CRS Reports

Select Demographic and Other Characteristics of Recent U.S. Circuit and District Court Nominees

This Insight provides information related to select demographic and other characteristics of U.S. circuit and district court nominees whose nominations were submitted to the Senate by President Trump prior to August 1, 2017. President Trump submitted a total of 26 nominations prior to this date. The select demographic and other characteristics of these 26 individuals are compared to the same demographic and other characteristics of the first 26 individuals nominated to U.S. circuit and district court judgeships during the Obama, George W. Bush, and Clinton presidencies. The information is summarized in Figure 1. While August 1, 2017, is used as the cut-off date for the purposes of this Insight, President Trump submitted his 26th nomination to the Senate on July 19, 2017. In comparison, President George W. Bush submitted his 26th nomination to the Senate on June 20 of his first year in office (while Presidents Obama and Clinton submitted their 26th nominations on October 29 and October 27, respectively, during their first years in office). It likely took Presidents Obama and Clinton longer to submit 26 lower federal court nominations, in part, because both had a vacancy to fill on the Supreme Court that occurred in June of each President’s first year in office (in contrast to President Trump, who assumed office with a vacancy on the Court that had already existed for 342 days). The numerical breakdown in the demographic or other characteristics of a President’s initial set of nominees is not necessarily indicative of the final numerical breakdown in the characteristics of those individuals nominated during a President’s entire term in office. For example, of President Obama’s first 26 nominees, 1 (3.8%) was Hispanic. In contrast, of all those nominated to U.S. circuit and district court judgeships by the end of his presidency, 37 (9.6%) were Hispanic. CRS has recently published a report, U.S. Circuit and District Court Judges: Profile of Select Characteristics, which provides information and analysis related to select demographic and other characteristics of active U.S. circuit and district court judges. Court Type As shown by Figure 1, of President Trump’s first 26 nominations, 9 (25%) were for vacant circuit court judgeships and 17 (65%) were for district court judgeships. Of the four presidencies included in the figure, the George W. Bush presidency is the only one during which a majority of the first 26 nominations were made for circuit court judgeships (19, or 73%, of all nominations were for circuit court vacancies—compared to 7 nominations for district court vacancies). Gender Of President Trump’s first 26 nominees, 20 (77%) were men and 6 (23%) were women. This was also the same numerical breakdown for President George W. Bush’s first 26 nominations. In comparison, President Clinton nominated the greatest number of women (with 11, or 42%, of his 26 nominees being women), followed by President Obama (with 10, or 38%, of 26 nominees being women). Figure 1. Comparison of Select Demographic and Other Characteristics of U.S. Circuit and District Court Nominees / Source: Congressional Research Service Race As shown by the figure, of President Trump’s first 26 nominees, 25 (96%) were white and 1 (3.8%) was non-white (Asian American). Of the four presidencies, President Obama’s first 26 nominees included the greatest number of non-white nominees (9 African Americans, 1 Hispanic, and 4 Asian Americans—representing 14, or 54%, of his first 26 lower federal court nominations). Professional Experience Immediately Prior to Nomination Of President Trump’s first 26 nominees, 10 (38%) were serving as federal or state judges prior to being nominated, and 10 (38%) were working as attorneys in private practice. The number of President Trump’s nominees working as federal or state judges immediately prior to nomination is the lowest of the four Presidents (with President Obama having nominated the greatest number of federal or state judges among his first 26 nominees—17, or 65%). Additionally, the number of President Trump’s nominees working as attorneys in private practice immediately prior to nomination is the greatest of the four Presidents (with President Obama having nominated the fewest number of attorneys in private practice among his first 26 nominees—6, or 23%). Appointing President of Departed Judge Of President Trump’s first 26 nominees, 17 (65%) were nominated to replace a departed judge who had been appointed by a former Republican President (while 9, or 35%, were nominated to replace a judge appointed by a Democratic President). For each of the four Presidents included in the analysis, a majority (or in the case of President Clinton, a plurality) of his first 26 nominations were submitted to replace departed judges who had been appointed by a former President belonging to the same political party as the appointing President. Nominations Submitted After August 1, 2017 The 8 nominations submitted (as of this writing) by President Trump after August 1, 2017, are similar to the 26 nominations included in Figure 1 that were submitted prior to August 1. Of the 8 nominations: 2 (25%) are for circuit court judgeships and 6 (75%) are for district court judgeships; 7 (87%) of the nominees are men and 1 is a woman; each of the 8 nominees is white; 5 (62.5%) are working as attorneys in private practice, while 2 are serving as judges and 1 holds another type of government position; and 5 (62.5%) are nominated to replace a judge appointed by a former Republican President, while 3 (37.5%) are nominated to replace a judge appointed by a Democratic President.

Aug 17, 2017

Farm Bill Primer: ARC and PLC Support Programs

Aug 17, 2017

Who Regulates Whom? An Overview of the U.S. Financial Regulatory Framework

The financial regulatory system has been described as fragmented, with multiple overlapping regulators and a dual state-federal regulatory system. The system evolved piecemeal, punctuated by major changes in response to various historical financial crises. The most recent financial crisis also resulted in changes to the regulatory system through the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 (Dodd-Frank Act; P.L. 111-203) and the Housing and Economic Recovery Act of 2008 (HERA; P.L. 110-289). To address the fragmented nature of the system, the Dodd-Frank Act created the Financial Stability Oversight Council (FSOC), a council of regulators and experts chaired by the Treasury Secretary. At the federal level, regulators can be clustered in the following areas: Depository regulators—Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), and Federal Reserve for banks; and National Credit Union Administration (NCUA) for credit unions; Securities markets regulators—Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC); Government-sponsored enterprise (GSE) regulators—Federal Housing Finance Agency (FHFA), created by HERA, and Farm Credit Administration (FCA); and Consumer protection regulator—Consumer Financial Protection Bureau (CFPB), created by the Dodd-Frank Act. These regulators regulate financial institutions, markets, and products using licensing, registration, rulemaking, supervisory, enforcement, and resolution powers. Other entities that play a role in financial regulation are interagency bodies, state regulators, and international regulatory fora. Notably, federal regulators generally play a secondary role in insurance markets. Financial regulation aims to achieve diverse goals, which vary from regulator to regulator: market efficiency and integrity, consumer and investor protections, capital formation or access to credit, taxpayer protection, illicit activity prevention, and financial stability. Policy debate revolves around the tradeoffs between these various goals. Different types of regulation—prudential (safety and soundness), disclosure, standard setting, competition, and price and rate regulations—are used to achieve these goals. Many observers believe that the structure of the regulatory system influences regulatory outcomes. For that reason, there is ongoing congressional debate about the best way to structure the regulatory system. As background for that debate, this report provides an overview of the U.S. financial regulatory framework. It briefly describes each of the federal financial regulators and the types of institutions they supervise. It also discusses the other entities that play a role in financial regulation.

Aug 17, 2017

Public Health Service Agencies: Overview and Funding (FY2016-FY2018)

Within the Department of Health and Human Services (HHS), eight agencies are designated components of the U.S. Public Health Service (PHS). The PHS agencies are funded primarily with annual discretionary appropriations. They also receive significant amounts of funding from other sources, including mandatory funds from the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended), user fees, and third-party reimbursements (collections). The Agency for Healthcare Research and Quality (AHRQ) funds research on improving the quality and delivery of health care. For more than a decade prior to FY2015, AHRQ did not receive its own annual appropriation. Instead, it relied on redistributed (“set-aside”) discretionary funds from other PHS agencies for most of its funding, with supplemental amounts from the ACA’s mandatory Patient-Centered Outcomes Research Trust Fund (PCORTF). Since FY2015, AHRQ has received an annual appropriation in lieu of any set-aside funds. The agency’s FY2017 funding level of $417 million was $11 million less than the FY2016 level of $428 million. The Centers for Disease Control and Prevention (CDC) is the federal government’s lead public health agency. CDC obtains its funding from multiple sources besides discretionary appropriations. The Agency for Toxic Substances and Disease Registry (ATSDR) investigates the public health impact of exposure to hazardous substances. ATSDR is headed by the CDC director and included in the discussion of CDC in this report. The CDC/ATSDR funding level decreased from $12.2 billion in FY2016 to $12.1 billion in FY2017. The Food and Drug Administration (FDA) regulates drugs, medical devices, food, and tobacco products, among other consumer products. The agency is funded with annual discretionary appropriations and industry user fees. The agency’s funding levels for FY2016 and FY2017 remained constant at about $4.7 billion, with user fees accounting for 41% of FDA’s total FY2017 funding. The Health Resources and Services Administration (HRSA) funds programs and systems that provide health care services to the uninsured and medically underserved. HRSA, like CDC, relies on funding from several different sources. The agency’s funding decreased from $10.8 billion in FY2016 to $10.7 billion in FY2017. The Indian Health Service (IHS) supports a health care delivery system for Native Americans. IHS’s funding, which includes discretionary appropriations and collections from third-party payers of health care, increased between FY2016 and FY2017 from $6.2 billion to $6.4 billion. Appropriations increased during that period, while collections stayed the same in both fiscal years. The National Institutes of Health (NIH) funds basic, clinical, and translational biomedical and behavioral research. NIH gets more than 99% of its funding from discretionary appropriations. Recent increases in NIH’s annual appropriations have boosted its funding level to a new high of $34.1 billion in FY2017, compared with $32.3 billion in FY2016. The Substance Abuse and Mental Health Services Administration (SAMHSA) funds mental health and substance abuse prevention and treatment services. SAMHSA’s funding, about 95% of which comes from discretionary appropriations, was approximately $3.8 billion in FY2016 and $4.3 billion in FY2017. This report supersedes two earlier products, both of which remain available: CRS Report R43304, Public Health Service Agencies: Overview and Funding (FY2010-FY2016), and CRS Report R44505, Public Health Service Agencies: Overview and Funding (FY2015-FY2017).

Aug 16, 2017

Farm Bill Primer: The Farm Safety Net

Aug 16, 2017

Drought Response and Preparedness: Policy and Legislation

Aug 14, 2017

Department of Transportation (DOT): FY2018 Appropriations

In 2017, the Trump Administration proposed a $75 billion budget for the Department of Transportation (DOT) for FY2018: $16.4 billion in discretionary funding and $58.7 billion in mandatory funding. That is approximately $2 billion less than was provided for FY2017. The budget request reflected the Administration’s call for significant cuts in funding for transit and rail programs. The DOT appropriations bill funds federal programs covering aviation, highways and highway safety, public transit, intercity rail, maritime safety, pipelines, and related activities. Federal highway, transit, and rail programs were reauthorized in fall 2015, and their future funding authorizations were somewhat increased. There is general agreement that more funding is needed for transportation infrastructure, but Congress has not been able to agree on a source that could provide the additional funding. The federal excise tax on motor fuel, which is the primary funding source for federal highway and transit programs, has not been increased in over 20 years, and does not raise enough revenue to support even the current level of spending. To address this shortfall, Congress periodically transfers money from the general fund to the Highway Trust Fund to provide sufficient funding for the programs. The annual appropriations for DOT are combined with those for the Department of Housing and Urban Development (HUD) in the Transportation, Housing and Urban Development, and Related Agencies (THUD) appropriations bill. The House Appropriations Committee reported H.R. 3353, the THUD FY2018 appropriations bill, in which Division A is FY2018 appropriations for DOT. The committee recommended $77.5 billion in new budget authority for DOT, 0.5% ($400 million) more than the comparable figure in FY2017 and roughly 3% ($2.4 billion) more than the Administration requested. The Senate Committee on Appropriations has reported S. 1655, its FY2018 THUD bill, in which Division A is DOT appropriations. The Senate committee recommended $78.6 billion in new budget authority, 2% ($1.6 billion) more than the comparable FY2017 amount and 4.7% ($3.5 billion) more than the Administration requested. Notable differences between the House and Senate committee bills include funding for the TIGER grant program (the House committee recommended no funding; the Senate committee recommended $550 million) and for new transit projects (beyond projects with existing grant agreements, the House committee recommended $400 million for Joint Public Transportation and Intercity Passenger Rail Projects, while the Senate committee recommended $768 million for new projects in the New Starts, Small Starts, and Core Capacity programs). With inflation forecast at 1.7% for FY2017 and 1.9% for FY2018, the House bill would result in a slight decrease in real DOT funding, while the Senate bill would result in roughly level funding, compared to FY2017.

Aug 14, 2017

Farm Safety-Net Payments Under the 2014 Farm Bill: Comparison by Program Crop

The 2014 farm bill (Agricultural Act of 2014, P.L. 113-79) authorizes farm safety-net programs for the five crop years of 2014 through 2018. This includes revenue support for 20 “covered commodities” under either the Agricultural Risk Coverage (ARC) program or the Price Loss Coverage (PLC) program and interim financing and floor price support for an expanded list of 24 “loan commodities” under the Marketing Assistance Loan (MAL) program. Outlays under the MAL, ARC, and PLC programs are funded by the U.S. Department of Agriculture’s (USDA) Commodity Credit Corporation (CCC). In addition, federally subsidized crop insurance is available for over 100 agricultural commodities—including both covered and loan commodities. Federal crop insurance is permanently authorized by the Federal Crop Insurance Act (7 U.S.C. 1501 et seq.) but is periodically modified by new farm bill legislation. The principal subsidy component of federal crop insurance is premium subsidies that pay for an average of 62% of the cost of buying an insurance policy since 2014. Premium subsidies are funded by USDA’s Federal Crop Insurance Corporation (FCIC). Through the first three years of the 2014 farm bill (2014 through 2016), USDA has spent over $38 billion on commodity-specific farm program outlays. Annually, commodity-specific outlays are estimated at $12.7 billion per year, including $7.5 billion for CCC programs and $5.2 billion in FCIC crop insurance premium subsidies. When farm program payments are linked to specific crops, they can influence relative market incentives and resource allocations. Furthermore, significant differences in spending across program crops may have regional or geographic implications. This report looks at available CCC and FCIC data for the major program crops and compares relative support using several different measures: absolute payments, payments per acre, payments as a share of the value of production, and payments as a share of the cost of production. In addition, price and income support levels are compared to market prices. By all of these measures, there has been substantial variation in relative support across program crops. Annual corn payments account for 46% of all CCC and FCIC commodity-specific outlays; however, corn also has the most planted acres and the largest annual value of production. When payments are compared per acre, and as a share of either the value or the cost of production for each crop, then peanuts and rice receive higher levels of support than do other program crops. One particular analytical method for comparing price-protection levels across program crops involves PLC reference prices. PLC reference prices for each commodity are adjusted such that 35%, 40%, or 45% of monthly farm price observations fall below the adjusted reference price during the January 2008 through May 2017 period. The choice of these reference levels is arbitrary but facilitates comparison. Important differences in support levels emerge. Peanuts and cottonseed (included for comparative purposes as a hypothetical program crop) receive significantly higher price protection levels compared to the other program crops. Canola and sorghum also have above-average support levels relative to the remaining program crops. In contrast, soybeans and pulse crops receive lower levels of price protection.

