2007 - 2008 Policies for the Jurisdiction of the:
Labor and Economic Development Committee
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Policies:
Agricultural Trade (Joint with Agriculture, Environment and Energy Development Committee)
America's farms and ranches currently export approximately 30 percent of their production. These exports buttress the nation's balance of payments and are important to the well-being of the entire American economy. Farm exports are essential to the financial health of American agriculture and to the economic development of American states.
However, the agriculture sector is no longer a net positive for America’s balance of payments and 2005 saw an historic change. For the first time in over a century, Americans spent more on imported foods and spirits from abroad than farmers were able to sell overseas. This change only underscores the importance of agriculture in trade negotiations and the need to open foreign markets to American agricultural products.
Trade Agreements
Protectionist trade practices and export subsidies of other countries often effectively limit American agricultural exports. The United States and its trading partners therefore should seek agreements that reduce and eventually eliminate the reliance on protectionist trade policies and practices.
The National Conference of State Legislatures (NCSL) supports the federal government’s efforts to negotiate trade agreements that secure free and open access to overseas markets for American agricultural products. In this connection, NCSL supports the President’s ability to negotiate trade agreements in accordance with the federalism and policy principles outlined in NCSL’s Presidential Trade Promotion Authority policy.
In negotiating new agreements, special attention should be placed on import quotas that thwart international trade opportunities.
Trade negotiations also should result in provisions that will speed resolution of cross-border disputes while respecting American values of due process and federalism.
The Doha Round of World Trade Organization negotiations has opened new discussions regarding agricultural trade and the trade-distorting effects of subsidies. While talks are laborious and tenuous, NCSL supports the federal government’s efforts to work through these multilateral negotiations to open markets that are currently closed to U.S. products and to reduce the use of trade-distorting subsidies. State legislators recognize that some U.S. trading partners view some current U.S. farm support programs as trade-distorting under WTO rules. NCSL recognizes the importance of rural development supports while acknowledging the need to design such farm programs so that they do not conflict with WTO rules. With this in mind, NCSL looks forward to an active engagement with congressional leaders, U.S. negotiators, and USDA officials regarding how these programs can be better designed to support rural prosperity while also complying with U.S. trade obligations. Further, NCSL encourages the Congress and the Administration to expand Trade Adjustment Assistance programs or efforts to convert farm supports to non-trade distorting support programs, such as environmental conservation, local food purchasing, conversion to biofuel crops, alternate crop conversion, or expansion of non-farm income generating opportunities in order to help America’s farm communities adapt, adjust to, and fully exploit new agricultural markets.
In addition to global negotiations under the WTO, NCSL supports bilateral and regional Free Trade Agreements (FTAs) that similarly open markets to American agricultural exports.
State legislators are nonetheless concerned that U.S. offers in these negotiations could unexpectedly and adversely affect state economies. The federal government should notify the states of any potential impacts that U.S. subsidy reductions may have on regions, jobs, or tax bases.
While expanded international trade in agricultural products as a result of new trade agreements creates new opportunities for American exports and increased revenues, it also creates new burdens for both federal and state agriculture inspection and quarantine services. NCSL calls upon the federal government to support training for inspection professionals and the development of new technologies to secure the health and safety of imported foods and agricultural products.
If any of our trading partners refuse to remove unnecessary trade barriers or persist in violations of international trade laws and agreements, the President should restrict their imports of agricultural products or livestock into this country. Similarly, NCSL supports the federal government’s decision to challenge some of our trading partners’ decisions regarding the importation of genetically modified foods.
Market Development
To enhance agricultural exports, Congress and the Administration should support an aggressive market development effort for agricultural products, including the use of export credits. Emphasis should be placed on developing markets for high-value products.
In addition to traditional commodity sales programs, food aid can be a valuable tool in market development. Current programs, however, should be redirected to encourage, rather than to discourage, the development of local food security in nations facing food shortages. Surplus stocks of grain and other commodities should be used for distribution to less-developed nations.
Trade Embargoes
In order to recapture and maintain foreign markets, the United States must demonstrate that it is a reliable supplier. To ensure that past mistakes in the use of foreign trade embargoes are not repeated, NCSL opposes any embargo of agricultural products, unless that embargo includes all trade with the target country. NCSL supports the dissolution of the embargo on exports to Cuba for food products and medicine.
Trade Policy Development
The Secretary of Agriculture and other public officials representing agriculture should be included as full and equal partners in the formulation of United States policies affecting foreign trade. USDA should in turn cooperate with state agricultural trade officials in a coordinated effort to promote agricultural exports. State legislatures, both directly and through NCSL, should be consulted on the development of trade policies and kept abreast of evaluations of their efficacy and economic impact. In particular, NCSL supports the appointment of one or more state legislators to the U.S. Trade Representative’s Agriculture Policy Advisory Committee (APAC).
Export Finance
Existing agricultural export finance programs and other financing institutions, such as the Export-Import Bank, should be bolstered to assist American producers in capturing foreign agriculture sales.
Grain Quality
The National Conference of State Legislatures urges the Congress to monitor closely the impact of the recent reforms in grain quality standards. Additional legislative remedies should be considered if American farmers lose sales because of the sale of commodities which, although they meet legal standards, are nonetheless inferior in quality to foreign grain exports.
Further, NCSL encourages efforts to stem the costs of export grain inspection, while maintaining the integrity and quality of American exports. Proposals for third party inspection, provided that USDA supervision of the inspection and weighing systems remains, and that states who currently do or wish to perform inspections retain their exclusive authority to do so, could benefit American producers.
Free Trade in Agricultural Products
The National Conference of State Legislatures urges the United States Department of Agriculture, the United States Department of Commerce, the United States Department of State, and the United States Trade Representative to take all measures necessary to open foreign markets to bulk and value-added agricultural commodities from the states. Trade distorting policies must be eliminated so that American farmers may compete fairly in the world marketplace. The federal government should work to lower these trade barriers, identify specific procedures for quick settlement to border disputes, and encourage international commerce in the area of agriculture.
August 2009
Arts and culture can influence an array of policy goals, including economic development, rural development, urban revitalization, revenue generation, tourism, accessibility and participation, diversity, education, and youth development. For many of these areas, states and the federal government are partnered. Support for the production, distribution, and infrastructure of the arts is critical to success in tourism, attracting business interests, economic development, and quality of life issues. Further, the arts are a core academic subject in our schools. Strong and sequential arts education through primary and secondary school contributes to student success and workforce development. In our education systems, the study of the arts should remain vibrant. NCSL encourages a better and stronger understanding of this partnership as well as a reasoned study and understanding of the inputs and benefits.
Tourism
Tourism is a vital element of state economic development, diversification, and rural development programs, as well as a leading services sector employer. NCSL encourages Congress and the Administration to open and maintain consultative processes with state governments, and state legislatures in particular, to ensure that state and federal policies and programs encourage the continued vitality of this important sector of the economy. Further, federal economic development and disaster recovery programs should include tourism among the activities eligible for support.
National Heritage Areas
The National Park Service defines a National Heritage Area as a place designated by the United States Congress where natural, cultural, historic, and recreational resources combine to form a cohesive, nationally distinctive landscape arising from patterns of human activity shaped by geography. Recognizing these areas as viable drivers for historic preservation and cultural tourism, the National Park Service and the Congress should consult state legislators, as both state policymakers and community leaders, to identify ways of maximizing the National Heritage Area designation to the benefit of their communities and their states.
Collaboration and Coordination
The National Endowment for the Arts, the National Endowment for the Humanities, the National Trust for Historic Preservation, the White House Preserve America initiative, offices within USDA Rural Development, the National Park Service, the Smithsonian Institution, the U.S. Department of Education, and many others are engaged in promoting various aspects of culture, the arts, heritage preservation, and tourism. NCSL encourages collaboration and coordination among these disparate agencies and budgetary line-items with state legislatures to ensure that the policy and program outcomes meet the needs and goals identified by state policymakers. Further, this collaboration and coordination should improve the identification and sharing of best practices from and among the states and the federal government.
August 2010
The Social Security Act currently limits the total sum that a permanently, totally disabled worker may receive in federal Social Security disability benefits and state workers’ compensation benefits combined to 80% of the worker’s pre-injury income.
That act as amended in 1981 (U.S.C. 424 a(a)) requires that if the sum of Social Security disability benefits and worker’s compensation exceeds that 80% cap, the Social Security benefits must be reduced by the excess amount. The stated purpose of these amendments was to prevent disabled workers from collecting the full amount of both Social Security disability benefits and workers’ compensations, which in some cases resulted in the workers receiving benefits of substantially greater value than the value of their previous wages.
Rather than just preventing the combined total of Social Security and workers’ compensation benefits for the disabled from exceeding the value of previous wages, the amendments, because they do not adjust the 80% cap for inflation, have instead had the effect, over time, of steadily reducing the real value of the combined Social Security and workers’ compensation benefits to those injured workers.
With sustained, substantial inflation causing the Consumer Price Index to increase more than 30% during the last 10 years and more than 100% in the last 20 years, the failure to adjust the 80% cap often has a devastating impact on the real value of the benefits on which many disabled workers depend.
The fact that the Social Security Act provides for the annual adjustment of Social Security benefits, including disability benefits, suggests that an historic goal of the act is to prevent inflation from eroding the value of benefits. This goal is undermined by the failure of the 1981 amendments to provide for an inflationary adjustment of the 80% cap for beneficiaries receiving both Social Security and workers’ compensation benefits.
