr. President, I introduced an identical bill in the last Congress,
but Congress adjourned sine die before the bill could be acted on by
both houses. I was very appreciative that last year the distinguished
chairman of the Finance Committee, Senator Roth, indicated his
willingness to favorably consider the legislation early in this
Congress, and look forward to working with him.
Mr. President, I ask unanimous that the text of S. 354 be printed in
the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:

S. 354

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,

SECTION 1. FINDINGS.

Congress makes the following findings:
(1) Mongolia has received nondiscriminatory trade treatment
since 1991 and has been found to be in full compliance with
the freedom of emigration requirements of title IV of the
Trade Act of 1974;
(2) Mongolia has, since ending its nearly 70 years of
dependence on the former Union of Soviet Socialist Republics,
established a parliamentary democracy and a free-market
economic system;
(3) Mongolia concluded a bilateral trade treaty with the
United States in 1991 and a bilateral investment treaty in
1994;
(4) Mongolia has acceded to the Agreement Establishing the
World Trade Organization;
(5) Mongolia has demonstrated a strong desire to build a
friendly and cooperative trade relationship with the United
States; and
(6) The extension of nondiscriminatory trade status to the
products of Mongolia would enable the United States to avail
itself of all the rights available under the World Trade
Organization with respect to Mongolia.

SEC. 2. TERMINATION OF APPLICATION OF TITLE IV OF THE TRADE
ACT OF 1974 TO MONGOLIA.

(a) Presidential Determinations and Extensions of
Nondiscriminatory Treatment.--Notwithstanding any provision
of title IV of the Trade Act of 1974 (19 U.S.C. 2431 et
seq.), the President may--
(1) determine that such title should no longer apply to
Mongolia; and
(2) after making a determination under paragraph (1) with
respect to Mongolia, proclaim the extension of
nondiscriminatory treatment to the products of that country.
(b) Termination of Application of Title IV.--On or after
the effective date of the extension under subsection (a)(2)
of nondiscriminatory treatment to the products of Mongolia,
title IV of the Trade Act of 1974 shall cease to apply to
that country.

Mr. McCAIN. Mr. President, today I am proud to cosponsor legislation
with Senators Thomas, Robb, and Kerry to grant nondiscriminatory trade
status to Mongolia. Passage of this legislation will play an important
role in aiding Mongolia's transition to a democratic government and a
market-oriented economy.
There has been a stunning political transformation in Mongolia since
it broke away from Communist rule in 1990. In the past seven years,
there have been two presidential elections and three parliamentary
elections. All of these have been open and democratic, and have not
suffered from violence or fraud.
The most important aspect of these elections is that they show the
triumph of democracy and democratic forces. In 1996, the Mongolian
Social Democratic Party (MSDP) and Mongolian National Democratic Party
(MNDP) joined forces to win an unexpected victory in the parliamentary
elections. By fulfilling its ``Contract with the Mongolian Voter,''
this coalition is ensuring the establishment of a political system
based on our cherished democratic principles. After a few months of
uncertainty, the Mongolian government is now back on track and
committed to continue its reforms. I am happy to say that the
International Republican Institute is continuing to play a major role
in showing these political parties how to establish a stable democratic
government.
This democratic transformation has established a firm human rights
regime. The Mongolian Constitution allows freedom of speech, the press
and expression. Separation of Church and state is recognized in this
predominantly Buddhist nation as well as the right to worship or not
worship. Full freedom of emigration is allowed, and Mongolia now is in
full compliance with sections 402 and 409 of the Trade Act of 1974,
also known as the Jackson-Vanik Amendment. An independent judiciary has
been established to protect these rights from any future violation.
Mongolia is also in the middle of an economic transformation. As part
of the ``Contract with the Mongolian

[[Page S1171]]

Voter,'' the democratic coalition of the MNDP and MSDP ran on promises
to establish private property rights and encourage foreign investment.
The Mongolian government is now steadily creating a market economy. A
program has been set up to allow residents of government-owned high
rise apartments to acquire ownership of their residence. In 1997,
Mongolia joined the international trading system by joining the World
Trade Organization and eliminating all tariffs, except on personal
automobiles, alcoholic beverages, and tobacco. On January 1, 1999, the
state-run press became privatized. The economic news also continues to
be good. The 1997 GDP growth was 3.3%, and the inflation rate has
dropped from 53.2% in 1996 to 9.2% in June, 1998. The Mongolian
government is now boldly moving to set the nation on a course to
privatize large-scale enterprise and reform the state pension system.
When I was in Mongolia in 1997, I saw the effects of this economic
transformation firsthand. At a town hall meeting in Kharakhorum, the
ancient capital of the Mongol Empire, I met a herdsman and asked him
about the economic liberalization. First, I asked him how many sheep he
had under Communism. He said none, because the Communists didn't allow
private property. Then I asked him how many sheep he owned after
privatization. He answered that he had three sheep then, which is not
much in a country with 25 million sheep. So I asked him how many sheep
he has now. He answered that he now has 90 goats, 60 sheep, 20 cows and
6 horses. I asked him if that was considered successful. He replied
that he was successful as were many herdsmen in this new economy. He
then told me that he would never want to change the system back to what
it was, because ``now Mongols have control over their own life and
destiny.'' That is the new culture of a market Mongolian economy.
There are many benefits to supporting Mongolian democracy and
economic liberalization. In 1991, Secretary of State James Baker
promised Mongolia that the United States would be Mongolia's ``third
neighbor.'' We remain committed to that course of action to encourage
Mongolia in its endeavors and promote it as an example of how nations
can successfully convert from a Communist totalitarian state to a
market democracy. The democratic Mongolia has already begun to promote
peace and stability among its neighbors by becoming the world's first
national nuclear-free zone. Furthermore, the United States will be able
to count on the liberalized Mongolian economy as an important market
for American goods and services.
I hope that my colleagues here in the Senate will join me in passing
this legislation to grant nondiscriminatory trade status to Mongolia to
help it continue its successful democratic transformation and
transition to a market economy.
______

By Mr. MOYNIHAN (for himself and Mr. Bingaman):
S. 355. A bill to amend title 13, United States Code, to eliminate
the provision that prevents sampling from being used in determining the
population for purposes of the apportionment of Representatives in
Congress among the several States; to the Committee on Government
Affairs.

a just apportionment for all states act

Mr. MOYNIHAN. Mr. President, I rise today to introduce, along with my
friend and colleague, Senator Bingaman, a bill to allow the use of
sampling in determining the populations of the states for use in
reapportionment. The Supreme Court has ruled that the 1976 amendments
to the Census Act do not permit sampling in determining these
populations. We believe sampling is vital to achieving the goal of the
most accurate census possible, and to a fair and accurate
redistricting.
The Bureau of the Census proposes to count each census tract by mail
and then by sending out enumerators until they have responses for 90
percent of the addresses. The Bureau proposes to then use sampling to
infer who lives at the remaining ten percent of addresses in each tract
based on what they know of the 90 percent. This would provide a more
accurate census then we get by repeatedly sending enumerators to hard-
to-count locations and would save $500 million or more in personnel
costs.
The Census plan is supported by the National Academy of Sciences'
National Research Council, which was directed by Congress in 1992 to
study ways to achieve the most accurate population count possible. The
NRC report finds that the Bureau should ``make a good faith effort to
count everyone, but then truncate physical enumeration after a
reasonable effort to reach nonrespondents. The number and character of
the remaining nonrespondents should then be estimated through
sampling.''
Mr. President, the taking of a census goes back centuries. I quote
from the King James version of the Bible, chapter two of Luke: ``And it
came to pass in those days that there went out a decree from Caesar
Augustus that all the world should be taxed (or enrolled, according to
the footnote) * * * And all went to be taxed, everyone into his own
city.'' The early censuses were taken to enable the rule or ruling
government to tax or raise an army.

