Legislative update

federal legislative update

July 29, 2020

Overview

Congress enters its last week of work in Washington, D.C. before the August recess in a tense environment. Some 30 million Americans are collecting unemployment, benefits are set to expire July 31 and Congress and the White House have not yet agreed on the best legislative package to pass this week to help Americans during the coronavirus pandemic. House appropriations bills have moved to the floor expediently while the Senate is stalled, but both chambers successfully passed the annual National Defense Authorization Act and will next work on negotiating differences for a final version. Meanwhile Senate Majority Leader Mitch McConnell (R-KY) and Appropriations Chairman Richard Shelby (R-AL) announced the Republican proposal after days of the White House and fellow senators haggling over unemployment benefits, and two months after the Democratically controlled House passed its own $3 trillion rescue package. The plan includes another round of direct cash payments to Americans; sweeping protections for businesses and health workers to prevent coronavirus-related lawsuits; and a $105 billion boost for schools. However, the Republicans’ package won't extend a $600 boost in unemployment benefits, which is a priority for Speaker Nancy Pelosi (D-CA), so this will be a sticking point. While both parties came together to honor Rep. John Lewis within the US Capitol today and tomorrow, partisan politics will dominate the week. Looking ahead in election news, the first presidential debate is now set for September 29 in Cleveland at Case Western Reserve University. More details are provided below.

Budget & Appropriations

On July 29-August 1, the House is considering HR 7617, which is a minibus appropriations bill that includes Defense; Commerce-Justice-Science; Energy and Water Development; Financial Services and General Government; Homeland Security; Labor, Health and Human Services and Education; and Transportation-Housing and Urban Development. The rest of the appropriations bills are expected to be brought to the House floor after the August recess. Below is a chart that summarizes funding levels in the House appropriations measures. Meanwhile, the Senate is delaying consideration due to political disagreements over which amendments are allowed during markups. The Senate subcommittees and full committee votes are not expected until after the August recess. Finally, two different versions of the National Defense Authorization Act have passed the House and the Senate. Next both chambers need to start conference committee negotiations, which are expected after the August recess. Also, the Senate last week confirmed the nomination of Russell Vought to be Director of the White House Office of Management and Budget on a partisan vote of 51-45.

House Bill – Funding level

In the minibus legislation to be passed by the House on July 29-August 1:
Commerce-Justice-Science – $71.473 billion
Defense – $694.6 billion
Energy & Water Development – $49.6 billion
Financial Services-General Government – $24.64 billion
Homeland Security – $50.72 billion
Labor-HHS-Education – $196.5 billion
Transportation-HUD – $75.9 billion

In the minibus legislation passed by the House on July 24 by 224-189:
Agriculture-FDA – $23.98 billion
Interior-Environment HR 7612 – $36.76 billion
Legislative Branch (HR 7611) – $4.198 billion
Military Construction-Veterans Affairs – $250.9 billion
State, Foreign Operations – $65.87 billion

National Defense Authorization Act that has passed each chamber:
NDAA (Senate) – $740.5 billion
NDAA (House) – $732 billion

Appropriations

Some key parts of the appropriations measure that passed the House on July 24:

FDA Appropriations Bill

The Ag-FDA bill provides $24 billion in discretionary spending for these agencies in FY21. This is an increase of $487 million over FY20 and more than $4.11 billion than the administration requested in their FY21 request. It includes an additional an increase of $40.8 million for FDA for a total of $3.21 billion. The legislation also invests over $1.025 billion for the expansion of broadband service to provide economic development opportunities and improved education and healthcare services and additional investments to assist rural areas access basic utilities. This includes $1.45 billion for rural water and waste program loans, and over $610 million in water and waste grants for clean and reliable drinking water systems and sanitary waste disposal systems. It also contains $5.75 billion in discretionary funding for Women, Infants, and Children (WIC) as well as $25.13 billion in funding for child nutrition programs. It provides free or reduced school lunches and snacks for children who qualify for the program as well for the Summer Food Service Program to ensure low-income children continue to receive nutritious meals when school is not in session.