The National Conference of State Legislatures therefore urges Congress to amend the Social Security Act to provide that the calculation of the 80% limit on total combined Social Security and workers’ compensation benefits for permanently and totally disabled workers defined under the act be based, not on the pre-injury earnings of the workers, but on those earnings adjusted for inflation occurring after the injury.
August 2008
The nation's legislators recognize the many challenges facing the nation as the labor force and workplace change. In the states, differing circumstances reflect a changing economic base, unique demographic trends, and limitations on available resources. State employment security, unemployment and labor market information systems must figure prominently in efforts to serve the workers and businesses of a 21st century economy.
Under the framework of the system outlined in the Federal Unemployment Tax Act (FUTA), states collect a state payroll tax to finance unemployment benefits and the IRS collects a federal payroll tax to provide funds for administration of both the federal and the state systems. The federal treasury holds the collected taxes in 'trust' accounts. The amount being collected is more than adequate to fund administrative costs, but the amount returned to the states for administration has been shrinking because these funds are included in the federal unified budget and are subject to the appropriations process every year. In recent years, states have received an average of a 50-cent return on every dollar collected. State legislators in many states have been forced to add a surtax to employer taxes or to appropriate general fund revenues, or do both, to replace the $3.998 billion confiscated by the Congress in FY06. The remaining accumulated 'trust' funds serve as a "paper" offset to deficits or as an enhancement to federal budget surpluses.
Program flexibility has also been reduced by restrictions on Reed Act funds, which can only be used for administering the unemployment compensation law. These funds should be distributed to the states pursuant to the original intent of the Reed Act with maximum flexibility to also support the Employment Security System.
Legislators are concerned that the percentage of unemployed workers receiving unemployment insurance benefits has dropped dramatically, and that state unemployment insurance agencies have experienced reduced funding appropriated by Congress in recent years. NCSL therefore supports legislation recently introduced in Congress that will strengthen the unemployment insurance system by using $7 billion in revenue from the federal unemployment insurance surtax to provide reimbursements to states that modernize their programs by improving benefits for unemployed workers who have fallen through the cracks of the unemployment insurance system. The legislation also provides $500 million shared by all states for additional unemployment insurance administrative funding.
NCSL therefore urges the following reforms:
- Moving the dedicated FUTA trust fund from the discretionary side to the mandatory side of the federal budget.
- Adequate funds for state administrative functions.
- Use the 'temporary' surcharge for benefit improvements for unemployed workers.
- Adherence to the provisions of the Reed Act that guarantee that surplus funds be returned to the states.
- A continuation of the state legislative role in the appropriation of administrative funds.
Further, legislation enacted in more than forty states imposes new penalties on employers that seek to avoid paying their fair share of unemployment tax in order to eliminate the practice called SUTA dumping (standing for “state unemployment tax avoidance”). NCSL believes that SUTA dumping negatively impacts state unemployment insurance trust funds and shifts the tax burden to law-abiding employers who then pay more than their fair share when SUTA dumping is not addressed under current law. In keeping with the shared nature of the national unemployment insurance program, NCSL believes the states and federal government should continue to act collaboratively to curb these abuses.
Expires August 2010
The United States must promote its exports not only to decrease the trade deficit but also to provide for new jobs and more rapid economic development in our communities. Both the states and the federal government have a role in export promotion.
States rely on foreign trade and marketing programs to promote exports. In order to assist these state efforts, the federal government must intensify its trade promotion efforts.
Export Controls
America must maintain strong export controls to protect our national security. But, as the rest of the world catches up to the United States in high-technology fields, we must ensure that our control system protects our security without hurting our economic interests.
Trade Data
A major responsibility of the federal government is the collection of trade data on U.S. exports and imports. The federal government should continue to maintain a comprehensive data base of information so that state trade agencies may assist their exporters.
Export Financing
State legislators play a crucial role in export promotion and export finance. Legislators are working with government agencies to facilitate the export process for small- and medium-sized businesses. These businesses often find it extremely difficult to obtain financing from commercial banks. They also find it difficult to secure federal insurance against the risk of default by a foreign buyer. To remedy this problem, a number of state legislatures have supported export finance programs.
The total burden of export financing should not be placed on the states. States are restricted by size and political realities, so state programs can only supplement, not replace, federal programs. The federal government must help by providing adequate federal financing.
Although Eximbank has become an important financing mechanism for exporters, it must live within current budgetary restraints. Therefore, funding for Eximbank's direct, as well as guaranteed loan programs, should be maintained. Further, NCSL supports a constant level of funding for Eximbank's City/State Program.
A National Strategy
The National Conference of State Legislatures supports legislation that seeks to develop a national export marketing strategy and greater coordination of and cooperation with state/federal programs in export policy. NCSL endorses strengthening of current U.S. export programs to address trade imbalances and respond to overseas opportunities to improve our competitive position in the world.
This national strategy should continue to include permanent statutory safe harbors in Federal antitrust law for joint export trade activity, particularly of small- and medium-sized businesses. The Webb Pomerene Act and the Export Trading Company Act promote exports by enabling U.S. enterprises to coordinate their offshore sales efforts, collectively reaching foreign markets that they might not be able to access individually. The Acts operate transparently through registration of coordinated efforts with Federal antitrust authorities. Further, they provide safe harbors for joint sales, marketing and distribution of U.S. goods and services overseas provided there is no restraint of trade within the United States and no adverse effect on firms wishing to export individually. Clear statutory safe harbors are essential to ensure that this desirable type of cooperative behavior, which is essential in many sectors and broadly significant at a time of record-high U.S. merchandise trade deficits, can continue.
August 2009
Federal Reductions to Social Security Benefits of State and Local Government Employees
The Social Security Administration reduces benefits of state and local employees who earn government pensions through work not covered by Social Security. While the majority of state and local governments and their employees pay into the Social Security system, roughly 28% of state and local employees do not contribute to Social Security and instead contribute to and receive uncovered government retirement benefits. The majority of these uncovered employees are teachers (49%) and public safety officers (76%).
While these employees do not contribute to Social Security through their state or local government work, they often earn Social Security benefits through other employment covered by Social Security. Similarly, these employees may also earn a Social Security benefit as the spouse of a beneficiary who paid into the Social Security program. Since 1983, the Social Security Administration has reduced these earned and spousal benefits through two reductions called the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
In addition to these offsets, uncovered government pension benefits in their entirety are taxed as income when they are received, unlike Social Security benefits, which are taxable only after the amount received exceeds an excludable maximum set in the Internal Revenue Code.
The reduction of Social Security benefits unfairly and imprecisely reduces the Social Security benefits of government employees. These reductions have unintentionally harmed a disproportionate number of women and moderate and lower-income state and local government retirees. These same retirees confront full taxation of their uncovered government pension benefits.
The National Conference of State Legislatures supports efforts by the Congress and the Administration to address the inequities and unintended consequences to state and local government retirees caused by federal reductions of Social Security benefits. NCSL urges the Congress to enact legislation that will reduce or eliminate the impact of the GPO and WEP on state and local government retirees, particularly those who have earned lower uncovered government pension benefits or partial benefits. Several proposals before Congress would exempt a portion of uncovered government pension benefits from application of the GPO and the WEP, while others would repeal the GPO and the WEP.
Further, the National Conference of State Legislatures supports efforts by the Congress and the Administration to exclude from gross income that portion of an uncovered government pension that is equal to the exclusion currently provided for benefits payable under Social Security.
Finally, NCSL opposes efforts by the Social Security Administration and the Congress to shift responsibility and costs for compliance associated with determining to whom these offsets should apply to state and local government employers and pension systems. The Social Security Administration has repeatedly sought authority to require state and local government employers and pension paying entities to collect and remit to SSA data on earnings and pension income from uncovered State and local employment in an effort to eliminate current self-reporting by retirees and thereby increase compliance with GPO and WEP offsets. Currently state and local employers annually remit earnings information to the SSA through the W-2. Similarly, state and local pension paying entities annual remit the 1099-R, detailing “Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs Insurance Contracts, etc.” to the IRS as a means to report retirement income.
The President’s FY 2007 Budget contained a proposal that purports to “improve the administration of the windfall elimination provision (WEP) and the government pension offset provision (GPO) by establishing a mandatory system for collecting data on pension income from non-covered State and local employment.” Under this scheme State and local governments would be required to provide data, in an electronic format, directly to SSA regarding the receipt of government pensions based on employment not covered by Social Security. SSA could then compare the reports with beneficiary payment records and examine cases that indicate the possibility that WEP or GPO applies. If a State or local government failed to comply with SSA’s request for this information, a penalty could be imposed on the State by denying the State access to IRS tax information the State may need to administer State tax provisions.
NCSL opposes this proposal and urges the Social Security Administration to seek authority from Congress to access existing 1099R data from the IRS in order to determine possible matches for non-compliance with GPO and WEP. State tax administrators rely extensively on tax data provided by the IRS to administer state tax systems and should not be penalized in SSA’s efforts to enforce compliance with federal law. Similarly, state retirement administrators may not have the information SSA seeks as this information is held at by the employer and may not be relevant to retirement pension benefits administered by state and local plans. States were these proposals to become law should be fully compensated for providing this data collection and for any associated costs of compliance. The SSA estimates that this proposal would provide $2.4 billion in estimated savings over ten years to the Social Security Trust fund and impact the benefits of 60,000 Social Security recipients. As an alternative to this proposal, NCSL urges the Social Security Administration to seek additional authority from the Congress to access existing 1099-R data to determine which individuals may be subject to the offsets rather than forcing state pension systems and state employers who have chosen not to participate in Social Security to collect data that is may not be readily available.