Aug 10, 2017

China-India Border Tensions at Doka La

Recent border tensions between India and China may be indicative of a new phase of heightened Sino-Indian rivalry. This rivalry is manifesting itself not only along the two nations’ 2,167-mile-long disputed Himalayan border, but also throughout South Asia and the broader Indian Ocean littoral region. Intensified frictions raise the potential for open conflict and could serve as an impetus for further U.S.-India strategic cooperation that could have implications for China. An issue for Congress is whether to call on the Administration to put forth a strategy and report on this strategic development. The Situation at Doka La Border tensions between China and India escalated in mid-June 2017 as China extended an unpaved road on the Doka La Plateau on the disputed border between China and Bhutan, high in the Himalayas. Chinese road-building activity was first revealed by a Royal Bhutan Army Patrol that sought to dissuade the Chinese from continuing. Indian military personnel subsequently moved to the border area. Doka La is located in territory disputed by Bhutan and China to the north of the Siliguri Corridor. The corridor, also known as the “chicken’s neck,” links central India with its seven northeastern states. It is approximately 20 miles wide at its narrowest part. Chinese control of the corridor would isolate 45 million Indians in an area the size of the United Kingdom. Bhutan does not have diplomatic relations with China but does have a “special” relationship with India based on a 1949 Treaty of Friendship, which gives India a guiding influence over Bhutan’s defense and foreign affairs. The treaty was revised in 2007 to give Bhutan a greater level of autonomy. With a population of less than 1 million, Bhutan is dwarfed by India (1.3 billion) and China (1.4 billion). The Doka La border tensions mounted while Prime Minister Modi traveled to Washington, DC, to meet with President Trump. China may have been motivated to signal displeasure over developing ties between India and the United States. History of Border Tensions China and India fought a month-long border war in late 1962. The conflict occurred days after the Cuban missile crisis occupied the United States. The war was a humiliating defeat for India and left Indian leaders with a deep sense of betrayal by China. The war followed a 1959 Tibetan uprising against Chinese rule that sent Tibet’s spiritual leader, the 14th Dalai Lama, into exile in India, strengthening China’s perception of a threat by India to its rule in Tibet. Following the border war, China retained control over an extensive area in the western sector of the border (known as Aksai Chin), which previously was Indian territory. China also claims large swaths of territory in the border’s eastern sector in Arunachal Pradesh, and does not recognize the 1914 McMahon Line that British and Tibetan authorities recognized as the border between India and Tibet, and that a newly independent India recognized in 1947. Over time, the buffer states that historically helped separate India and China have come under pressure as Chinese and Indian power has expanded into the region. In geopolitical terms Bhutan, like Nepal, can be viewed as a buffer state between India and China. Tibet, over which the Chinese Communist Party gained control in 1951, and Sikkim, annexed by India in 1975, also acted as buffers between the two great powers of Asia. China recognized India’s annexation of Sikkim in 2003, but the situation at Doka La could potentially lead to a shift in China’s position on Sikkim and to increased efforts by China to develop its influence in Bhutan. Beijing views Arunachal Pradesh as disputed territory between China and India, calling the territory South Tibet, and China objected to a visit to the border by the Dalai Lama in April 2017. The People’s Liberation Army held live fire drills close to the border with Arunachal Pradesh in July 2017. A Chinese Foreign Ministry spokesman said China was “firmly opposed” to then-U.S. Ambassador to India Richard Verma’s visit to Arunachal Pradesh in October 2016 and urged the United States to stop getting involved. Policy Responses The Indian Ministry of External Affairs stated that “India is deeply concerned” about the developments at Doka La and that India and Bhutan “have been in continuous contact.” Some Indian strategists have argued for a more comprehensive response by India to China’s “strategic incursions.” According to some analysts, an overall improved Indian military posture along the frontier with China may be boosting Indian resolve in dealing with China over Doka La. China has stated that “India should immediately and unconditionally withdraw its trespassing border troops back to the Indian side of the boundary” as “a prerequisite and basis for resolving the incident.” The United States has not played a significant role in the dispute. The July 2017 trilateral Malabar Naval Exercise, which included India, the United States, and Japan, as well as the U.S.-India Defense Logistics Agreement, pointed for some to a developing strategic relationship between India and the United States. Still, some analysts in the United States have wondered why the United States has “said precious little” with regard to Doka La given perceptions of strategic convergence between the two nations on the rise of China. Issues for Congress The border standoff at Doka La marks a shift in China-India ties that likely has more to do with the broader relationship than with the Himalayan border alone. An intensification of rivalry between China and India appears to be under way. For New Delhi, China’s efforts to block India from membership in the Nuclear Suppliers Group, develop the China-Pakistan Economic Corridor through a part of Kashmir claimed by India, protect a Pakistan-based terrorist from UN sanctions, and develop China’s strategic presence in the Indian Ocean littoral have combined to increase New Delhi’s frustration with and suspicion of China. China has been wary of India’s decisions to not attend China’s Belt and Road summit in May 2017, allow the Dalai Lama to visit Arunachal Pradesh, and continue to develop strategic ties with the United States. Given these larger dynamics, as well as specific statements and posturing on Doka La, it may be some time before the dispute is fully resolved.

Aug 9, 2017

Paris Agreement on Climate Change: U.S. Letter to United Nations

The Department of State communicated to the United Nations on August 4, 2017, a U.S. intention to withdraw from the 2016 Paris Agreement (PA). The PA is an international agreement to address climate change over the coming century existing under the 1992 U.N. Framework Convention on Climate Change (UNFCCC). On June 1, 2017, President Donald Trump publicly announced this intent. The letter to the U.N. stated that “unless the United States finds suitable terms for reengagement,” it would provide formal written notification of the U.S. intent to withdraw “as soon as it is eligible to do so.” Under the terms of the PA, first eligibility would be November 4, 2019—three years after the PA entered into force for the United States. The letter also requested that the Secretary-General communicate this information to other Parties and to other countries that are entitled to become Parties to the agreement. Because the communication does not have legal effect—given its early date—the action’s significance largely lies in what the press release relates about U.S. substantive greenhouse gas (GHG) policies. Specifically, the press release states that United States will: be “open to re-engaging in the Paris Agreement if the United States can identify terms that are more favorable to it, its businesses, its workers, its people, and its taxpayers”; continue to reduce its GHG emissions while promoting technological advance and other countries’ access to fossil fuels “more cleanly and efficiently” as well as renewable energy and “other clean energy” sources (language almost identical to text in the joint communiqué of the G-20 leaders on July 8); and “continue to participate in international climate change negotiations and meetings ... to protect U.S. interests and ensure all future policy options remain open to the administration.” President Trump’s intent to withdraw from the PA, and broader questions about U.S. climate change policy, were the subject of reportedly intense discussions among leaders of the G-7 and G-20 countries at their recent respective summit meetings. The G-20 communiqué noted the U.S. intent to withdraw and the continued commitment of the other members of the G-20, stating: [T]he Leaders of the other G20 members state that the Paris Agreement is irreversible. We reiterate the importance of fulfilling the UNFCCC commitment by developed countries in providing means of implementation including financial resources to assist developing countries with respect to both mitigation and adaptation actions. The State Department press release indicates U.S. willingness to continue to participate in negotiations under the PA, as the United States is entitled to do as long as it remains a Party. During these negotiations, the Parties will define the PA’s rules and methods, similar to the way in which a federal agency promulgates rules and guidance to implement a statute passed by Congress. The rules to be negotiated cover such topics as common standards for reporting on GHG emissions and actions Parties are taking to reduce them, processes for public and international review of Parties’ implementation of their commitments, and standards for accounting and review of financing of actions under the agreement. The content of the GHG emission reduction pledges by Parties are not legal obligations but may have political import. For more information: CRS Report R44761, Withdrawal from International Agreements: Legal Framework, the Paris Agreement, and the Iran Nuclear Agreement, by Stephen P. Mulligan CRS In Focus IF10668, Potential Implications of U.S. Withdrawal from the Paris Agreement on Climate Change, by Jane A. Leggett CRS Report R44609, Climate Change: Frequently Asked Questions About the 2015 Paris Agreement, by Jane A. Leggett and Richard K. Lattanzio

Aug 8, 2017

Puerto Rico Electric Power Authority and Debt Restructuring Under PROMESA, P.L. 114-187

In recent years, the Commonwealth of Puerto Rico (CPR) has faced a fiscal crisis resulting from economic contraction, high public sector debt levels, outmigration, and other factors. In recent weeks, the finances of the Puerto Rico Electric Power Authority (PREPA)—or in Spanish, the Autoridad de Energía Eléctrica (AEE)—have attracted specific attention. PREPA’s debt—about $9 billion—is larger than that of any other operational U.S. public corporation. Planned actions to address the debt, and high electricity prices due to the deteriorating state of the island’s generating and transmission infrastructure, may adversely affect its economic development prospects and the well-being of its residents. Moreover, the restructuring of PREPA could have wider implications for municipal finance and infrastructure policy. PREPA has been one of the largest U.S. public power utilities, serving about 1.4 million customers. According to 2014 industry statistics, PREPA ranked in the top 10 of U.S. public power utilities in terms of net electric power generated, with about 12.7 million megawatt-hours and approximately $4.6 billion in sales. PREPA’s 6,023 megawatts in power generation capacity continues to be dominated by fossil fuels, especially heavy fuel oil. Residential customers currently pay $0.20 per kilowatt-hour (kWh), a rate above that in any mainland state, but below those on some Caribbean and Pacific islands. Financial and political forces combined to reshape PREPA in 2014. In May 2014, Puerto Rico enacted an energy reform law that established a rate review board. Lack of financial liquidity prompted PREPA to intensify negotiations with creditors, requiring the appointment of a chief restructuring officer (CRO) and a revamped board. In November 2015, PREPA and a coalition of creditors reached a Restructuring Support Agreement (RSA) which called for an exchange of old for new bonds representing a 15% reduction of debt levels. In February 2016, Puerto Rico enacted a PREPA Revitalization Act to fulfill requirements of the RSA. PREPA requested rate increases in April 2016, arguing that revenues fell short of covering costs by nearly $0.08 per kWh. The lack of access to a debt restructuring process under a Chapter 9 bankruptcy (an option not available to Puerto Rico under federal law) likely complicated negotiations between PREPA and creditors. PROMESA and Debt Restructuring Processes In June 2016, Congress passed the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA; P.L. 114-187) to address the crisis. Among other provisions, PROMESA established the Financial Oversight and Management Board for Puerto Rico (Oversight Board) and created processes for adjusting the island’s public debts and for developing sustainable fiscal plans. Puerto Rico’s Governor was charged with developing fiscal plans for CPR and its public corporations, subject to Oversight Board certification. In Title III, PROMESA drew on provisions of the U.S. Bankruptcy Code. Title VI of PROMESA set up a collective action process similar to strategies used in sovereign debt workouts. The RSA was expected to be implemented through Title VI. On March 22, 2017, the House Committee on Natural Resources held a status hearing on the PREPA RSA. The PREPA fiscal plan outlined proposals and projections for the utility’s finances, operations, capital investments, and market environment for the coming decade. The plan projected a 23% reduction in energy sales, and called for setting a $0.21 per kWh target rate by 2023. Extensions of the RSA shielded PREPA from suits from participating creditors. However, on July 2, 2017, the Oversight Board decided to initiate a Title III debt restructuring process. On July 18, 2017, a creditor coalition holding nearly two-thirds of PREPA’s debt sued to lift a stay on litigation and have a receiver appointed under terms of a 1974 bond agreement. A hearing on the case was scheduled for August 9, 2017. Operational Challenges Facing PREPA Although Puerto Rico has taken steps to make its power generation more efficient, significant operational and investment hurdles exist. PREPA’s power generation remains heavily dependent on old, inefficient, and unreliable oil and diesel-fired plants. PREPA contracts with two private generators that use other fuels: an AES plant fueled by coal, and an Eco Eléctrica combined-cycle electric power plant that uses natural gas (imported mostly from Trinidad and Tobago) as liquefied natural gas (LNG). A second LNG terminal is under development with an in-service date in the second quarter of 2018. Concerns about the Title III process, however, may complicate that project. Completion of the terminal may allow for the expanded use of natural gas as a power generation fuel for PREPA and potentially other electricity generators in Puerto Rico. PREPA has planned to increase its natural gas-fired power generation from 34% in 2018 to 57% of all electric generation by 2026. In July 2010, Puerto Rico enacted a Renewable Energy Portfolio Standard (RPS), which essentially requires PREPA to supply increasing amounts of retail electricity sales from eligible “green energy” resources, rising to 20% of retail sales by 2035. PREPA’s business practices have also raised concerns. PREPA’s revenues are reduced by unbilled power generation, with approximately 14% of power generated by PREPA classified as lost or unaccounted for in recent years. PREPA had not been billing many municipalities and government offices, in part to offset payments in lieu of taxation, as well as some nonprofit organizations and businesses. PREPA has recently become more aggressive in collecting past due amounts. Some of PREPA’s largest unpaid accounts, however, were accumulated by other public corporations that are also facing debt restructuring processes. PREPA’s Prospects Now that PREPA has entered into a PROMESA Title III debt restructuring process, changes in the structure, finances, and operations of the utility appear likely. How well PREPA serves its mission in future years may well depend on changes in its governance. Some have called for privatizing PREPA as a means of addressing governance issues. Measures imposed through the RSA, such as appointing a more technically oriented board and a CRO, might also be seen as hardening fiscal constraints. Recent changes in PREPA’s board have raised concerns among creditors, while the Governor views those changes as necessary for implementing his proposals to rescue the utility.

Aug 8, 2017

Farm Bill Primer Series: A Guide to Omnibus Legislation on Agriculture and Food Programs

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Aug 7, 2017

Tolling U.S. Highways and Bridges

The Federal-Aid Road Act of 1916 (39 Stat. 355), which provided federal funds to states for highway construction, included the requirement that all roads funded under the act be “free from tolls of all kinds.” Following the funding of the Interstate System in 1956, the “freedom from tolls” policy was reaffirmed (23 U.S.C. §301). Although the provision still exists, exceptions to the general ban on tolls now cover the vast majority of federal-aid roads and bridges. New roads, bridges, and tunnels may be tolled, and most existing roads, bridges, and tunnels may be tolled if they are reconstructed or replaced. Yet growth in the extent of toll facilities has been slow, and some new toll projects have struggled financially. The failure, beginning in 2008, of federal highway user taxes and fees to provide sufficient revenues to fund the surface transportation program authorized by Congress has renewed interest in expanding toll financing. The Congressional Budget Office (CBO) projects that annual highway revenues, mostly from motor fuels taxes, will fall an average of $20 billion short of the amount needed to sustain the current federal surface transportation program between FY2021 and FY2025, and some Members of Congress see an expansion of tolling as a way to reduce the need for federal expenditures on roads. Congress could achieve an expansion of tolling in several ways. At one extreme, it could simply encourage tolling pilot projects on Interstate System highways, of which relatively few have been implemented to date. At the other extreme, Congress might authorize states to toll federal-aid highways as they see fit, or even require that Interstate highway segments be converted to toll roads as they undergo reconstruction, eventually turning all Interstates into toll roads. One obstacle to increased use of tolling is that tolls are a relatively inefficient way of raising revenue. The costs of toll collection on many existing toll roads exceed 10% of revenues even if all tolls are collected electronically, not including the cost of toll collection infrastructure. This compares unfavorably to the cost of collecting the existing federal motor fuels tax, estimated to be less than 1% of revenues. In addition, many roads may not have sufficient traffic willing to pay a high enough toll to fully cover financing, construction, maintenance, and toll collection costs. Due to these factors, as well as their political unpopularity, tolls are likely to play a limited role in funding surface transportation projects in the near future. Beyond a requirement that toll rates on bridges “shall be just and reasonable” and a provision limiting tolls on over-the-road buses, current federal law provides no role for the federal government in regulating toll rates or practices. States do not need to ask for permission from the Federal Highway Administration (FHWA) prior to imposing tolls but must be careful to adhere to the legal requirements, especially in regard to the use of revenues. However, there have been controversies in a number of states over toll schedules that favor in-state residents over others; over attempts to collect tolls at state borders, where more nonresidents would be affected, rather than at internal locations; and over trucking industry complaints that truck tolls are excessive compared to auto tolls. If tolling becomes more widespread, the extent to which tolling should be subject to federal oversight may become a more prominent question.

