In This Issue : Enter the 3-letter anchor name, which will link to the articles below. (2) TITLE GOES HERE: Enter the article's title --> SUBHEAD --> Nonprofit Sector Head of Faith-Based Office Quits White House Releases Report on Faith Based Charities Federal Budget Accounting Gimmicks to the Rescue of the FY 2001 Budget More Information on the Impact of the Tax Cuts What Exactly is the AMT? Sequestration What? Regulatory Issues Bush Administration Proposes to Cut Medicaid Patient Rights Major Clean Air Program in Limbo Black Lung Rules Upheld GAO-Cheney Showdown Continues Information and Technology Privacy and Public Access to Court Records SIDE BAR: Nonprof Sector: White House Conference on Philanthropy Budget: Social Security Commission Interim Report; More Tax Cuts General Announcements Head of Faith-Based Office Quits Surprising nearly everyone, John DiIulio, the head of President Bush's faith-based office, announced his resignation on August 17. According to White House officials, his main reason for quitting had to do with personal reasons. He wanted to spend more time with his family, which was very difficult given the heavy workload he faced and his commute from his home in Philadelphia to Washington. The White House also noted that DiIulio always planned on leaving within the first year after the charitable choice legislation passed. Acknowledging these factors, others also point out that he faced difficulties as a Democrat that tried to move charitable choice on a bipartisan basis. It is rumored that he ran into road blocks within the White House from those who wanted to aggressively move the President's faith-based agenda. DiIulio also was criticized by both conservative and liberal groups who were dissatisfied, for different reasons, with the agenda. The charitable choice legislation has run into a difficult time in Congress despite the President's continued push for it. Some argue that the resignation of the administration's first Democrat, DiIulio, coupled with the switch to the Democratic caucus by Sen. James Jeffords (I-VT), will make it even harder to pass charitable choice. The House passed H.R. 7, the "Community Solutions Act," on July 19. Sen. Joseph Lieberman (D-CT), a leader on faith-based issues in the Senate, has identified several problems with the bill. He is concerned that there is no new money for the initiative, creating greater competition for limited resources. He opposes language that allows religious institutions to discriminate in hiring practices. And he is against the vouchers that are created by H.R. 7. (H.R. 7 allows the agency head to turn categorical programs into vouchers, giving money to potential beneficiaries to pick the service provider of their choice.) DiIulio announced his resignation one day after his office released a report about barriers that faith-based and community organizations face in trying to participate in social service programs. See related story. Back to Top White House Releases Report on Faith Based Charities Last week the White House Office of Faith-Based and Community Initiatives released a report entitled "Unlevel Playing Field: Barriers to Participation by Faith-Based and Community Organizations in Federal Social Service Programs". The report's central point is already known to many charities: it's difficult to get federal funds. The report also blames many of the difficulties that faith-based organizations have in getting federal funding on agency skittishness about funding church organizations. The report does not, however, explain how the Bush Administration's push for charitable choice legislation will solve any of these problems. The Pew Forum on Religion and Public Life convened a meeting to discuss the White House report. OMB Watch has prepared a detailed analysis of the report. Back to Top Accounting Gimmicks to the Rescue of the FY 2001 Budget Democrats have been pointing out, and even some Republicans have begun to concede (see August 6 Watcher) that, in order to make the budget balance for FY 2001 (which is the current fiscal year, ending September 30, 2001), some of the Social Security Trust Funds will have to be used. This is nothing new, and has frequently -- more often than not -- happened. The government always borrows the amount of the Social Security revenue and issues Treasury bonds in return. It then uses the Social Security revenue to pay down the debt or to balance the budget. For a number of years, the budget was in deficit and the Social Security revenues were used to balance it. Now that the budget is in surplus (or was, until the tax cut), the Social Security revenues have been used to pay down the debt. In part because of the new situation of having a non-Social Security surplus, the political will has formed, by both parties, to use the Social Security revenue only for debt reduction. Neither Democrats nor Republicans want to "dip into" the Social Security revenue. But, with the cost of the tax cut now being felt and the decrease in federal revenue due to the economic slowdown, it looks like there will, in fact, be a budget deficit in 2001, requiring the infusion of some of the Social Security surplus. The Democrats have been pointing "we told you so" fingers blaming the tax cut, and the Republicans have been arguing that it's not the tax cut but the unforeseen economic slowdown, while realizing that they will still look pretty bad if they "raid" Social Security to balance the budget. The Congressional Budget Office (CBO) will shortly -- perhaps on August 28 -- be issuing its new ten-year estimate, and the $125 billion that was estimated as the surplus over and above the $157 billion Social Security surplus, is now practically gone, what with the cost of the tax cut, lost revenue due to the slow economic climate, and spending. It looks like there will only be a $3 or $4 billion dollar non-Social Security surplus. Ergo, it seems pretty clear that some of the Social Security surplus will have to be used to balance this year's budget. (Get a preview of the revised estimate by looking at the monthly CBO report.) To solve this problem, the Administration has come up with a brand new budget gimmick. It goes like this: Each year, Social Security revenue is estimated and the actual amount not known until all the payroll taxes are in and have been tallied -- a very long process. Fortuitously, it turns out that the estimates in 1998, 1999 and 2000 were less than the actual revenue -- $5.6 billion less. Voila! We can now increase the non-Social Security surplus for 2001 by that amount. (Well, almost -- the other move is to subtract the actual $1.3 billion deficit of the Postal