August 2009
The National Conference of State Legislatures (NCSL) believes that trade has the potential to improve the livelihoods of Americans and thus supports efforts to expand U.S. exports through well-crafted international trade agreements. However, NCSL also believes that these agreements must be harmonized with traditional American values of constitutional federalism. In particular, reservations can be made to trade and investment agreements that limit preemption of state law and that preserve the authority of state legislatures. Further, implementing legislation for trade and investment agreements can and should be crafted to include protections for our constitutional system of federalism. These measures, among others, are necessary to ensure that international trade agreements do not adversely impact state budgets or constrain state regulatory authority. Without them, NCSL will be unable to support such trade and investment agreements.
Trade that Protects State Sovereignty
The states are committed and prepared to treat foreign firms that do business within their borders in a nondiscriminatory fashion, under a standard based on the broad protection afforded by the Commerce Clause and the Foreign Commerce Clause of the U.S. Constitution. What the states are not prepared to accept, however, is a challenge to their sovereignty and to state authority based on arbitrary and unreasonable standards of discrimination against foreign commerce, similar to that employed by the GATT panel in the so-called Beer II decision. In order to better safeguard state sovereignty, the USTR should be guided by the following recommendations in all trade negotiations.
First, reservations must be made to trade and investment agreements to “carve out” state laws that might otherwise be subject to challenge. Particular care must be exercised to ensure that state tax laws and revenue systems are not subject to unjustified challenge under international agreements. Provisions must also be made in federal implementing legislation that commit the federal government to protect state lawmaking authority when it is exercised in conformity with accepted U.S. constitutional principles of nondiscrimination against foreign commerce.
Second, NCSL encourages the Office of the United States Trade Representative (USTR) to utilize the “positive list” approach for making services, procurement, and investment commitments in trade agreements. This approach allows states to know more precisely the areas of the economy and state authority implicated in a trade agreement and would avoid the kind of serious problems we now face in the area of internet gambling. A “negative list” approach commits the United States to implement trade disciplines on all covered sectors unless areas or state laws are specifically exempted in the annexes of the agreement. USTR should acquiesce to a “negative list” approach only as a last resort. If the federal government agrees to a “negative list” approach, then the annexes listing exemptions should retain the unbound sectors and the limits of U.S. commitments that exempt state laws.
Following appropriate consultations with USTR, the states must be able to set and adjust their commitments – a right the states have and which USTR has repeatedly recognized. USTR should therefore make clear to trade negotiating partners that U.S. states retain the ability to make adjustments to commitments regarding state-level services, procurement, and investment policies.
Finally, NCSL encourages USTR and its trade negotiation colleagues in the federal government to develop economic and non-economic impact statements for agreements under negotiation. These could resemble the state and local analyses conducted by the Congressional Budget Office. NCSL recognizes that such analyses could be politically sensitive and could affect negotiation strategies employed by other countries; therefore, it would be understandable if such analyses were shared exclusively with the Intergovernmental Policy Advisory Group (IGPAC). It is important that state officials have access to such information before determining whether they can support an agreement.
Private Rights of Action and Investor-State Disputes
Following the passage of the North American Free Trade Agreement (NAFTA) in the 1990s, several foreign investors have used the “investor-state” provisions of that agreement to attack state laws and state court decisions before an international tribunal. By providing access to international investment arbitration by foreign investors, NAFTA and various related Free Trade Agreements (FTAs) provide greater procedural rights for review of claims against U.S. law and policy than would be provided to a U.S. investor under similar circumstances. Consequently, the decisions of these tribunals have had an adverse impact on state sovereignty and federalism. Unfortunately, the “no greater rights” language in the 2002 Trade Promotion Authority (TPA) has been interpreted to cover only substantive rights. The ability of foreign investors to bring claims in front of an international investment tribunal, as opposed to through the U.S. courts, is clearly a greater procedural right than that enjoyed by U.S. investors; and NCSL is concerned that these tribunals, because they are frequently unfamiliar with U.S. federalism and jurisprudence, would in any case provide foreign investors with greater substantive rights. At present such language is not inserted into the operational text of investment chapters of these trade agreements, but rather, is only found in the preamble. NCSL will only support a grant of presidential trade negotiating authority if such a grant of authority includes a “no greater procedural or substantive rights” mandate. NCSL is committed to working with USTR and other federal agencies as they interpret and apply “no greater procedural or substantive rights” language to trade agreement negotiations.
Trade agreement implementing language must include provisions that deny any new private right of action in U.S. courts or before international dispute resolution panels based on international trade or investment agreements. Implementing legislation must also include provisions stating that neither the decisions of international dispute resolution panels nor international trade and investment agreements themselves are binding on the states as a matter of U.S. law. Implementing legislation for any agreement must include provisions that promote effective and meaningful consultation between the states and the federal government related to any dispute involving state law or any dispute that could prompt retaliation against states. These provisions should include a timetable for prompt notice to states of a potential state issue, as well as the right of attorneys for the state to participate as part of the “team” defending a state law before international tribunals. States must also be given the right to file amicus briefs before international dispute resolution panels, both independently and collectively through state organizations such as NCSL. It is imperative that when state laws are under challenge in international proceedings, the federal government defend state laws as vigorously as it defends federal law.
The federal government retains the power to sue a state to enforce international trade agreements. However, NCSL urges the federal government to assure states that the federal government will not seek to preempt state law as a means of enforcing compliance with an international agreement unless Congress has expressed clear intent to preempt state law in implementing legislation or other law. Likewise, the federal government must not withhold federal funds otherwise appropriated by Congress to a state as a means of enforcing compliance with provisions of an international agreement. Specifically, the federal government must indemnify the states for costs incurred relating to trade challenges and ensure that the federal government will not seek to use administrative measures (such as withholding of payments) to compel compliance or to pay a damage award.
Because the federal government retains the power to sue a state to enforce international agreements, federal legislation implementing any new trade or investment accord must include appropriate protections for the states related to rules of procedure, evidence, and remedies in such litigation. The federal government must bear the burden of proof in court showing that state law is inconsistent with an international agreement, regardless of the finding of an international dispute resolution panel. The President must be required, at least 30 days before the Justice Department files suit against a state, to file a report with Congress justifying its proposed action. In the event of an unfavorable judgment, states must be protected from financial liability. If the federal government agrees to allow foreign firms to collect money damages for “harm” caused by a state law, then the federal government must bear the burden of any such award by international tribunals and not seek to shift the cost to states in any manner.
Additionally, state Offices of Attorney General must be fairly compensated by the federal government for the time and expense associated with defending against a foreign investor claim. The absence of such a requirement has led to a kind of “unfunded mandate,” such as was experienced by the California Department of Justice during its preparations for defense in the NAFTA “Methanex” case.
Consultation
The President, the U.S. Trade Representative, and other federal agencies involved in negotiating trade agreements must remain cognizant of the intimate role that state legislators play in crafting state laws, policies, and programs directly affected by today’s international commercial agreements. It is imperative that the USTR and other agencies consult with state legislators and NCSL prior to the outset of trade negotiations in order to ensure that both the negotiators and state legislators are aware of any state laws, policies, or programs that may be impacted by a negotiated agreement.
In general, NCSL remains very concerned about the manner in which the federal government consults with states on trade issues. NCSL applauds efforts by the U.S. Trade Representative to work with IGPAC and looks forward to full and active participation in this body. We are also encouraged by USTR’s move away from solely relying on the Single Point of Contact (SPOC) system for collecting information from states and for relaying important information to states. NCSL encourages USTR and other federal agencies involved in trade negotiations to develop effective systems of communication with state and local officials that respect the fact that many public policy decisions require approval or action by both legislative and executive governmental institutions, that incorporate all branches of government and that, as appropriate, rely on state and local officials’ national associations for information collection and dissemination. Such information collection and dissemination efforts must respect both the needs and time frames of negotiations, but also the many demands on the time and attention of state policymakers by allowing enough time for sufficient study and appropriate response.
NCSL notes that a number of states have created oversight committees or state commissions that study the impact of international trade agreements on the state’s economy and regulatory authority. It is appropriate for USTR to consult with these state-level bodies.
NCSL also notes the proposal put forward by IGPAC in August 2004 for the creation of a standing federal-state commission on international trade. IGPAC also proposed: 1) trade policy capacity with resources relevant to state level concerns; 2) information sharing between USTR and states and trade policy dialogue between states; 3) improvement of trade data and analysis; 4) discussion of procurement from the state perspective; 5) improvement in the state/federal trade development partnership; and 6) assessment of the costs and benefits assessment of the costs and benefits of federal trade development funding allocated to agriculture, industries, services and technologies. NCSL strongly supports the content of this proposal, the outline of which has been included in recent IGPAC reports to USTR regarding new free trade agreements. NCSL requests that USTR provide a statement of its position on the IGPAC proposal or a written response detailing USTR concerns regarding aspects of the standing commission proposal. It is unfortunate that this good-faith effort by IGPAC to model possible new approaches to federal-state consultation has been ignored.