The first census for more sociological reasons was taken in
Nuremberg, in 1449. So it was not a new idea to the Founding Fathers
when they wrote it into the Constitution to facilitate fair taxation
and accurate apportionment of the House of Representatives, the latter
of which was the foundation of the Great Compromise that has served us
well ever since.
The Constitution says in Article I, Section 2:

Representatives and direct Taxes shall be apportioned among
the several States which may be included within this Union,
according to their respective numbers, which shall be
determined by adding to the whole Number of free Persons,
including those bound to Service for a term of years, and
excluding Indians not taxed, three fifths of all other
persons. The actual enumeration shall be made within three
years of the first meeting of the Congress of the United
States, and within every subsequent term of ten years, in
such manner as they shall direct by law.

Those who cite this as saying the Constitution requires an ``actual
enumeration'' should consider whether the phrase is being taken out of
context. The Supreme Court has not yet ruled on the constitutionality
of sampling. Rather the Court has ruled on the census laws last amended
in 1976.
I also note that we have not taken an ``actual enumeration'' the way
the Founding Fathers envisioned since 1960, after which enumerators
going to every door were replaced with mail-in responses. The
Constitution provides for a postal system, but did not direct that the
census be taken by mail. Yet we do it that way. Why not sample if that
is a further improvement?
Sampling would go far toward correcting one of the most serious flaws
in the census, the undercount. Statistical work in the 1940's
demonstrated that we can estimate how many people the census misses.
The estimate for 1940 was 5.4 percent of the population. After
decreasing steadily to 1.2 percent in 1980, the 1990 undercount
increased to 1.8 percent, or more than four million people.
More significantly, the undercount is not distributed evenly. The
differential undercount, as it is known, of minorities was 5.7 percent
for Blacks, 5.0 percent for Hispanics, 2.3 percent for Asian-Pacific
Islanders, and 4.5 percent for Native Americans, compared with 1.2
percent for non-Hispanic whites. The difference between the black and
non-black undercount was the largest since 1940. By disproportionately
missing minorities, we deprive them of equal representation in Congress
and of proportionate funding from Federal programs based on population.
The Census Bureau estimates that the total undercount will reach 1.9
percent in 2000 if the 1990 methods are used instead of sampling.
Mr. President, I have some history with the undercount issue. In 1966
when I became Director of the Joint Center for Urban Studies at MIT and
Harvard, I asked Professor David Heer to work with me in planning a
conference to publicize the non-white undercount in the 1960 census and
to foster concern about the problems of obtaining a full enumeration,
especially of the urban poor. I ask unanimous consent that my foreword
to the report from that conference be printed in the Record, for it is,
save for some small numerical changes, disturbingly still relevant.
Sampling is the key to the problem and we must proceed with it so that
we have one accurate census count for all purposes, all uses. I also
ask unanimous consent that the text of the bill be printed in the
Record and I hope my colleagues will support it.

[[Page S1172]]

There being no objection, the items were ordered to be printed in the
Record, as follows:

S. 355

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``A Just Apportionment for All
States Act''.

SEC. 2. USE OF SAMPLING.

Section 195 of title 13, United States Code, is amended by
striking ``Except for the determination of population for
purposes of apportionment of Representatives in Congress
among the several States, the'' and inserting ``The''.
____

Social Statistics and the City

(By David M. Heer)

FOREWORD

At one point in the course of the 1950's John Kenneth
Galbraith observed that it is the statisticians, as much as
any single group, who shape public policy, for the simple
reason that societies never really become effectively
concerned with social problems until they learn to measure
them. An unassuming truth, perhaps, but a mighty one, and one
that did more than he may know to sustain morale in a number
of Washington bureaucracies (hateful word!) during a period
when the relevant cabinet officers had on their own reached
very much the same conclusion--and distrusted their charges
all the more in consequence. For it is one of the ironies of
American government that individuals and groups that have
been most resistant to liberal social change have quite
accurately perceived that social statistics are all too
readily transformed into political dynamite, whilst in a
curious way the reform temperament has tended to view the
whole statistical process as plodding, overcautious, and
somehow a brake on progress. (Why must every statistic be
accompanied by detailed notes about the size of the
``standard error''?)
The answer, of course, is that this is what must be done if
the fact is to be accurately stated, and ultimately accepted.
But, given this atmosphere of suspicion on the one hand and
impatience on the other, it is something of a wonder that the
statistical officers of the federal government have with
such fortitude and fairness remained faithful to a high
intellectual calling, and an even more demanding public
trust.
There is no agency of which this is more true than the
Bureau of the Census, the first, still the most important,
information-gathering agency of the federal government. For
getting on, now, for two centuries, the Census has collected
and compiled the essential facts of the American experience.
Of late the ten-year cycle has begun to modulate somewhat,
and as more an more current reports have been forthcoming,
the Census has been quietly transforming itself into a
continuously flowing source of information about the American
people. In turn, American society has become more and more
dependent on it. It would be difficult to find an aspect of
public or private life not touched and somehow shaped by
Census information. And yet for all this, it is somehow
ignored. To declare that the Census is without friends would
be absurd. But partisans? When Census appropriations are cut,
who bleeds on Capitol Hill or in the Executive Office of the
President? The answer is almost everyone in general, and
therefore no one in particular. But the result, too often, is
the neglect, even the abuse, of an indispensable public
institution, which often of late has served better than it
has been served.
The papers in this collection, as Professor Heer's
introduction explains, were presented at a conference held in
June 1976 with the avowed purpose of arousing a measure of
public concern about the difficulties encountered by the
Census in obtaining a full count of the urban poor,
especially perhaps the Negro poor. It became apparent, for
example, that in 1960 one fifth of nonwhite males aged 25-29
had in effect disappeared and had been left out of the Census
count altogether. Invisible men. Altogether, one tenth of the
nonwhite population had been ``missed.'' The ramifications of
this fact were considerable, and its implications will
suggest themselves immediately. It was hoped that a public
airing of the issue might lead to greater public support to
ensure that the Census would have the resources in 1970 to do
what is, after all, its fundamental job, that of counting all
the American people. As the reader will see, the scholarly
case for providing this support was made with considerable
energy and candor. But perhaps the most compelling argument
arose from a chance remark by a conference participant to the
effect that if the decennial census were not required by the
Constitution, the Bureau would doubtless never have survived
the economy drives of the nineteenth century. The thought
flashed: the full enumeration of the American population is
not simply an optional public service provided by government
for the use of sales managers, sociologists, and regional
planners. It is, rather, the constitutionally mandated
process whereby political representation in the Congress is
distributed as between different areas of the nation. It is a
matter not of convenience but of the highest seriousness,
affecting the very foundations of sovereignty. That being the
case, there is no lawful course but to provide the Bureau
with whatever resources are necessary to obtain a full
enumeration. Inasmuch as Negroes and other ``minorities'' are
concentrated in specific urban locations, to undercount
significantly the population in those areas is to deny
residents their rights under Article I, Section 3 of the
Constitution, as well, no doubt, as under Section 1 of the
Fourteenth Amendment. Given the further, more recent practice
of distributing federal, state, and local categorical aid on
the basis not only of the number but also social and economic
characteristics of local populations, the constitutional case
for full enumeration would seem to be further strengthened.
A sound legal case? Others will judge; and possibly one day
the courts will decide. But of one thing the conference had
no doubt: the common-sense case is irrefutable. America needs
to count all its people. (And reciprocally, all its people
need to make themselves available to be counted.) But if the
legal case adds any strength to the common-sense argument, it
remains only to add that should either of the arguments bring
some improvement in the future, ti will be but another
instance of the generosity of the Carnegie Corporation, which
provided funds for the conference and for this publication.