Military Construction and Veterans Affairs

The MilCon-VA bill provides a total of $10.1 billion, not including overseas contingency operations funding, for military construction and $104.8 billion in discretionary appropriations for the VA. The Veterans Medical Care programs are provided with $90.0 billion which is an increase of $9.8 billion above the FY20 enacted levels. In addition, it contains:

  • $10.3 billion for Mental Healthcare, including $313 million for suicide prevention outreach
  • $661 million for Gender-specific Care for Women
  • $1.9 billion for Homeless Assistance Programs
  • $504 million for Opioid Abuse Prevention
  • $300 million for Rural Health Initiatives
  • $840 million for Medical and Prosthetic Research
  • $2.6 billion for the VA Electronic Health Record System, an increase of $1.1 billion above the 2020 enacted level

As the final batch of appropriations bills move through the House, G2G will provide more details on the contents of each bill and likelihood for inclusion in the final legislation negotiated with the Senate and the White House.

health

COVID-19 Testing

The CDC will soon recommend that coronavirus patients not be retested to prove they’ve recovered from the disease, in a shift that comes amid a nationwide testing crunch. ADM Brett Giroir, MD, the Assistant Secretary for Health at the Department of Health and Human Services (HHS) calls retesting “medically unnecessary” and warned that it’s “clogging up the system.” He also claimed this decision is based on science. Also, pooling testing that was once thought of as a solution to the mass testing gap that could preserve testing for those mostly likely to be positive is no longer considered viable as now too many coronavirus cases span the country. Finally, CMS is now covering COVID-19 testing within long-term care facilities with mortality rates especially high in those settings. As of July 24, nursing homes and other long-term care facilities in 42 states reported 59,506 COVID-19 deaths, which is 44% of all COVID-19 deaths in those states. The Trump administration already shipped 654 antigen testing devices to 635 nursing homes. It plans to send nearly 1,800 of the machines, which are made by Quidel Corp. and Becton, Dickinson & Co., within the next three weeks. It also plans to provide each of the nation’s 15,400 nursing homes with one of the devices as they become available in the coming months, according to CMS administrator Seema Verma. But even if the test comes back negative, it is still the recommendation of the FDA that those patients get a PCR test.

COVID-19 Data

The CDC coronavirus dashboards were suddenly removed from the website, reflecting deep tensions between the Trump administration and its own public health agency. The CDC pulled its dashboards in response to the White House ordering hospitals to begin reporting data to a new HHS system — effectively bypassing the CDC — in a controversial decision that frustrated public health officials and prompted the agency to take major hospital capacity maps offline without notice. This surprised those relying on the public-facing data and even some within the administration, who restored the dashboards by end of the day July 23. Some are concerned this is an attempt to hide data, but HHS officials, including Deborah Birx, claim the data shift was long overdue as HHS has spent months building an alternative designed to more quickly and efficiently collect data crucial to tracking the virus’ spread.

COVID-19 Vaccines

On July 27, the first large study of a COVID-19 vaccine in the US began with the dosing of a single patient today in Savannah, GA, paving the way for large trials by Moderna and NIH that will examine the vaccine’s safety and efficacy in 30,000 people. The Moderna candidate, backed by $955 million in government money, will be tested at 89 sites across the country. It uses mRNA, a synthetic form of genetic material from the virus designed to nudge the body’s immune system into attack mode. If the trial succeeds, the company is on track to make 500 million doses of its vaccine in 2021. The public will see recommendations for who should be first in line for a the vaccine by late August or early September, according to the new National Academies committee tasked with developing a framework for ensuring the fair distribution of virus vaccine doses, which held its first meeting July 24, per direction from NIH and CDC.

Also supply chain seems unprepared to deliver the vaccine. The industries that send goods around the world on ships, planes and trucks acknowledge they aren’t ready to handle the challenges of shipping an eventual vaccine from drugmakers to billions of people. Freight companies face problems ranging from shrinking capacity on container ships and cargo aircraft to a lack of visibility on when a vaccine will arrive. Shippers have struggled for years to reduce cumbersome paperwork and upgrade old technology that, unless addressed soon, will slow the transport of fragile vials of medicine in unprecedented quantities. Many of these problems need to be resolved to ensure broad and effective distribution.