Procurement
The United States is party to the World Trade Organization’s Agreement on Government Procure-ment (GPA). When negotiating the GPA, USTR solicited the state governors for permission to include state procurement and to bind state procurement processes to the GPA. USTR asserts that 37 states were voluntarily bound through this process to the GPA. In September 2003, USTR requested governors to make similar commitments to several FTAs being negotiated at the time.
State procurement policy and practices often are set in state law and are sometimes designed to serve social or economic purposes beyond the mere provision of goods and services for state government use. Unfortunately, current FTAs could prohibit state and local governments from passing new laws favoring local suppliers in government contracts for goods and services and bar governments from imposing technical specifications in its public contracts if those specifications pose an “unnecessary” barrier to trade. The agreements’ national treatment rules will prohibit governments from favoring local suppliers, even when there are good social and economic development reasons to do so. The agreements’ rules on technical specifications and supplier qualifications could allow foreign companies to ask their home government to challenge procurement rules designed to achieve social or development goals, such as incorporating living wage provisions and environmental quality standards into the production of goods and services, assistance to minority-owned firms, and local purchasing preferences. NCSL encourages USTR to ensure that states can retain the ability to use procurement policy to promote these public interests while negotiating any modifications to GPA or procurement chapters in FTAs.
It is unacceptable that state legislatures are not being consulted regarding GPA and other procurement-related issues. Under most state constitutions, the legislature has substantial power to enact spending measures and to set procurement policies. NCSL demands that USTR consult with state legislatures about state procurement practices. USTR should only be able to bind a state to an international procurement agreement following formal consent from the state legislature. We are particularly troubled by the recently negotiated U.S.-Korea FTA, which by reference binds all GPA states to the additional provisions negotiated under the procurement chapter of that agreement.
Services
Services constitute an important and growing segment of the American and global economies. NCSL concurs that it is critical that the United States remain competitive in services sectors. However, international competition in service industries cannot compromise state constitutional or traditional authority or in any way impinge upon states’ ability to protect the public interest. Prior, during, and after service sector-related negotiations, USTR must undertake consultations with state legislatures, where policies about government-provided services, regulation of monopolies, provision of essential services (such as energy, water, health, education, transportation, or public safety), or privatization are set. Consultation with state legislatures is absolutely necessary prior to, during, and after a General Agreement on Trade in Services (GATS) round or the negotiation of an FTA including services provisions. NCSL applauds the consultations that have been undertaken related to electric utility services and encourages USTR to devote substantially the same attention and effort, potentially through similar mechanisms, to consultations related to other sectors. We are particularly concerned about the inclusion of higher education, which the United States has proposed to subject to WTO jurisdiction in the context of the Doha Round. This proposal may have consequences for state higher education subsidies and other state regulatory policies related to higher education that should be carefully examined before the sector is committed. The WTO gambling suit illustrates the dangers of committing service sectors without a thorough vetting by appropriate state officials.
Regulation of gaming interests ranging from lotteries to horseracing has long been a prerogative of the states, and state policymakers have chosen vastly different approaches as they balance varying public morals, revenue, land-use, and other considerations. As the World Trade Organization Dispute Resolution Body has ruled that the United States did make a commitment covering gambling under “other recreational services,” that the United States is in violation of that commitment, and that the United States has failed to comply with its ruling, NCSL appreciates USTR’s invocation of GATS article XXI to withdraw the U.S. commitment and calls on USTR to consult effectively, meaningfully, and timely with the states as USTR negotiates compensatory concessions to our trading partners. Further, NCSL endorses the use of article XXI to withdraw other commitments under GATS that may run counter to state policy, regulatory, or police authority.
Adjusting to Free Trade
NCSL acknowledges that trade can bolster economies and increase standards of living. However, there are many who may suffer as states, localities, manufacturing or service industries, small farms, and communities adjust to the new realities of open markets. NCSL supports federal efforts to provide meaningful Trade Adjustment Assistance (TAA) to affected workers. NCSL encourages Congress and the implementing federal agencies:
- to ensure that the funding for TAA programs is sufficient to meet current and future needs;
- to expand benefits eligibility to service-sector and agricultural workers impacted by trade;
- to work with NCSL and state legislatures to ensure that TAA programs are flexible to suit different states’ needs;
- to engage in aggressive outreach to ensure that workers, employers, and communities are informed of the benefits of the TAA program and are able to effectively utilize the program;
- to ensure that adversely affected workers are provided the full income support, training, reemployment services and other services and benefits to which they are entitled, and that claims for such benefits are reviewed expeditiously and objectively;
- to simplify procedures for determining TAA eligibility; and
- to refrain from modifying TAA in any way that would jeopardize the program’s mandate to help trade-affected workers who have lost their jobs as a result of increased imports or shifts in production out of the United States.
In general, the federal government should work with the states and the private sector to develop lifetime educational and workforce training opportunities that prepare Americans to compete successfully in a changing global economy.
Building Capacity in Trading Partners
NSCL recognizes that many developing countries do not have the institutions or capacity to implement and enforce the numerous obligations assumed under an FTA. NCSL supports federal efforts to fund programs to assist in building the trade capacity and trade agreement compliance of developing countries. Moreover, NCSL recognizes that developing countries need additional assistance to help them take advantage of opportunities created by trade in order to alleviate poverty. We therefore support federal funding for infrastructure and rural development so that any benefits of trade may be more broadly shared. Funds should also be directed to ensure that laws and institutions related to labor and the environment are improved and strengthened.
Support for Trade Negotiating Representation
NCSL recognizes that the negotiation of trade agreements – whether bilateral, multilateral, or global – on such a range of goods, services, and investment opportunities as America’s trillion-dollar economy demands is a monumental undertaking. NCSL supports the authorization and appropriation of adequate resources so that USTR is best equipped to fully consult with state legislatures in order to represent their interests and the American public in trade negotiations while protecting and preserving American constitutional principles.
August 2010
(Joint policy with Human Services and Welfare Committee)
The National Conference of State Legislatures (NCSL) strongly believes that the federal government must preserve the financial integrity of the Social Security system and assure the long-term solvency of the program. It is critical that all workers paying into the system have confidence that Social Security will continue to be available to them at retirement. State legislatures believe that Social Security must ensure a safety net for low-income older retirees as well as provide survivor benefits and disability insurance. NCSL believes that efforts to assure solvency should strengthen the existing program upon which so many beneficiaries and their families rely. Social Security reform should continue to encourage private savings and employer-provided pension plans.
The Administration and Congress face difficult choices in maintaining the solvency of Social Security. State legislatures stand ready to assist our federal partners in this effort. NCSL believes that state and local retirement systems provide valuable models for consideration in the Social Security debate.
While Social Security currently has a surplus, the Social Security Actuaries 2002 report predicts that in 2017 trust fund expenditures will begin to exceed payroll tax revenues. After 2014, interest on accumulated assets will be drawn down to pay benefits. By 2020, trust fund principal will be drawn down to pay benefits. By 2041, current payroll tax rates will be sufficient to pay only 73 percent of benefit obligations. To avoid this shortfall, members of Congress and the Administration have put forth a variety of reform proposals.
There are serious implications for the states in these reform proposals. As Congress considers alternatives to maintain Social Security solvency, it must analyze and understand the impact of these proposals on states, taxpayers, state budgets, and state laws. These proposals for Social Security reform have major impacts on state employees, teachers, local government, private employers and taxpayers. As employers and policymakers, state legislators oppose reform proposals that finance this shortfall by shifting federal costs to state budgets. If Social Security does not continue to provide a stable form of assistance to the elderly, state low-income programs and state budgets would be severely impacted. NCSL strongly opposes any efforts to reform Social Security that create unfunded mandates for the states or preempt state laws and authority.
NCSL encourages federal policymakers to consider the following concerns when deliberating Social Security reform proposals.
Mandatory Social Security Coverage of State and Local Government Employees
NCSL has long opposed further involvement of the federal government in the administration of public retirement plans including the expansion of mandated Social Security coverage to state and local employees not currently covered under the system. NCSL maintains that state and local governments should be allowed to affiliate their retirement plans voluntarily with Social Security, as was the case before passage of the Omnibus Budget Reconciliation Act of 1990. The imposition of mandatory coverage on state and local employees who are not currently required to contribute to the system constitutes a direct cost shift to those states and will have a detrimental effect on their state budgets, state retirement plans and the retirement savings of state and local employees. The extension of mandatory coverage to new categories of state and local employees does not significantly contribute to solution of the solvency problem. NCSL's policy, "Mandatory Social Security Coverage of State and Local Government Employees," continues to oppose this mandate.
Increasing the Return on Social Security Investments
States and local retirement system choices provide models for federal reform of Social Security. We encourage Congress and the Administration to review state laws, funding choices and programs, whether they choose to create individual private accounts, authorize public investment in private markets, or pursue other options for reform. The return on Social Security has historically been far below the return on public and private pension plan investments in the market. NCSL believes that Congress and the Administration must act to increase the return on Social Security investments. NCSL believes that the best means to increase the return on Social Security investments is through some level of investment in the private markets. NCSL maintains that this investment must:
- Be administered through an independent board well insulated from political interference;
- Include Social Security beneficiaries on the board;
- Be invested for the exclusive benefit of Social Security beneficiaries as in state pension law;
- Guarantee the current level of Social Security benefits;
- Be protected from steep administrative costs;
- Be used solely for retirement, survivor benefits and disability; and
- Not preempt state laws governing securities fraud.