Aug 4, 2017

Global Engagement Center: Background and Issues

The State Department’s Global Engagement Center (GEC) is tasked with countering foreign state and non-state propaganda and disinformation targeting the United States and U.S. interests. A number of recent reports have stated that the GEC has not been given access to authorized funds for FY2017, leading to speculation and concern in some quarters about its continued role and operations. Counterterrorism Communications in the State Department The GEC is the latest iteration of State Department efforts to coordinate interagency communications countering the messaging and influence of terrorist organizations and other groups and countries that threaten U.S. interests and security. Beginning in 2006, several “centers” have been established in the State Department to produce strategy for, direct, and coordinate counterterrorism (CT) and countering violent extremism (CVE) communications: The Counterterrorism Communication Center (CTCC) was established in the Bureau of International Information Programs (IIP) in summer 2006, coordinating interagency messaging and creating specific messaging for the Departments of State and Defense. The Global Strategic Engagement Center (GSEC) replaced the CTCC in 2008, conducting similar activities guided by the decisionmaking and planning of the National Security Council’s (NSC’s) Policy Coordination Committee (PCC) for Public Diplomacy and Strategic Communication. Established by executive order in 2011, the Center for Strategic Counterterrorism Communication (CSCC) replaced the GSEC in 2010, with dedicated funding, an interagency Steering Committee and operational Support Office, and a Coordinator leading the organization. Establishing the GEC In March 2016, President Barack Obama issued Executive Order 13721, revoking the executive order that established the CSCC, and directing the Secretary of State to establish the GEC. Similar to the structure and purpose of the CSCC, the GEC was tasked with leading interagency efforts to carry out U.S.-government-sponsored counterterrorism communications to foreign publics, with a GEC Coordinator reporting to the Secretary through the Under Secretary of State for Public Diplomacy and Public Affairs. The GEC was designed to lead a whole-of-government approach to countering terrorist messaging, violent extremism, and ideological support to terrorism; better integrating advanced technologies and analysis into U.S. government counterterrorism communications efforts; and leveraging private sector and local foreign communicators, all aided by greater budgetary authority than had been afforded its predecessors. Executive Order 13721 directed executive branch agencies to provide the GEC with personnel, resources, and information to carry out its mission, and established an interagency Steering Committee, chaired by the Under Secretary of State for Public Diplomacy and Public Affairs, to allow other agencies to provide strategic advice and ensure support for the GEC. Expanding the GEC’s Mandate In December 2016, Congress enacted Section 1287 of the National Defense Authorization Act for Fiscal Year 2017 (P.L. 114-328; FY2017 NDAA), which requires the Secretary of State essentially to reestablish the GEC with a purpose, structure, and authority that differ from those provided in Executive Order 13721. Whereas the original GEC had a specific purpose to focus on countering terrorist and extremist groups’ influence, Section 1287 states that the GEC’s purpose is to “counter foreign state and non-state propaganda and disinformation efforts” that threaten U.S. national security interests as well as the national security interests of U.S. allied and partner countries. This language indicates a much broader purpose for the new GEC than the original one, possibly encompassing counterterrorism communications but also expanding the GEC’s coverage to include countering certain foreign communications from any source. Section 1287 also provides the new GEC with specific hiring and grant-making authorities that were not included in Executive Order 13721. Under Section 1287, the GEC will be terminated in December 2024. Increasing the GEC’s Funding Along with a significantly broadened mandate, the GEC stands to receive substantially increased funding under Section 1287, continuing an upward trend in recent years for funding of the GEC and the CSCC before it. GEC predecessors CTCC and GSEC were housed in State’s Bureau of International Information Programs (IIP), and did not receive dedicated funding through legislation. For FY2015, the CSCC had a budget of approximately $6 million in dedicated funding. Establishment of the GEC to replace the CSCC came with an expectation of an expanded role for the new GEC and a corresponding increase in funding. FY2016 GEC funding was approximately $16 million, jumping to an estimated $32 million by the end of FY2017. The State Department has requested to maintain GEC at the same funding level in FY2018. Section 1287 authorizes another increase in GEC funding, albeit through designating new transfer authority to the Secretary of Defense: pursuant to the provision, if the GEC receives less than $80 million in direct funding in FY2017 or FY2018, the Secretary of Defense is authorized to transfer up to $60 million to fund the GEC in each of those two fiscal years. GEC funding increases could be considerable, therefore, but such increases do not seem to be mandated per se by the authorization in Section 1287. Current GEC Funding Issue Recent news articles have reported that the State Department has not used all available funding for the GEC in FY2017, including a reported $19.8 million in State Department accounts, and that the Secretary of State has not requested transfer of Defense Department funds authorized under Section 1287. Observers cited in these reports have questioned whether the GEC continues to have support of State Department leadership or can effectively carry out its mandate, and whether organizational inefficiency or shifts in U.S. policy are behind these funding decisions. Senators Rob Portman and Chris Murphy, sponsors of the GEC legislation in the FY2017 NDAA, among other Members of Congress, have criticized the GEC funding situation, stating that GEC capabilities and effectiveness are harmed by the continued lack of funding. State Department officials have countered that reviews of various organizations, activities, and policies within the department are ongoing, with the goal of ensuring that resources are being used effectively, and that the delays in utilization of GEC funding can be attributed to such review.

Aug 4, 2017

The Energy Savings and Industrial Competitiveness Act: S. 385 and H.R. 1443

Energy efficiency—providing the same or an improved level of service with less energy—has been of interest to some Members of Congress. Proponents of increased energy efficiency see an untapped “resource” that can mitigate the demand for additional energy supplies. Perceived benefits of energy efficiency include lowered energy bills, reduced demand for energy, improved energy security and independence, and reduced air pollution and greenhouse gas emissions. Challenges to energy efficiency include market barriers that do not incentivize builders or developers to invest in energy efficiency, customers’ lack of information or awareness of energy saving opportunities and investment returns, and policy barriers that focus on energy supply rather than investment in energy efficiency. S. 385—the Energy Savings and Industrial Competitiveness Act—and its House companion bill, H.R. 1443, address energy efficiency in buildings, industry, and federal agencies, and various regulatory measures. Energy savings through increased efficiency can be significant. Estimates by the Department of Energy (DOE) and the National Academies of achievable energy savings using available cost-effective technologies are about 20% for the buildings sector and range from 14% to 22% for the industrial sector. Combined, these sectors consume 72% of all U.S. primary energy. Further savings can be realized through efforts to improve energy efficiency across the federal government, which is the single largest energy consumer in the United States. The Congressional Budget Office (CBO) estimated that S. 385 would increase direct federal spending by $17 million between 2017 and 2027. Enacting the bill would not affect revenues. CBO estimated that implementing the legislation would cost the government $198 million over the next five years, assuming appropriations actions that fulfill all provisions of the legislation. Supporters of S. 385/H.R. 1443 state that the bills can improve competitiveness, save consumers money, and increase energy security while reducing air pollution and greenhouse gas emissions. Provisions identified as potentially controversial include directing DOE to establish aggregate energy saving targets for commercial and residential buildings, determining cost-effectiveness of conservation measures over the lifetime of the building, and removing the requirement to eliminate fossil fuel use by federal buildings. S. 385 was reported without amendment by the Senate Committee on Energy and Natural Resources (SENR) on May 10, 2017. H.R. 1443 was referred in the House on March 9, 2017, to the following committees: Energy and Commerce; Budget; Financial Services; Science, Space, and Technology; Transportation and Infrastructure; and Oversight and Government Reform. On June 28, 2017, S. 1460, the Energy and Natural Resources Act of 2017, was introduced. Title I of the bill addresses energy efficiency and includes many provisions related to S. 385/H.R. 1443. A comparison of the provisions identified several differences between S. 1460 and S. 385/H.R. 1443 that may be of interest to Congress.

Aug 4, 2017

Farm Bill Primer: Disaster Assistance Programs

Aug 4, 2017

Executive Branch Reorganization

The federal bureaucracy of the present day is the product of more than two centuries of legislative and administrative actions by successive generations of elected and appointed officials. As such, the diverse organizations and processes of the federal government are a consequence of the influence and decisions of thousands of officials with differing viewpoints about the role of government and diverse policy preferences. The federal bureaucracy’s organizational arrangements are also reflective of ongoing competition between Congress and the President to influence the behavior of agencies. With its size, complexity, and idiosyncratic history, the federal bureaucracy is sometimes perceived as immutable. Notwithstanding this perception, federal organizational structures and processes are under continual congressional and administrative study and alteration in response to changing contexts and priorities. The term reorganization may be defined to encompass the intended alterations in the purpose, functions, procedures, assignments, and relationships within and among organizations. It involves more than just structural rearrangement of organizational units and personnel, and it can occur within agencies as well as among two or more agencies. Government reorganizations can also entail changes in interagency processes or the distribution of resources and functions among agencies. The government organizations that are the focus of this report are those that exercise significant federal legal authority. Primary constitutional responsibility for the structural organization of the executive branch of the federal government, as well as the creation of the principal components of that branch, rests with Congress. Congress also has delimited the operations of the executive departments, agencies, and other governmental entities through specifications of both government-wide and agency-specific processes. Key tools that Congress uses to shape the contours of the federal government include authorizing legislation, appropriations legislation, and oversight. The President has often played a leadership role in reorganization of the executive branch by transmitting proposals and advocating legislative action in public statements and private negotiations. Presidents and their appointed agency heads also have a variety of administrative tools at their disposal for making structural and procedural organizational changes that are not in conflict with statutes. In addition to the tools just mentioned, each of the three major governing actors discussed in this report—Congress, the President, and agency heads—has tried to address the challenge of coordination across organizational boundaries by establishing interagency coordinative mechanisms of one kind or another. These are often used in an effort to establish cooperation among agencies with shared missions, similar functions, or overlapping jurisdiction. Some arrangements provide for collaboration among equals, while others designate a lead agency with authority to direct activities. This report discusses some tools available to Congress, the President, and agency leaders, respectively, for initiation and implementation of executive branch reorganization. It also discusses the interagency coordinative mechanisms that are sometimes used by each of these actors to bridge interorganizational gaps. The report concludes with general observations regarding federal reorganization efforts.

Aug 3, 2017

North Korean Cyber Capabilities: In Brief

As North Korea has accelerated its missile and nuclear programs in spite of international sanctions, Congress and the Trump Administration have elevated North Korea to a top U.S. foreign policy priority. Legislation such as the North Korea Sanctions and Policy Enhancement Act of 2016 (P.L. 114-122), and international sanctions imposed by the United Nations Security Council have focused on North Korea’s WMD and ballistic missile programs and human rights abuses. According to some experts, another threat is emerging from North Korea: an ambitious and well-resourced cyber program. North Korea’s cyberattacks have the potential not only to disrupt international commerce, but to direct resources to its clandestine weapons and delivery system programs, potentially enhancing its ability to evade international sanctions. As Congress addresses the multitude of threats emanating from North Korea, it may need to consider responses to the cyber aspect of North Korea’s repertoire. This would likely involve multiple committees, some of which operate in a classified setting. This report will provide a brief summary of what unclassified open-source reporting has revealed about the secretive program, introduce four case studies in which North Korean operators are suspected of having perpetrated malicious operations, and provide an overview of the international finance messaging service that these hackers may be exploiting. SWIFT Sony Bangladesh WannaCry

Aug 3, 2017

Countering America’s Adversaries Through Sanctions Act

Aug 2, 2017

Carbon Capture and Sequestration (CCS) in the United States

Carbon capture and sequestration (or storage)—known as CCS—is a process that involves capturing man-made carbon dioxide (CO2) at its source and storing it permanently underground. (CCS is sometimes referred to as CCUS—carbon capture, utilization, and storage.) CCS could reduce the amount of CO2—an important greenhouse gas—emitted to the atmosphere from the burning of fossil fuels at power plants and other large industrial facilities. Globally, two fossil-fueled power plants currently generate electricity and capture CO2 in large quantities: the Boundary Dam plant in Canada and the Petra Nova plant in Texas. Both plants retrofitted post-combustion capture technology to units of existing plants. A third fossil-fueled electricity-generating operation, the Kemper County Energy Facility in Mississippi, was scheduled to begin CCS operations by now, but cost overruns and delays in construction and operations led to the suspension of the plant’s CCS component on June 28, 2017. Each of the power plants using CCS systems may be referred to as a demonstration project, or a nearly first-of-its-kind venture using technologies developed at a pilot scale ramped up to commercial scale. Such projects move through many phases, from the initial research and development (R&D) phase through the final commercial deployment phase. It is not unusual for projects in the demonstration phase of this process to experience higher-than-anticipated costs, delays, and other challenges. Several other U.S. Department of Energy (DOE)-supported demonstration projects, such as FutureGen, the AEP Mountaineer project, and the Hydrogen Energy California Project, among others, faced challenges that led to their cancellation or suspension. Given the mixed success of large CCS projects in the United States, the economic viability of, and the commercial interest in, such projects remains uncertain. The U.S. Department of Energy has long supported R&D on CCS within its Fossil Energy Research and Development (FER&D) portfolio. The Trump Administration proposed to cut FER&D funding substantially in its FY2018 budget request. The Trump Administration’s proposal differs from the policy trends of the previous two Administrations, which supported R&D on CCS and emphasized the development of large-scale demonstration projects to evaluate how CCS might be deployed commercially. Some in Congress have signaled continued support for DOE’s R&D efforts with respect to CCS. The House Energy and Water Development appropriations draft legislation would support CCS R&D at a level comparable to that in FY2017, for example ($635 million versus $668 enacted for FY2017). The Senate version of the bill would fund FER&D at $573 million in FY2018, $95 million less than FY2017 but $293 million more than the Administration request. In addition, some Members of Congress have continued to introduce legislation in the 115th Congress intended to advance CCS. These bills include H.R. 2010, H.R. 2011, H.R. 2296, S. 843, S. 1068, and S. 1535. The Obama Administration commissioned a CCS task force, which concluded in 2010 that the largest barrier to long-term demonstration and deployment of CCS technology is the absence of a federal policy to reduce greenhouse gas emissions. The task force further concluded that widespread deployment of CCS would occur only if the technology is commercially available at economically competitive prices. None of those factors appear to be in place currently, which may indicate that demonstration and deployment of industrial-scale CCS will be delayed compared to earlier projections, pending future policy, technological, and economic developments.

Jul 28, 2017

NAFTA and Motor Vehicle Trade

Motor vehicles and vehicle parts accounted for more than 20% of the total value of U.S. merchandise trade with Canada and Mexico in 2016, making them the largest category of manufactured products traded among the United States, Mexico, and Canada. Since the North American Free Trade Agreement (NAFTA) took effect in January 1994, the vehicle supply chain has become fully integrated, with parts manufacturing and assembly in all three countries. On May 18, 2017, the Trump Administration notified Congress of its intent to renegotiate NAFTA. In consequence, the 115th Congress will likely address numerous issues related to NAFTA and the North American motor vehicle industry. NAFTA has contributed to a large increase in trade in vehicles and auto parts within North America. Since 1994, Mexico has grown to become a major location for vehicle and parts manufacturing, while production in the United States and Canada has remained fairly steady, except during recessions. In addition to NAFTA trade liberalization commitments, growth of the Mexican vehicle industry was assisted by unilateral Mexican measures that removed restrictive trade and investment barriers, as well as Mexico’s lower labor costs, the government’s investment in training engineers and technicians to operate and manage motor vehicle plants, and numerous free trade agreements that give Mexican vehicles and parts tariff-free access to countries where U.S. exports face a tariff. In 2016, the United States had a motor vehicle trade deficit with both NAFTA partners, a deficit in vehicle parts trade with Mexico, and a surplus in vehicle parts trade with Canada. A topic in the renegotiation of NAFTA may be rules of origin, which determine which products qualify for the benefits of the agreement. NAFTA requires that 62.5% of a vehicle’s net cost and 60% of the cost of parts originate in the NAFTA region in order for those products to have duty-free access to the United States. This is the highest such requirement for motor vehicles of any U.S. trade agreement. In general, vehicle and parts manufacturers support retaining the current rules of origin, whereas the United Auto Workers union seeks to require a higher percentage of regional content, which it believes would reduce the share of parts produced in non-NAFTA countries. The Trump Administration announced its negotiating objectives for NAFTA renegotiation on July 17, 2017, but it has not enumerated negotiating objectives specific to the automotive industry. However, some of its stated goals are consistent with recommendations of auto industry and union representatives, including updating customs procedures, promoting greater regulatory compatibility within the NAFTA region, improving intellectual property protection, improving labor and environmental provisions, and deterring currency manipulation.

Jul 28, 2017

Ongoing Section 232 Steel and Aluminum Investigations

The Department of Commerce is currently conducting two investigations to determine the national security implications of U.S. imports of steel and aluminum under Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. § 1862, as amended). Section 232, sometimes called the "national security clause," provides the President with the ability to impose restrictions on imports, such as tariffs or quotas, if the Secretary of Commerce, in consultation with the Department of Defense and other government officials, determines such imports threaten to impair the national security of the United States. The Commerce Department has 270 days from the initiation date to prepare a report and recommendations. The President then has 90 days to accept the findings and determine what actions, if any, to take. There are diverse views on the investigations among steel and aluminum producers, manufacturers that use steel and aluminum as inputs into their final products, and other stakeholders. To date, the Commerce Department has held public hearings on the steel and aluminum investigations, Members of Congress have raised the issue with U.S. Trade Representative (USTR) Robert Lighthizer, including during House Ways and Means and Senate Finance committee hearings, and Commerce Department officials privately have briefed each of the committees. Steel Industry Stakeholder Views Steel industry stakeholders along the supply chain are not united in support or in opposition to the ongoing investigation, as demonstrated by testimony at the Commerce Department hearing. U.S. steel producers and the Congressional Steel Caucus support the 232 investigation and measures to further limit imports. Industry representatives voice concern about the low utilization rate and recent closure of U.S. steelmaking plants and related employment losses. On the other hand, steel purchasers, including manufacturers who use domestic and foreign steel as inputs into their products (e.g., auto makers and builders), along with certain downstream industry representatives, oppose new restrictions on imports, warning that such actions could increase manufacturing and consumer costs, put jobs at risk, and lead to potential retaliation by U.S. trading partners. Other sectors of the U.S. economy dependent on the global steel supply chain include ports that handle imports and exports. For example, in testimony, the Port of New Orleans noted that 45% of imported cargo and 35% of cargo-related related revenue is from imported steel shipments. Additionally, other industries, such as agriculture, may face higher transportation costs for their own goods to reach the port downriver if fewer barges are moving imported steel upriver. Aluminum Industry Stakeholder Views Aluminum stakeholders are similarly mixed in their view of the 232 investigation as to the national security risk and need for potential remedies as demonstrated by a recent survey of international supply chain representatives. At the Commerce Department hearing, the Aluminum Association, representing aluminum producers, and some companies voiced support for the investigation. However, they advocated a targeted response, such as a negotiated agreement with China. The Congressional Aluminum Caucus Members support U.S. action to restrict aluminum imports, whereas other Members favor a more directed response or exemptions for certain segments, such as rolled-can sheets used for food and beverage products. According to a June U.S. International Trade Commission report, competitiveness of the U.S. industry varies across segments and, globally, the production costs are affected by government policies. Selected Policy Implications The Section 232 investigations and potential actions raise multiple policy issues. These include: Global overcapacity. Global overcapacity in steel and aluminum is at the root of many industry concerns. Fostered by government policies, China is the world’s leading manufacturer of steel and aluminum, and its excess capacity has driven down global prices. While the Trump Administration raised the overcapacity issue during the recent meeting of the U.S.-China Comprehensive Economic Dialogue, no agreement was reached. The G-20 reached an agreement that aimed to resolve the issue multilaterally through the OECD Global Forum on Steel Excess Capacity. The Forum’s report with specific policy recommendations is due in November. Separately, as both Mexico and Canada are top U.S. steel suppliers, the United States may raise the issue during negotiations with Mexico and Canada to update the North American Free Trade Agreement (NAFTA), in addition to working through the North American Steel Trade Committee (NASTC), which has identified potential impediments to intra-NAFTA steel trade. Consistency with World Trade Organization (WTO) commitments. Questions have been raised about whether trade restrictive action under Section 232 would be consistent with U.S. WTO obligations. U.S. trading partners could challenge potential U.S. action under WTO dispute settlement, as China stated it would do. If challenged, the United States may very likely invoke Article XXI of the General Agreement on Tariffs and Trade (GATT), which allows WTO members to take measures in order to protect "essential security interests." Whether actions to protect a specific industry constitute an essential security interest is subject to debate. While some state that the national security definition should include defense and critical infrastructure needs, others warn that U.S. actions could create a slippery slope as to what products are considered to have "national security" implications. For example, some have raised concerns that countries may increase tariffs on agricultural products in the name of food security. Retaliation by U.S. trading partners. Some observers, including former chairs of the President’s Council of Economic Advisers, note the possibility of trade retaliation by affected trading partners. The president of the European Commission, for example, has indicated that the European Union (EU) is prepared to impose counter-measures to U.S. potential actions, which could possibly lead to increased tariffs or other barriers on certain U.S. exports. Scope and impact of U.S. actions. Should the President act to restrict imports, the scope and impact on domestic constituencies and U.S. allies is unclear. On the one hand, domestic producers may see higher prices for their goods, but costs may rise for consumers and manufacturers using steel inputs. The President has discretion to exclude specific product categories, countries, or provide other exemptions from any import restrictions. Some U.S. allies, such as Canada and Australia, have asked to be exempt from any potential action. Implementation. Should the President impose tariffs or quota under Section 232, Commerce, USTR, and U.S. Customs and Border Protection would oversee implementation and enforcement. One question is whether the agencies have the necessary resources to effectively administer the 232 trade enforcement action or to defend challenges to it.