Mr. BINGAMAN. Mr. President, I am pleased to speak in support of this
important legislation being introduced today by my friend from New
York, Senator Moynihan. This bill turns into law what we all recognize
is the only practical way to count our citizens in the decennial
census. There is no question--the science is unequivocal--sampling is
the only way to assure an accurate census.
Not only does sampling provide a better census, it costs less than
all other alternative methods--as much as $3 billion less. What could
be clearer? Sampling gives a better answer at a lower cost. This bill
ought to pass the Senate unanimously.
Mr. President, the Constitution says the census shall be conducted in
a manner that Congress shall by law direct. The recent Supreme Court
case found that under the current law sampling may be used for all
aspects of the census except for the decision on how many
representatives each state will have. In fact, current law says
sampling shall be used for every other purpose of the census.
My state now has three House members and that number isn't going to
change after this census one way or the other. However, we now know New
Mexico had the second highest undercount rate in the 1990 census--3.1
percent, or nearly 50,000 New Mexicans were simply left out, including
20,000 children. Among New Mexico's native American community, the
undercount rate was an astounding 9 percent. This undercount is
literally costing New Mexico millions of dollars every year.
In Albuquerque, our largest city, 12,000 men, women, and children
were left out. Nationwide, 4 million Americans were not accounted for.
Mr. President, this massive undercount is unacceptable to New Mexico
and should be unacceptable to every Senator, especially when the Census
Bureau has a solution that is tried, tested, and reliable. I believe
every citizen counts, and every citizen should be counted.
Federal funding for education, transportation, crime prevention and
other priorities is allocated to states based on population. The
majority of people overlooked in the past census are poor, the very
citizens we must assure are not being left out. If the existing
undercount is repeated in future censuses, New Mexico will again be
denied its fair share of critical federal funds.
Under current law we can have a two-number census, one without
sampling for apportionment and one with sampling for all other
purposes. I can appreciate why some people don't want a two-number
census. The country would be better served with only a single-number
census as long as it's the best number the Census Bureau can come up
with. However, some in Congress would use the appropriations process to
stymie the census.
Mr. President, the census is done only once per decade, it is too
important to decide this issue as part of the annual appropriation
process. This bill will assure that the Census Bureau has available the
very best tools for this important task. Science-based sampling is the
only way to give America the quality we demand in our census. It is
inconceivable to me that anyone would support a second-rate census.
I am pleased to support this bill, and I hope the Senate will take
prompt action on it. I also urge the House to move forward quickly to
pass this important legislation. I thank Mr. Moynihan for his efforts.

[[Page S1173]]

______

By Mr. KYL (for himself and Mr. McCain):
S. 356. A bill to authorize the Secretary of the Interior to convey
certain works, facilities, and titles of the Gila Project, and
designated lands within or adjacent to the Gila Project, to the
Wellton-Mohawk Irrigation and Drainage District, and for other
purposes; to the Committee on Energy and Natural Resources.

wellton-mohawk project transfer

Mr. KYL. Mr. President, I rise today to introduce a bill to transfer
title to the Wellton-Mohawk Irrigation and Drainage District in Yuma,
Arizona from the Federal government to the project beneficiaries. If
you think this sounds like deja vu, you would be correct--it is. In May
of 1998, during the 105th Congress, I introduced the same bill. The
version I introduce today is the same version the passed the Senate at
the end of last Congress. The bill was approved by all the relevant
House and Senate Committees, passed by the Senate, included in a
package of similar bills in the House, but, for reasons that I have not
been able to determine, never managed to get signed into law. And this
particular project transfer was one Regional Director Bob Johnson
called ``low hanging fruit.'' In a meeting in my office, he assured me
that the Wellton-Mohawk project was a ``perfect example'' of the kind
of project that should transfer under the administration's 1995
Framework for Transfer. So this is exactly the kind of project the
Department of the Interior should transfer project title from the
Department to the project beneficiaries.
Mr. President, I would like to thank Senator John McCain for
cosponsoring this bill with me and I ask unanimous consent that the
text of the bill be printed in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:

S. 356

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
Sec. 1. Short Title.--This Act may be referred to as the
``Wellton-Mohawk Transfer Act''.
Sec. 2. Transfer.--The Secretary of the Interior
(``Secretary'') is authorized to carry out the terms of the
Memorandum of Agreement No. 8-AA-34-WAO14 (``Agreement'')
dated July 10, 1998 between the Secretary and the Wellton-
Mohawk Irrigation and Drainage District (``District'')
providing for the transfer of works, facilities, and lands to
the District, including conveyance of Acquired Lands, Public
Lands, and Withdrawn Lands, as defined in the Agreement.
Sec. 3. Water and Power Contracts.--Notwithstanding the
transfer, the Secretary and the Secretary of Energy shall
provide for and deliver Colorado River water and Parker-Davis
Project Priority Use Power to the District in accordance with
the terms of existing contracts with the District, including
any amendments or supplements thereto or extensions thereof
and as provided under section 2 of the Agreement.
Sec. 4. Savings.--Nothing in this Act shall affect any
obligations under the Colorado River Basin Salinity Control
Act (P.L. 93-320, 42 U.S.C. 1571).
Sec. 5. Report.--If transfer of works, facilities, and
lands pursuant to the Agreement has not occurred by July 1,
2000, the Secretary shall report on the status of the
transfer as provided in section 5 of the Agreement.
Sec. 6. Authorization.--There are authorized to be
appropriated such sums as may be necessary to carry out the
provisions of this Act.
______

By Mr. GRAMS:
S. 357. A bill to amend the Federal Crop Insurance Act to establish a
pilot program in certain States to provide improved crop insurance
options for producers; to the Committee on Agriculture, Nutrition, and
Forestry.

federal crop insurance reform act

______

By Mr. GRAMS:
S. 358. A bill to freeze Federal discretionary spending at fiscal
year 2000 levels, to extend the discretionary budget caps until the
year 2010, and to require a two-thirds vote of the Senate to breach
caps; to the Committee on the Budget and the Committee on Governmental
Affairs, jointly, pursuant to the order of August 4, 1977 with
instructions that if one Committee reports, the other Committee have
thirty days to report or be discharged.

budget reform legislation

______

By Mr. GRAMS (for himself and Mr. Crapo):
S. 359. A bill to establish procedures to provide for a taxpayer
protection lock-box and related downward adjustment of discretionary
spending limits, to provide for additional deficit reduction with funds
resulting from the stimulative effect of revenue reductions, and to
provide for the retirement security of current and future retirees
through reforms of the Old Age Survivor and Disability Insurance Act;
to the Committee on the Budget and the Committee on Governmental
Affairs, jointly, pursuant to the order of August 4, 1977, with
instructions that if one Committee reports, the other Committee have
thirty days to report or be discharged.

taxpayer protection lock-box legislation

Mr. GRAMS. Mr. President, I have a number of bills I want to
introduce today. I want to start out by talking a little bit about the
three bills dealing with budget reform, and then also an important bill
leading to crop insurance reform.
Mr. President, I rise today to introduce these bills that would
reform the Federal budget process, strengthen fiscal discipline and
restore Government accountability to ensure that taxpayers are fully
represented in Washington.
I commend Leader Lott and Chairman Domenici for including budget
process reform as one of the top five priorities in the 106th Congress.
I believe this should be our immediate priority as we prepare to make
our budget process work better.
Mr. President, the Federal budget process has become a reckless game
in which the team roster is limited to a handful of Washington
politicians and technocrats while the taxpayers are relegated to the
sidelines.
This has not only weakened the nation's fiscal discipline but also
undermined the system of checks and balances established by the
Constitution.
The most recent example of this abusive process was the 1998 Omnibus
Appropriation legislation. The bill included $520 billion in funding
for many essential Government programs, representing 8 out of Congress'
13 annual appropriations bills.
But the entire negotiations were exclusive, arbitrary, and conducted
behind closed doors by only a few congressional leaders and White House
staff.
Few Members of the Congress had any idea what was in the bill but
were asked to approve it, without debate, without adequate review,
without amendments, and without roll call votes.
As a result, Washington broke the spending caps mandated in last
year's Balanced Budget Act by spending more than $21 billion of the
surplus for so-called ``emergency'' purposes.
Budget negotiators magically invented a new smoke and mirrors budget
term--``forward funding'' which shifted $9.3 billion into future
budgets. Long-criticized ``backdoor spending'' thrived: for example,
lawmakers sneaked $1 billion to fund programs to achieve initiatives
under the Kyoto treaty. The White House has not sent up the Treaty and
the Congress has many reservations about it.
Without any policy consideration, hundreds of millions of taxpayer
dollars went to fund such pork programs as, amazingly, caffeinated
chewing gum research.
The budget process is seriously flawed. Twenty-five years ago,
Congress tried to change its budget practices and get spending under
control by passing the Congressional Budget Act. Yet, over these 25
years, our national debt has grown from $540 billion to $5.6 trillion.
Spending is at an all-time high, and so are taxes. The budget process
has become so complicated that most lawmakers have a hard time
understanding it. Of course, that hasn't stopped the proliferation of
budget gimmicks to circumvent the intent of the Congress.
Before the situation explodes completely, Congress must immediately
reform the budget process to ensure the integrity of our budget and
appropriations process. We can begin in the 106th Congress by taking a
few simple steps.
The first step is to ensure our government's continued operation
without any interruption. Last week, I introduced important legislation
that would continue funding for the Government at the prior year's
level when Congress and the President fail to complete appropriations
legislation.

