March 3, 2003
The Honorable Jim Nussle The Honorable John M. Spratt, Jr. Dear Chairman Nussle and Ranking Member Spratt: As is the custom of the Committee on Energy and Commerce, the Majority and the Minority are transmitting separate Views and Estimates on the budget. These are the Views and Estimates from the Minority. The President’s budget for FY 2004 continues the trend of this Administration’s past budgets of the past two years in which previous surpluses have been turned into deficits. At the same time, many critical domestic programs have been deeply cut. These remarks will be confined to programs within the Committee on Energy and Commerce. A detailed analysis prepared by the Committee’s minority staff is attached. Health Medicare The President’s budget dedicates $400 billion over 10 years to add a prescription drug benefit for seniors in managed care plans and to Medicare "reform." This is approximately the amount of the prescription drug benefit passed by the House in the last Congress. Like the President’s previous budgets, there are few specifics about the drug benefit. The bill that passed the House in the last Congress provided all of its subsidies to private insurers rather than beneficiaries. Beneficiaries would have to purchase drug benefit from plans from these private insurers. There were no guarantees on premiums, deductibles or copayments. Even the sponsors of the bill estimated that beneficiaries noted that the standard package would provide large gaps in coverage for individuals who spent more than $2,000 on drugs. The bill also included various demonstration programs to privatize Medicare. This year the President’s budget takes bolder steps to privatize Medicare. The President would require seniors to join private insurance plans if they wished to get prescription drugs. Ultimately, this could force seniors to choose between prescription drugs and retaining their choice of doctors. The budget is silent on whether beneficiaries would be entitled to a choice of plans and whether the private plan would be less costly. There would also be no guarantee that all beneficiaries would receive the same benefits for the same price. In fact, it is likely that beneficiaries in different parts of the country would be treated differently. Another component of the President’s budget would combine the $100 Part B physician deductible with the $876 Part A hospital deductible and create one uniform deductible. The effect of this proposal would shift large costs onto the 85% of beneficiaries who use only physician care in a given year. The President also proposes new cost-sharing burdens on beneficiaries, including the implementation of home health and hospice copayments. These proposals will add new burdens on seniors who are in our most vulnerable populations. The President’s budget once again portrays Medicare as "bankrupt." In last year’s budget this assertion was made by combining the costs and revenues of Medicare’s Part A and Part B. Of course, 75% of Part B costs are intended to be funded by general revenues, so under this analysis, employment-based taxes will never equal all of Medicare costs. This year, the President’s budget states that the unfunded promises of Medicare equal a "staggering $13.3 trillion. Once again, the budget looks at the difference between Medicare Parts A and B combined outlays and revenues over a 75-year period. But, of course, 75% of the Part B outlays are supposed to be funded by general revenues. Under a similar analysis, Department of Defense "unfunded liabilities" (assuming 2% real growth) would be $67 trillion. Medicaid and Children’s Health Insurance Program The President is proposing fundamental changes in Medicaid and the Children’s Health Insurance Program. The President proposes an optional 10-year "budget-neutral" block grant to cover these programs. A budget analysis of the proposal has been extremely difficult since the budget gives few details, and pronouncements by Administration officials about the plan seem to change regularly. For this reason, the National Governors Association chose to take no position on the proposal at this time and are looking for additional details. The Budget Committee needs to take a hard look at what appears to be a highly ill-conceived proposal from several perspectives. First, the proposal comes at a time when States are caught in a crossfire. Medicaid enrollment is rising as the economy falters. For example, enrollment grew by 8.6% in 2002 and 7.7% in 2003. Moreover, prescription drugs which constitute 8.2% of total Medicaid costs, have been rising by over 16% annually from 1990 to 2000. At the same time, the economic downturn has created budget deficits in nearly all of the states. This combination would appear to place additional strains on state budgets in the absence of additional Federal help. Second, the proposal appears to be a block grant, since the budget appears to assume a fixed rate of growth for Medicaid, regardless of changes in the Medicaid population or medical costs. This means that the Federal government’s liabilities would be fixed while the states’ liabilities would not. Experience with block grants suggest that beneficiaries of programs placed under block grants are in grave danger of ultimately losing funding. Secretary Tommy Thompson recently stated that the entitlement for the mandatory Medicaid population would continue. However, this raises two new concerns depending upon the interpretation of this statement, and we have not received clarification despite our requests. If the total amount of Medicaid funds to a state were capped, by definition, increases in spending on mandatory populations would come at the expense of the optional populations. If, on the other hand, only funding for the optional populations were capped, states would no longer receive matching funds for those beneficiaries once the cap was reached, removing incentives to cover those in need. To further understand this matter, Budget Committee members need to understand that so-called optional populations have mandatory needs. Those receiving optional benefits account for 