Service fund, which is included for accounting purposes in the Social Security fund, leaving $4.3 billion as the additional non-Social Security surplus.) This should easily cover the shortfall in the FY 2001 budget, which is only estimated at around $3 billion. End result -- the Social Security surplus for FY 2001 will all be used for debt reduction and not "raided" for spending. The Social Security Trust Fund has been slightly reduced, but not "raided" because it was only an accounting difference. Never mind that these accounting differences have never been used for this purpose before. Ironically, one reason for the budget shortfall in 2001 was the shifting of corporate estimated tax payments due September 15, 2001, to October 1, 2001, for the purpose of offsetting the cost of the tax cuts. This switched the revenue effect from those payments from FY 2001 to FY 2002 (since FY 2002 begins October 1, 2001), reducing revenue for FY 2001. The caveat we've all received about lies also holds true for budget gimmicks -- one leads to another and another and another.... Expect the Return of Rosy Scenarios... With the FY 2001 Social Security surplus safe, what about the next ten years? The tax cut will still be draining revenues, and there is no sign yet that the economic slowdown is over. According to some reports, when the Office of Management and Budget (OMB) issues its mid-year review, it will simply project higher rates of economic growth than are probably realistic. Faster growth equals more government revenue.... Some estimates are that growth in 2002 will be estimated at 3.2%, up considerably from the 1.7% used for 2001. The reason given for this rosy pictures is -- you got it -- the great things that the tax cuts will do for the economy. Using rosy scenarios is a technique past administrations have used to soften bad budget news. Back to Top More Information on the Impact of the Tax Cuts The National Education Association (NEA) released a report on Monday, August 13, finding that state revenue losses from federal tax cuts will greatly exceed the education funding increases provided in the President's budget -- in other words, the federal "gift" of increased education funding to states has been more than taken away by the cost to states of the Bush tax cut. The most expensive part of the tax cut in terms of decreases in state revenue is the phase out and repeal of the federal estate tax -- which has been estimated to cost the states more than $65 billion over the next ten years. To add insult to injury, the estate tax is not fully repealed until 2010, while the federal estate tax credit to states ends by 2005 -- in other words, the federal government will continue to collect revenue at the states' expense from 2005 to 2010. The NEA report breaks losses down by each state, so check the report to see how much your state will have to scrimp. Another excellent issue brief about the 2001 tax cut recently issued by The Century Foundation includes a year-by-year analysis and a chart showing the budget effects of the tax cut. A recent paper by Americans for Democratic Action (ADA) discusses the negative effect of the Bush tax cut, in terms of estimates of revenue loss, estimates of the projected surplus, effect on use of the off-budget trust funds, and the effect on domestic discretionary spending. Back to Top What Exactly is the AMT? One of the many criticisms of the "Economic Growth and Tax Relief Reconciliation Act of 2001" is that it will increase the number of taxpayers who are liable for the Alternative Minimum Tax (AMT), thus erasing any benefits of the tax cut for those taxpayers. Unless you have been faced with the AMT, you probably don't know what it is. Here are some facts about the AMT, since paradoxically, because of the "benefits" of the Bush tax cut, you now may be liable for a higher tax rate under the AMT. Back to Top Sequestration What? The Congressional Budget Office has issued its "sequestration" update for FY 2002. Under the current budget rules, there are limits on the yearly amount of discretionary spending. Those caps expire after 2002. When a cap is exceeded there is supposed to be a "sequestration," or across-the-board cuts in discretionary spending, to keep within the overall limit. There is also a requirement -- called "pay-as-you-go" (PAYGO) - that any new mandatory spending be offset. On August 15 of each year, CBO is required to release new estimates, based on legislation and appropriations up to that point, about whether it looks like the caps will be exceeded or the PAYGO provisions violated. As far as discretionary spending goes, the report finds that spending for 2001 will remain under the cap, so no sequestration will be necessary. For 2002, the CBO warns that "adhering to the spending caps for 2002 will be extremely challenging for lawmakers." Estimates are that the caps will be exceeded, thus requiring sequestration under the rules, by over $100 billion. Since no appropriations bills had been passed, this is only an estimate. So should we be prepared for across-the-board cuts? Not likely. The caps were ignored in 2001 and will probably be ignored in 2002. The real budget cap now is the resolution not to use any of the Medicare or Social Security surpluses for spending. Also, CBO is only responsible for issuing sequestration advisories, with the Office of Management and Budget (OMB) holding responsibility for enforcing any actual sequestration. Nevertheless, the CBO report adds to the increasing data that there will be a budget crunch as the appropriations season begins again in September. Back to Top Bush Administration Proposes to Cut Back Medicaid Patient Rights The Bush administration announced on August 16 that it would postpone and ultimately scale back a Clinton-era rule designed to ensure better care for 19 million poor and disabled patients currently enrolled in Medicaid managed care plans. The administration's replacement proposal offered in Monday's Federal Register is substantially weaker, and much more friendly to the managed care industry, which strongly opposed the Clinton measure (now suspended for up to a year while the administration's changes are finalized). For instance:

• The Clinton rule would allow a Medicaid patient who believed he was wrongfully denied treatment in a life-threatening situation to request and receive an internal appeal within 72 hours. The Bush plan would grant such an appeal only within three working days or possibly two weeks if an HMO decided it needed more time to gather information. As Rep. Henry Waxman (D-CA) has pointed out, "Medicaid patients who get seriously ill on Fridays are in trouble."