Health Disparities

A group of Democratic senators are pushing for $350 billion for minority communities in the next coronavirus stimulus measure to address needs ranging from childcare to infrastructure. The first objective of the proposal is to immediately help communities of color respond to the pandemic through a $135 billion investment in childcare, mental health and primary care, and jobs. The second objective of the proposal is building long lasting wealth and health in these communities over the next five years by investing $215 billion for infrastructure, a homeowner down payment tax credit, Medicaid expansion, and more measures. The Senate Democrats’ new Economic Justice Act would seek to partially offset the cost of the proposal by re-programming $200 billion of unspent funds from the CARES Act – the so-called Title IV Funds that were previously provided to the Department of Treasury to facilitate corporate lending by the Federal Reserve. The Democrats are hoping to get some portion of this bill in the next COVID-19 legislative package.

Medicare Mismanagement

The head of the Centers for Medicare and Medicaid Services violated federal contracting regulations in awarding $6.4 million for public relations services, the HHS Inspector General’s office said in a report released mid-July. The CMS and its administrator, Seema Verma, allowed contractors to make management decisions, improperly treated them as employees, and paid some questionable costs, according to the Inspector General.

Drug Pricing

On July 24, President Trump signed four executive orders to try to reign in drug pricing:

  • A one-month ultimatum for drug manufacturers to propose alternative plans to reduce drug prices
  • Elimination of the rebates drug makers pay to insurers, but includes a caveat that the plan cannot be implemented if it will raise premiums and the government’s own actuaries have estimated that the rebate rule would increase premiums by up to 25%
  • Grants to individuals of waivers of the prohibition of importation of prescription drugs, authorization of the re-importation of insulin products made in the US if the HHS Secretary finds re-importation is required for emergency medical care, and finalization of a rule allowing states to develop safe importation plans for certain prescription drugs, thus paving the way to allowing individual consumers to buy drugs from other countries
  • Require federally qualified health centers who purchase insulins and epinephrine in the 340B program to pass the savings from discounted drug prices directly on to medically underserved patients

Defense

National Defense Authorization Act

The House and Senate both passed their versions of the National Defense Authorization Act (NDAA) and are ready to begin negotiations to merge the bills. The Senate passed S. 4049 on July 23 with a bipartisan 86-14 vote. The bill provides a total of $740.5 billion for defense programs within the United States, which includes $636.4 billion for the Department of Defense, $25.9 billion for the Department of Energy’s national security programs and $69 billion for the Overseas Contingency Operations (OCO).

Some highlights of the Senate NDAA include:

  • 3% pay raise for service members
  • $139 billion for procurement programs, which is $3.23 billion more than requested
  • $107 billion for research and development, $442.4 million more than the administration requested
  • Would allow $4 million for pandemic vaccine response research
  • Would allow $2 million to continue to the development of nanovaccine capabilities for COVID-19
  • $391.4 million for U.S. Cyber Command, $41.7 million more than requested
  • $32.7 billion for the Defense Health Program, which is $5 million more than the administration requested

The Senate Report requires the DOD to develop a framework to improve the effectiveness of cyber forward operations.  This will deploy US teams to other countries to prevent harmful cyber activity within their own networks. The bill also directs Cyber Command to expand its efforts to develop tools and techniques for offensive cyber operations. It allows the DOD to provide financial assistance to manufacturing extension centers overseen by the National Institute of Standards and Technology to support delivery of services for small manufacturers. However, this authority would end five years after the bill’s enactment. Due to the Coronavirus the DOD could waive requirements related to the provision of health-care items and services for 60 days during a declared public health or other emergency, including by deferring a beneficiary’s coverage termination. Waivers could be renewed for additional 60-day periods during an emergency declaration. The department would also have to develop a plan to protect the mental health of service members during the pandemic. The department would have to provide a National Guard member separating from active service with transitional health benefits if their service supported the government response to the pandemic.

The House passed their version of the NDAA on July 21 in a bipartisan vote of 295-125. The House bill provides $740.5 billion for FY21, including $635.4 billion in base funding and $69 billion in OCO funding. This bill also includes:

  • 3% pay increase for service members.
  • $138.2 billion for procurement within the DOD, which is over $2.4 billion more than what was requested
  • $264.8 million more for RDT&E bringing the total to $106.8 billion
  • $32.7 billion for the Defense Health Program, which is an additional $51.2 million more than requested
  • Would create a new $1 billion Pandemic Preparedness and Resilience National Security Fund with $200 million for procurement and R&D to carry out the Small Business Industrial Base Resilience Program – more details below on this