30% of all Medicaid beneficiaries, including more than half of elderly people covered under Medicaid. This group includes elderly nursing home residents, disabled individuals above SSI levels, and pregnant women at 133% of poverty level. Third, the budget says that the proposal is budget-neutral. It proposes a short-term increase in funding to states that opt into the new program, but require a reduction in funding in later years. This would leave governors in future years to pay off what amounts to a loan to the state. Fourth, while flexibility to States to use funds more efficiently for the benefit of recipients and cost-savings is certainly desirable, the President’s budget appears to equate flexibility with the ability of governors to reduce benefits, reduce eligible populations, or increase cost-sharing to recipients. While such "flexibility" may save states money, it will come at the expense of the elderly, children, and other populations that are most vulnerable. Fifth, the Budget Committee should consider other bipartisan budget proposals that have been introduced in this Congress and the previous Congress to increase the Federal matching share for Medicaid, and to return the $1.2 billion for the Children’s Health Insurance Program that has reverted to the Treasury. Public Health The President’s budget includes a number of program cuts that could seriously affect public health and safety. The Committee is no doubt aware that with respect to homeland security matters, the budget is woefully inadequate with respect to funding for first responders. Many funds which the budget takes credit for in this area are existing programs, or funds taken from existing programs and placed in a new category. The budget also appears to contain significant cuts in a variety of public health programs at the Centers for Disease Control and Prevention, the Substance Abuse and Mental Health Services Administration, and the Health Resources and Services Administration. Due to the delayed passage of the FY 2003 appropriations for these programs, we are unable to provide a detailed comparison of funding, but we urge the Committee to carefully review these programs in light of the recently-passed appropriations. Environment The President’s Budget for the Environmental Protection Agency (EPA) would reduce actual spending by $500 million dollars from the FY 2002 enacted level (including the supplemental appropriation) -- dropping from $8.1 billion to $7.6 billion. In terms of maintaining purchasing power at the FY 2002 enacted level, the President’s budget is a reduction of $800 million or 9.5%. The budget will be felt in a variety of areas, including reduced enforcement and inspections, less money available than needed for safe drinking water, inadequate funding for cleanups of superfund sites and leaking underground storage tanks, and fewer brownfields grants than authorized by the new law. Enforcement and Inspections The Administration’s budget will result in about 5,000 fewer inspections than were conducted in FY 2000 to detect violations of the environmental laws administered by the EPA to ensure clean air, clean water, safe drinking water, and responsible treatment, storage and disposal of hazardous waste. Overall, the Bush Administration’s FY 2004 budget for civil enforcement personnel remains 124 full-time equivalents (FTE’s) below the enacted levels in the FY 2001 operating plan and 52 FTE’s* below the levels enacted in the Consolidated Appropriations Resolution, FY 2003 (P.L. 108-7). The key program areas of compliance monitoring and civil enforcement account for 85 FTE’s of the shortfall between the budget request for FY 2004 and the enacted levels for FY 2001. Safe Drinking Water Act Based upon EPA’s own analysis of the resources required for safe drinking water across the country, the President’s budget plan fails to meet the needs for safe drinking water across the country. On September 20, 2002, the EPA released a Clean Water and Drinking Water Infrastructure GAP Analysis which found that for drinking water the funding gap between projected spending, assuming no growth in revenues, was $265 billion for the 20-year period from 2000 to 2019. Assuming a 3% annual real growth in revenues the report indicates that the gap on the drinking water side could possibly be reduced to $53 billion dollars. The huge funding needs documented in the EPA and CBO reports compares to the $850 million budgeted in FY 2004 by the Bush Administration for the drinking water state revolving loan fund. Local governments, states, drinking water suppliers, and the EPA all agree that there is a tremendous resource gap – which will continue to grow – for drinking water infrastructure funding necessary to protect the public health. The Bush budget freezes this important program with no adjustment for inflation at a level that is $150 million less than the amount authorized by Congress. Leaking Underground Storage Tank Program By spending just 40% of the $180 million collected in fuel taxes to pay for clean up of petroleum releases from abandoned gas stations, groundwater contaminated by MTBE, and other petroleum releases from leaking underground storage tanks, the Administration’s budget will leave thousands of sites in need of cleanups. The Leaking Underground Storage Tank (LUST) Trust Fund was created by Congress in 1986 and is financed by a 0.1 cent a gallon tax on motor fuels. The LUST Trust Fund was specifically created to address contamination from leaking underground storage tanks at gas stations and other facilities. These tanks are often the source of MTBE and petroleum contamination in groundwater and it is estimated that many old gas stations are brownfields sites. The budget acknowledges that there is a "backlog of Underground Storage Tank sites with confirmed releases waiting to be addressed." Nationwide there are an estimated 143,000 such releases with more confirmed each year. In FY 2001, the EPA failed to meet its goal of 21,000 LUST cleanups nationwide, falling short by 1,924 cleanups. In FY 2002, the goal was 21,500 cleanups but only 15,728 were completed. This program