• The Bush plan scraps a requirement that health plans provide coverage for family planning services and infertility treatment or, if there is a moral or religious objection, instruct patients where to receive such treatment.
• The Clinton rule promises that Medicaid recipients who are forced into a managed care plan and require ongoing care such as pregnant women, the elderly, or the disabled will continue to receive the same level of care. The Bush plan removes this provision.
• The Bush plan axes a requirement that states publicize poor-performing health plans in local newspapers, and relaxes requirements that HMOs communicate effectively with patients who speak poor English.
• The Clinton rule instructs managed care plans to send out information on coverage specifics once a year, which the Bush plan removes as well.

State governments have also been aggressive in lobbying against the Clinton rule, which reportedly factored heavily in the administration's decision to roll it back. Yet, HREF="http://www.familiesusa.org/media/press/2001/mmcregs.htm">as Families USA explains, the regulations were supposed to be a quid pro quo for the additional flexibility granted to states in 1997 in how they could administer their Medicaid programs. States have used this flexibility to aggressively move Medicaid patients into managed care plans, yet with the administration's delay, there remain inadequate protections to ensure quality care. For more information, see this letter from Reps. John Dingell (D-MI), Sherrod Brown (D-OH), and Waxman protesting the administration's decision to delay the Medicaid protections. Back to Top Major Clean Air Program in Limbo The Bush administration delayed a decision on how to scale back a major clean air program -- called New Source Review (NSR) -- that requires older coal-fired power plants to add the latest anti-pollution machinery whenever they are substantially upgraded. The Clinton Justice Department used this program to aggressively crack down on older plants, suing dozens who failed to comply. Several months ago, President Bush signaled a policy shift after an intense lobbying campaign by the utility industry, asking the Environmental Protection Agency (EPA) to conduct a study on NSR and issue recommendations within 90 days. That 90-day period lapsed on August 17 with EPA saying its NSR report will instead be incorporated into a comprehensive package of legislative recommendations to combat emissions of three power-plant pollutants -- nitrogen oxide, sulfur dioxide, and mercury. This approach is of little comfort to the environmental community. In fact, it heightens concern that the "comprehensive plan" -- which conspicuously does not include carbon dioxide, a major emission of coal-fired power plants that Bush promised to regulate during his campaign -- will be used as a smoke screen to mask the gutting of a core component of the Clean Air Act. Already, the Bush Justice Department has frozen dozens of cases against utilities, oil companies and other firms accused or suspected of violating the Clean Air Act. According to the Wall Street Journal, Justice Department officials even advised Dominion Resources Inc. -- a Richmond utility about to enter into a final settlement for a $1.2 million pollution control upgrade -- to wait for EPA to complete its reconsidering of New Source Review. A study by the Clean Air Task Force shows that as many as 170,000 asthma attacks and 5,500 to 9,000 premature deaths are caused annually by pollution from the 51 plants that are targets of NSR enforcement actions. Back to Top Black Lung Rules Upheld On August 9, U.S. District Court Judge Emmett G. Sullivan rejected all of the National Mining Association's (NMA) challenges to numerous provisions of new black lung rules, marking a major victory for the United Mine Workers of America (UMWA) and the Department of Labor, which defended the standards. The Black Lung Benefits Act guarantees monetary and medical benefits to miners who become disabled by or die from black lung disease (pneumoconiosis); the DOL under President Clinton promulgated the rules to revise procedures for processing these black lung claims. Previously, coal companies would often hire doctor after doctor and expert after expert in an effort to block a victim's claim. This process required the victim to hire his own expert often at enormous personal cost to counter the company's experts. The new rules put an end to this situation by limiting the number of medical "reports" each side can gather to two. The Court's ruling comes after the Bush administration consented to an injunction of the black lung rules at the request of the NMA earlier in the year. In a statement on the decision, UMWA International President Cecil E. Roberts calls this a "100-percent victory for sick miners and their widows." Back to Top GAO-Cheney Showdown Continues The General Accounting Office (GAO) is not giving up on its demand to obtain documents about the National Energy Policy Development Group, a task force chaired by Vice President Dick Cheney that made recommendations on energy policy. When we last reported on this issue, GAO had sent a "demand" letter to Cheney for certain documents related to who the task force met with and how much all of it cost. GAO was pursuing the documents in response to a request from Reps. John Dingell (D-MI) and