Jul 28, 2017

U.S. Petroleum Trade with Venezuela: Financial and Economic Considerations Associated with Possible Sanctions

The political crisis in Venezuela is at a pivotal point (See CRS Report R44841, Venezuela: Background and U.S. Policy). President Nicolas Maduro is convening elections on July 30 for delegates to a constituent assembly to rewrite the country’s constitution and possibly dismantle the legislative branch. On July 17, 2017, President Donald Trump issued a statement that declared that “the United States will take strong and swift economic actions” if the assembly elections occur. Those actions reportedly could include sanctions on Venezuela’s energy sector, which generates 95% of its export earnings. While there are humanitarian and political risks of implementing sanctions on Venezuela, this insight explores economic considerations of potential petroleum sector sanctions. Background Venezuela is in a political, economic, and social crisis. Since March 2017, President Maduro has quashed ongoing protests. His constituent assembly process is moving forward despite opposition from Venezuela’s attorney general and international condemnation. In an unofficial plebiscite on July 16, 2017, 98% of 7.2 million Venezuelans who voted opposed the assembly. The United States has taken various actions to pressure the Maduro regime not to take undemocratic actions to stay in power. Those have included: speaking out against abuses of power; providing democracy and human rights aid for civil society; and sanctioning officials for drug trafficking, human rights abuses, and undemocratic actions. In both chambers of Congress, resolutions have been introduced to express concerns over the situation in Venezuela. The Senate passed (S.Res. 35) and the House Foreign Affairs Committee has ordered to be reported (H.Res. 259) separate resolutions urging U.S. and multilateral actions to hasten a return to democracy in Venezuela. U.S.-Venezuela Petroleum Trade Petroleum trade between the United States and Venezuela is dominated by imports of heavy Venezuelan crude oil to U.S. refineries (Figure 1), mostly to the Gulf Coast. In 2016 U.S. refineries imported 741,000 barrels per day (bpd) of Venezuelan crude oil. U.S. importers also purchased 55,000 bpd of Venezuelan petroleum products. U.S. exports to Venezuela consisted of 75,000 bpd of petroleum products. According to the U.S. Energy Information Administration (EIA), the United States did not export crude oil directly to Venezuela in 2016. However, 30,000 bpd of light crude oil was exported to Curacao where the Venezuelan national oil company Petroleos de Venezuela, S.A. (PDVSA) owns a refinery and oil storage facility. U.S. light oil exported to Curacao is reportedly used as a diluent for blending with Venezuelan heavy crude oil. Figure 1. U.S. and Venezuela Petroleum Trade / Source: CRS, data from the Energy Information Administration. Financial and Economic Considerations Associated with Possible Sanctions The structure and framework of possible petroleum-related sanctions will determine related financial and economic impacts. While details have not been disclosed, the relatively large volume of U.S. crude oil imports from Venezuela results in this element of the trade relationship having the greatest impact potential. Generally—assuming such targeted sanctions take effect—Venezuela export revenues as well as operating profits for some U.S. refiners would likely be impacted. The magnitude of these effects would be a function of the sanctions timing and application. Immediate prohibition of U.S. imports would likely result in a short-term shock to the oil supply chain, resulting in heavy crude oil price escalation for U.S. refiners. Venezuela heavy crude oil prices would decline. These price effects would eventually be resolved to some degree through changes to transportation routes, likely resulting in a less-than-optimal, and possibly more costly, oil transportation system. Venezuela heavy crudes typically bound for the United States would need to secure alternative purchasers, likely further away in Asia. Lower prices would likely be needed in order to attract new buyers and Venezuela may have to discount their crude oil to levels that at least compensate for potentially higher shipping costs (approximately $1 to $3 per barrel above current shipping options, depending on the vessel type used). Additional crude oil quality discounts may also be necessary. Price discounts would be absorbed by PDVSA and export revenues would decrease accordingly. Availability of heavy crudes for U.S. refiners would decrease and prices for such crudes would, all else being equal, increase. Heavy crude oil prices would likely rise to levels that would attract crude barrels from alternative suppliers that may be geographically further away (e.g., Saudi Arabia). Over time, once transportation systems adjust, heavy crude oil prices should reflect any transportation cost inefficiencies that might result from possible sanctions as well as crude oil quality considerations. Downward price pressure associated with Venezuelan barrels moving to non-U.S. markets would partially offset transportation and quality premiums. To the extent that transportation inefficiencies and quality differences are reflected in petroleum product prices, sanctions-related oil price premiums would likely be absorbed by consumers. The impact to U.S. refiners is a consideration associated with prohibiting Venezuelan oil imports. Table 1 shows the companies that purchased Venezuelan crude oil and the states where oil was delivered during the month of April 2017. Table 1. Crude Oil Imports from Venezuela by Company and State, April 2017 Thousand Barrels Mississippi Louisiana Texas Delaware Total Percentage Chevron 3,108 3,108 13% Citgo (see notes) 3,998 2,568 6,566 27% Houston Refining 575 575 2% Marathon 1,096 1,096 5% Motiva 1,023 1,023 4% Paulsboro 2,414 499 2,913 12% Phillips 66 3,042 3,042 12% Valero 2,753 3,278 6,031 25% Total 3,108 10,261 10,486 499 24,354 100% Percentage 13% 42% 43% 2% 100% Source: Energy Information Administration, Company Level Imports, with data for April 2017, available at https://www.eia.gov/petroleum/imports/companylevel/, accessed July 23, 2017. Notes: Citgo is majority-owned by Venezuelan national oil company PDVSA. Russian oil company Rosneft holds 49.9% of Citgo as loan collateral. Other refiners purchase Venezuelan crude throughout the year, most located in the Gulf Coast. As indicated, 98% of Venezuelan crude imports were delivered to the Gulf Coast and five companies purchased 89% of Venezuelan crude. However, all U.S. refiners that utilize heavy crudes would likely experience price impacts. The American Fuel and Petrochemical Manufacturers (AFPM)—an organization of U.S. refiners—published a letter opposing sanctions that might prohibit Venezuelan crude oil imports.

Jul 27, 2017

Provisions of Obamacare Repeal Reconciliation Act of 2017 (ORRA)

Per the reconciliation instructions in the budget resolution for FY2017 (S.Con.Res. 3), the House passed its reconciliation bill, H.R. 1628—the American Health Care Act (AHCA)—with amendments on May 4, 2017. The House bill was received in the Senate on June 7, 2017, and the next day the Senate majority leader had it placed on the calendar, making it available for floor consideration. The Senate Budget Committee published on its website a “discussion draft” titled, “The Better Care Reconciliation Act of 2017” (BCRA) on June 22, 2017, and subsequently updated the discussion draft on June 26, July 13, and July 20. The Senate’s draft legislation is written in the form of an amendment in the nature of a substitute, meaning that it is intended to be considered by the Senate as an amendment to H.R. 1628, as passed by the House, and that all of the House-passed language would be stricken and the language of the BCRA would be inserted in its place. On July 19, 2017, the Senate Budget Committee posted the “Obamacare Repeal Reconciliation Act of 2017” (ORRA) on its website as another draft reconciliation bill. ORRA is largely based off the Restoring Americans’ Healthcare Freedom Reconciliation Act of 2015 (H.R. 3762), which was vetoed by President Obama on January 8, 2016, and returned to the House. ORRA would repeal several provisions of the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended), and it could restrict federal funding for the Planned Parenthood Federation of America (PPFA) and its affiliates and clinics for a period of one year. The bill also would appropriate (1) an additional $422 million for FY2017 to the Community Health Center Fund and (2) $750 million for each of FY2018 and FY2019 to award grants to states to address the substance abuse public health crisis or respond to urgent mental health needs. The Congressional Budget Office and the Joint Committee on Taxation estimate that ORRA would reduce federal deficits by $473 billion from FY2017 through FY2026, and they estimate that 17 million more people would be uninsured under ORRA than under current law in FY2018, with that figure growing to 32 million in CY2026. A number of the provisions in ORRA are also in the AHCA and/or BCRA. However, ORRA does not include the AHCA or BCRA provisions that would substitute the ACA’s premium tax credit for premium tax credits with different eligibility rules and calculation requirements. ORRA also does not include the AHCA or BCRA provisions that would establish new programs and requirements that are not related to the ACA, for example, a new fund to provide funding to states for specified activities intended to improve access to health insurance and health care or provisions to convert Medicaid financing to a per capita cap model (i.e., per enrollee limits on federal payments to states) with a block grant option (i.e., a predetermined fixed amount of federal funding) for certain populations. This report provides summaries of each ORRA provision.

Jul 24, 2017

Base Erosion and Profit Shifting (BEPS): OECD Tax Proposals

Taxes collected by countries around the world can be reduced through various avoidance mechanisms that shift corporate profits out of higher-tax-rate jurisdictions into lower-tax-rate jurisdictions and through other mechanisms that reduce taxes on interest, dividends, and royalties. The Organization for Economic Cooperation and Development (OECD) has been engaged in a project to reduce such base erosion and profit shifting (BEPS) in which firms use tax-avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low- or no-tax locations. In October 2015, the OECD published its final list of 15 BEPS action items. The OECD framework was endorsed by the G-20 Finance Ministers in February 2016. All OECD and G-20 countries agreed to implement four minimum BEPS standards: Action 5, countering harmful tax practices (mostly aimed at patent boxes); Action 6, preventing treaty abuse (largely about arranging payments to flow through countries with treaties that reduce withholding taxes on dividends and other passive payments); Action 13, country-by-country (CbC) reporting; and Action 14, increasing the effectiveness of dispute resolution. These action items have led to limited changes to U.S. companies because of either a lack of relevance (no patent box regime exists in the United States) or existing practices, although CbC reporting requires additional information from U.S. multinationals. Although implementation of some items can be done through regulation, others would require legislation or treaty amendments, which must be approved by the Senate. Other than the four agreed-upon standards, the remaining proposals are not specific recommendations because there was no agreement among the countries. Action Item 1 contains an extensive discussion of the digital economy, but its proposals relate only to the value added tax (VAT), which the United States does not have. Action Items 2-4 and 7-10 relate to profit shifting by multinational firms via a variety of mechanisms, including locating interest deductions in high-tax countries or through transfer prices of the sales of goods and services between related corporations. The United States has generally adopted few changes, although present practices in many aspects already embody the standards. One instance in which U.S. rules appear at variance with OECD proposals are check-the-box rules, which create hybrid entities with, for example, interest deducted in one country but not taxed in another. The OECD standards for transfer prices stress that the allocation of income should reflect functions, assets, and risks that are controlled and assumed, rather than contractual arrangements. Cost-sharing arrangements commonly used in the United States, which allow foreign subsidiaries to provide financing for research in the United States in exchange for a share of profits, is also an area in which U.S. practice appears inconsistent with BEPS proposals. The Government Accountability Office (GAO), in a study of the transfer-pricing issues, while indicating that a move from contract to content would reduce profit shifting, argued that risk could not be transferred between related firms in the same way as between unrelated firms. The United States and other countries would benefit by gaining revenues from reductions in base erosion and profit shifting which, according to Action Item 11 on measuring and monitoring BEPS, costs between 4% and 10% of global corporate tax revenues. There have, however, been concerns that the United States risks losing some revenue and companies paying additional taxes if other countries inappropriately increase their taxation of U.S. firms, eventually generating foreign-tax credits that offset U.S. income tax. These effects might occur through changes in the definition of permanent establishment and through the use of CbC data to move to an effective formula-based approach to taxation, which could produce double taxation. At the same time, a uniform set of standards and reporting requirements may be beneficial, as many countries were proceeding to enact unilateral changes and reporting requirements prior to the OECD project. Concerns have also been expressed by firms regarding confidentiality and compliance costs of CbC reporting. The United States has opted for bilateral agreements to share CbC data in part to help ensure confidentiality.

Jul 24, 2017

Bureau of Reclamation: FY2017 Appropriations

Jul 24, 2017

Amended Sugar Agreements Recast U.S.-Mexico Trade

Jul 21, 2017

Legislative Branch: FY2018 Appropriations

The legislative branch appropriations bill provides funding for the Senate; House of Representatives; Joint Items; Capitol Police; Office of Compliance; Congressional Budget Office (CBO); Architect of the Capitol (AOC); Library of Congress (LOC), including the Congressional Research Service (CRS); Government Publishing Office (GPO); Government Accountability Office (GAO); Open World Leadership Center; and the John C. Stennis Center. The FY2018 legislative branch budget request of $4.865 billion was submitted on May 23, 2017. In general, FY2018 legislative branch budget requests were developed and submitted to the Office of Management and Budget (OMB) prior to the enactment of FY2017 funding. By law, the President includes the legislative branch request in the annual budget submission without change. The House and Senate Appropriations Committees’ Legislative Branch Subcommittees held hearings in May and June to consider the FY2018 legislative branch requests. On June 23, 2016, the House Appropriations Committee Legislative Branch Subcommittee held a markup of the draft bill. The bill was ordered reported to the full committee by voice vote. On June 29, the House Appropriations Committee held a markup of the bill. Four amendments were considered: two were adopted, one was not adopted, and one was withdrawn. The bill was ordered reported by voice vote. It would provide $3.580 billion, not including Senate items (H.R. 3162, H.Rept. 115-199). On July 18, 2017, the text of H.R. 3162 was included in a print issued by the House Rules Committee entitled, “Text of the Defense, Military Construction, Veterans Affairs, Legislative Branch, and Energy And Water Development National Security Appropriations Act, 2018” (Committee Print 115-30, which also contains the text ofH.R. 3219, H.R. 2998, and H.R. 3266). When compared to FY2010, which was the peak of legislative branch funding, the FY2017 level of $4.440 billion has decreased 4.9% when not adjusted for inflation and 14.9% when adjusted for inflation. The FY2017 level was an increase of $77.0 million (+1.7%) from FY2016. The FY2016 level of $4.363 billion represented an increase of $63 million (+1.5%) from the FY2015 level of $4.300 billion, and the FY2015 level represented an increase of $41.7 million (+1.0%) from the FY2014 funding level of $4.259 billion. The FY2013 act funded legislative branch accounts at the FY2012 enacted level, with some exceptions (also known as “anomalies”), less across-the-board rescissions that applied to all appropriations in the act, and not including sequestration reductions implemented on March 1. The FY2012 level of $4.307 billion represented a decrease of $236.9 million (-5.2%) from the FY2011 level, which itself represented a $125.1 million decrease (-2.7%) from FY2010. The smallest of the appropriations bills, the legislative branch comprises approximately 0.4% of total discretionary budget authority.

