Legislative Update: The 109th Congress,
First Session
Hurricane Katrina not only made a shambles of New Orleans and the Gulf area, it also tore a hole in the congressional calendar for the remainder of the 109th Congress 1st session scheduled to end before December 2005. After the hurricane, the only part of the Bush administration’s congressional agenda that remained on track was the Senate debate over the nomination of John Roberts to be chief justice of the Supreme Court.

Here’s where things stand now:

Hurricane Katrina
Congress is now focused on providing assistance to the individuals, families and towns/cities devastated by Hurricane Katrina. Lawmakers have already appropriated more than $62 billion to help with the initial clean up. Estimates are that Katrina may cost anywhere from $100 billion to $200 billion in federal funds and that the lives of many victims will not return to normal for several years.

The AFT has been working hard to provide assistance to the school systems, students and union members affected by Katrina. Locals in Houston, Dallas, San Antonio and Austin have been serving as clearinghouses for members and their families. The AFT and the Texas Federation of Teachers have been particularly active in raising money and providing needed supplies to AFT evacuees. And the Louisiana Federation of Teachers has served as home to locals from New Orleans and neighboring Jefferson and St. Tammany parishes, helping locate members and coordinating benefits for them. The AFL-CIO is establishing centers to help union members in Louisiana, Mississippi and Alabama. The national union is also working with both the United Teachers of New Orleans, our affiliate there, and the Louisiana Federation of Teachers to contact members and their families and provide timely information on new job opportunities, financial help and other vital services.

AFT president Edward J. McElroy and secretary-treasurer Nat LaCour have met several times with key members of Congress and the Department of Education to insure that the federal government provides adequate funding for the needs of displaced students and teachers and other school employees as well as those who will educate the evacuees. The union is also working for federal assistance in rebuilding and replacing destroyed and damaged school infrastructure and for necessary financial assistance and essential healthcare coverage for storm victims through a fully financed federal Medicaid program.

These massive new costs—while necessary—will add directly to the federal deficit, which, in the current “no new taxes” environment, will put additional pressure to cut other federal programs.

It is expected that Katrina-based hearings and appropriations will continue for the next three months and move aside other bills that the AFT has been following.

To make a secure donation online, go to www.aft.org/katrina/ and follow the directions there for a Visa or MasterCard transaction. Or you may send a check payable to AFT (memo: disaster relief) to: AFT Disaster Relief Fund/Attn: Connie Cordovilla/555 New Jersey Ave., N.W./Washington, DC 20001.

Budget Reconciliation Legislation
As you may remember, the Republican budget resolution that passed last spring requires three reconciliation bills to be passed in September. Katrina forced a delay in this deadline until after Oct 26.

The three reconciliation bills include:

• A bill to cut mandatory federal spending by $35 billion dollars, including a $10 billion cut in Medicaid, a $7 billion reduction in student loans and a $6 billion increase in funds for the Pension Benefit Guarantee Corporation in the wake of massive defaults by the airline and older industrial companies on their pension obligations. Although the Medicaid cuts of $10 billion are small compared to the overall Medicaid budget of $330 million, the structural changes in Medicaid that are part of this bill present the most serious threat. The bill would grant massive authority for states to reduce benefit levels and raise eligibility requirements to cut their overall costs. This authority includes the ability to make substantial changes in co-payments and deductibles.
  
  Included in this bill are new federal rules that would create a more rigid ”assets test” that will make it more difficult for seniors to receive Medicaid-financed nursing home or home care. These rules would require a person who gives away assets up to five years before requiring nursing home care to recover the value of these funds or property before receiving Medicaid assistance for nursing home or home care. Funds given to sick family members, charities and college-bound grandchildren would all have to be recovered and used to pay nursing home expenses before an elderly person could become eligible for Medicaid. Unexpected illness, strokes or Alzheimer’s disease would not change the five-year requirement. The record keeping required by these rules would be a severe burden on most seniors.
  
  The silver lining? Key congressional committees have indicated that major changes are being planned in this part of the bill. The AFT will be an active participant in reducing these Draconian requirements.
  
• A second reconciliation bill would increase the federal deficit by $70 billion by extending tax reductions for capital gains and dividends and adjusting the Alternative Minimum Tax for individuals and corporations. Together, these two reconciliation bills would actually increase the federal deficit by $35 billion.
  
• The final reconciliation bill would raise the federal ceiling to allow more federal borrowing to finance these tax bills, the war in Iraq, Katrina aid and other routine spending. It is expected that the federal debt for 2006 will top the current one-year record of $412 billion.