In response to the COVID-19 pandemic the House bill creates a Pandemic Preparedness and Resilience National Security Fund, directing $1 billion to efforts to proactively increase the country’s ability to prepare for and respond to future pandemics. It also creates the Small Business Industrial Base Resiliency Program and the DOD to purchase or make commitments to purchase materials or services from small business in response to the COVID-19 pandemic. This initiative is intended to support the small businesses and domestic manufactures by addressing important issues relating to the needs and support of small businesses in response to the pandemic, as well as to identify and assist with supply chain vulnerabilities related to the pandemic for small businesses. In terms of cyber, the bill extends the Solarium Commission for two additional years and provides full responsibility for certification and coordination to the Principal Cyber Advisor. The bill adds $600 million in funding for science and technology and another $50 million for additional funding for biotechnology and pandemic preparedness. The bill also will require the DOD to rename military bases and forts that bear the names of Confederate officials.

Cybersecurity

Twitter, which just experienced the worst breach in its 14-year history, is working to uncover whether its employees were victims of sophisticated phishing schemes or if they deliberately let hackers into access high-profile accounts and has assured the public that there is no evidence that attackers accessed the passwords of its users. Speculation over the identity of the hack’s perpetrators and the purpose of the attack has caused the government to respond. The FBI has opened an investigation into the hacking attack, an act that is normally triggered by national security threats or attacks from foreign adversaries. Meanwhile in Congress, Senate Commerce Chairman Roger Wicker (R-MS) asked Twitter CEO Jack Dorsey to brief the panel’s staff about the incident and Rep. James Comer (R-KY), the ranking Republican on the House Oversight and Reform Committee, requested information from Dorsey about the hack.

stem & innovation

Scientific Innovation

On July 15, the House Appropriations Committee approved $71 billion, much of which would be allocated to scientific agencies to invest in the future scientific workforce and research. The annual Commerce, Justice and Science appropriations bill would provide $1 billion, $35 million more than approved for fiscal year 2020, for the National Institute of Standards and Technology, which tests new technologies. Furthermore, the National Science Foundation (NSF) would receive $9 billion in funding, which is $270 million more than the previous fiscal year. The funds would be used for research on advanced manufacturing and artificial intelligence.

NSF Leadership

New NSF Director, Sethuraman “Panch” Panchanathan began his tenure on June 23, following a seven-month Senate confirmation process. He replaced adviser Kelvin Droegemeier, who led the agency on an acting basis after France Córdova completed her six-year term as director in March. In July, Panch outlined his vision for NSF and said it revolves around three “pillars”: engaging more Americans in science across the socioeconomic and geographic spectrum, maintaining global leadership in science, and “advancing research into the future.” Previously, his work focused on human-technology interactions, developing haptic user interfaces for individuals with disabilities and co-founding two companies that developed physical rehabilitation technologies. Over time, he also took on administrative responsibilities, becoming Arizona State’s chief research officer in 2010 and serving on NSF's governing board from 2014 through spring 2020.

STEM Education

As the pandemic continues to make remote schooling difficult, the House Appropriations Committee responded to the constraints by making several allocations to enhance STEM education. A portion of the $9 billion for the NSF would be dedicated to STEM education. The Committee also allocated funds to improve high-speed internet in rural areas to make remote learning easier on students. Furthermore, House Appropriations Committee approved $85 million in STEM grants for the Department of Education, which is a $20 million increase from fiscal year 2020.

economic development

COVID-19 Package

Senate Majority Leader Mitch McConnell (R-KY) has a new plan for COVID-19 response that is coming two months after the Democratically controlled House passed its own $3 trillion rescue package. It includes cutting supplemental unemployment benefits to $200 weekly from $600 weekly until states are able to create a system that would offer 70% of a laid-off worker’s previous pay up to a state-set limit. The package includes $105 billion to help schools adapt for children to return to the classroom; $16 billion in grants to states for testing, contact tracing, and surveillance; and $20 billion for vaccine, therapeutic and diagnostic development; $20 billion to assist America’s farmers and ranchers who have suffered as a result of the pandemic; nearly $30 billion to protect our nation’s military and defense industrial base; and another round of Paycheck Protection Plan loans limited to businesses with no more than 300 employees, coming down from the 500-worker limit originally set in the third coronavirus stimulus bill passed in March and limiting loans to businesses that have lost at least of 50% of revenue compared to a previous year’s quarter. This plan also covers protections for businesses and health workers to prevent coronavirus-related lawsuits.