Jul 20, 2017

Accounting and Auditing Regulatory Structure: U.S. and International

Accounting and auditing standards in the United States are promulgated and regulated by various federal, state, and self-regulatory organizations (SROs). Accounting and auditing standards are also influenced by practitioners from businesses, nonprofits, and government entities. Congress has allowed financial accounting and auditing practitioners to remain largely self-regulated while retaining oversight responsibility. At certain times, Congress has sought to achieve specific accounting- and auditing-based policy objectives by enacting legislation such as the Sarbanes-Oxley Act of 2002 (SOX; P.L. 107-204) and the Federal Credit Reform Act of 1990 (FCRA; P.L. 101-508). The informational needs of stakeholders differ between the different sectors of the economy—the private sector, the federal government, and state and local governments. As a consequence, different accounting and auditing standards have evolved in these sectors. In the private sector, financial statements communicate to stakeholders how the company used its resources to generate profit and expand its business, or how the company incurred loss and the chances the business will survive over the long run. In comparison, public-sector entities such as the federal, state, and local governments issue reports to communicate how tax revenues were used to benefit citizens. State and local governments have standards distinct from those of the federal government. As such, accounting and auditing standards can be classified into three areas: (1) private industry standards, (2) federal government standards, and (3) state and local government standards. The accounting and auditing standards created for publicly traded companies are subject to the Securities and Exchange Commission’s (SEC’s) oversight. Congress has oversight over the SEC and annually appropriates its funding. Throughout its history, the SEC has relied on SROs to establish financial reporting standards for the private sector; these are known as Generally Accepted Accounting Principles (GAAP). Currently, the SEC recognizes the Financial Accounting Standards Board (FASB) as the designated authority for establishing GAAP. SOX created the Public Company Accounting Oversight Board (PCAOB) to oversee the auditing profession for the private sector. The SEC has oversight responsibility over FASB and PCAOB. The Federal Accounting Standards Advisory Board (FASAB) was created to establish the financial reporting and accounting standards for the federal government. The Government Accountability Office (GAO) has responsibility for establishing auditing standards for federal government agencies, including federal grant recipients in state and local governments. A counterpart to FASAB for state and local governments is the Government Accounting Standards Board (GASB). Many of the underlying principles between FASAB and GASB are the same, but each state or territory is allowed to choose whether it follows GASB standards in full or modifies the standards to fit local needs. Auditing standards vary by state and local governments. Two policy issues might be of particular interest to Congress and investors. The first is the relationship between accounting and auditing standards in the United States and in other countries. In particular, there is debate over whether or to what degree international accounting and auditing standards should influence U.S. GAAP and U.S. Generally Accepted Auditing Standards (U.S. GAAS), respectively. The second is to what degree business risk should be evaluated based on sustainability issues. Increasingly, investors expect firms to respond to environmental, social, and governance (ESG) issues. The Sustainability Accounting Standards Board (SASB) has created a series of provisional standards for the private sector. SASB is an independent organization that is not recognized by Congress or the SEC as an official standard-setting body.

Jul 19, 2017

Energy and Water Development: FY2018 Appropriations

The Energy and Water Development appropriations bill provides funding for civil works projects of the Army Corps of Engineers (Corps); the Department of the Interior’s Bureau of Reclamation (Reclamation) and Central Utah Project (CUP); the Department of Energy (DOE); the Nuclear Regulatory Commission (NRC); and several other independent agencies. DOE typically accounts for about 80% of the bill’s total funding. President Trump submitted his FY2018 budget proposal to Congress on May 23, 2017. The budget requests for agencies included in the Energy and Water Development appropriations bill total $34.189 billion (including offsets)—$4.261 billion (11.1%) below the FY2017 level. The largest proposed increase would go toward DOE nuclear weapons activities, up by $994 million (10.7%). The House Appropriations Committee approved its version of the FY2018 Energy and Water Development appropriations bill with a manager’s amendment by voice vote on July 12, 2017, with total funding of $37.64 billion without scorekeeping adjustments—$809 million below FY2017 and $3.45 billion above the Administration request (H.R. 3266, H.Rept. 115-230). On July 18, 2017, the House Rules Committee released the amendment process for H.R. 3219, the Department of Defense Appropriations Act, 2018; amendments are to be drafted to a version of the bill that contains the language of four FY2018 appropriations bills including H.R. 3266. The Senate Appropriations Subcommittee on Energy and Water Development approved its version of the Energy and Water Development Appropriations bill by voice vote on July 18, 2017, with total funding of $38.4 billion. Major Energy and Water Development funding issues for FY2018 include Water Agency Funding Reductions. The Trump Administration requested reductions of 17.2% for the Corps and 14.3% for Reclamation for FY2018. Those cuts were largely rejected by the House Appropriations Committee and the Senate Appropriations Subcommittee. Termination of Energy Efficiency Grants. DOE’s Weatherization Assistance Program and State Energy Program would be terminated under the FY2018 budget request. The House committee voted to continue those programs at the FY2017 funding level. The Senate subcommittee also voted to continue those programs. Cuts in Energy R&D. Under the FY2018 budget request, appropriations for DOE research and development on energy efficiency and renewable energy (EERE), nuclear energy, and fossil energy would be cut by a total of 53.7%. The House panel approved most of the reductions in EERE R&D (54.4% from FY2017 enacted) but largely rejected the proposed nuclear and fossil energy reductions (4.7% and 5.0%, respectively). The Senate subcommittee largely rejected reductions in EERE approving funding at $153 million below FY2017 enacted level (7.3% reduction). Nuclear Waste Repository. The Administration’s budget request would provide new funding for the first time since FY2010 for a proposed nuclear waste repository at Yucca Mountain, NV. DOE would receive $110 million to seek an NRC license for the repository, and NRC would receive $30 million to consider DOE’s application. DOE would receive $10 million to develop interim nuclear waste storage facilities. The House panel approved the request. Elimination of Advanced Research Projects Agency—Energy (ARPA-E). The Trump Administration proposes to eliminate funds for new research projects by ARPA-E, and terminate the program after currently funded projects are completed. The ARPA-E termination was approved by the House committee. The Senate subcommittee rejected the termination and approved an increase in funding for ARPA-E above the FY2017 enacted level. Plutonium Disposition Plant Termination. Construction of the Mixed-Oxide Fuel Fabrication Facility (MFFF), which would make fuel for nuclear reactors out of surplus weapons plutonium, would be terminated under the Trump Administration request. The Obama Administration had recommended termination since FY2015, but Congress has voted to continue construction. For FY2018, the House committee also voted to continue construction.

Jul 19, 2017

FY2018 Appropriations for Department of Justice Grant Programs

Each year, Congress provides funding for a variety of grant programs through the Department of Justice (DOJ). These programs are used to fund state, local, and tribal governments and nonprofit organizations for a variety of criminal justice-related purposes, such as efforts to combat violence against women, reduce backlogs of DNA evidence, support community policing, assist crime victims, promote prisoner reentry, and improve the functioning of the juvenile justice system. Congress funds these programs through five accounts in the annual Commerce, Justice, Science, and Related Agencies (CJS) appropriations act: Violence Against Women Programs; Research, Evaluation, and Statistics; State and Local Law Enforcement Assistance; Juvenile Justice Programs; and Community Oriented Policing Services. For FY2018, the Trump Administration requests a total of $1.979 billion for the five DOJ grant accounts. This amount includes a total of $610.0 million in transfers from the Crime Victims Fund to three accounts: $445.0 million to Violence Against Women Programs, $73.0 million to State and Local Law Enforcement Assistance, and $92.0 million to Juvenile Justice Programs. President Trump’s budget would eliminate funding for some programs, such as the State Criminal Alien Assistance Program (-$210.0 million), the Byrne Criminal Justice Innovation program (-$17.5 million), and anti-methamphetamine (-$7.5 million) and anti-heroin (-$10.0 million) task forces. The budget request also includes reductions to several programs, including the Edward Byrne Memorial Justice Assistance Grant (JAG) program (-$70.5 million), grants for juvenile mentoring programs (-$22.0 million), and the Comprehensive School Safety Initiative (-$30.0 million). However, the Administration requests increased funding for two programs to combat violent crime: an additional $63.5 million for Project Safe Neighborhoods and $5.0 million for a new program, the National Crime Reduction Assistance Network.

Jul 18, 2017

History of the ESEA Title I-A Formulas

The Elementary and Secondary Education Act (ESEA) is the primary source of federal aid to K-12 education. The ESEA was last reauthorized by the Every Student Succeeds Act (ESSA; P.L. 114-95) in 2015. The Title I-A program has always been the largest grant program authorized under the ESEA. Title I-A grants provide supplementary educational and related services to low-achieving and other students attending elementary and secondary schools with relatively high concentrations of students from low-income families. The U.S. Department of Education (ED) determines Title I-A grants to local educational agencies (LEAs) based on four separate funding formulas: Basic Grants, Concentration Grants, Targeted Grants, and Education Finance Incentive Grants (EFIG). The current four formula strategy has evolved over time, beginning with the Basic Grant formula when the ESEA was originally enacted in 1965. The Concentration Grant formula was added in the 1970s in an attempt to provide additional funding for LEAs with high concentrations of poverty. During consideration of ESEA reauthorization in the early 1990s, there was an attempt by the Senate to replace the two existing formulas with a new formula (Education Finance Incentive Grant (EFIG) formula) that would better target Title I-A funds to concentrations of poverty. A compromise on a single new formula was not reached; nor was there agreement on eliminating the existing formulas or only adding one of the new formulas created by the House (Targeted Grant formula) and the Senate (EFIG formula). As a result, funds are allocated through four formulas under current law. This report begins with an overview of key policy issues and underlying tensions that have factored into the evolution of the Title I-A formulas. These include issues related to the selection of poverty measures and identification of formula children, determination of the role state expenditures on public K-12 education would play in allocations, the use of state minimum grant and LEA hold harmless provisions, determination of the relative emphasis to place on percentages versus counts of formula children when targeting Title I-A funds on areas with high concentrations of poverty, and the tradeoff between transparency and complexity with respect to the formulas. The report then traces the evolution of the Title I-A formulas and identifies the reasons offered for changes to them, as expressed in committee reports, floor debates, and to a limited extent, congressional hearings. The report concludes with three appendices. Appendix A provides historical appropriations data for the Title I-A formulas dating back to FY1980. Appendix B provides a summary of major changes that have been made to the factors that comprise each of the four Title I-A formulas that are currently authorized from their initial enactment through the ESSA. Appendix C provides a list of selected acronyms used in this report.

Jul 17, 2017

Human Rights in China and U.S. Policy: Issues for the 115th Congress

This report examines human rights conditions in the People’s Republic of China (PRC) and policy options for Congress. The PRC government under the leadership of Chinese Communist Party General Secretary and State President Xi Jinping has implemented a clampdown on political dissent, civil society, human rights activists and lawyers, and the religious, cultural, and linguistic practices of Tibetans and Uyghurs. Other major human rights violations in China include the practice of incommunicado detention, torture of persons in custody, censorship of the Internet, and restrictions on the freedoms of religion, association, and assembly. The era of Hu Jintao, Xi’s predecessor, who was China’s leader from 2002 to 2012, was marked by serious human rights abuses, but also by an emerging civil society of nongovernmental organizations and advocacy groups, a growing number of human rights activists and lawyers, and the rise of limited investigative reporting and public discourse on social media platforms. Despite moving forward with some policies aimed at reducing rights abuses and making the government more transparent and responsive, Xi has implemented new laws that appear to strengthen the role of the Communist Party and the state over a wide range of social and civil society activities in the name of national security, and instated greater government controls over the media and the Internet. Since July 2015, over 250 human rights lawyers and activists have been temporarily detained, arrested, sentenced to prison terms, or placed under heavy surveillance in what is known as the “7-09 Crackdown.” Human rights conditions in the PRC long have been a central issue in U.S.-China ties. According to some analysts, the Trump Administration has indicated a partial departure from the Obama Administration’s approach toward human rights in China, which some analysts say suggests less emphasis on human rights in U.S. dealings with Beijing. The issue of human rights is not among the “four pillars” of the new U.S.-China Comprehensive Dialogue that was established during discussions between President Trump and President Xi at Mar-a-Lago in April 2017. In a speech to State Department employees in May 2017, Secretary of State Rex Tillerson stated that “guiding all of our foreign policy actions are our fundamental values: our values around freedom, human dignity, the way people are treated.” He also said, “If we condition too heavily that others must adopt this value that we’ve come to over a long history of our own, it really creates obstacles to our ability to advance our national security interests, our economic interests.” Congress and successive Administrations have developed an array of means for promoting human rights and democracy in China, often deployed simultaneously. Policy tools include open censure of China; quiet diplomacy; congressional hearings and legislation; funding for rule of law and civil society programs in the PRC; support for dissidents and prodemocracy groups in China and the United States; sanctions; bilateral dialogue; Internet freedom efforts; public diplomacy; and coordinating international pressure. Another high-profile policy practice is the U.S. government issuance of congressionally mandated country reports, including reports on human rights, religious freedom, and trafficking in persons. Many experts and policymakers have sharply disagreed over the best policy approaches and methods to apply toward human rights issues in China. Possible approaches range from supporting incremental progress and promoting human rights through bilateral and international engagement, to conditioning the further development of bilateral ties on improvements in human rights in China. Some approaches attempt to balance U.S. values and human rights concerns with other U.S. interests in the bilateral relationship. Other approaches challenge the underlying assumption that U.S. human rights values and policies may involve trade-offs with other U.S. interests, arguing instead that human rights are fundamental to other U.S. objectives. For additional information, including policy recommendations, see CRS Report R41007, Understanding China’s Political System; the Congressional-Executive Commission on China’s Annual Report 2016; the U.S. Department of State’s Country Reports on Human Rights Practices for 2016; and other resources cited in the report.

