Capitol to Capitol | Vol. 21, Issue 4

Jeff Hurley 3/3/2014

Capitol to Capitol

ON THE HORIZON. The president is scheduled to release his FY 2015 budget tomorrow. Look for more information from NCSL later this week.

UNFUNDED MANDATES REFORM PASSES HOUSE. Legislation requiring more transparency in unfunded federal mandates imposed on state and local governments passed the House Friday by a 234-176 vote. The Unfunded Mandates Transparency and Information Act (H.R. 899) would strengthen the Unfunded Mandates Reform Act (UMRA) by expanding Congressional Budget Office reporting requirements to include new conditions of grant aid. In a letter signed by NCSL President Sen. Bruce Starr and President-elect Sen. Debbie Smith, NCSL supported provisions in H.R. 899 to improve upon the shortcomings in UMRA. The passage of H.R. 899 renews momentum to curb the practice of imposing unfunded federal mandates on state and local governments, which was the goal of UMRA when it became law in 1995. Senate passage may be problematic due to provisions addressing federal mandates on the private sector. NCSL staff contacts: Sheri Steisel, Jeff Hurley

NEW TAX REFORM PLAN MAY TRANSFER ECONOMIC BURDEN TO STATES. Last Wednesday, House Ways and Means Committee Chair Dave Camp (R-MI) released a tax reform “discussion draft,” a comprehensive, revenue-neutral proposal that could significantly overhaul the federal tax code. The 979-page plan, titled the Tax Reform Act of 2014, would consolidate and reduce individual tax rates and limit a number of exemptions, including the mortgage deduction. Chairman Camp’s proposal would have a considerable affect on state budgets. The draft would eliminate the deduction for state and local taxes, a provision, which at least as it applies to income taxes, has been allowed since the inception of the federal income tax in 1913. In addition, a 10 percent surcharge tax on earnings of high-income people ($450,000 for couples, $425,000 for individuals) would include bond interest that is currently not taxed, which would negatively impact municipal bonds for state and local infrastructure financing. Camp, who will step down as chair of the House tax-writing committee at the end of the year, faces an uphill battle to see his plan enacted. The tax proposal’s prospects for the 113th Congress currently appear weak at best, but it may provide a starting point for comprehensive tax reform when Congress convenes next year. NCSL staff contacts: Sheri Steisel, Jeff Hurley

FACT SHEET ON STATE FINANCES. NCSL and a host of other state and local organizations released a fact sheet on pensions, municipal bonds and bankruptcy last week highlighting the fiscal strength of state and local governments. The report helps clarify the financial misperceptions of the overall financial condition of states and municipalities, and reiterates that state and local governments do not require, nor seek, any federal financial assistance. NCSL staff contacts: Sheri Steisel, Jeff Hurley

TANF EBT BAN RULE RELEASED. States have been waiting for Department of Health and Human Services guidance on how to implement the ban on the use of the Temporary Assistance for Needy Families (TANF) Electronic Benefit Transfer (EBT) transactions at casinos, liquor stores and strip clubs. The wait is over, with a notice of proposed rulemaking released in mid-February. States must implement and enforce the ban enacted in the Middle Class Tax Relief and Job Creation Act of 2012 or lose 5 percent of TANF funds. Until final rules are released, states must report and demonstrate a “reasonable interpretation” of the statute. Comments are due May 6. NCSL staff comments: Joy Wilson, Rachel Morgan

WATER, WATER EVERYWHERE. On Feb. 26, NCSL sent a letter to the chairs of the Water Resources Development Act (WRDA) Conference Committee, regarding water infrastructure financing policy that could be included in a WRDA reauthorization. The letter argues that if a water infrastructure financing authority is a part of a final WRDA reauthorization, as outlined in a Senate version then state revolving funds and other revenues should not be diverted from current funding streams for water infrastructure improvements. In the letter NCSL also reminded the conferees of NCSL’s support for provisions within the final reauthorization that would ensure full use of the harbor maintenance trust fund. The WRDA conference committee was established in November to compromise on a final bill to authorize funds for harbor and port maintenance and infrastructure improvements, after both chambers passed separate reauthorization bills. NCSL staff contacts: Ben Husch, Melanie Condon

Capitol to Capitol is a publication of the National Conference of State Legislatures, the premier bipartisan organization representing the interest of states, territories and commonwealths. The Conference operates from offices in Denver, Colorado, and Washington, D.C.