The unemployment benefit adjustment is due to all states currently offering close to 50% wage replacement. In this plan, the federal government would make up the difference to bring a recipient’s wage up to the 70% level once the transition is complete. Speaker Pelosi (D-CA) and others have rejected cuts to the $600 level and have called for negotiations to start on a bipartisan solution immediately. The problem is many Republicans argue that some people work less when they get $600 a week in expanded unemployment insurance benefits from the government because it is higher than their wages, but a new Yale University study finds no evidence of that happening. Another problem is some people aren’t receiving their benefits as states’ unemployment agencies have been so swamped with claims – leaving more than $100 billion of benefits unpaid, according to the Departments of Treasury and Labor.

Leading up to the latest plan, the Chamber of Commerce asked Congress to make a variety of changes to the Paycheck Protection Program, including extending the deadline and making the loans available to trade groups; to shore up the Economic Injury Disaster Loan program; to bolster the Employee Retention Credit; to set aside money to help schools reopen safely; to extend federal unemployment benefits passed in March but pare them down from the current amount of $600 a week; and to provide help to state and local governments, which Democratic lawmakers have championed for months. It also responds to the U.S. employment dropping by 4.1 million from the first week to the second week of July. Last week also marks the 18th week in a row that unemployment claims were more than twice of the worst week during the Great Recession. Consumer spending continues to decline, particularly in states like California and Texas where COVID-19 rates are spiking. While airline bookings increased at the end of June, as COVID spikes continue to rise, bookings have begun to decline, and cancellations have increased.

Another challenge to rejuvenating the economy is the country’s budget gap that expanded to $864.1 billion in June, reflecting a record $1.1 trillion in outlays largely tied to a surge in spending by the Small Business Administration for the Paycheck Protection Program. The nation’s deficit in the first nine months of the current fiscal year totaled $2.7 trillion—nearly three times as big as the shortfall registered for all of fiscal 2019. Perhaps some funding gaps can be filled by millionaires. About 80 millionaires across the globe calling themselves the Millionaires for Humanity, including Walt Disney heiress Abigail Disney, former BlackRock managing director Morris Pearl, and entrepreneur Djaffar Shalchi, are now pushing for higher taxes on the rich to help pay for the billions in new government relief programs made necessary by the coronavirus.

Nonprofit Relief

Earlier in July, the House passed a measure (S. 4209) that was introduced by Senator Tim Scott (R-SC) and had already passed the Senate to provide coronavirus relief to nonprofit groups and state, local and tribal governments. The bill would ease cash flow problem caused by Labor Department regulation requiring 100% payment of unemployment contributions for furloughed staff before aid can be received. It would reset it to 50%. President Trump is expected to sign it into law.

Business Relief

The Main Street Lending Program, targeting mid-sized and larger businesses, faced significant criticism due to its sluggish start. It is now issuing an additional $2 million in emergency loans to struggling U.S. businesses and recently adjusted its qualifications to include nonprofit organizations. For the smaller businesses, on June 5, President Trump signed the Paycheck Protection Program (PPP) Flexibility Act into law. While the law does not include all of the provisions for which small businesses were hoping, including continual exclusion of VC- and PE-backed companies, it did provide some relief provisions for PPP beneficiaries. The law:

  • Expands the period of loan forgiveness from eight weeks to 24 weeks after issuance of the loan
  • Reduces the minimum requirements of loan use toward payroll costs from 75% of the loan to 60%
  • Allows companies with PPP loans to defer their payroll tax payments
  • Includes two new exceptions let borrowers obtain full forgiveness even without fully restoring their workforce.
  • Changes made by the PPPFA have been incorporated in new forgiveness applications released by the SBA.
  • Extends time to pay off the loan to five years instead of the original two.

Childcare

House leadership fast-tracked consideration of two measures addressing childcare, skipping committee-level consideration because of the COVID-19 pandemic. The House passed the Child Care Is Essential Act (HR 7027) and the Child Care for Economic Recovery Act (HR 7327) that address what both Republicans and Democrats have called for more investments in the childcare industry because workers can’t return without safe childcare.