Jul 17, 2017

The Proposed EU-Japan FTA and Implications for U.S. Trade Policy

On July 6, 2017, ahead of the G-20 annual summit, the European Union (EU) and Japan announced reaching an agreement “in principle” on a bilateral free trade agreement (FTA), following 18 rounds of negotiations over four years. The EU and Japan aim for entry-into-force (EIF) of the agreement in early 2019. Considerable uncertainty surrounds the agreement, however, as some commitments remain under negotiation and current United Kingdom (UK) negotiations over withdrawal from the EU (“Brexit”) further complicate the path forward. (The European Commission negotiates FTAs on behalf of the EU and its member states, under the EU’s common external trade policy.) The two partners characterized the proposed FTA as strategically significant and as a strong message of support for trade liberalization. Though average tariffs are already relatively low in both countries, the agreement, which eliminates most tariffs and establishes common trade rules and disciplines on a number of issues, could be economically and strategically consequential. The two partners account for nearly 30% of global production, are home to many of the world’s largest companies in key industries, and include more than 630 million consumers (Figure 1). Some analysts downplay the significance of the agreement due to uncertainty over its final content and the extent to which it would affect trade and investment outcomes in each party. The proposed FTA could place U.S. companies at a competitive disadvantage in two major markets and affect U.S. ability to shape international trade norms. Figure 1. EU, Japan, and U.S. Demographics / Source: International Monetary Fund (IMF) World Economic Outlook, April 2017; and WTO Tariff Profiles. Notes: Applied MFN tariffs are the most-favored-nation tariffs that each WTO member applies on imports from other WTO members. MFN tariffs currently apply to trade between the EU, Japan, and the United States. Agreement Contents Market access. The proposed agreement would commit the two partners to eliminate nearly all tariffs between them, most upon EIF, with tariffs on more sensitive items, including autos and many agricultural products, phased out over time. Once fully implemented, 99% of EU and 97% of Japanese tariff lines would be eliminated. Some observers have called the agreement a “cars for cheese” deal, as key commitments in economically significant sectors include the EU’s elimination of its 10% tariff on passenger motor vehicle imports, and Japan’s removal of restrictions on imports of dairy, cheese, and other agricultural products. The agreement also would liberalize several services sectors, cover temporary movement of business personnel, and increase public procurement access, including railways, between the parties. Regulatory cooperation. The two partners provisionally agree to strengthen regulatory cooperation and address technical barriers to trade (TBT), such as by using the same international standards for motor vehicle product safety, and using a framework for developing sector-specific mutual recognition agreements (MRAs). The parties also commit to addressing sanitary and phytosanitary standards (SPS) barriers to agriculture trade, but reserve as domestic policy choices treatment of hormones and genetically modified organisms (GMOs). Rules. The agreement would build on WTO intellectual property rights (IPR) commitments, including trade secret protection; require Japan to protect over 200 EU geographical indications (GIs) on foodstuffs, wines, and spirits, a top EU commercial interest and longstanding concern of the United States; and establish rules regarding labor, the environment, and state-owned enterprises. Some rules remain under negotiation, including treatment of investment disputes. The EU favors its Investment Court System proposal, while Japan reportedly favors existing investor-state dispute settlement (ISDS) frameworks, similar to U.S. FTAs. Other issues are expected to be excluded entirely, such as whaling and illegal logging, to some environmental groups’ dismay, as well as substantive commitments on cross-border data flows, sensitive issues in the EU. U.S. Trade Policy Implications The implications of the proposed EU-Japan FTA may influence Congress’ oversight of, and legislation on, U.S. trade policy. The agreement demonstrates that some major economies aim to continue with trade liberalization and rules-setting, despite shifts in U.S. trade policy under President Trump’s “America First” approach, which has increasingly focused on “unfair” trading practices related to U.S. domestic import competition and review of past U.S. FTAs such as NAFTA. It also raises the questions of whether the United States will play a leading or reactive role in future international trade agreement negotiations and the associated costs and benefits of either approach. U.S. trade agreement negotiations. Favoring bilateral over multi-country FTAs, the President withdrew the United States from the Trans-Pacific Partnership (TPP) and is reviewing the status of the now-paused Transatlantic Trade and Investment Partnership (T-TIP) FTA negotiations. If the EU-Japan FTA becomes effective, it could hasten U.S. interest in resuming the T-TIP negotiations and pursuing a bilateral FTA with Japan to ensure U.S. firms’ competitiveness in these markets. Many argue that the 2010 completion of the EU-South Korea FTA similarly spurred U.S. ratification of its own FTA with South Korea in 2011. U.S. commercial implications. An EU-Japan FTA could increase the relative price of U.S. goods and services exports to both the EU and Japan, lowering their competitiveness in key U.S. markets (Figure 2). The impact on U.S. firms would vary by product, with intensively traded products and those with the highest preference margin (the spread between MFN tariff levels and preferential (lower) rates under the FTA) the most affected. In addition, the agreement would provide lower cost access to intermediate goods in both the EU and Japan, which could have longer term effects on supply chains and multinational firms’ decisions on production locations. Figure 2. U.S., EU, and Japanese Goods Trade / Source: IMF Direction of Trade Statistics. Note: Data reported by exporting country. Strategic Implications/Rule-writing. The Obama Administration cast TPP and T-TIP as an opportunity to lead in setting global trade rules with like-minded trading partners. With the U.S. withdrawal from TPP and the stalled T-TIP negotiations, the EU-Japan FTA, which includes two of the world’s four largest exporters and importers and largest U.S. trading partners (Table 1), presents strategic questions regarding U.S. ability to shape international trade norms. For example, on regulatory issues, an EU-Japan FTA could make the EU’s precautionary principle approach more dominant than the U.S. risk-based approach. Many U.S. businesses oppose the EU push to expand GI protections, viewing it as a constraint on using generic food names. The absence of data flow commitments in the agreement contrasts the U.S. approach to data provisions in the TPP, which many stakeholders in the United States continue to support. The EU’s Investment Court System also differs from ISDS; while the subject of contentious debate in the United States, ISDS has been the system historically favored by the U.S. government for resolving investor-state disputes. Table 1. Top World Exporters and Importers (billions of dollars) World Merchandise Trade World Commercial Services trade Exports (share) Imports (share) Exports (share) Imports (share) China 2,275 (17%) U.S. 2,308 (17%) EU-28 915 (25%) EU-28 732 (20%) EU-28 1,985 (15%) EU-28 1,914 (14%) U.S. 690 (19%) U.S. 469 (13%) U.S. 1,505 (12%) China 1,682 (13%) China 285 (8%) China 466 (13%) Japan 625 (5%) Japan 648 (5%) Japan 158 (4%) Japan 174 (5%) Source: WTO World Trade Statistical Review, 2016. Notes: Excludes intra-EU trade.

Jul 14, 2017

U.S. Role in the World: Background and Issues for Congress

The overall U.S. role in the world since the end of World War II in 1945 (i.e., over the past 70 years) is generally described as one of global leadership and significant engagement in international affairs. A key aim of that role has been to promote and defend the open international order that the United States, with the support of its allies, created in the years after World War II. In addition to promoting and defending the open international order, the overall U.S. role is generally described as having been one of promoting freedom, democracy, and human rights, while criticizing and resisting authoritarianism where possible, and opposing the emergence of regional hegemons in Eurasia or a spheres-of-influence world. Certain statements and actions from the Trump Administration have led to uncertainty about the Administration’s intentions regarding the future U.S. role in the world. Based on those statements and actions, some observers have speculated that the Trump Administration may want to change the U.S. role in one or more ways. A change in the overall U.S. role could have profound implications for U.S. foreign policy, national security, and international economic policy, for Congress as an institution, and for many federal policies and programs. A major dimension of the debate over the U.S. role is whether the United States should attempt to continue playing the active internationalist role that it has played for the past 70 years, or instead adopt a more restrained role that reduces U.S. involvement in world affairs. A second dimension concerns how to balance or combine the pursuit of narrowly defined U.S. interests with the goal of defending and promoting U.S. values such as democracy, freedom, and human rights. A third dimension relates to the balance between the use of so-called hard power (primarily but not exclusively military combat power) and soft power (including diplomacy, development assistance, support for international organizations, education and cultural exchanges, and the international popularity of elements of U.S. culture such as music, movies, television shows, and literature) in U.S. foreign policy. An initial potential issue for Congress is to determine whether the Trump Administration wants to change the U.S. role, and if so, in what ways. A follow-on potential issue for Congress—arguably the central policy issue for this CRS report—is whether there should be a change in the U.S. role, and if so, what that change should be, including whether a given proposed change would be feasible or practical, and what consequences may result. An initial aspect of this issue concerns Congress: what should be Congress’s role, relative to that of the executive branch, in considering whether the U.S. role in the world should change, and if so, what that change should be? The Constitution vests Congress with several powers that can bear on the U.S. role in the world. Another potential issue for Congress is whether a change in the U.S. role would have any implications for the preservation and use of congressional powers and prerogatives relating to foreign policy, national security, and international economic policy. A related issue is whether a change in the U.S. role would have any implications for congressional organization, capacity, and operations relating to foreign policy, national security, and international economic policy. Policy and program areas that could be affected, perhaps substantially or even profoundly, by a changed U.S. role include the role of allies and alliances in U.S. foreign policy; the organization of, and funding levels and foreign policy priorities for, the Department of State and U.S. foreign assistance; U.S. trade and international economic policy; defense strategy and budgets; and policies and programs related to homeland security, border security, immigration, and refugees.

Jul 12, 2017

Department of State, Foreign Operations, and Related Programs FY2018 Budget Request: In Brief

The 115th Congress is considering FY2018 funding levels for the Department of State, Foreign Operations, and Related Programs (SFOPS). President Donald J. Trump submitted his FY2018 budget request to Congress on May 23, 2017. The request seeks $40.25 billion (-30% compared with FY2017 enacted) for SFOPS, including Overseas Contingency Operations (OCO) funds. Of this total, $13.20 billion (-27% compared with FY2017 enacted) would be for the Department of State Operations and related programs. For Foreign Operations, the FY2018 request includes $27.05 billion (-31% compared with FY2017 enacted). The total OCO funds in the request amount to $12.02 billion (-42% below FY2017 enacted, including the FY2017 supplemental; excluding the supplemental, it would be -21%). OCO funds are important in the budget request since these funds do not count against the discretionary spending limits imposed by the Budget Control Act of 2011 (P.L. 112-25). Prominent issues in the SFOPS request include, among others, a reduction in annual appropriations for diplomatic security, contributions to international organizations and international peacekeeping, and educational and cultural exchange programs; a proposal to consolidate several bilateral foreign aid programs into one new account called the Economic Support and Development Fund (ESDF); proposed elimination of some foreign operations entities, such as the Trade and Development Agency and the Inter-American Foundation; and a 44% reduction in humanitarian assistance, including a zeroing out of the P.L. 480 (Food for Peace) foreign food aid program. The FY2018 appropriations for Defense (DOD) could affect SFOPS funding in FY2018 because of the discretionary spending limits set by the Budget Control Act of 2011 (P.L. 112-25). For FY2018, the caps are set at $549 billion for defense and $516 billion for nondefense (including SFOPS). Congress may seek to avert sequestration by amending or repealing the BCA, or passing a bipartisan budget agreement to raise OCO-designated funding for both DOD and SFOPS, as it did in FY2015. (For more detail on defense FY2018 budget issues, see CRS Report R44866, FY2018 Defense Budget Request: The Basics.) This report will be updated as congressional action on the foreign affairs budget occurs.

Jul 11, 2017

H.R. 23, the Gaining Responsibility on Water Act of 2017 (GROW Act)

In recent years, parts of the American West (i.e., the 17 states west of the Mississippi River) have been subject to prolonged drought conditions, including a severe drought in California that lasted from 2012 to 2016. Dating to the 112th Congress, several bills were proposed to address these conditions. The 114th Congress saw significant drought-related legislation enacted in the form of Subtitle J of the Water Resources Infrastructure Improvements for the Nation Act (WIIN Act; P.L. 114-322). The WIIN Act included a number of provisions generally related to the Bureau of Reclamation (or Reclamation, a bureau within the Department of the Interior), as well as several provisions specifically focusing on the operations of the Central Valley Project (CVP), a large federal water project in California. Some, but not all, of those provisions are scheduled to sunset after five years. Although by most metrics the drought in California has ended, debate continues regarding the possible detrimental effects of certain federal water supply-related authorities and the federal role in water resources development more broadly. Although some argue that rollback of existing environmental protections should be only a temporary measure taken during times of drought (if at all), others contend that the drought in California magnified an issue that needs to be addressed, regardless of hydrological conditions. In the 115th Congress, multiple proposals (including those that were previously proposed but were not enacted in the WIIN Act) have been consolidated in H.R. 23, the Gaining Responsibility on Water Act of 2017 (GROW Act). The House Rules Committee version of H.R. 23 included seven titles. Titles I-IV of the bill are for the most part specific to California and include directives for the operation of the CVP and amendments to the Central Valley Project Improvement Act (CVPIA; Title XXIV of P.L. 102-575) and the San Joaquin River Restoration Act (Title X of P.L. 111-11, the Omnibus Public Land Management Act of 2009), among other things. Titles V-VII would be West-wide in their application and would include changes related to water supply development on federal lands and Reclamation’s project-development process. These titles also would include restrictions on the federal government’s abilities to exercise reserved water rights. Supporters of the bill argue that these changes would provide more water to users from existing and new sources while safeguarding existing state water rights. Opponents believe that the bill goes too far in rolling back environmental protections, which, along with the effects of other parts of the legislation (e.g., potential new storage projects), could be detrimental to species and their habitat. Several of the bill’s titles have been considered and/or passed by the House in the 115th or prior congresses. Other titles are new or altered compared to language that has been considered previously. Based on past congressional debates, some provisions (in particular those that would make major changes to CVP operations and the San Joaquin River Restoration Settlement) may be controversial. In considering these provisions, Congress may consider the trade-offs involved in proposed changes. This report focuses on the most prominent provisions of H.R. 23. It provides relevant context and background for individual titles and sections, as well as a broad discussion of potential issues for Congress in considering this legislation.

Jul 11, 2017

Monument Proclamations Under Executive Order Review: Comparison of Selected Provisions

The Antiquities Act of 1906 (54 U.S.C. §§320301-320303) authorizes the President to proclaim national monuments on federal lands that contain “historic landmarks, historic and prehistoric structures, and other objects of historic or scientific interest.” The President is to reserve “the smallest area compatible with the proper care and management of the objects to be protected.” From 1906 to date, Presidents have established 157 monuments and have enlarged, diminished, or otherwise modified previously proclaimed monuments. Presidential establishment of monuments has sometimes been contentious, based on the size of the areas and types of resources protected; the effects of monument designation on land uses; and the lack of requirements for public participation, congressional and state approval, and environmental review, among other issues. On April 26, 2017, President Trump issued an executive order requiring the Secretary of the Interior to review national monuments established or expanded by presidential proclamation since 1996 that meet certain criteria. The review arises in the context of current controversy over the President’s monument authority and is to determine conformance of monument designation with a policy set out in the executive order. On May 5, 2017, the Department of the Interior (DOI) identified 27 national monuments that would be reviewed. One of the 27 monuments, Katahdin Woods and Waters National Monument, is under review based on the adequacy of public outreach and coordination with stakeholders in establishing the monument. The other 26 monuments are under review because the size at establishment or after expansion exceeded 100,000 acres. Of these 26 monuments, 5 are marine based and 21 are land based. The Secretary is to issue a final report on the review of monuments within 120 days of the issuance of the executive order—August 24, 2017. In his final report, the Secretary is to include recommendations for presidential actions, legislative proposals, or other actions. Congress has authority to alter the President’s authority to proclaim monuments and to establish, abolish, or amend monuments (including regulating uses of monument lands). To facilitate congressional decisionmaking and oversight of national monuments, including consideration of uses of monument lands, this report provides a compilation and summary of provisions of proclamations for the 21 land-based monuments with sizes exceeding 100,000 acres. It focuses on provisions related to six topics important in the debate on national monuments: energy, livestock grazing, use of motorized and non-motorized mechanized vehicles, timber, hunting and fishing, and tribes. These provisions are summarized to provide an overview of their emphasis and variation, and the verbatim text of the pertinent provisions is provided in six separate tables. An analysis of monument proclamations in the context of other authorities would be necessary to determine the extent to which activities are authorized on particular lands and the effect (if any) on changes in land management on the ground. The proclamations for the 21 national monuments generally bar new mineral and geothermal leases, mining claims, and prospecting or exploration activities, subject to valid existing rights. For all but one of the 21 monuments—Sand to Snow—the proclamations address livestock grazing. They typically express that legal authorities governing livestock grazing on agency lands also apply to lands within the monument. Most of the proclamations prohibit the use of motorized and non-motorized mechanized vehicles off-road except for emergency or administrative purposes. Only four of the monument proclamations address timber on monument lands, directly or possibly as part of language on vegetative management. The proclamations appear to recognize the primary authority of states to manage fish and wildlife, by generally specifying that the proclamations do not enlarge or diminish the jurisdiction of the relevant state with regard to fish and wildlife management. The proclamations for 14 of the 21 national monuments expressly state that they do not enlarge or diminish the rights of any Indian tribe.

Jul 11, 2017

Federal Research and Development Funding: FY2018

President Trump’s budget request for FY2018 includes $117.697 billion for research and development (R&D). This represents a $30.605 billion (20.6%) decrease from the FY2016 actual level of $148.302 billion (FY2017 enacted levels were not available at the time of publication). Adjusted for inflation, the President’s FY2018 R&D request represents a constant dollar decrease of 23.6% from the FY2016 actual level. However, in 2016 the Office of Management and Budget changed the definition used for “development” to “experimental development.” This new definition was used in calculating R&D in the FY2018 budget but no adjustments were made to data reported for FY2016 or FY2017 data to reflect the new definition. OMB asserts that the definitional change results in the exclusion of $33.547 billion from FY2018 requested R&D funding (DOD and NASA) that would have been included in previous years. According to OMB, these funds are being requested in the FY2018 budget, but no longer classified as R&D. Thus, applying the prior definition for R&D, aggregate federal R&D in the Trump Administration’s budget for FY2018 would represent a $2.942 billion (2.0%) increase over FY2016; in constant dollars, federal R&D would be down $2.837 billion or 1.9%. The DOD and VA would receive increased R&D funding for FY2018. The other major federal R&D funding agencies would see their R&D budgets reduced under the President’s budget. The request represents the President’s R&D priorities; Congress may opt to agree with none, part, or all of the request, and it may express different priorities through the appropriations process. In particular, Congress will play a central role in determining the allocation of the federal R&D investment in a period of intense pressure on discretionary spending. Budget caps may limit overall R&D funding and may require movement of resources across disciplines, programs, or agencies to address priorities. Funding for R&D is concentrated in a few departments and agencies. Under President Trump’s FY2018 budget request, eight federal agencies would receive 96.5% of total federal R&D funding, with the Department of Defense (45.4%) and the Department of Health and Human Services (22.2%) combined accounting for more than two-thirds of all federal R&D funding. President’s Trump’s FY2018 budget is largely silent on funding levels for a number of multiagency R&D initiatives in President Obama’s FY2017 request, including the National Nanotechnology Initiative, Networking and Information Technology Research and Development program, U.S. Global Change Research Program, Brain Research through Advancing Innovative Neurotechnologies (BRAIN) initiative, Precision Medicine Initiative, Cancer Moonshot, Materials Genome Initiative, National Robotics Initiative, and National Network for Manufacturing Innovation. However, some activities supporting these initiatives are discussed in agency budget justifications and reported in the agency analyses in this report. In recent years, Congress has completed the annual appropriations process after the start of the fiscal year. Failure to complete the process by the start of the fiscal year and the accompanying use of continuing resolutions can affect agencies’ execution of their R&D budgets, including the delay or cancellation of planned R&D activities and the acquisition of R&D-related equipment.