Medicare Part D, the Prescription Drug Plan
Beginning this fall, older Americans will be faced with a choice of joining the Medicare prescription drug program (Part D) or remaining in drug coverage if they are fortunate enough to have their employers or states provide prescription drug care. The complexity of this plan will reverberate in Congress. The AFT is supporting two substantive changes in the law. They would allow creation of a national Medicare-administered program and permit Medicare to negotiate lower drug prices. Both of these changes are prohibited under present law. No changes are likely, however, before the end of 2006.

There are several major points that should be made about the new program:

• Coverage is an individual choice. Each person must elect to be covered. Your Part D drug coverage will not extend to your spouse. 
• To be eligible for Part D, you must be covered by either Medicare A or B. If your spouse is not covered by one or both parts of Medicare, he/she will not be eligible for Part D.
• Unless you are covered by a drug plan as good as or better than Part D coverage, you must choose a Part D plan between Nov. 15 and May 15. Joining Part D after May 15, 2006, will require a 1 percent increase in the monthly premium for each month you failed to join for the entire time you are covered by a Part D plan.

For more information on Medicare and the Part D drug coverage, check the fact sheet and checklist developed by the AFT and posted in the Retiree area of the AFT Web site http://www.aft.org, and Medicare Interactive/AFT, www.medicareinteractive.orgaft, (a special Web site co-sponsored by the AFT and the Medicare Rights Center).

Social Security
AFT members and other union members have done yeoman’s work informing the general public about the president’s Social Security changes. Private accounts, the Bush approach to undermining the Social Security system, are increasingly viewed negatively by most Americans. There were reports that the House would take up a comprehensive retirement bill, including Social Security, but the Katrina disaster has put this in doubt. The Senate is stymied and will not act this year if at all. These doubts have been reinforced by the growing unpopularity of the president’s proposal and his overall weakness in the polls.

These Grow Accounts do nothing for the long-term solvency requirements of Social Security.

Keep up the pressure on members of Congress and work to educate your friends and families on this vital issue. Information and a letter to your senators and representatives on the issue are available on the AFT Web site http://www.aft.org.

The Estate Tax
The Republican Congress is moving to eliminate the federal estate tax. The House has already passed full repeal, but because of Katrina, the Senate wisely refused to take it up earlier this month.

The federal estate tax affects only 1 percent of the estates that are probated in each year. Presently, estates worth less than $1.5 million –- $3 million for couples –- are exempt from the estate tax. This exemption increases to $3.5 million for individuals and $7 million for couples in 2009 to 2011. After 2011, the federal estate tax returns to 2001 levels.

Full repeal of the estate tax will cost the federal treasury more than $1 trillion between 2012 and 2021, with the benefits going only to the richest Americans. During this period, the federal government must repay the Social Security trust fund for monies borrowed in order to pay 100 percent of the guaranteed benefits and address the financial instability of the Medicare program, which is projected to run out of money in 2016. A $1 trillion revenue loss during this period would make those obligations difficult, if not impossible, to meet.

The AFT, along with the AFL-CIO and other supporters, is working against full repeal of the federal estate tax.

Pension Reform and the Fight over Defined-Benefit Pension Plans
There are a number of efforts at the federal level to finance the PBGC in order to protect private defined-benefit pension plans. A number of older industrial companies, such as Bethlehem Steel, have now been joined by United Airlines, Delta and Northwest in trying to shift their pension liabilities to the PBGC. Furthermore, a number of private companies are dropping their defined-benefit pension plans. This has provided an opportunity for those who seek to destroy teacher and state employee retirement plans.

At the state level, there are growing efforts to convert existing defined-benefit teacher and state and local government employee retirement plans to defined-contribution 401(k)-type plans for all active employees. Efforts to convert the California system to a defined-contribution plan were thwarted by the AFT and other unions working together. Unfortunately, a similar effort in Alaska was successful. Threats are growing throughout the nation to move against these retirement plans. For example, a new attack is expected in California. It is vital that you stay in touch with your AFT state federation to find out how you can help thwart this right-wing drive. Although current retirees are usually exempted from such a change, this move for new hires will ultimately affect the benefits of current retirees by reducing the flow of contributions, which provide funds for defined-benefit plans’ investments and benefits.

The AFT is working in coalition with both the teacher and state retirement plans and other unions to protect this vital source of retirement security.

If you have questions on these or other federal legislative issues, please contact Bill Cunningham at 202-393-6301 or email: bcunning@aft.org.