A strong public education program must accompany reform that would create individual accounts so that beneficiaries will have the knowledge necessary to make good investment decisions.
Guarding Against Fraud and Abuse
NCSL strongly opposes any proposal that would preempt state authority to regulate securities or give sole authority to regulate investment fraud to the Securities and Exchange Commission (SEC). States traditionally have been the protectors of individual and small investors and should maintain this role without federal intervention or preemption.
Many states have created special laws and consumer protection programs to prevent white-collar crimes, particularly against the elderly. These laws are critical to the protection of senior citizens. NCSL strongly opposes any effort to preempt state authority to regulate crimes against the elderly. Individuals must be protected from fraud through the strong enforcement of laws governing securities fraud.
Raising the Retirement Age
Prior Social Security reform efforts, to adjust for longer life expectancies, included a gradual increase in the "full retirement age". Beginning in 2002, the full retirement age, the age at which beneficiaries are eligible to receive unreduced Social Security benefits, gradually rises from 65 to 67. Contemporary solvency proposals that would increase the full retirement age even higher raise serious concerns for beneficiaries. While Americans are living longer, many workers are choosing to retire earlier than before. Conversely, other workers may be unable to continue working due to physical limitations, age discrimination or other limitations. Still other workers with shorter than average life expectancies, particularly African Americans, may experience little return from Social Security for themselves and their survivors.
Currently, public safety employees of state and local government are exempt from actuarial reductions to their public pension benefits. Efforts to raise the full retirement age disproportionately harm both private sector employees and non-public safety state and local employees who do not contribute to Social Security. Under current law, the age at which a more highly paid beneficiary may receive an unreduced private pension benefit is tied to the Social Security full retirement age. Due to this coupling, relatively highly compensated long-term private pension beneficiaries who choose to retire before age 65 receive an actuarially reduced benefit for life even if their employer deems them eligible to receive a full private pension benefit prior to age 65. The age at which public employees, excluding public safety employees, may receive an unreduced public pension benefit is not tied to the Social Security full retirement age but is instead defined in federal Internal Revenue Code policy, which sets the age at 62. In recognition of public safety concerns, public safety workers, like police and fire, are exempt from these actuarial reductions. More highly-compensated long-term non-public safety state and local employees who do not contribute to Social Security rely on their public pensions for the bulk of their retirement security. Actuarial reductions to public pension benefits disproportionately burden these employees. NCSL believes that public employers should be allowed to provide full pension benefits to all of their employees without the imposition of these Internal Revenue Code limits. Further, for purposes of consistency, NCSL supports the uncoupling of private sector benefit limits from the Social Security full retirement age.
NCSL encourages Congress and the Administration to consider the impact that raising the retirement age may have on various groups of workers. NCSL opposes further increases of the full retirement age.
Raising the Payroll Tax Rate
Raising the payroll tax rate constitutes a direct cost shift to employers and employees for the cost of Social Security solvency. States, as employers, would bear increased costs if the payroll tax rate were increased. As well, the payroll tax is regressive and an increase would disproportionately affect workers making less than the wage base. An increase in the payroll tax rate may also provide disincentives to employer-provided pension benefits. NCSL opposes an increase in the payroll tax rate.
Modification of the Earnings Limit
NCSL has long supported increasing the earnings test for older workers, especially those who provide essential child care services. NCSL acknowledges the federal government for responding to state concerns by repealing the earnings limitation for workers aged 65 to 69. Under current law, beneficiaries under the full retirement age may earn up to $11,280 annually without reducing the amount of benefits they receive from Social Security. Beneficiaries who retire at their full retirement age may earn up to $30,000 in the year that they retire without receiving a reduced benefit. However, the earnings penalty under age 65 severely hampers the ability of seniors to continue working once they begin to receive Social Security. NCSL supports the elimination of or an increase in the earnings limit on wages earned by Social Security beneficiaries. As the worker-to-beneficiary ratio continues to fall, older workers may become increasingly important to productivity. This penalty severely inhibits seniors who would prefer to and continue to be able to work. This would not have a negative impact on Social Security solvency.
Means-Testing of Beneficiaries
Social Security benefits are calculated based on earnings and time in the workforce. Although workers contribute the same percentage of payroll taxes to the system, a combined employer-employee contribution of 12.4% of payroll up to $85,900, lower-income workers receive a higher proportion of their contributions in benefits than to higher-income workers. NCSL opposes proposals to means-test eligibility to receive Social Security. Such proposals may reduce overall public support for Social Security and are not necessary to achieve Social Security solvency.
August 2008
The National Conference of State Legislatures urges Congress to reject all proposals that would mandate Medicare coverage to all employees of state and local governments. Such proposals violate the agreement to gradually phase-in coverage for all newly hired employees on or after April l, l986 reached in the Consolidated Omnibus Budget Resolution Act of l985 (COBRA) by the Administration, the Congress and the states.
Mandatory Medicare proposals would cause the federal government to renege on its promise of a tax reduction to low- and moderate-middle income Americans by effectively increasing the Medicare payroll tax on at least four to five million Americans employed by state and local governments. The Medicare tax on employers would also seriously jeopardize the fiscal integrity of at least ten states that currently have the highest percentage of non-covered employees: Alaska, California, Colorado, Illinois, Louisiana, Maine, Massachusetts, Nevada, Ohio and Texas. The Joint Committee on Taxation estimated in January 2005 that the extension of Medicare payroll tax to all State and local government employees would yield the federal government $5.4 billion in revenues over a ten year period. The federal government should not increase the employment costs of State and local governments and increase taxes on state and local workers in order to infuse additional revenue into the Hospital Insurance Trust Fund.
August 2009
On June 28, 1991, the U.S. Department of the Treasury and the Internal Revenue Service releases final regulations and a revenue procedure under a new requirement passed as part o the Omnibus Budget Reconciliation Act of 1990 (OBRA 1990). The law mandates full Social Security coverage, including Medicare, for public sector employees who are not members of a retirement system. The final regulations contain rules for determining whether an employee of a state or local government is a member of a retirement system for purposes of determining whether the employee’s wages are subject to Social Security taxes.
The final regulations set a new precedent. For the first time, the federal government required public employee retirement systems to meet minimum contribution and benefit level standards. Public plans must meet these tests if the Social Security tax is to be avoided.
This precedent setting action, which became effective on January 1, 1992, affected approximately 3.8 million workers not covered by a public employee retirement plan. Most of these workers were part-time, seasonal and temporary (PST) employees, and in many cases, were the least able to pay an additional tax. The change in law also required PST employees to be immediately and fully vested (100 percent) in any employer-sponsored retirement arrangement in order to satisfy the rules.
The National Conference of State Legislatures maintains that the U.S. Department of Treasury and the IRS went beyond the intent of OBRA 1990 in their interpretation of the law. NCSL further contends that this action could make it easier for he federal government to expand mandatory Social Security coverage to all state and local public employees.
Sine then State and localities have faced repeated attempts by Congress and the Administration to extend mandatory Social Security coverage to all newly hired state and local government employees. A 2005 study by the Segal Company found that the estimated cost to public employees and their employees for the first five years of mandatory coverage is $44 billion. The Social Security Administration however estimates that extending mandatory coverage to all newly hired state and local government employees would only extend the solvency of the Social Security trust fund by about tow years. NCSL maintains that mandatory coverage would result in a massive unfunded mandate on the states that would adversely impact the fiscal health and financing of state and local pension plans. In particular mandatory coverage would raise the cost of maintaining current benefit levels of state retirement systems and would likely force states to reduce plan benefits or raise taxes to maintain benefit levels.
NCSL continues to call upon the Administration and Congress to grandfather preexisting state and local retirement plans. In other words, public plans in existence prior to the adoption of OBRA 1990 (November 5, 1990) would be deemed in compliance with the law and benefits received from a state or local retirement system would qualify as being equivalent to a benefit received under Social Security. Furthermore, NCSL opposes expansion of mandatory Social Security Coverage to public employees of state and local governments who are not already covered. NCSL believes that state and local governments should be allowed to affiliate their plans with Social Security on a voluntary basis.
August 2009
The Fair Labor Standards Act of 1938 (FLSA) sets the minimum wage for over eighty million nonexempt workers in the United States. The act requires employers to pay covered workers at least the minimum wage and to pay employees working more than 40 hours in a week at an overtime rate of one and one half times the regular rate. The original minimum wage rate was $.25 an hour and has increased through amendments over the years.
The act as amended in 1996 (U.S.C. 206 a(1)), increased the federal minimum wage rate to $4.75 and to $5.15 an hour in 1997. The amendments to the law also revised the tip credit provisions, which allow employers to pay qualifying tipped employees at least $2.13 per hour if they received the remainder of the federal minimum wage rate in tips. We must bring the federal minimum wage back to its historic level because the real value of the minimum wage has fallen 33 percent since its high in 1968. Today, the minimum wage is at its lowest level since 1955 (in inflation-adjusted dollars).
Bills have been introduced in Congress that would increase the federal minimum wage to $7.25 an hour in three steps over a two year period. Another bill that has been introduced would mandate a tip credit for employers of tipped employees in states where the minimum wage rate is higher than the federal rate.