Jul 10, 2017

S. 1460: A New Energy and Resources Bill for the 115th Congress

On June 28, Senators Murkowski and Cantwell (Chair and Ranking Member, respectively, of the Energy and Natural Resources Committee) introduced S. 1460, the Energy and Natural Resources Act of 2017. The next day, the bill was read a second time and placed on the Senate calendar. S. 1460 has many similarities, but also significant differences, with the Senate-passed version of S. 2012, the comprehensive energy and natural resources bill in the 114th Congress (see CRS Report R44291, Energy Legislation: Comparison of Selected Provisions in S. 2012 as Passed by the House and Senate, by Brent D. Yacobucci). Although both the House and Senate each passed a version of S. 2012, the Conference Committee on the bill was unable to reach an agreement on reconciled language. The new bill has two divisions, Division A—Energy, and Division B—Natural Resources. Related and Incorporated Bills S. 1460 contains a majority of the provisions from the Senate version of S. 2012 (S. 2012 ES), and also includes language from a broad range of more targeted bills in the 115th Congress. These include: S. 239, the Energy Savings Through Public-Private Partnerships Act of 2017; S. 245, the Indian Tribal Energy Development and Self-Determination Act Amendments of 2017 S. 385, the Energy Savings and Industrial Competitiveness Act; S. 698, the National Landslide Preparedness Act; S. 714, the Yakima River Basin Water Enhancement Project Phase III Act of 2017; S. 733, the Sportsmen’s Act; S. 857, the African American Civil Rights Network Act; and S. 1225, the Vehicle Innovation Act of 2017. Energy Division A is divided into four titles: Title I—Efficiency; Title II—Infrastructure; Title III—Supply; and Title IV—Accountability. These four titles largely mirror the structure of last year’s bill, although there are some key differences between S. 1460 and S. 2012. For example, S. 1460 maintains provisions on energy efficiency for sectors such as buildings, transportation, schools, and manufacturing, while provisions related to standards for furnaces, commercial refrigeration systems, and air conditioning units are not included. S. 1460 maintains provisions to expedite liquefied natural gas (LNG) exports and provision on coal research and development. Other changes include modifications to provisions on R&D in nuclear energy, solar power, high-energy physics, and electrical energy storage. The bill contains similar provisions on energy markets, critical minerals development, and helium supply. Natural Resources Division B is divided into seven titles: Title V—Conservation Authorizations; Title VI—Land Conveyances and Related Matters; Title VII—National Park System Management, Studies, and Related Matters; Title VIII—Sportsmen’s Access and Related Matters; Title IX—Water Infrastructure and Related Matters; Title X—Natural Hazards; and Title XI—Indian Energy. Most notably, while S. 2012 as passed by the Senate contained an entire title reauthorizing EPA’s Brownfields Program, S. 1460 contains no similar language. Also, the new bill does not carry over provisions on western water, drought, and fish habitat conservation; these provisions were largely included in P.L. 114-322, which was enacted in the previous Congress. S. 1460 contains a new title on natural hazards, establishing a volcano early warning system and a landslide hazard reduction program (Title X). Title XI, on Indian Energy, is substantially similar to last year’s bill, as are provisions in Title V (Conservation Authorizations) on the National Park Service Maintenance and Conservation Fund, the Land and Water Conservation Fund (LWCF), and the Historic Preservation Fund. Title VIII, on sportsmen’s access, is largely similar except that S. 1460 adds a new section on permission to carry firearms at Army Corps of Engineers projects. Title VI on land conveyances, designations, and withdrawals contains many different provisions from S. 2012 ES—including provisions on Cow Creek Umpqua land, Pascua Yaqui Tribe land, and Oregon coastal land. Additions in Title VII on the National Park System (NPS) include the establishment of an African American Civil Rights Network among relevant NPS units; and National Heritage Area designations for the Appalachian Forest (WV, MD), Maritime Washington (WA), Mountains to Sound Greenway (WA), Sacramento-San Joaquin Delta (CA), and Susquehanna (PA) National Heritage Areas.

Jul 10, 2017

Trade in Services Agreement (TiSA) Negotiations

Jul 7, 2017

Ecosystem Restoration of the Chesapeake Bay

Jul 5, 2017

North Korea’s Long-Range Missile Test

On July 4, 2017, North Korea tested a long-range ballistic missile that some observers characterized as having intercontinental range. If so, it represents reaching a milestone years earlier than many analysts predicted. The two-stage missile reportedly flew in a high trajectory for 37 minutes, demonstrating a theoretical range that could include Alaska. It is not known what payload was used, but the actual range using a nuclear warhead would likely be significantly shorter. Although North Korea has not proven the capability to miniaturize a nuclear warhead or develop a reentry vehicle that could survive reentering the atmosphere, the test represented an advance that could threaten the United States. The test was timed to coincide with the July 4th holiday, as well as to respond to last week’s summit between President Trump and South Korean President Moon Jae-in. President Trump’s tweets following the launch suggested that he would further pressure Beijing to rein in North Korea this week when he meets with China’s President Xi Jinping and Russia’s President Vladimir Putin at the Group of Twenty (G-20) summit. Since Trump took office, his policy on North Korea appears to have hardened, particularly following the release and subsequent death of Otto Wambier in June, a U.S. college student who had been held in North Korea for 17 months. Last week the Treasury Department announced actions to intensify pressure on North Korea, including sanctions against a Chinese shipping company and a Chinese bank accused of facilitating Pyongyang’s illicit activities. During his press conference with Moon, Trump called North Korea a “reckless and brutal regime” and indicated no willingness to engage in diplomacy with Pyongyang. Moon, elected in May, has advocated for a balance of pressure and engagement with North Korea, including pursuing more inter-Korean economic cooperation projects. However, immediately following the launch, the U.S. and South Korean militaries embarked on previously unscheduled military exercises that included firing precision-strike missiles that could target much of North Korea. These exercises could indicate convergence of Washington and Seoul’s approaches. Following the test, China and Russia issued a joint statement reiterating their past proposal for a “dual suspension:” the United States and South Korea halt military exercises in exchange for a freeze of North Korea’s nuclear weapons program. Many observers see that proposal as unlikely to move forward. With leaders scheduled to attend the G-20 summit, following an emergency meeting of the U.N. Security Council (UNSC), a stark diplomatic divide could develop with China and Russia on one side, and the United States, South Korea, and Japan on the other. North Korea’s advancing capabilities underscore the limitations of two decades of policy aimed at stopping the regime’s nuclear weapons and missile programs. Unilateral U.S. economic sanctions, imposed since the end of the Korean War in 1953, and incrementally increasing sanctions imposed by the UNSC since 2006 have failed to halt Pyongyang’s military drive. The regime also appears to be undeterred despite the threat—both explicit and unspoken—of a possible military strike. Multiple rounds of diplomacy in years past—mostly through the Six-Party Talks among the United States, China, South Korea, North Korea, Japan, and Russia—also have broken down. Going Forward Observers are discussing redoubled efforts for diplomatic engagement, increased economic pressure, or military intervention. Most of these options have been explored in varying degrees after North Korea’s previous provocations. Diplomatic Engagement An effort to coordinate diplomacy may involve restarting the Six-Party Talks and drawing Pyongyang back to negotiations. An alternative could be direct bilateral talks with North Korea: Trump has appeared open to the idea, saying he would “honored” to meet with North Korean dictator Kim Jong-un “under the right circumstances.” Convening powers in the region to entice North Korea into a deal would necessitate more policy coordination with allies. This could prove difficult for the United States as U.S. ambassadorships to Japan and South Korea remain vacant, and the President has yet to nominate a permanent Assistant Secretary of State for East Asia and Pacific Affairs. Increased Pressure Secretary of State Tillerson has called for “global action” to stop North Korea’s threat, specifically citing countries that host overseas North Korean workers or fail to implement UNSC sanctions. China—North Korea’s primary trade partner—is often singled out for its ineffectual enforcement. U.N. member states could improve implementation by imposing economic restrictions on individuals, entities, and networks for sanctions violations identified by the U.N. Panel of Experts. Other “pressure” levers include a renewed emphasis on interdiction of illicit goods in commercial trade. Unilaterally, the United States could impose restrictions (“secondary sanctions”) on states—and their entities—that fail to fully implement UNSC sanctions. Existing legislation (e.g., P.L. 114-122) authorizes the President to impose restrictions on financial institutions suspected of facilitating illicit activity with North Korea, even if the bulk of an institution’s business with North Korea is legal trade. H.R. 1644 (received in the Senate) could strengthen the President’s authority to impose secondary sanctions. Military Options In the past, the United States has opted not to use military strikes on North Korea due to the threat of a potentially devastating counterattack on South Korea or Japan, and the possibility of creating a humanitarian crisis. Some analysts predict that a strike could escalate into broader conflict and result in perhaps hundreds of thousands of civilian casualties in South Korea and on U.S. military bases. Such a conflict could at a minimum trigger upheaval in the region, may involve armed conflict with China, and could potentially spiral into nuclear warfare. Some offensive options fall short of direct military intervention: using cyber tools to sabotage North Korea’s missile tests; upgrading U.S. intelligence resources to clarify North Korea’s capabilities and weaknesses; or increasing the flow of information into the country to spread awareness of the regime’s abuses. Some analysts have urged Congress to consider approaches to destabilize the regime, while others have counseled against it, in part because the United States may be unprepared or unwilling to engage in remedying the consequences of a possible government collapse.

Jul 5, 2017

Comparison of the American Health Care Act (AHCA) and the Better Care Reconciliation Act (BCRA)

Per the reconciliation instructions in the budget resolution for FY2017 (S.Con.Res. 3), the House passed its reconciliation bill, H.R. 1628—the American Health Care Act (AHCA)—with amendments on May 4, 2017. The House bill was received in the Senate on June 7, 2017, and the next day the Senate majority leader had it placed on the calendar, making it available for floor consideration. The Senate Budget Committee published on its website a “discussion draft” titled, “The Better Care Reconciliation Act of 2017” (BCRA) on June 22 and subsequently updated the discussion draft on June 26. The Senate’s draft legislation is written in the form of an amendment in the nature of a substitute, meaning that it is intended to be considered by the Senate as an amendment to H.R. 1628, as passed by the House, but that all of the House-passed language would be stricken and the language of the BCRA would be inserted in its place. Both the AHCA and the BCRA would repeal or modify provisions of the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended). For example, both would substitute the ACA’s premium tax credit for premium tax credits with different eligibility rules and calculation requirements, and both would effectively eliminate the ACA’s individual and employer mandates. Both the AHCA and the BCRA also would make a number of changes to the Medicaid program. They would repeal some parts of the ACA related to Medicaid, such as the changes the ACA made to presumptive eligibility and the state option to provide Medicaid coverage to non-elderly individuals with income above 133% of the federal poverty level (FPL). They also would amend the enhanced matching rates for the ACA Medicaid expansion and the ACA Medicaid disproportionate share hospital (DSH) allotment reductions. In addition, both the AHCA and the BCRA include new programs and requirements that are not related to the ACA. For example, under each, a new fund would be created to provide funding to states for specified activities intended to improve access to health insurance and health care in the state. The most significant Medicaid-related new provisions in the AHCA and the BCRA would convert Medicaid financing to a per capita cap model (i.e., per enrollee limits on federal payments to states) starting in FY2020 with a block grant option for states. Both also include a provision that would permit states to require nondisabled, non-elderly, non-pregnant adults to satisfy a work requirement to receive Medicaid coverage. The AHCA and the BCRA both contain provisions that could restrict federal funding for the Planned Parenthood Federation of America (PPFA) and its affiliated clinics for a period of one year, and each would appropriate an additional $422 million for FY2017 to the Community Health Center Fund. Both would repeal all funding for the ACA-established Prevention and Public Health Fund (PPHF), and both would repeal many of the new taxes and fees established under the ACA. Although the AHCA and the BCRA share many provisions, the BCRA strikes some AHCA provisions and adds some new provisions. For example, the BCRA does not include the AHCA’s provision that would repeal the requirement for private health insurance plans to meet a generosity level based on actuarial value. Furthermore, the BCRA would not allow states to apply for waivers from three federal requirements that apply to private health insurance issuers; instead, the BCRA would modify the current law state innovation waivers. In other examples, the BCRA strikes a Medicaid provision in the AHCA that would let states disenroll high-dollar lottery winners, and the BCRA adds a few new Medicaid provisions, including provisions providing states the option to cover certain inpatient psychiatric services for non-elderly adults and to establish Medicaid and State Children’s Health Insurance Program (CHIP) quality performance bonus payments. This report contains three tables that, together, provide an overview of AHCA provisions and BCRA provisions, as baselined against current law. Table 1 includes provisions that apply to the private health insurance market; Table 2 includes provisions that affect the Medicaid program; and Table 3 includes provisions related to public health, taxes, and implementation funding.

Jul 3, 2017

Department of Labor’s 2016 Fiduciary Rule: Background and Issues

Regulations issued in 1975 (called the 1975 rule in this report) defined investment advice using a five-part test. To be held to ERISA’s fiduciary standard with respect to his or her advice, an individual had to (1) make recommendations on investing in, purchasing, or selling securities or other property, or give advice as to the value (2) on a regular basis (3) pursuant to a mutual understanding that the advice (4) will serve as a primary basis for investment decisions, and (5) will be individualized to the particular needs of the plan regarding such matters as, among other things, investment policies or strategy, overall portfolio composition, or diversification of plan investments. On April 8, 2016, the Department of Labor (DOL) issued a final regulation (called the 2016 final rule in this report) that redefined the term investment advice within pension and retirement plans. Under the Employee Retirement Income Security Act of 1974 (ERISA; P.L. 93-406), a person who provides investment advice has a fiduciary obligation, which means that the person must provide the advice in the sole interest of plan participants. Thus, redefining the term investment advice could affect who is subject to this fiduciary standard. With the 2016 rule, DOL broadened the term’s definition to capture activities that currently occur within pension and retirement plans, but did not meet the 1975 definition of investment advice. The 2016 final rule replaced the five-part test of the 1975 rule with a more inclusive definition. (Table 1 compares the prior and current definitions.) For example, under the prior regulation, an individual had to provide advice on a regular basis to be a fiduciary, which generally would not have included recommendations on whether to roll over a 401(k) account balance to an Individual Retirement Account (IRA). The expanded definition removed the requirement that advice be given on a regular basis. Under the prior regulation, securities brokers and dealers who provided services to retirement plans and who were not fiduciaries were not required to act in the sole interests of plan participants. Rather, their recommendations had to meet a suitability standard, which requires that recommendations be suitable for the plan participant, given factors such as an individual’s income, risk tolerance, and investment objectives. The suitability standard is a lower standard than a fiduciary standard. Under DOL’s 2016 regulation, brokers and dealers are generally considered to be fiduciaries when they provide recommendations to participants in retirement plans. In addition to broadening the definition of investment advice, the rule provides carve-outs for situations that are not considered to be investment advice. For example, providing generalized investment or retirement education is not considered investment advice under the final rule. The 2016 final rule is accompanied by new prohibited transaction exemptions (PTEs) and amendments to existing PTEs. These allow fiduciaries to continue to engage in certain practices that would otherwise be prohibited (such as charging commissions for products they recommend or having revenue-sharing agreements with third parties). DOL first proposed broadening the definition of investment advice in October 2010. The proposed regulation generated much controversy and was withdrawn in September 2011. The revised proposals issued in April 2015 also generated considerable controversy. Following the release of the proposals, DOL received public comments and held three-and-a-half days of public hearings on the proposals. DOL issued the 2016 final rule on April 8, 2016, with an effective date June 7, 2016, and an applicability date of April 10, 2017. On February 3, 2017, President Trump issued a memorandum on the fiduciary rule that directed DOL to (1) review the rule to determine whether it adversely affects access to retirement information and financial advice, and if it finds that it does so then (2) publish a proposed rule to rescind or revise the rule. On March 2, 2017, DOL proposed delaying the rule’s applicability date by 60 days. On March 10, 2017, DOL issued a Temporary Enforcement Policy indicating it will not initiate enforcement actions against financial advisers or financial institutions that fail to satisfy the conditions of the rule or PTEs in the period between the applicability date and when DOL decides to either delay or not delay the applicability date of the 2016 final rule and PTEs. On April 7, 2017, DOL issued a 60-day delay of the 2016 final rule’s applicability date while it reviews the effects of the rule pursuant to the presidential memorandum of February 3, 2017. DOL delayed the applicability date by 60 days from April 10, 2017, to June 9, 2017, of (1) the expanded definition of investment advice and (2) the Impartial Conduct Standard of the Best Interest Contract (BIC) exemption. While these two aspects of the rule are currently in place, other aspects of the exemption, such as requirements to make specific disclosures and warrant policies and procedures and to execute written contracts are to become applicable on January 1, 2018.