[[Page S1174]]

Mr. President, we all still have a fresh memory of the 1995 Federal
Government shutdown, the longest one in history, which caused financial
damage and inconvenience to millions of Americans when the President
refused to support a Balanced Budget Act and tax relief for Americans.
However, the most serious damage done by the 27-day shutdown was that
it shook the American people's confidence in their Government and in
their elected officials.
I am concerned that President Clinton would use this technique again
to force Congress into spending more money. I believe we can do better
for the taxpayers and believe my legislation, the Good Government bill,
will help to do that.
In May of 1997, I first proposed this as a stand-alone vote in an
effort to pass the flood relief bill for Northern Minnesota. The Senate
Democratic leader agreed and supported my proposal. I was able to
obtain a commitment from the Senate leadership of both parties to
pursue the legislation separately in the near future.
Last summer, I sought to offer it as an amendment to an
appropriations bill. This amendment, originally sponsored by Senator
McCain, would have created an automatic procedure for a CR at the end
of each fiscal year. Unfortunately, my efforts were not successful.
If I had succeeded, we would not have had to go through the debacle
last year's omnibus spending bill.
Mr. President, we all have different philosophies and policies on
budget priorities, and of course we will not always agree.
But there are essential functions and services of the Federal
Government we must continue to fund regardless of our differences in
budget priorities. Program funding must be based on merits, not on
political leverage.
This legislation would continue funding for the Federal Government at
100 percent of the previous year's level when Congress and the
President fail to complete appropriations legislation at the end of any
fiscal year.
The virtue of this legislation is that it would allow us to debate
issues concerning spending policy and the merits of budget priorities
while we continue to keep essential Government functions operating. The
American taxpayer will no longer be held hostage to a Government
shutdown.
Mr. President, there are still plenty of uncertainties involved in
our budget and appropriations process, particularly this year. We must
ensure that this good-government contingency plan is adopted to keep
the Government up and running in the event a budget agreement is not
reached.
Another step we must take is to control our emergency spending.
Emergency spending is spending over the budget allotment and is
supposed to cover true emergencies, such as natural disaster relief.
Instead, Congress and the Administration have used this as an
opportunity to bust the budget for a lot of spending that is not
emergency related at all. Most of this spending can be planned within
our budget limits. Even natural disasters happen regularly--why not put
something in our budget to pay for them?
That is why I am introducing the ``Emergency Spending Control Act''
today as well. This legislation would require the President to submit a
line item in his budget for natural disaster relief funding. The
funding levels for this line item would be based on the average
spending of the last five years on natural disaster relief.
The amount in this line item would not be subject to the current
spending caps. The funding of this budget line item must be used
exclusively for natural disaster relief--any use for non-natural
disasters is strictly prohibited.
Mr. President, as a Senator whose State has been previously
devastated by the 1997 flood of the Red and Minnesota Rivers,
tornadoes, snow, ice and other natural disasters, I know how important
enacting this legislation is not only for Minnesotans, but for all
Americans.
Fortunately, city mayors, the State of Minnesota, and the Federal
Emergency Management Agency acted quickly in the Red River Valley, and
the rebuilding process moved relatively fast.
Local governments continue to work closely with my office and with
State and Federal agencies to answer the many questions that still
arise as people seek to rebuild their homes, their businesses, and the
rest of their lives.
We owe it to these Minnesotans and other Americans who have been
faced with a natural disaster to require the President to submit a line
item in his budget for natural disaster relief funding.
Local and State officials should not be required to come to
Washington and lobby for funding every time that a natural disaster
occurs. We should not have to consider and pass separate ``emergency''
legislation which becomes a magnet for other so-called emergency
spending. Disasters occur every year, we should budget for them.
Mr. President, the second to the last bill I am introducing today is
a bill to enforce and expand the statutory spending caps. Spending
limits are a good tool to control spending--if the President and
lawmakers stick to them. But since the establishment of statutory
spending limits, Washington has repeatedly broken them.
Washington set forth new spending caps in 1990 after it failed to
meet its deficit reduction targets. In 1993, President Clinton broke
the statutory spending caps for his new spending increases and created
new caps.
But in 1997, the President could not live within his own spending
caps, and he broke them again. Last year, President Clinton proposed
over $22 billion of so-called ``emergency spending'' in the omnibus
spending legislation and again broke the caps.
Again and again, Washington lowers the fiscal bar and then jumps over
it at the expense of the American taxpayers.
This is wrong. Mr. President. If we commit to living within the
statutory spending caps, we must stick to it. We must use every tool
available to enforce these spending limits.
My legislation will help Congress to enforce its fiscal discipline by
creating a new budget point of order to allow Congress to exceed
spending limits only if two-thirds of its members vote to do so.
In addition, my bill would extend the limits beyond the year 2000.
Doing so will ensure that spending increases won't grow faster than the
income growth of working Americans.
There are many other budget process reforms I support as well,
promoted by other Senators. One I would like to highlight is the
biennial budget, which is proposed by our distinguished colleague,
Senator Domenici. Biennial budgeting will allow us to examine our
fiscal discipline as well as providing valuable time for our oversight
responsibilities.
If the Congress adopts each of these changes, it will ensure a budget
process that serves the best interests of the nation, allows careful
policy and spending deliberation, and strengthens our political
institution of government through representation as established by the
Constitution.
Mr. President, finally I want to take a few minutes to introduce a
bill which takes an important step toward improving the nation's
federal crop insurance program--and that is a bill that I have
introduced, the ``Crop Insurance Reform Act.''
Last year, we witnessed devastating circumstances come together to
create a crisis atmosphere for many of our nation's farmers. I know
that in my own state of Minnesota, multiple years of wet weather and
crop disease--especially scab--coupled with rising production costs and
plummeting commodity prices have devastated family farms in record
numbers.
With the increased opportunities that accompany Freedom to Farm come
increased risks. We've seen this first hand.
Freedom to Farm can work, but a necessary component of it, as I have
argued repeatedly, is an adequate crop insurance program. This
component has been missing so far. One of the promises made during
debate of the 1996 Farm Bill was that Congress would address the need
for better crop insurance.
We must not let another growing season pass without having instituted
a new, effective crop insurance program.
This overhaul is a major undertaking, and instituting a program of
comprehensive reform should be and is now a legislative priority.