The National Conference of State Legislatures supports increasing the federal minimum wage. NCSL does however oppose strongly any effort on the part of the federal government to mandate a tip credit for states that have a minimum wage higher than the federal minimum wage.
August 2009
The National Conference of State Legislatures supports efforts to negotiate trade agreements that secure free and open access to overseas markets for American products. In negotiating new agreements, adequate federalism protections must be included. NCSL has sought to work closely with the United States Trade Representative (USTR) and Congress to ensure that these concerns are taken into account in recent trade and investment agreements and their implementing legislation. In 2002, NCSL worked with the U.S. Congress and other national state and local government organizations to ensure that necessary protections for state and local authority are understood and appreciated. Anticipating a strong and cooperative partnership, NCSL supported the 2002 renewal of Presidential Trade Promotion Authority.
Implementing legislation for the Uruguay Round of the General Agreement on Tariffs and Trade reflects a partnership between USTR, Congress and NCSL in providing federalism protections while at the same time opening overseas markets to American products. NCSL supports continued cooperation and opportunities to build on this relationship as future trade agreements are negotiated. However, NCSL is concerned that investment chapters containing investor-state dispute resolution provisions similar to Chapter 11 of the North American Free Trade Agreement, services chapters, and procurement chapters could threaten basic state policy and regulatory authority and practices. NCSL believes that states must receive assurances that federalism protections similar to those provided in implementing legislation for the GATT are incorporated into any new trade or investment agreement and its implementing legislation.
With earnest caveats for strong mandates that future trade agreements grant “no greater rights” to foreign investors than those granted to U.S. citizens, NCSL supported the Presidential Trade Promotion Authority (TPA) adopted in 2002. However, NCSL fears that the Central American Free Trade Agreement (CAFTA), signed in May 2004 and put into effect by Congress in the summer of 2005, does not fully enshrine the principle of “no greater rights” as it was intended. In particular, NCSL is concerned that investment provisions in CAFTA may have opened new and troubling opportunities for challenges to the sovereign states’ policymaking and regulatory authority. Further, NCSL is concerned with the inadequate mechanisms for state notification and consultation utilized by USTR, as evidenced by USTR’s rejection of suggestions made by the Intergovernmental Policy Advisory Committee (IGPAC) for improving consultation and, in particular, the suggestion that USTR carbon copy requests made of state governors to that state’s legislative leaders.
NCSL continues to support the “no greater rights” doctrine and enjoins trade negotiators to interpret TPA’s “no greater rights” in the broadest sense possible for the protection of state sovereignty and American federalism in negotiations for both goods and services. NCSL believes that this interpretation should incorporate substantive considerations as well as principles of takings as interpreted by the U.S. Supreme Court and procedural matters consistent with U.S. constitutional due process. NCSL is committed to working with the U. S. Trade Representative (USTR) and other federal agencies as they interpret and apply TPA’s “no greater rights” language to trade agreement negotiations.
NCSL supports the negotiation of free trade agreements that also safeguard the U.S. system of federalism and looks forward to working with the Congress in anticipation of the current TPA’s expiration in 2007 to devise a trade promotion authority bill that contains adequate protections for state sovereignty. In particular, NCSL will support TPA legislation only upon the condition that it require that an agreement negotiated under TPA:
- grant “no greater rights” both substantively and procedurally to foreign investors than granted to U.S. citizens;
- protect state police and regulatory authorities;
- “grandfather” existing state laws;
- utilize an “opt in” or “positive list” process for making commitments relative to state-level authorities or interests;
- fully indemnify the states for any monetary claims brought against the United States under an agreement as a result of state action;
- require express congressional action to legitimize preemption of a state law to comply with a trade agreement;
- require federal or other reimbursement of state expenses incurred in trade disputes;
- include enforceable labor and environmental standards; and
- be briefed to the Intergovernmental Policy Advisory Committee (IGPAC) as the first round of negotiations concludes.
Federalism protections must be consistent with NCSL’s policy on Free Trade and Federalism. These provisions include, but are not limited to: reservations to trade and investment agreements to “grandfather” existing state laws that might otherwise be subject to challenge and provisions that promote effective and meaningful consultation between the states and the federal government related to any dispute involving state law or any dispute that could prompt retaliation against states. NCSL supports efforts to include language in TPA legislation that requires agreements negotiated under that authority respect state sovereignty and state governmental functions. Provisions must also be made in federal implementing legislation that so far as possible commit the federal government to protecting and defending state authority when it is exercised in conformity with accepted U.S. constitutional principles of nondiscrimination against foreign commerce.
August 2008
(Joint policy with Human Services and Welfare Committee)
The National Conference of State Legislatures (NCSL) is very concerned about identity theft and fraudulent uses of identity documents. While NCSL strongly supports efforts to protect the integrity of Social Security numbers (SSNs), such efforts cannot be achieved through unfunded federal mandates on state and local government. Many states have implemented or are considering statutes to protect the integrity and restrict certain usages of SSNs.
The SSN was originally created to administer the Social Security program. However, it is extensively used by state, local and tribal governments for both record keeping and identification. The federal government often requires states to use SSNs in program management and data matching, especially in the delivery of health and human services programs. SSNs are used in vital records, paternity and divorce case documents, Motor Vehicle/Drivers License documentation, child support enforcement and administration, state retirement systems and to prevent fraudulent access to benefits and services.
Numerous pieces of Congressional legislation have been introduced in recent years that would require states to restrict the display, purchase or sale of Social Security numbers. The Congressional Budget Office found on two occasions (S. 848, the Social Security Number Misuse Prevention Act of 2002, and H.R. 2971, the Social Security Privacy and Identity Theft Prevention Act of 2004) that the cost of such provisions to state, local and tribal governments is likely to exceed the threshold amount for an intergovernmental mandate in at least one of the first five years following the date the mandates go into effect. These provisions would apply to a wide range of state and local agencies and would entail time-consuming efforts for state agencies to comply. States would have to make systemic changes to alter their document maintenance and retrieval systems. Some potential areas of cost include changes in information technology to ensure that systems only display SSNs in instances where access is permissible and labor costs to screen government documents for SSNs and then redact them before allowing citizens to access them. In many cases, especially death certificates, such redaction would have to be done by hand.
NCSL calls upon the federal government to abide by the provisions of the Unfunded Mandate Reform Act of 1995 and abandon efforts to put burdensome, unrealistic and costly mandates on state and local governments. NCSL supports a federal role in providing technical support, highlighting successful models, facilitating discussion on this issue and providing necessary funding for changes made at the discretion of the states. NCSL calls upon the federal government to begin by addressing flaws in the issuance of SSNs and to examine other ways to safeguard individual privacy, including consideration of password protection of SSNs. NCSL encourages the federal government to work with the states to develop joint recommendations on Social Security number usage.
August 2008
Adequate and affordable housing is a necessary ingredient for community, education, workforce, and economic development. State legislators support the integration and coordination of public and private resources to make effective, affordable housing services available as means to preventing homelessness, to encouraging self-sufficiency, to promoting economic opportunity, or to promoting homeownership. NCSL encourages the Congress and the Administration to support flexibility and state discretion in housing programs and to avoid legislatively mandated set-asides in programs such as the HOME Investment Partnerships (HOME) program and the Low-Income Housing Tax Credit. NCSL encourages efforts to promote a greater state role in administering federal housing programs, subject to sufficient funding and flexibility.
Regulatory Impacts
NCSL is encouraged by the efforts of the Congress to review and reduce regulatory burden at the federal level. We request Congress and the Administration to fully review and examine the impact on housing affordability of relevant federal laws and regulations. It is imperative that state and local governments make land use decisions based on the unique needs of their jurisdiction without interference from the federal government.
Housing Choices
America's population and housing needs and preferences have become more diverse. NCSL recognizes that adequate and affordable housing can take many forms, including apartment dwellings, condominiums, cooperatives, single-family homes and manufactured housing. Federal housing policy must provide ample flexibility that allows state legislators the ability to fully utilize this entire range of possibilities as they craft affordable housing policy to meet the needs of their constituents.
Distressed Communities, Urban Sprawl, and Smart Growth
As the inner-cities core spread to the suburban corridors and as businesses and builders develop what may have been once green spaces, the desire by some for either limited or no growth may further impact the availability of affordable homes. Some states and localities have considered smart growth plans to ease the impacts of urban sprawl. Several localities have chosen to limit urban sprawl by preserving already affordable homes and apartments inside their boundaries.
While the National Conference of State Legislatures does not take a position as to whether a state or locality should consider or adopt any smart growth initiatives, NCSL opposes any federal mandate requiring states and/or local communities to adopt such long-term comprehensive plans. Rather, NCSL calls upon the Congress and the Administration to work with states and our cities in the development and redevelopment of infill sites in many of our older cities and inner suburbs. Many infill sites are brownfields; abandoned industrial sites with some kind of contaminant that could be a barrier to any redevelopment. To make these brownfields available for housing, Congress needs to give states flexibility to immunize project providers from future federal cleanup liability and provide the necessary funding to assist states in the clean-up of these sites.
Housing Counseling
The National Conference of State Legislatures endorses efforts both by the federal government and the private sector to make the dream of homeownership a reality for more Americans. NCSL is pleased to be a partner with our federal colleagues and the private sector in this endeavor and supports programs that help people determine the best housing option for them, promote financial literacy, as well as homeownership preparedness.