Jul 3, 2017

Commerce, Justice, Science and Related Agencies (CJS) FY2018 Appropriations: Trade-Related Agencies

This report tracks and provides an overview of actions taken by the Administration and Congress to provide FY2018 appropriations for the International Trade Administration (ITA), the U.S. International Trade Commission (USITC), and the office of the United States Trade Representative (USTR). These three trade-related agencies are funded through the annual Commerce, Justice, Science, and Related Agencies (CJS) appropriations act. This report also provides an overview of three trade-related programs administered by ITA, USITC, and USTR. The Trump Administration requests a total of $62.3 billion for CJS for FY2018, a $4.1 billion (6.2%) reduction compared to the FY2017-enacted amount. For the three trade-related agencies for FY2018, the Administration requests a total of $587.7 million (0.9% of total CJS) for the three agencies. The request includes $442.5 million for ITA, $87.6 million for USITC, and $57.6 million for USTR, all of which would be less than the FY2017-enacted appropriations. The Consolidated Appropriations Act, 2017 (P.L. 115-31) provided a total of $636.5 million for the three agencies (1.0% of total CJS), including $483.0 million for ITA, $62.0 million for USITC, and $91.5 million for USTR.

Jun 30, 2017

The Federal Budget: Overview and Issues for FY2018 and Beyond

The federal budget is a central component of the congressional “power of the purse.” Each fiscal year, Congress and the President engage in a number of practices that influence short- and long-run revenue and expenditure trends. This report offers context for the current budget debate and tracks legislative events related to the federal budget. In recent years, policies enacted to decrease spending along with a stronger economy have led to reduced budget deficits. The Budget Control Act of 2011 (BCA; P.L. 112-25) implemented several measures intended to reduce the deficit from FY2012 through FY2021. The American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240), the Bipartisan Budget Act of 2013 (BBA 2013; P.L. 113-67), and the Bipartisan Budget Act of 2015 (BBA 2015; P.L. 114-74) increased the discretionary budget authority levels permitted under the BCA for FY2013 through FY2017. Various deficit reduction measures were included to offset the costs of the changes to spending levels in that legislation. The BCA will continue to affect spending limits in FY2018 and beyond, and Congress may debate enacting further modifications. The annual appropriations process, the statutory debt limit, and “tax extenders” each may draw congressional attention in FY2018. Additionally, Congress may choose to debate structural changes to the federal tax system, including reforms proposed by the House Committee on Ways and Means and the Trump Administration. Though federal budget deficits have stabilized in recent years, they remain well above their historical average. The Trump Administration released its FY2018 budget on May 23, 2017. Proposed policy changes in the budget included reductions in individual and corporate income tax rates, increases in discretionary defense spending, and large decreases in mandatory spending other than Social Security and Medicare (with the largest budgetary effects resulting from decreases in Medicaid spending) and in nondefense discretionary programs. Following passage of full-year FY2017 appropriations, Congress has turned its attention to the FY2018 budget. The Budget Committees in the House and Senate each develop a budget resolution as they receive information and testimony from a number of sources, including the Administration, the Congressional Budget Office, and congressional committees with jurisdiction over spending and revenues. Trends resulting from current federal fiscal policies are generally thought by economists to be unsustainable in the long term. Projections suggest that achieving a sustainable long-term trajectory for the federal budget would require deficit reduction. Reductions in deficits could be accomplished through revenue increases, spending reductions, or some combination of the two.

Jun 30, 2017

The Teaching Health Center Graduate Medical Education (THCGME) Program: Policy Considerations for Reauthorization

Teaching health centers (THCs) are outpatient facilities that receive federal funds directly to train medical and dental residents. These facilities are operated by federal health centers, rural health clinics, and tribal health programs, among others. THCs typically provide care to low-income and otherwise underserved populations and are generally located in federally designated health professional shortage areas (HPSAs). The federal government created the teaching health center graduate medical education program (THCGME) in 2010 to pay THCs for the expenses they incur when training residents. However, most residents receive the bulk of their training in teaching hospitals, not THCs. Such training is generally supported in the form of graduate medical education (GME) payments that are made by a number of government programs directly to hospitals based, with some limits, on the number of residents the hospital trains. Medicare is the largest source of GME support; it paid an estimated $11 billion in FY2013. A number of expert groups have criticized the hospital-focused nature of residency training, potentially favoring increased emphasis on THCs. Some have argued that health care is shifting to nonhospital settings and that hospital-focused training may not adequately prepare residents to provide outpatient care. Residencies in THCs may ready physicians for such a shift in health care. In addition, THCs may also train the types of residents that experts identify as most needed. Expert groups have found primary care shortages and particularly recommend increasing primary care training in underserved areas (often home to THCs). Past research has shown that medical residents are more likely to practice in areas near their residency training sites. Thus, some experts suggest that training residents at facilities within HPSAs—including THCs—could be a way to alleviate geographic shortages. Legislative History and Funding THCGME was created by the Patient Protection and Affordable Care Act (ACA, P.L. 111-148), and the first class of residents began their three-year training programs in 2011. The ACA provided a direct appropriation of $230 million for FY2011 through FY2015. It did not specify an annual breakdown. THCGME is administered by the Health Resources and Services Administration (HRSA), an agency within the Department of Health and Human Services (HHS). From 2011 through 2015, the number of THCGME training programs increased, as did the number of residents trained (see Table 1). The program supports residencies at THCs in 24 states. THCGME’s funding was extended for FY2016 and FY2017 in the Medicare and CHIP Reauthorization Act (MACRA, P.L. 114-10), which provided $60 million for each year. (The FY2017 amount was reduced to $55.9 million by the sequester.) With MACRA funds, HRSA continued its support of existing training programs but did not expand the program to new THCs. Table 1. Teaching Health Center Residents and Program Funding Academic Year Number of Residents (Full-Time Equivalents) Funded Total Number of Residents Trained Number of Residency Programs Funded Funding Source 2011-2012 63 N/A 11 ACAa 2012-2013 143 158 22 ACAa 2013-2014 327 361 44 ACAa 2014-2015 556 600 60 ACAa 2015-2016 660 758 60 MACRAb 2016-2017 N/A N/A 59c MACRAb 2017-2018 (proposed) 800c N/A 59c $60 million new proposed mandatory funding Source: CRS Analysis of Budget Documents from the Health Resources and Services Administration. Notes: Academic years=July 1-June 30; for example, the 2017-2018 academic year begins on July 1, 2017. N/A=not available. ACA provided $230 million for FY2011-FY2015. MACRA provided $60 million for FY2016-FY2017. The FY2017 amount was reduced to $55.9 million. Number anticipated in the FY2018 HRSA Budget Justification. Costs Per Resident When the THCGME began, there was uncertainty about the appropriate per-resident amount under the program. Such costs may differ from hospital-based training programs, because there may be higher training costs in small programs and in outpatient settings. HRSA initially estimated that it would pay $150,000 per resident. For context (within the hospital setting), Medicare estimates it paid $137,000 per resident in FY2013, and the Department of Veterans Affairs estimates it paid $146,000 per resident in FY2015. Recent research found that THCs spend between $145,000 per resident and $169,000 per resident. Some of this variation is because it is more expensive to start a new program than it is to add residents to an existing program. HRSA estimates that the overall per-resident cost for THCs is $157,602. Under MACRA, HRSA reduced its per-resident amount to $95,000 per resident so it could maintain the number of residents the program had supported under the ACA. HRSA was subsequently able to increase this amount for FY2017. No funding is currently expected for FY2018; as such, residents have been accepted to begin training in 2017, but uncertainty remains about recruitment efforts for future residents. Outcomes Associated with Teaching Health Centers Outcomes research associated with training in THCs is preliminary, as the first class completed training in 2014. Initial findings suggest that the program is meeting its stated goals. Specifically, more than 90% of the program’s recent graduates are practicing primary care, and 76% are doing so in a HPSA. Despite these reports, THCs are concerned about sustaining their programs because of the uncertainty of future federal funding. Policy Considerations Congress may face a number of policy questions with regard to THCGME, including the following: Should the program’s funding be extended? If funding is not extended, what, if any payments should be provided to fund current residents who are completing their training at a THC? If program funding is extended, is the program’s current size appropriate? If funding is extended, is the program’s current per-resident funding level appropriate? Is the current funding time frame appropriate? THC training is a minimum of three years and requires a recruitment year prior to training. The most recent extension in MACRA was for two years, the same extension time the Administration proposed in its FY2018 budget. Congress may consider a longer time frame because of the multiyear nature of GME. What is the role of THCGME in the context of the federal government’s full investment in GME? Is this program coordinated with other investments?

Jun 29, 2017

Oil and Natural Gas Pipelines: Role of the U.S. Army Corps of Engineers

Growth in North American crude oil and natural gas production has led to efforts to expand the domestic oil and natural gas pipeline network. Pipeline developers are required to obtain authorizations from the U.S. Army Corps of Engineers (Corps) before constructing certain pipeline segments. Under the agency’s regulatory program, the Corps is responsible for authorizing activities that may affect federally regulated waters and wetlands. Under its civil works program, the agency is responsible for approving activities that cross or may affect Corps-managed lands and Corps water resource projects. The agency’s role with respect to pipelines can be controversial and may raise policy issues for Congress. Congress has a long-standing interest in pipeline development and the regulation of pipelines because of the role of pipelines in the domestic energy markets. Corps Regulation of Water Crossings. The Corps has regulatory responsibilities pursuant to Section 404 of the Clean Water Act (33 U.S.C. §1344), under which the Corps authorizes activities that may discharge dredge or fill material into waters of the United States, including wetlands. The agency also has regulatory responsibilities pursuant to Section 10 of the Rivers and Harbors Act of 1899 (33 U.S.C. §403), under which the Corps authorizes structures and work in or affecting the course, condition, or capacity of navigable waters. Because most pipelines cross or potentially affect U.S. waters and wetlands somewhere along their routes, pipeline developers routinely are required to obtain Corps authorization for some pipeline segments. The Corps authorizes most pipeline water crossings using a general permit—Nationwide Permit 12—for utility-line activities in waters of the United States. A nationwide permit essentially preauthorizes a group of activities similar in nature that are likely to have a minor effect on waters and wetlands both individually and cumulatively. Approvals Related to Corps Land and Corps Projects. A pipeline developer may need permissions from the agency’s civil works program if a pipeline segment may affect or cross a Corps water resource project and Corps-managed land. That is, the Corps would need to grant (1) an easement, typically for a right-of-way, to cross federal land managed by the Corps or (2) a consent to cross non-Corps land with a Corps real estate interest (typically a federal flood easement over nonfederal land). Prior to the granting of the easement or consent, the Corps generally must provide permission for the pipeline to alter the associated Corps water resource project. The easement at a Corps project for the Dakota Access Pipeline to cross under the Missouri River in North Dakota was particularly controversial. Corps Actions Must Comply with Federal Statutes. In carrying out its regulatory and civil works authorities, the Corps complies with applicable federal requirements. For example, the Corps identifies and considers the environmental impacts of the agency’s proposed action (e.g., Corps permit of an activity affecting a wetland) pursuant to the National Environmental Policy Act (NEPA; 42 U.S.C. §§4321 et seq.) and considers impacts on historic properties pursuant to the National Historical Preservation Act (NHPA; 54 U.S.C. §306108). Policy Issues. Various questions arise in policy debates on Corps’ actions related to pipelines: How does the Corps determine the direct, indirect, and cumulative impacts of its decisions to authorize activities in regulated waters or Corps-managed lands? When the federal role in a pipeline is limited to approving activities at discrete segments, to what extent should federal agencies influence siting and other aspects of a pipeline? How does the use of Corps general permits affect the agency’s review, information available to stakeholders and the public, and compliance with NHPA? These questions reflect some of the basic debates and challenges that Congress and other policymakers face regarding federal approvals associated with private infrastructure.

Jun 28, 2017

The Advanced Nuclear Production Tax Credit

The advanced nuclear production tax credit (PTC) (Internal Revenue Code (IRC) Section 45J) provides a 1.8 cent per kilowatt hour (kWh) tax credit for electricity sold that was produced at qualifying facilities. Criteria for qualifying facilities include that they must use nuclear reactor designs approved by the Nuclear Regulatory Commission after 1993, and must be placed in service by the end of 2020. Qualifying facilities can claim tax credits during the first eight years of production. There are additional limitations associated with the provision. First, the credit is restricted to 6,000 megawatts (MW) of total electric generating capacity for all qualifying facilities nationwide, with the 6,000 MW allocated by the Internal Revenue Service (IRS). Second, taxpayers can claim no more than $125 million in tax credits per 1,000 MW of the allocated capacity in any single year. On June 20, 2017, the House passed H.R. 1551, a bill that would modify the credit for production from advanced nuclear power facilities. Specifically, the legislation proposes to (1) provide a reallocation for any unused portion of the 6,000 MW capacity limit; (2) eliminate the 2020 placed-in-service deadline for entities that have received an allocation of unused capacity; and (3) allow public entities to elect to forgo credits, allowing those credits to be transferred to project partners. If the 6,000 MW of capacity is reallocated, reallocations would first go to facilities placed in service before 2021, to the extent that such facilities did not receive an allocation equal to their full nameplate capacity. Any remaining unallocated capacity could then be allocated to facilities placed in service after January 1, 2021, in the order in which such facilities are placed in service. The Joint Committee on Taxation (JCT) has estimated that H.R. 1551 would reduce federal revenues by $16 million over the 2018 through 2027 budget window. Legislative History and Background The advanced nuclear PTC was enacted as part of the Energy Policy Act of 2005 (EPACT05; P.L. 109-58). The tax credit was one of several provisions in the act designed to support investment in new nuclear power plants. When the advanced nuclear PTC was enacted, it was estimated to cost $278 million over the 2005-2016 budget window. When enacted, however, most of the cost associated with this provision, costs in excess of $278 million, would have been expected to occur outside the budget window. Looking at the 10-year budget window upon enactment does not capture costs associated with production occurring after 2016. Current Tax Expenditure Estimates Both the JCT and Department of the Treasury provide tax expenditure estimates, or estimates of the forgone revenue, associated with provisions in the coming years. The JCT estimates the credit to be de minimis over the 2016-2020 budget window, meaning that the estimated amount of forgone revenue associated with the provision is less than $50 million over the five-year period. JCT tax expenditure estimates are not currently available beyond 2020. The Treasury’s tax expenditure estimates differ from the JCT, both in value and in the time period covered. The Treasury estimates that over the 2017-2026 budget window there will be $3.9 billion in forgone revenue, with revenue losses beginning in 2019. Development of advanced nuclear production capacity has been slower than was anticipated when EPACT05 was enacted. In 2005, when EPACT05 was enacted, the JCT had estimated that the provision would result in federal revenue losses beginning in 2013. However, current tax expenditure estimates from both the JCT and Treasury project essentially zero revenue losses through at least 2018. Industry Considerations Extension of the advanced nuclear PTC could be crucial for the completion of four new commercial advanced reactors currently under construction. The projects, Vogtle units 3 and 4 in Georgia and Summer 2 and 3 in South Carolina, are billions of dollars over budget and years behind schedule. Westinghouse Electric Company had been the lead contractor for the new units, but Westinghouse’s bankruptcy filing on March 29, 2017, placed the future of the projects in doubt. Construction has continued on an interim basis while the plants’ owners determine whether to complete them. The additional delays caused by the Westinghouse bankruptcy, if the owners decide to continue, are widely expected to push the completion of the new reactors beyond the 2020 deadline to qualify for the advanced nuclear PTC. H.R. 1551 would ensure that the four reactors, if completed, could receive the tax credit. Moreover, the bill would potentially increase the value of the credits to the projects by allowing public and nonprofit entities (such as municipal utilities and electric cooperatives) to transfer credits to other taxable entities or partners involved in the project. Policy Options As noted above, in the 115th Congress, the House has passed legislation that would modify the advanced nuclear PTC. The legislation being considered, H.R. 1551, would help ensure that existing allocations are used. The legislation does not, however, provide any additional allocations. Additional allocations could provide an incentive to invest in additional nuclear capacity, beyond what is already under construction. The Energy Information Administration (EIA) projects that retirements of nuclear capacity are expected to exceed capacity additions in the coming years, resulting in a reduction of U.S. nuclear generating capacity. The existing advanced nuclear PTC is not indexed for inflation. Indexing the credit for inflation (along with the per-reactor annual limit) is another option that could be considered. Should additional allocations be provided, indexing the credit for inflation could address erosion in the real value of the credit that happens over time. The renewable energy PTC (IRC Section 45) includes an inflation adjustment, as do other incentives in the IRC. There are other policy options, beyond targeted tax incentives, for supporting development of nuclear energy, should Congress make this a policy objective. For example, technology-neutral incentives that provide payments or credits for zero- or low-emissions electricity, or a carbon tax, could support investment in nuclear energy capacity. For further discussion of challenges in the industry and policy options, see CRS Report R44715, Financial Challenges of Operating Nuclear Power Plants in the United States, by Phillip Brown and Mark Holt.

Jun 27, 2017