Monday, December 20, 2010

Substitute Amendment on 9/11 Bill

As you may be aware, Sens. Gillibrand and Schumer have released an updated substitute of the 9/11 bill (H.R. 847).  A CBO cost estimate is available here.

The health title remains unchanged from the House-passed bill; the changes in the most recent draft are a reduction in the amount of new money placed into the 9/11 Victim Compensation Fund (to reflect recent class action settlements) and changes to the pay-fors.  The changes are summarized below, and a summary of the original legislation is available here.

As a reminder on process, Sen. Reid has said he will at some point (the time has not yet been announced) move to reconsider the cloture vote on the motion to proceed to the House-passed bill.  If that motion succeeds, then Sen. Reid will be able to amend the House-passed bill with the updated Gillibrand substitute.  We will have more information on the status of the legislation as it becomes available.

Changes Made in the Gillibrand Substitute

9/11 Victim Compensation Fund:  The substitute reduces the total value of the Victims’ Compensation fund by $1.2 billion dollars to slightly under $3 billion dollars for the first ten years.  This reduces the total amount of federal funds paid for compensation under Title II to $7.18 billion (down from $8.4 billion).  The New York Senators represent that this change was made possible as a result of the settlement reached last month with Ground Zero workers.

Government Procurement Excise Tax:  The substitute imposes a 2% “excise tax” on federal procurement payments (by definition, made pursuant to a contract with the U.S. Government) for the provision of goods or services, if provided by a country not party to the WTO Government Procurement Agreement (GPA) (or, presumably, a US-FTA partner).

This provision may be problematic under U.S.-WTO obligations. The GPA is a pluri-lateral WTO agreement to which the US is party with more than 40 other WTO Members.  With respect to procurement obligations, the U.S. is free to differentiate its treatment between non-GPA WTO members and U.S. producers.  However, with respect to an excise tax, such differentiation may conflict with the U.S.’s WTO obligations covering internal taxation with respect to the importation of goods.  For example, if the excise tax is not considered to be a law governing procurement, then it may violate the national treatment obligation which requires the U.S. to treat imports in a manner equal to domestic products.  There may be additional arguments raising trade concerns, but this example is illustrative.

The substitute also specifies it “shall be applied in a manner consistent with United States obligations under international agreements.” It is therefore possible that it would not be applied with respect to the procurement of goods from any other WTO member.  Under this scenario, the vast majority of government procurements likely to be affected would be with respect to Iraq and Afghanistan, which are not full members of the WTO.

It is unclear how JCT/CBO is calculating its score.  The score may include revenues which may reflect contracts with suppliers in WTO Member countries that are not signatories to the GPA, which may be WTO inconsistent (and technically not covered since the bill requires consistency with US international obligations) and also apparently uses, for the bulk of the numbers, contracts with suppliers in Afghanistan and Iraq.  Moreover, the scoring assumes that current spending levels in Iraq and Afghanistan will continue for 10 years at current levels.

Extension of Travel Promotion Act Fees:  The substitute extends and re-directs travel promotion fees created earlier this year to fund the 9/11 health programs.   In March 2010, the President signed into law the Travel Promotion Act (Sec. 9 of PL 111-145, the United States Capitol Police Administrative Technical Corrections Act of 2009), which created a nonprofit corporation to market the United States as an international travel destination.  The corporation is partially funded by a $14 assessment on international visitors from nations that have US-visa waiver programs (i.e., visitors from nations that are not required to obtain a visa for temporary travel to the United States), as well as matching funds from the travel and tourism industry.   Of the $14 fee, $10 is funneled into the Travel Promotion Fund created by the Act to cover operating expenses of the nonprofit corporation.  The remaining $4 is redirected to the general fund to cover the costs of administering the Electronic System for Travel Authorization (ESTA) — authorization that all nationals of visa waiver countries must obtain prior to travelling to the United States.  The Travel Promotion Act authorizes the imposition of this tax on foreign travelers through the end of FY 2014.  The 9/11 bill would extend the collection of the $14 fee past the FY 2014 sunset through FY 2021 and, beginning in FY 2015, redirect all the revenue from the fee into general fund where it can be used to offset health care costs in the 9/11 bill.

H1-B Visa Fees:  The bill extends until September 30, 2021 (from September 30, 2014) the Emergency Border Security Appropriations Act of 2010, passed in August, which raised fees on H1-B and L-1 visas for those companies that have more than half their U.S.-based employees on such visas.