NCSL applauds efforts by the federal government to recognize this dilemma and to respond with housing counseling. These efforts should respond to a need and not simply become a federal mandate, should build upon and not replace state and local counseling programs, should provide complete flexibility for states to use any federal assistance to improve or establish counseling services, should recognize the variety of housing options available to U.S. residents and not endorse a single option, and should include adequate outreach components to reach those populations in most need of counseling and assistance. Federal housing counseling efforts should not siphon funds from proven and successful programs and should be separately and adequately funded.
Financing
States have developed an array of innovative housing affordability policies and are responding to the homeownership problem by issuing mortgage revenue bonds and establishing housing trust funds to expand homeownership opportunities for moderate-income families. NCSL is encouraged and supportive of public private partnership programs and initiatives that cut home buying transaction costs, reduce down payment and mortgage carrying costs, and increase the availability of financing.
NCSL encourages the federal government to consult state legislators and other state officials as voucher program reforms are designed to ensure that they will meet state needs, provide the flexibility we desire, avoid cost shifts to states, and continue with ample federal funding for program and administrative costs. Additionally, we urge the Congress to sustain funding levels sufficient to maintain existing vouchers and already committed project based Section 8 subsidies.
The HOME Investment Partnership program is a successful and proven model of a state-federal partnership that should be used in other housing and development areas. HOME was designed as a federal-state-local program, with states receiving a substantial share of the funding, having the flexibility to fit HOME funds into the full range of housing services, including homebuyer education and counseling, and having the authority to spend funds anywhere within a state rather than only in rural areas. NCSL encourages statutory and regulatory changes that further streamline and simplify HOME so that it is more responsive to state-identified needs. NCSL also supports effective federal programs and adequate funding to address the affordable housing and community development needs of rural America.
The Low-Income Housing Tax Credit is a vital tool in producing new, affordable housing. NCSL supports the Housing Credit Program as well as the creation of a state-administered homeownership tax credit to stimulate the production of homes for low-income families as long as it does not undermine investor interest in the Housing Credit.
Department of Housing and Urban Development
The National Conference of State Legislatures is supportive of efforts to revitalize the Department of Housing and Urban Development (HUD) and to reinvent its services delivery. State legislators are well aware of the promises of federal housing and development assistance for distressed communities within their states, only to see those resources tied up in the bureaucratic maze of HUD headquarters in Washington. NCSL stands ready to work with the Administration and Congress to reinvent HUD into a community development department which would work in partnership with state and local governments and the private sector to provide the tools and flexibility for empowering those Americans within distressed communities to become part of this nation's economic mainstream.
August 2010
Many State and local governments provide retired employees with group health care coverage, through their retirement systems or by some other mechanism. Some of these government employers cover all or part of the health care expenses for these retired plan members. Yet, health care costs continue to rise at rates that threaten the ability of government employers to continue to provide these benefits. Further, out-of-pocket health care costs consume a growing percentage of retirement income for retired government employees. State efforts to provide health care for retirees have further been challenged by new governmental accounting standards that require states to account for the full cost of these benefits. These new requirement have caused many state and local governmental entities to consider greater funding of these benefits, plan design changes and increased participation by current employees and retirees in the financing of these benefits.
States have demonstrated creativity and innovation in their efforts to make health care for retirees accessible and affordable, yet their ability to affect the accessibility and affordability of health care is increasingly limited and challenged.
The National Conference of State Legislatures support federal legislation that would allow retirees to deduct premium and medical expenses from their taxable retirement income and applauds recently passed legislation that provides for pre-tax distributions of retirement income used to purchase retiree health or long term care insurance up to $3,000 annually for public safety retirees. The law requires that premiums, in order to be excluded from income, would need to be paid directly to the insurer. NCSL encourages the Treasury to minimize costs, administrative burden and complexity in promulgating rules to implement this provision and further encourages Treasury to consider alternative means of allowing distributions to be made pre-tax where pension paying entities are unable to provide for payments directly to the insurer. NCSL further encourages Congress to extend this tax treatment to all public sector retirees covered under similar plans.
Similarly, the National Conference of State Legislatures supports federal legislation that would allow current employees to rollover unused balances in flexible spending arrangements to future plan years or to contribute unused balances in flexible spending arrangements to qualified retirement plans, including 403 (b) and IRAs, or 457 governmental deferred compensation plans, or into retirement health care savings vehicles.
August 2009
There is continued emphasis on increasing retirement savings nationwide, and state and local governments have been responsible partners in achieving this goal by providing retirement savings vehicles to virtually all full-time state and local employees as compared to approximately 58 percent of employees provided pension benefits in the private sector. State and local governments have a strong commitment to the retirement security of their employees and retirees. State and local governments provide sound, secure benefits in retirement. There are approximately 2,600 public employee pension plans in the United States covering over 20 million state and local government workers. These plans hold nearly $3 trillion in assets for the benefit of plan participants and their beneficiaries.
State and local governments however face continued efforts by the federal government to expand federal regulation of state and local public pension plans and benefits and to impose taxes on public plan assets held in trust for plan participants. Examples of federal intrusion into the regulation of these plans range from proposals to regulate public plans under ERISA, to tax short-term public pension fund investments, to regulate investment options, impose excise taxes on plans and preempt state plans from state regulatory authority. States and localities have comprehensive laws that provide for rigorous regulation of retirement plans and strong protections for plan participants and assets. The National Conference of State Legislatures is concerned that continued efforts by the federal government to intrude into the administration and regulation of these plans will result in preemptive, redundant, costly and administratively burdensome requirements on governmental pension plans that will ultimately erode state sovereignty over these plans. NCSL further, firmly oppose federal legislative and regulatory proposals which would burden public sector pension plans with new federal requirements intended to address private sector pension concerns. The National Conference of State Legislatures believes that public retirement plans and assets are thoroughly protected under state law. NCSL maintains that any additional federal regulation of state and local pension plans, systems and assets is a violation of the sovereign power of state governments. Further, NCSL urges that current regulations that impose excessive and unnecessary administrative costs on states and localities be simplified or eliminated.
Additional federal regulation is duplicative of state regulation and could preempt the array of strong state and local laws that protect public pension funds and their active and retired members. It could also undermine the decision making process applicable to public plans. Retirement plans are creatures of state and local laws. Any proposed change is subject to the political process, which involves a vigorous public debate. Issues affecting the plans and their members are debated in a legislative setting, which allows for complete and open examination of the issues. Finally, state and local plans are backed by their respective state or local governments, which are permanent institutions that have a strong moral, contractual, and, in some cases, constitutional commitment to back their pension liabilities. This strong commitment assures state and local employees and retirees that they will receive the pension benefits to which they are entitled.
Generally, public plans adhere to the following:
- They are administered through boards of trustees, which, unlike private plans, generally include representatives of retiree and active members.
- Boards act for the exclusive benefit of members of the pension system, as required under state trust law.
- Plan fiduciaries include both individuals responsible for overall plan administration and those involved in daily investment activities.
- The fiduciaries are responsible to the plan participants for the operation of the plans in accordance with applicable laws.
- Fiduciaries are subject to strict fiduciary and trust law that governs their conduct on behalf of the plan, including the investment of the plan's assets.
- Breaches of fiduciary trust laws result in civil or criminal penalties.
- In addition to fiduciary law, public pension plan boards and administrators are subject to codes of ethics, conflicts of interest laws, and criminal laws.
- Boards and administrators, who violate any of these laws, may be punished by imprisonment, fines, or both.
- Routinely provide comprehensive disclosure, investment education and benefit statements to plan participants.
In addition to the foregoing safeguards, public pension plans are subject to oversight through the legislative process. The plans are also audited routinely and are subject to comprehensive reporting and disclosure requirements. The plans are funded on an actuarial basis by annual employee and employer contributions.
With nearly $3 trillion in assets and limited unfunded liabilities, public pension plans have been repeatedly targeted as a revenue source by the federal government. Both Congress and the Administration have considered taxing public plans through a direct tax on investments or through penalties or excise taxes under the US Internal Revenue Code. NCSL believes that taxation of public pension plans violates a long-standing and sound component of federal tax policy, which exempts state plans from taxation. Such taxation would also reduce the amount of funds available to pay benefits promised to plan members, likely forcing states to divert resources away from other priorities in order to address shortfalls or to pass on the cost of compliance to public pension systems and/or to plan participants in the case of self-directed plans. Therefore, NCSL calls upon Congress and the administration to oppose taxation and excessive regulation of state pension and benefits plans as the sovereignty of these plans should be maintained by the states.
August 2009
Many state and local governmental entities sponsor a supplemental defined contribution plan in addition to the general retirement plan to allow participants to defer an additional portion of their salary in anticipation of retirement needs, and some states provide limited matching contributions to encourage supplemental plan participation. Tax favored savings arrangements available to employees of state and local government are valuable in both increasing the attractiveness of public service as a career and in encouraging public employees to play a proactive role in providing for their own retirement security.
Federal legislation enacted over the last decade has simplified participation in, and the administration of, these supplemental arrangements. Much of this legislation recognized that arrangements sponsored by governmental entities are unique from those sponsored by other entities. Efforts to simplify federal regulation and taxation of these plans while maintaining the unique characteristics of these arrangements have been continually supported by NCSL—including efforts to provide similar tax treatment of employer contributions to governmental 401(k), 401(a), 403(b), and 457 plans and efforts to incorporate after tax contribution features in all such salary reduction arrangements.