[[Page S1175]]

In fact, the President has included a number of ideas for reforming
the federal crop insurance program in his recent budget proposal. Most
importantly, the President has suggested increasing the federal
subsidies on crop insurance premiums and eliminating disparities in
subsidy rates. Essentially, this is similar to legislation I introduced
last year and am introducing again today. Unfortunately, while the
President claims to support crop insurance reform, he has failed to
identify any money in his budget to fund it. However, now that he has
recognized the urgency of the situation, I hope we can work together to
accomplish meaningful reform.
Furthermore, we must resume the debate now so that we can have the
best system in place in time, and that we can do it in time for the
year 2000 crops. The bill I am introducing today is a first step. It is
the result of months of work from my Minnesota Crop Insurance Work
Group.
The Work Group consists of various commodity groups, farm
organizations, rural lenders, and agriculture economists. We have also
worked closely with USDA's Farm Service and Risk Management Agencies.
But it was my primary intention to assemble a committee of farmers and
lenders--people who know the situation and have seen the problems
firsthand.
The Crop Insurance Reform Act is designed to address the coverage
decision a farmer must make at the initial stages of purchasing crop
insurance. Producers have been telling us that they need better
coverage, but that it is currently too expensive.
My bill will allow more options for producers to choose from when
making risk-management decisions. It essentially provides farmers with
an enhanced coverage product at a more affordable price.
Currently, producer premium subsidies range from nearly 42 percent at
the 100 percent price election for 65 percent coverage, to only 13
percent at the 100 percent price election for 85 percent coverage.
Although the Risk Management Agency has recently provided better
product options, the relatively low subsidy levels at the higher ends
of coverage make them cost prohibitive.
My bill will put in place a flat subsidy level of 31 percent across
the 100 percent price election and at all levels of coverage.
This will adjust the producer premiums to make better coverage more
affordable, thereby removing the incentive from purchasing lesser-grade
coverage. The Crop Insurance Reform Act puts the focus of the coverage
decision on what really matters: and that is the type of coverage which
would be needed in the event of a disaster or loss, rather than simply
making the decision based upon up-front costs.
When farmers are armed with the necessary risk management tools, I
believe everybody will save. The government saves in ad hoc disaster
payments, arguably the most expensive way to address any kind of
financial crisis. But more importantly, the family farmer saves.
This bill is part of a continued effort to reform Federal Crop
Insurance.
Over the next few months, I will continue to work with my Crop
Insurance Work Group, and my colleagues, Senators Lugar and Roberts, to
craft a comprehensive program which directly benefits producers and
also will be here to protect the taxpayers.
Mr. GRAMS. Mr. President, the second bill I am introducing with my
good friend, Senator Crapo of Idaho, is lockbox legislation.
Before being elected to the Senate in 1998, Mike Crapo led the fight
to enact the Lock Box legislation in the House of Representatives. His
version of the Lock Box legislation was passed by the House of
Representatives on four different occassions, both as a free standing
bill and as an amendment. I am pleased to have Senator Crapo as a
partner on this legislation in the Senate.
Mr. President, our short-term fiscal situation has improved greatly
due to the continued growth of our economy. It is reported that we may
end up with a unified budget surplus of over $80 billion this year and
a $4.5 trillion surplus in the next 15 years.
Of course, tax dollars are always considered ``free money'' by the
big spenders here in Washington, and the thought of all that new ``free
surplus money'' is creating a feeding frenzy on Capitol Hill.
If we don't lock away this increased revenue for the taxpayers, the
government will spend every penny of it. Despite the rhetoric about
reserving it all for Social Security, Washington has already spent $30
billion of last year's budget surplus.
We need a lockbox to dedicate any increased revenue in the future and
return it to the taxpayers as tax relief, debt reduction, and Social
Security reform.
Since the unexpected revenue has come directly from working
Americans, I believe it is only fair to return it to them. The tax
burden on the American people is still historically high. It's sound
policy to use our non-Social Security surplus to lower the tax burden
and allow families to keep a little more of their hard-earned money.
Over the past 30 years, as I mentioned, we have amassed a $5.6
trillion national debt thanks to Washington's culture of spending. A
newborn child today will bear over $20,000 of that debt the moment he
or she comes into the world. Each year, we sink more than $250 billion
into the black hole of interest payments, which could be better spent
fighting crime, maintaining roads and bridges, and equipping the
military. It's sound policy to use part of any surpluses to begin
paying down the national debt and reducing the financial burden on the
next generations.
The budget surpluses also give us a great opportunity to address our
other long-term financial imbalances. Federal unfunded liabilities
could eventually top $20 trillion, bankrupting our government if no
real reform occurs.
It's vitally important that we use the entire Social Security surplus
exclusively for Social Security, and we should even use a portion of
the non-Social Security surplus to finance Social Security reforms.
If we don't lock in the surplus, Washington will spend all of it to
expand the government. That's what they are doing now. Last month
alone, President Clinton proposed 41 new programs. The spending
increases he outlined could reach $300 billion a year, the highest
increase proposed by any President in our history.
Mr. President, we must never, never, never repeat the mistake we made
in 1997 and 1998, and allow Washington take a huge bite into the
taxpayers' money. We must do everything we can to ensure we reserve any
increased revenue for Social Security, tax relief and debt reduction.
______

By Mr. LAUTENBERG (for himself and Mr. Torricelli):
S. 362. A bill to authorize appropriations for the Coastal Heritage
Trail Route in New Jersey, and for other purposes; to the Committee on
Energy and Natural Resources.

LEGISLATION TO REAUTHORIZE THE NEW JERSEY COASTAL HERITAGE TRAIL ROUTE

Mr. LAUTENBERG. Mr. President, today I am introducing legislation to
reauthorize the New Jersey Coastal Heritage Trail Route so that we can
allow the National Park Service, together with its partners, to
complete its work in bringing recognition to New Jersey's rich coastal
history. I am pleased to be joined by Senator Torricelli in sponsoring
this legislation.
The Coastal Heritage Trail Route was first authorized in 1988 through
legislation sponsored by former Senator Bill Bradley and myself. This
legislation authorized the Secretary of the Interior to design a
vehicular route that would enable the public to enjoy the nationally
significant natural and cultural sites along the New Jersey coastline.
Thanks to the work of the National Park Service, the Coastal Heritage
Trail Route will, at completion, have five theme trails to allow for
the self-discovery of topics ranging from maritime history to wildlife
migration. These five vehicular discovery trails will travel along the
coast of New Jersey, through eight different counties, by way of the
Garden State Parkway and State Highway 49.
The first theme trail completed is the Maritime History trail. The
purpose of this trail is to explore the coastal trade, defense of the
nation, and fishing and ship building industries. The second trail is
the Coastal

[[Page S1176]]

Habitats trail. This trail enables visitors to learn about the special
natural resources of the New Jersey coast and the plants, animals and
especially birds that live there. The recently opened Wildlife
Migrations trail, allows individuals to explore the special places that
migrating species depend on along New Jersey's coast. A fourth trail is
the Historic Settlements trail. When completed, this trail will bring
the historic communities whose economies were based on local natural
resources to life. The final tour, Relaxation and Inspiration, will
depict how people have traditionally used their leisure time, at places
such as religious retreats and historic boardwalks.
The project, which was originally conceived and designed to recognize
the importance of New Jersey's coastal areas in our nation's history,
has grown into a rich partnership between the federal government, state
and local governments, and private individuals. This partnership
demonstrates a commitment among many levels of government and the
private sector to bringing history to life.
Mr. President, the New Jersey Coastal Heritage Trail Route is clearly
one of the National Park Service's success stories. Legislation to
renew authorization for the trail enacted in 1994 appropriately called
upon the Park Service to match 50 percent of its federal funding with
non-federal funds. I am pleased to report that the Service has gone
well beyond that matching requirement. Since 1994, appropriations for
the Trail Route totaled $1.8 million. During that same period, the Park
Service has raised $2.8 million in matching funds.
However, the work is not yet finished. Even though the Park Service
has been able to meet the funding requirements, at this time, only the
first three trails have been completed. The Park Service plans call for
completing the two remaining trails, and adding three new visitor
centers and interpretive materials to aid school children as they learn
about New Jersey's history. Our bill would make this possible by
increasing the authorization level for the trail to $4 million, and
extend the authorization to the Year 2004, which would give the Park
Service the additional time it needs to complete the Trail Route.
The Coastal Heritage Trail Route brings national recognition and
stature to many of New Jersey's special places, and helps to contribute
to New Jersey's number two industry, tourism. Most importantly, the
Trail Route provides residents and visitors with an opportunity to
explore New Jersey's natural and cultural history and develop an
appreciation for its importance. But what should happen if we don't
reauthorize the funds for this program? Among other effects, New Jersey
residents and visitors to our state will have lost valuable educational
opportunities. Much of the $2 million in grants that the project has
successfully generated will have been lost. And there would be a severe
impact on tourism if the five themes are not fully developed.
Mr. President, I just wanted to take a moment to commend Senator
Murkowski, the Chairman of the Senate Energy and Natural Resources
Committee and Senator Thomas, the Chairman of the Subcommittee on
National Parks, Historic Preservation, and Recreation. They and the
members of their staff worked hard in the last Congress to mark up this
legislation and report it favorably to the full Senate. Although this
bill was approved overwhelmingly by my colleagues in the Senate in the
last Congress, the House of Representatives did not vote on this
legislation prior to adjournment, and thus we must begin again. I have
every confidence that this important legislation will pass both houses
of Congress in a timely fashion during this session. Just today, the
House Resources Committee reported out the House version of this bill,
H.R. 171, introduced by Rep. Frank A. LoBiondo.
The completion of the Coastal Heritage Trail Route is an important
priority for New Jersey. The trail system will provide a sense of
history, not solely for the residents of New Jersey, but for its
visitors as well. By repealing the sunset provision on the original
act, and increasing the authorization, the National Park Service will
be allowed to complete the project that deserves to be finished.
I ask unanimous consent that copy of the bill be printed in the
Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:

S. 362

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,

SECTION 1. AUTHORIZATION OF APPROPRIATIONS.

Section 6 of Public Law 100-515 (16 U.S.C. 1244 note) is
amended--
(1) in subsection (b)(1), by striking ``$1,000,000'' and
inserting ``$4,000,000''; and
(2) in subsection (c), by striking ``five'' and inserting
``10''.
______

By Mr. DOMENICI:
S. 363. A bill to establish a program for training residents of low-
income rural areas for, and employing the residents in, new
telecommunications industry jobs located in rural areas, and for other
purposes; to the Committee on Health, Education, Labor, and Pensions.

THE RURAL EMPLOYMENT IN TELECOMMUNICATIONS INDUSTRY ACT OF 1999

Mr. DOMENICI. Mr. President, I rise today with great pleasure to
introduce ``The Rural Employment in Telecommunications Industry Act of
1999.''
The introduction of this Bill marks a historic opportunity for rural
communities to create jobs within the telecommunications industry. The
Bill establishes a program to train residents of low income rural areas
for employment in telecommunications industry jobs located in those
same rural areas.
As many of my colleagues know, I have an initiative called ``rural
payday'' and I believe this Bill is yet another step in creating jobs
for our rural areas. All too often a rural area is characterized by a
high number of low income residents and a high unemployment rate.
Moreover, our rural areas are often dependent upon a small number of
employers or a single industry for employment opportunities.
Consequently, when there is a plant closing, a downturn in the economy,
or a slowdown in the area's industry the already present problems are
only compounded.
Mr. President, I would also like to take a moment and talk about New
Mexico.
While New Mexico may be the 5th largest state by size with its
beautiful mountains, desert, and Great Plains and vibrant cities such
as Albuquerque, Santa Fe, and Las Cruces it is also a very rural state.
The Northwest and Southeast portions of the state are closely tied to
the fortunes of the oil and gas industry. Additionally, a community can
be dealt a severe blow with the closing or downsizing of an employer or
manufacturing plant.
I would also like to mention that communities like Clovis and Roswell
are already taking steps to lay the foundation for creating jobs
through the Call Center Industry. Just recently in Clovis, over a 1,000
people participated in a Career Expo that focused on attracting Call
Center companies to the area.
As I stated before, all too often rural areas do not possess the
resources of more metropolitan areas and can be devastated by a single
event or downturn in the economy. The Bill I am introducing today will
allow communities, like those I just mentioned, to apply for Federal
aid to assist them in taking the next step in attracting
telecommunications jobs.
The Bill will allow the Secretary of Labor to establish a program to
promote rural employment in the telecommunications industry by
providing grants to states with low income rural areas. The program
will be a win win proposition for all involved because employers
choosing to participate in the project by bringing jobs to the rural
area will be assured of a highly skilled workforce.
The program will provide residents with intensive services to train
them for the new jobs in the telecommunications industry. The intensive
services will include customized training and appropriate remedial
training, support services and placement of the individual in one of
the new jobs created by the program.
And that is what this bill is about, providing people with the tools
needed to succeed. With these steps we are embarking on the road of
providing our rural areas throughout our nation with a vehicle to
create jobs. We are creating opportunities and an environment where our
citizens can succeed and our communities can be vibrant.

[[Page S1177]]

______

By Mr. BOND (for himself, Mr. Kerry, and Mr. Lieberman):
S. 364. A bill to improve certain loan programs of the Small Business
Administration, and for other purposes; to the Committee on Small
Business.

small business investment improvement act of 1999

Mr. BOND. Mr. President, I rise today to introduce the Small Business
Investment Improvement Act of 1999. I am pleased to announce that two
of my colleagues from the Committee on Small Business, Senator Kerry
and Senator Lieberman, have joined as principal cosponsors. This is an
important bill for one simple reason: it makes more investment capital
available to small businesses that are seeking to grow and hire new
employees.
In 1958, Congress created the SBIC Program to assist small business
owners obtain investment capital. Forty years later, small businesses
continue to experience difficulty in obtaining investment capital from
banks and traditional investment sources. Although investment capital
is readily available to large businesses from traditional Wall Street
investment firms, small businesses seeking investments in the range of
$500,000-$2.5 million have to look elsewhere. SBICs are frequently the
only sources of investment capital for growing small businesses.
In 1992 and 1996, the Committee on Small Business worked closely with
the Small Business Administration to correct earlier deficiencies in
the law in order to ensure the future of the program. Today, the SBIC
Program is expanding rapidly in an effort to meet the growing demands
of small business owners for debt and equity investment capital.
Last year, the Committee on Small Business approved a bill similar to
the bill being introduced today. Today's bill includes two technical
changes in the SBIC program. The first change removes a requirement
that at least 50 percent of the annual program level of the approved
participating securities under the SBIC Program be reserved for funding
with SBICs having private capital of not more than $20 million. The
requirement has become obsolete following SBA's imposition of its
leverage commitment process and Congressional approval for SBA to issue
five year commitments for SBIC leverage.
The second technical change requires SBA to issue SBIC guarantees and
trust certificates at periodic intervals of not less than 12 months.
The current requirement is six months. This change will give maximum
flexibility for SBA and the SBIC industry to negotiate the placement of
certificates that fund leverage and obtain the lowest possible interest
rate.
The Small Business Investment Improvement Act of 1999 clarifies the
rules for the determination of an eligible small business or small
enterprise that is not required to pay Federal income tax at the
corporate level, but that is required to pass income through to its
shareholders or partners by using a specified formula to compute its
after-tax income. This provision is intended to permit ``pass through''
enterprises to be treated the same as enterprises that pay Federal
taxes for purposes of SBA size standard determinations.
The bill would also make a relatively small change in the operation
of the program. This change, however, would help smaller, small
businesses to be more attractive to investors. SBICs would be permitted
to accept royalty payments contingent on future performance from
companies in which they invest as a form of equity return for their
investment.
SBA already permits SBICs to receive warrants from small businesses,
which give the investing SBIC the right to acquire a portion of the
equity of the small business. By pledging royalties or warrants, the
small business is able to reduce the interest that would otherwise be
payable by the small business to the SBIC. Importantly, the royalty
feature provides the smaller, small business with an incentive to
attract SBIC investments when the return may otherwise be insufficient
to attract venture capital.
Lastly, the bill increases the program authorization levels to fund
Participating Securities. In Fiscal Year 1999, the authorization level
would increase from $800 million to $1.2 billion; in Fiscal Year 2000,
it would increase from $900 million to $1.5 billion. The two increases
have become necessary as the demand in the SBIC program was growing at
a rapid rate. Higher authorization levels are necessary if the SBIC
Program is going to meet the demand for investment capital from the
small business community.
Mr. President, this is a sound legislative proposal, which has the
support of many of my colleagues on the Committee on Small Business. It
is my hope we will be able to conduct a committee markup of this bill
in the near future.
I ask unanimous consent that the full text of the bill be printed in
the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:

S. 364

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Small Business Investment
Improvement Act of 1999''.