Henry Waxman (D-CA). Cheney refused to comply, arguing that GAO did not have the legal authority to obtain and review the documents. It appeared that GAO's only option was to go to court to obtain the information. However, on August 17 GAO tried an alternative. It sent a demand letter to President Bush, giving 20 days to comply with the request. GAO narrowed the scope of the request to who attended the task force meetings, who was hired, who served as consultants, and what the overall costs were. They dropped the request for the Vice President's personal schedule, which GAO argued was not something they wanted in the first place. The letter to Bush asserts that GAO does have the legal authority to pursue these documents, contradicting the Vice President's argument. It would appear that if the President refuses to comply with the GAO demand letter, GAO's last recourse will be the courts. Back to Top Privacy and Public Access to Court Records The Judicial Conference of the United States, through its Court Administration and the Case Management Committee Subcommittee on Privacy and Electronic Access to Case Files, issued its findings regarding the privacy and security concerns with respect to public access to electronic documents in federal court records. The 27-judge conference is the rulemaking body for the U.S. federal courts system, consisting of the Chief Justice of the United States, the 13 chief judges from the federal courts of appeals, one district judge from each of the 12 geographical judicial circuits, and the chief judge of the Court of International Trade. The June 26 report was made available to the public August 15, and lays out the following recommendations:

• Civil Cases: Documents should be made available in electronic form to the same extent they are available at the federal courthouse, with an exclusion on Social Security case filings (those files, however, would continue to be made available in full at federal courthouses). A policy recommendation was also made to truncate personal identifier information, so that only the last four digits of Social Security numbers, a person's birth year (and not full date), and a minor's initials, would be made available in both electronic and paper court filings.
• Criminal Cases: The report recommends, for now, that no remote electronic public access be provided to documents in criminal cases. It does, however, ask that the Conference reconsider the policy within two years. Criminal docket sheets will continue to be available through court websites and the federal courts' Public Access to Court Electronic Records (PACER) system.
• Bankruptcy Cases: As with the recommendation for civil case filings, bankruptcy case filings were recommended to be made available to the same degree electronically as they are at the federal courthouse, and to truncate personal identifier information in electronic records. The committee also approved amending the appropriate sections of the federal Bankruptcy Code and Rules to allow judges to seal documents based on privacy and security concerns, and to enable courts to collect full Social Security numbers from debtors, while only displaying the last four digits in electronic filings.
• Appellate Cases: For the purposes of remote electronic access, documents filed at the appellate level should be treated as they are at the trial or agency.

The recommendations are the result of over two years of inquiry, marked by a November 16, 2000 request for comments on policy options, which yielded some 240 comments (many filed electronically) by the January 26, 2001 deadline. After receiving comments, the Administrative Office of the U.S. Courts held a hearing on March 16, in order to allow representatives from the information access, lawmaker, legal, media, privacy, and public interest communities to voice their concerns and ideas with respect to public access to information. This hearing served as a precursor for the Conference to make a set of policy recommendations. The full Judicial Conference will consider the recommendations outlined in the report for adoption during its next meeting, set for September 11 in Washington, DC. If they are approved, a formal policy will be drafted through the Administrative Office of the U.S. Courts. Discussions will also occur with Congress about amending the aforementioned sections of the U.S. Code and Bankruptcy Rules. For a discussion around the recommendations, please visit the NPTalk site. Back to Top Notes and Sidebars White House Conference on Philanthropy The White House has indicated it will convene another conference on philanthropy some time soon. This will follow-up on the conferences started during the Clinton Administration. Social Security Commission Interim Report The final draft of the Bush Commission's Interim Report is now available online. There are slight language modifications (i.e, the "broken" SS system is now merely "unsustainable") and the report is now available in a graphic format. It is available at the commission website (www.csss.gov). More Tax Cuts Before recessing, the House began what will surely be an intense debate on a bill that would provide $33 billion (over the next 10 years) in tax breaks and credits for energy producers. Read more on HR 4, the "Securing America's Future Energy Act of 2001," in this analysis from Friends of the Earth.