NCSL supports further efforts to improve existing arrangements and to provide simplification and flexibility to these plans when directed by state and local government but oppose efforts to increase federal regulation of these plans or efforts to diminish the unique features and characteristics of these plans. NCSL opposes efforts to move to a one-size-fits-all approach that mandates the replacement of existing plans with vehicles designed for other sectors. Further we oppose efforts to supplant rather than supplement current savings and efforts that could result in additional cost and complexity for State and local governments as well as for plan participants.
NCSL maintains that primary regulation for these plans should remain with the states and that these plans should be allowed to continue to evolve in design to meet the unique needs of the state and local public sector workforce. NCSL encourages federal policy makers and regulators to continue to recognize the distinctive characteristics of state and local governments and their supplemental retirement arrangements and keep these in mind when promulgating regulations or further legislative changes to these plans.
August 2009
The National Conference of State Legislatures recognizes the benefits of international trade in creating jobs, raising living standards and stimulating growth in the United States.
In general, NCSL recognizes and supports U.S. efforts to increase the transparency, accessibility and accountability of the World Trade Organization. NCSL also supports broadening participation in the WTO and addressing environmental and labor matters. To achieve these ends, NCSL endorses the call for a new round of trade negotiations within the WTO to further reduce trade barriers in manufactured products, agriculture and services. NCSL believes that any new round of negotiations within the WTO must be designed to achieve these ends and be fully consistent with NCSL’s policy on Free Trade and Federalism.
In particular, NCSL will not support trade or investment agreements that do not include reservations that limit the unnecessary preemption of state law and that preserve the authority of state legislatures. Implementing legislation for trade and investment agreements must also be crafted to include protections for our constitutional system of federalism. Reservations must be made to trade and investment agreements to “grandfather” existing state laws that might otherwise be subject to challenge and so far as possible commit the federal government to protecting state authority when it is exercised in conformity with accepted U.S. constitutional principles of non-discrimination against foreign commerce. Particular care must be exercised to ensure that state tax laws and revenue systems are not subject to unjustified challenge under international agreements, and they generally should be “carved out” of such agreements. In addition, provisions must be made to deny any private right of action in U.S. courts or before international dispute resolution panels based on international trade or investment agreements.
General Agreement on Trade in Services
The United States is a signatory to the World Trade Organization’s General Agreement on Trade in Services (GATS). As GATS attempts to apply trade rules to and regulate tariffs for industries beyond the production and shipment of tangible goods, GATS touches upon many sectors regulated by states and of interest to state legislators.
Services constitute an important and growing segment of the American and the global economies. NCSL concurs that it is critical that the United States remain competitive in services sectors. However, international competition in service industries cannot compromise state constitutional or traditional authority or in any way impinge upon states’ ability to protect the public interest. Services negotiations in particular must incorporate a concerted effort to consult with state legislatures, where policies about government-provided services, regulation of monopolies, provision of essential services (such as energy, water, health, education, or public safety), powers of public utility commissions, or privatization are set. Consultation with state legislators is absolutely necessary prior to, during, and after negotiations conducted under the General Agreement on Trade in Services (GATS).
NCSL recognizes that sections 2103 and 2106 of the Presidential Trade Promotion Act of 2002 now require that the President notify the Congress as new rounds of GATS negotiations begin and that the Congress approve the results of those negotiations before implementation. NCSL applauds the Congress for instituting this modification to the GATS process and looks forward to working with USTR and the Congress as negotiations continue.
In particular, NCSL is concerned about GATS negotiations relative to energy and electricity. Trade rules of GATS apply to more than cross-border trade and cover state regulation of a domestic market, such as electricity where multinational companies have a commercial presence. GATS negotiations on energy and electricity on services related to transmission, distribution, and access of energy traders to the grid could conflict with state energy policy and alter the balance of domestic authority between states and the Federal Energy Regulatory Commission (FERC). NCSL has led efforts to create a working group of state and local policymakers, regulators, and other officials to examine and discuss energy and trade policy. This working group has held mutually beneficial meetings with USTR to promote dialogue and information exchange and has undertaken an exhaustive study of GATS implications for state and local authority over electricity policy. The working group has published an interim report and NCSL encourages USTR to remain engaged with the working group as it continues to study these issues.
NCSL applauds the consultations that have been undertaken thus far related to renewable energy and electric utility services and encourages USTR to devote substantially the same attention and effort, potentially through similar working groups such as the Intergovernmental Policy Advisory Committee’s services and investor-state working groups, to consultations related to other sectors.
Agreement on Government Procurement
The United States is party to the World Trade Organization’s Agreement on Government Procurement (GPA). When negotiating the GPA, USTR solicited the state governors for permission to include state procurement and to bind state procurement processes to the GPA. USTR asserts that 37 states were voluntarily bound through this process to the GPA. In September 2003, USTR requested state governors to make similar commitments to several free trade agreements (FTAs) being negotiated at the time. NCSL recognizes that consultation with a limited number of governors is simpler than communicating with 7,500 legislators and that USTR has increasingly made these letters available publicly on the Internet. Nonetheless, the federal government must work with state legislatures to assure that decisions about state procurement practices are made with their consent.
NCSL is concerned that USTR’s policy of communicating only with governors on procurement issues does not adequately provide for consultation with state legislatures or consider a need to change state law to adjust and obligate state procurement policy. State procurement policy and practices often are set in state law and are sometimes designed to serve social or economic purposes beyond the mere provision of goods and services for state government use. NCSL encourages USTR to insure that states can retain the ability to use procurement policy to promote these public interests while negotiating any modifications to GPA or procurement chapters in FTAs.
USTR has indicated to NCSL that there is some movement within the WTO to open and renegotiate sections of the WTO Agreement on Government Procurement (GPA). Recognizing the value of state purchasing power to international agreements including procurement provisions and the role of state legislatures in setting state procurement policies, NCSL urges USTR to consult regularly and meaningfully with NCSL during any renegotiations.
August 2008
The Western Hemisphere Travel Initiative (WHTI)
On April 5, 2005, the Departments of Homeland Security and State announced the Western Hemisphere Travel Initiative (WHTI) which would require all travelers to and from the United States to have a passport or other accepted document to enter or re-enter the United States. The federal government asserts that this initiative will increase the safety measures at the borders.
On September 1, 2005, the U.S. government published in the Federal Register an Advanced Notice of Proposed Rulemaking (ANPR) on the plan to implement the WHTI and opened a period of public comment on the plan.
The ANPR confirmed the U.S. Departments of Homeland Security and State have delayed and simplified the implementation of WHTI and now says that the rules will apply to all individuals traveling to the United States by air and by sea beginning December 31, 2006, and will apply to all individuals entering or re-entering the U.S. via its land border crossings as of December 31, 2007.
Impacts on Trade and Tourism
The WHTI as currently outlined will be a deterrent to travel and negatively impact the total number of border crossings, having significant implications for the economies of both Canada and the United States. The Canada–United States border relationship is a special one with more than 300,000 business people, tourists, and regular commuters traveling between Canada and the United States every day. On average $1.1-billion in goods crosses the Canada-United States Border every day. It is estimated that fifty-six percent (56%) of same-day travelers from the United States, forty percent (40%) of same-day travelers from Canada, fifty percent (50%) of overnight travelers from the United States, and thirty percent (30%) of overnight travelers from Canada do not possess a passport.
A recent report prepared by Conference Board of Canada for the Canadian Tourism Commission estimates that this passport requirement would result in 3.5 million fewer trips into the United States from Canada by 2008 with a related loss of $785 million in potential tourism revenue. Likewise, the report estimates 7.7 million fewer trips by U.S. citizens into Canada and $1.7 billion in lost revenues.
NCSL on Trade and Tourism
The National Conference of State Legislatures (NCSL) recognizes that tourism is a vital element of state economic development, diversification, and rural development programs as well as a leading services sector employer. As evidence of its importance to the U.S. economy, travel and tourism is the nation's largest export industry, ranks as the nation's third largest employer, and is the third largest retail sales industry. NCSL also acknowledges that free and open trade can bolster economies and increase standards of living and that measures that restrict the free flow of individuals and goods between the United States and Canada could negatively impact both economies.
Alternative Measures to the WHTI
NCSL applauds efforts by the U.S. Departments of Homeland Security and State to further secure America’s borders and protect the well-being of U.S. residents and their property. However, NCSL strongly encourages the federal government to seek the least onerous measures possible where the U.S. Canada border is concerned in full recognition of the trade and tourism traffic that benefits the people and nations on both sides of that line. To this end, NCSL encourages the federal government to fully explore frequent border-crossing programs – such as NEXUS, FAST, and CANPASS – and the range of identity documentation or passport substitutes that could be employed. At the same time, NCSL implores the federal government – the U.S. Congress, the White House, and the U.S. Departments of Homeland Security and State – to fully and effectively consult with NCSL and state legislatures to ensure that state interests and concerns are factored into these border security plans. Further, NCSL supports a delay, if necessary, in the implementation of WHTI to ensure that federal action along America’s northern border has a minimal effect on tourism, trade, citizens’ way-of-life, and states’ economies while achieving the goal of homeland security.
Effect on Southern Border Between United States and Mexico
NCSL acknowledges the importance of the cultural, economic and trade issues unique to the border between the United States and Mexico, and hereby expresses concern about the potential economic impact of the WHTI policy on the states | 
Arts, Culture and Economic Development