SEC. 2. SBIC PROGRAM.

(a) In General.--Section 308(i)(2) of the Small Business
Investment Act of 1958 (15 U.S.C. 687(i)(2)) is amended by
adding at the end the following: ``In this paragraph, the
term `interest' includes only the maximum mandatory sum,
expressed in dollars or as a percentage rate, that is payable
with respect to the business loan amount received by the
small business concern, and does not include the value, if
any, of contingent obligations, including warrants, royalty,
or conversion rights, granting the small business investment
company an ownership interest in the equity or increased
future revenue of the small business concern receiving the
business loan.''.
(b) Funding Levels.--Section 20 of the Small Business Act
(15 U.S.C. 631 note) is amended--
(1) in subsection (d)(1)(C)(i), by striking
``$800,000,000'' and inserting ``$1,200,000,000''; and
(2) in subsection (e)(1)(C)(i), by striking
``$900,000,000'' and inserting ``$1,500,000,000''.
(c) Definitions.--
(1) Small business concern.--Section 103(5) of the Small
Business Investment Act of 1958 (15 U.S.C. 662(5)) is
amended--
(A) by redesignating subparagraphs (A) through (C) as
clauses (i) through (iii), and indenting appropriately;
(B) in clause (iii), as redesignated, by adding ``and'' at
the end;
(C) by striking ``purposes of this Act, an investment'' and
inserting the following: ``purposes of this Act--
``(A) an investment''; and
(D) by adding at the end the following:
``(B) in determining whether a business concern satisfies
net income standards established pursuant to section 3(a)(2)
of the Small Business Act, if the business concern is not
required by law to pay Federal income taxes at the enterprise
level, but is required to pass income through to the
shareholders, partners, beneficiaries, or other equitable
owners of the business concern, the net income of the
business concern shall be determined by allowing a deduction
in an amount equal to the sum of--
``(i) if the business concern is not required by law to pay
State (and local, if any) income taxes at the enterprise
level, the net income (determined without regard to this
subparagraph), multiplied by the marginal State income tax
rate (or by the combined State and local income tax rates, as
applicable) that would have applied if the business concern
were a corporation; and
``(ii) the net income (so determined) less any deduction
for State (and local) income taxes calculated under clause
(i), multiplied by the marginal Federal income tax rate that
would have applied if the business concern were a
corporation;''.
(2) Smaller enterprise.--Section 103(12)(A)(ii) of the
Small Business Investment Act of 1958 (15 U.S.C.
662(12)(A)(ii)) is amended by inserting before the semicolon
at the end the following: ``except that, for purposes of this
clause, if the business concern is not required by law to pay
Federal income taxes at the enterprise level, but is required
to pass income through to the shareholders, partners,
beneficiaries, or other equitable owners of the business
concern, the net income of the business concern shall be
determined by allowing a deduction in an amount equal to the
sum of--

``(I) if the business concern is not required by law to pay
State (and local, if any) income taxes at the enterprise
level, the net income (determined without regard to this
clause), multiplied by the marginal State income tax rate (or
by the combined State and local income tax rates, as
applicable) that would have applied if the business concern
were a corporation; and
``(II) the net income (so determined) less any deduction
for State (and local) income taxes calculated under subclause
(I), multiplied by the marginal Federal income tax rate that
would have applied if the business concern were a
corporation''.

(d) Technical Corrections.--
(1) Repeal.--Section 303(g) of the Small Business
Investment Act of 1958 (15 U.S.C. 683(g)) is amended by
striking paragraph (13).
(2) Issuance of guarantees and trust certificates.--Section
320 of the Small Business Investment Act of 1958 (15 U.S.C.
687m) is amended by striking ``6'' and inserting ``12''.

[[Page S1178]]

(3) Elimination of table of contents.--Section 101 of the
Small Business Investment Act of 1958 (15 U.S.C. 661 note) is
amended to read as follows:

``SEC. 101. SHORT TITLE.

``This Act may be cited as the `Small Business Investment
Act of 1958'.''.

Mr. KERRY. Mr. President, today I join Chairman Bond in support of
the Small Business Investment Company Technical Corrections Act.
The Small Business Investment Company (SBIC) program is vital to our
fastest growing small companies that have capital needs exceeding the
caps on SBA's loan programs, but are not large enough to be attractive
to traditional venture capital investors. The demand is clear: Last
year, participating securities in the SBIC program invested $360
million in 495 financings. In Massachusetts, where there is an
impressive community of fast-growing companies, particularly in the hi-
tech industry, there were 140 SBIC financings, worth $145.4 million.
This legislation sets out to make five technical changes. They range
from improving the incentive for SBIC's to loan money to small
companies to structuring a fairer formula for determining whether
companies of the same revenue size can quality for SBIC financing. One
of the most important changes will increase the authorized levels for
participating securities.
The Participating Securities component of the SBIC program invests
principally in the equities of new or expanding businesses. To leverage
the private capital of participating securities and better serve these
fast-growing businesses, I supported Senator Lieberman's amendment to
H.R. 3412 during the last Congress, which would have raised the
authorization level for participating securities from $800 million to
$1 billion in fiscal year 1999 and from $900 million to $1.2 billion in
fiscal year 2000. This bill passed the Senate Small Business Committee
and the full Senate by unanimous consent, but unfortunately, the House
was unable to act on it before the 105th Congress ended.
Since that amendment was introduced, we have seen that the need is
even greater than those levels. The Administration anticipates faster
growth in the SBIC program because of both its increasing popularity
and the increase in additional personnel at the Small Business
Administration to its SBIC licensing unit. In fiscal years 1997 and
1998, SBA licensed approximately 30 new SBIC's per year. With more
staff devoted to the licensing unit, SBA projects that it will license
more than double that amount in fiscal year 1999. Accordingly, Senator
Bond's Act would increase the authorization level to $1.2 billion in
FY99 and to $1.5 billion in FY2000.
Mr. President, I am pleased to cosponsor this legislation and I
applaud the work of my colleagues on the Senate Small Business
Committee, Chairman Bond and Senator Lieberman.
______

By Mr. GORTON (for himself and Mrs. Murray):
S. 365. A bill to amend title XIX of the Social Security Act, to
allow States to use the funds available under the State children's
health insurance program for an enhanced matching rate for coverage of
additional children under the Medicaid program; to the Committee on
Finance.

children's health equity act

Mr. GORTON. Mr. President. In 1997, Congress and the President agreed
to provide $48 billion over the next 10 years as an incentive to states
to provide health care coverage to uninsured, low-income children. To
receive this money, states must expand eligibility levels to children
living in families with incomes up to 200% of the federal poverty
level.
Washington State has a strong record of ensuring that its low-income
kids have access to health care. Five years ago, my state decided to do
what Congress and the President have just last year required other
states to do. In 1994, Washington expanded its child Medicaid
eligibility level to 200% of the federal poverty level (FPL) all the
way through to the age of 18.
During the negotiations of the 1997 Balanced Budget Act (BBA),
Congress and the Administration recognized that certain states were
already undertaking Medicaid expansions up to or above 200 percent of
FPL, and that they would be allowed to use the new SCHIP funds.
Unfortunately, this provision was limited to those states that enacted
expansions on or after March 31, 1997 and disallowed Washington from
accessing the $230 million in SCHIP funds it had been allocated through
2002. As a result, Washington State cannot use its SCHIP allotment to
cover the 90,000 children currently eligible, but not covered for
health care at or below 200 percent of poverty. Exacerbating this
inequity is the fact that many states have begun accessing their SCHIP
allotments to cover kids at poverty levels far below Washington's
current or past eligibility levels.
The bill I am introducing today, along with Senator Murray, corrects
this technicality and is a top priority for the Washington State
delegation in the 106th Congress. Congresswoman Dunn has introduced a
companion measure in the House of Representatives that is cosponsored
by the entire Washington delegation.
This bipartisan, bicameral initiative represents a thoughtful,
carefully-crafted response to the unintended consequences of SCHIP and
brings much needed assistance to children currently at risk. Rather
than simply changing the effective date included in the BBA, this
initiative includes strong maintenance of effort language as well as
incentives for our state to find those 90,000 uninsured kids because we
feel strongly that they receive the health coverage for which they are
eligible.
This bill does not take money from other states nor does it provide
additional federal subsidies for children the state is now covering, it
simply allows Washington to continue to do the good work they have
already started by focusing on new, uninsured children at low income
levels first.
______