is also responsible for enforcing the 1998 Underground Storage Tank leak detection and upgrade standard. At the end of FY 2003, there will be a surplus of $1.9 billion in the Trust Fund which is expected to grow under the Bush Administration’s budget to $2.16 billion at the end of 2004. Nevertheless, the Bush budget requests funding for this program at the same level as last year. Superfund During the last four years of the Clinton Administration, the Superfund program completed all construction activities at an average of 87 sites per year. The Bush FY 2002 and FY 2003 budgets called this "dramatic progress." In FY 2001, however, the Bush Administration completed construction at only 47 sites – a 46% reduction from the average in the last four years of the Clinton Administration and a 39% shortfall in the Agency’s goal for FY 2001. The slowdown of Superfund cleanups will continue under the Bush budget because it attained 42 construction completions in FY 2002 and estimates 40 construction completions in FY 2003 and FY 2004. On May 10, 2001, Administrator Whitman stated that the EPA had a goal of reaching almost 900 construction completions by the end of FY 2002 and estimated "the Agency will achieve construction completions at 897 NPL sites by the end of FY 2002." Unfortunately, cleanups had been completed by the end of FY 2002 at only 846 sites – a shortfall of more than 50 from the Administration’s goal. Under the polluter-pays principle, Congress imposed taxes on industry, including the petroleum and chemical industries, to provide revenues to the Superfund Trust Fund to cleanup toxic waste sites. Each year since 1995, when the Republican-led Congress allowed the Superfund taxes to expire, President Clinton and the EPA sought to have the taxes reauthorized. President Bush’s budget, however, does not propose reauthorization of the Superfund taxes. Since 1995, industry taxpayers have saved over $9 billion due to the expiration of the Superfund taxes, approximately $4 million per day. Thus, the burden to fund cleanups is increasingly being shifted to the general public. In the President’s FY 2004 budget, $1.1 billion – about 80% of all Superfund expenditures – will come from general revenues. The President’s budget estimates that there will only be $159 million in the Superfund Trust Fund at the end of FY 2003 and $36 million in the Superfund Trust Fund at the end of FY 2004. Brownfields The President’s budget for FY 2004 requests a total of $149.5 million for brownfield grants for which local governments, redevelopment agencies, non-profits and states are eligible. This is $50 million less than Congress authorized under the Small Business Liability Relief and Brownfields Revitalization Act. In addition, the new legislation that authorizes $50 million annually for states and Indian Tribes to establish or enhance their response programs. The states and tribes can also use the money to capitalize revolving loan funds or purchase insurance or develop a risk sharing pool. The President’s budget for FY 2004 requests an additional $10 million for state grants which exceeds by $10 million the amount lawfully authorized under Section 128. Telecommunications Analog Spectrum Lease Fee Television broadcasters were given additional spectrum in the Telecommunications Act of 1996 to allow for the conversion from analog broadcasts to digital TV (DTV) broadcasts. The deadline for the broadcasters to return the analog spectrum was established as December 31, 2006, by the Balanced Budget Act of 1997. To protect consumers, there are exceptions in the law to allow the broadcasters to retain their analog spectrum for a period beyond 2006. The Administration is proposing to create an analog spectrum lease fee that would become effective in 2007 and raise $500 million annually until the analog spectrum is returned. The "fee" which is akin to a tax would be imposed upon commercial broadcasters who have not returned their analog spectrum by December 31, 2006. Any such lease fee on commercial broadcasters would impose additional financial burdens on broadcasters who are already facing significant costs during the digital transition. Moreover, encouraging broadcasters to cease broadcasting in analog prematurely could hurt those consumers who had not yet invested in a digital television or a digital converter box. Those consumers would no longer be able to receive over-the-air broadcasts for their news, entertainment, and emergency information. Corporation for Public Broadcasting In past years, $25 million has been appropriated to specifically assist with the expensive transition to digital. The budget proposes siphoning away money from the core funding that is used for production and maintenance and instead to use it for other purposes such as the digital transition. This action will reduce the ability of public broadcasters to continue to offer the content that they offer today and it will impair the ability of public TV and radio to make the transition to digital. Public Telecommunications Facilities, Planning, and Construction The President’s budget would eliminate a $44 million grant program that makes funding available to public TV and radio broadcasters for transmission equipment. Currently, the majority of these grants have been used to assist public broadcasters with purchasing digital equipment such as new towers and transmitters for the transition to digital broadcasts. All public TV stations are required by law to have completed the transition by May 2003. President Bush’s budget would suspend funding except for administration of current grants. Termination of this funding will severely impair the ability of the public broadcasters to meet the May 2003 deadline. These are some of the more glaring difficulties that the President’s budget poses for programs within the jurisdiction of the Committee on Energy and Commerce. Please call me, or have your staff contact David Schooler, Deputy Staff Director and General Counsel, if you have any questions. Sincerely,
cc: The Honorable W. J. "Billy" Tauzin, Chairman | |
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