By Mr. COCHRAN (for himself, Mr. Moynihan, and Mr. Frist):
S.J. Res. 8. A joint resolution providing for the reappointment of
Wesley S. Williams, Jr., as a citizen regent of the Board of Regents of
the Smithsonian Institution; to the Committee on Rules and
Administration.
______

By Mr. COCHRAN (for himself, Mr. Moynihan, and Mr. Frist):
S.J. Res. 9. A joint resolution providing for the reappointment of
Dr. Hanna H. Gray as a citizen regent of the Board of Regents of the
Smithsonian Institution; to the Committee on Rules and Administration.
______

By Mr. COCHRAN (for himself, Mr. Moynihan, and Mr. Frist):
S.J. Res. 10. A joint resolution providing for the reappointment of
Barber B. Conable, Jr., as a citizen regent of the Board of Regents of
the Smithsonian Institution; to the Committee on Rules and
Administration.

board of regents of the smithsonian institution reappointments

Mr. COCHRAN. Mr. President, today I am introducing three Senate Joint
Resolutions reappointing citizen regents of the Board of Regents of the
Smithsonian Institution. I am pleased that my fellow Smithsonian
Institution Regents, Senators Moynihan and Frist are cosponsors.
At its meeting on January 25, 1999, the Smithsonian Institution Board
of Regents recommended the following distinguished individuals for
reappointment to six year terms effective April 12, 1999: Barber B.
Conable, Jr. of New York; Dr. Hanna H. Gray of Illinois; and Mr. Wesley
S. Williams, Jr. of the District of Columbia.
I ask unanimous consent that copies of their biographies be included
in the Record.
There being no objection, the materials were ordered to be printed in
the Record, as follows:

Wesley S. Williams, Jr.

Wesley S. Williams, Jr., of Washington, D.C., has been
associated with the law firm of Covington & Burling since
1970 and a partner since 1975. He was previously legal
counsel to the Senate Committee on the District of Columbia,
a teaching fellow at Columbia University Law School, and
Special Counsel to the District of Columbia Council. He is
currently active on many corporate and non-profit boards and
has participated in the Smithsonian Luncheon Group. He was
appointed to the Board of Regents in April 1993, chairs its
Investment Policy Committee, and serves on the Regents'
Executive Committee, Nominating Committee, Committee on
Policy, Programs, and Planning, and ad hoc Committee on
Business. He also served on the Regents' Search Committee for
a New Secretary, and he is a member of the Commission of the
National Museum of American Art.

[[Page S1179]]

____
Hanna Holborn Gray

The Harry Pratt Judson Distinguished Service Professor of History, The
University of Chicago

Hanna H. Gray was President of the University of Chicago
from July 1, 1978 through June 30, 1993, and is now President
Emeritus.
Mrs. Gray is a historian with special interests in the
history of humanism, political and historical thought, and
politics in the Renaissance and the Reformation. She taught
history at the University of Chicago from 1961 to 1972 and is
now the Harry Pratt Judson Distinguished Service Professor of
History in the University of Chicago's Department of History.
She was born on October 25, 1930, in Heidelberg, Germany.
She received her B.A. degree from Bryn Mawr in 1950 and her
Ph.D. in history from Harvard University in 1957. From 1950
to 1951, she was a Fulbright Scholar at Oxford University.
She was an instructor at Bryn Mawr College in 1953-54 and
taught at Harvard from 1955 to 1960, returning as a Visiting
Lecturer in 1963-64. In 1961, she became a member of the
University of Chicago's faculty as Assistant Professor of
History, becoming Associate Professor in 1964.
Mrs. Gray was appointed Dean of the College of Arts and
Sciences and Professor of History at Northwestern University
in 1972. In 1974, she was elected Provost of Yale University
with an appointment as Professor of History. From 1977 to
1978, she also served as Acting President of Yale.
She has been a Fellow of the Newberry Library, a Fellow of
the Center of Behavioral Sciences, a Visiting Scholar at that
center, a Visiting Professor at the University of California
at Berkeley, and a Visiting Scholar for Phi Beta Kappa. She
is also an Honorary Fellow of St. Anne's College, Oxford.
Mrs. Gray is a member of the Renaissance Society of
America. She is a fellow of the American Academy of Arts and
Sciences and a member of the American Philosophical Society,
the National Academy of Education, and the Council on Foreign
Relations of New York. She holds honorary degrees from a
number of colleges and universities, including Oxford, Yale,
Brown, Columbia, Princeton, Duke, Harvard, and the
Universities of Michigan and Toronto, and The University of
Chicago.
She is chairman of the boards of the Andrew W. Mellon
Foundation and the Howard Hughes Medical Institute, serves on
the boards of Harvard University and the Marlboro School of
Music, and is a Regent of the Smithsonian Institution.
In addition, Mrs. Gray is a member of the boards of
directors of J.P. Morgan & Company, the Cummins Engine
Company, and Ameritech.
Mrs. Gray was one of twelve distinguished foreign-born
Amrericans to receive a Medal of Liberty award from President
Reagan at ceremonies marking the rekindling of the Statue of
Liberty's lamp in 1986. In 1991, she received the
Presidential Medal of Freedom, the nation's highest civilian
award, from President Bush. She received the Charles Frankel
Prize from the National Endowment of the Humanities and the
Jefferson Medal from the American Philosophical Society in
1993. In 1996, Mrs. Gray received the University of Chicago's
Quantrell Award for Excellence in Undergraduate Teaching. In
1997, she received the M. Carey Thomas Award from Bryn Mawr
College.
Her husband, Charles M. Gray, is Professor Emeritus in the
Department of History at the University of Chicago.
____

Barber B. Conable, Jr.

Barber Conable retired on August 31, 1991, from a five-year
term as President of The World Bank Group, headquartered in
Washington, D.C. The World Bank promotes economic growth and
an equitable distribution of the benefits of that growth to
improve the quality of life for people in developing
countries.
Mr. Conable was a Member of the House of Representatives
from 1965-1985. In Congress, he served 18 years on the House
Ways and Means Committee, the last eight years as its Ranking
Minority Member. He served in various capacities for 14 years
in the House Republican Leadership, including Chairman of the
Republican Policy Committee and the Republican Research
Committee. During his congressional service, he also was a
member of the Joint Economic Committee and the House Budget
and Ethics committees.
Following Mr. Conable's retirement from Congress, he served
on the Boards of four multinational corporations and the
Board of the New York Stock Exchange. He also was active in
foundation, museum, and nonprofit work, and was a
Distinguished Professor at the University of Rochester.
Currently Mr. Conable serves on the Board of Directors of
Corning, Inc., Pfizer, Inc., the American International
Group, Inc., and the First Empire State Corporation. In
addition, he is a Trustee of Cornell University and of the
National Museum of the American Indian of the Smithsonian
Institution. He has chaired the Museum's development
committee since October, 1990 and is a member of its
International Founders Council, the volunteer committee for
the National Campaign to raise funds for construction of the
Museum on the Mall.
Mr. Conable is a native of Warsaw, New York and graduated
from Cornell University and Cornell Law School. He was a
Marine in World War II and the Korean War.
Mr. and Mrs. Conable are parents of three daughters and a
son. They reside in Alexander, New York.

____________________