Prospects Increase for Partial Government Shutdown; FARM Bill Finalized

Faced with a December 21 deadline to approve fresh spending authority for dozens of federal agencies, President Trump met this week with Senate Minority Leader Chuck Schumer (D-NY) and House Minority Leader Nancy Pelosi (D-CA) to discuss a potential compromise on the fiscal year 2019 budget.  The primary sticking point in the negotiations continues to be the scope of funding for southwest border security, with President Trump doubling down on his demands for $5 billion for the construction of a border wall.  For their part, Democrats appear willing to support just $1.3 billion, with the funding limited to providing pedestrian fencing and security upgrades.

In a terse Oval Office exchange, President Trump made clear his willingness to shut down the government if Democrats do not agree to his desired level of investment for the wall.  While an appropriations package that includes $5 billion for wall construction could potentially pass the GOP-controlled House, Senate Democrats have the votes to stop such a bill from advancing to the president’s desk.

As of this writing, Congress and the president have just over one week to come up with a plan to keep the government open.  If no compromise emerges, many federal agencies would be forced to furlough non-essential employees until a new spending deal is reached.  It should be noted that Congress approved earlier this year legislation that provides full-year funding for agencies covered by the following appropriations measures: Defense, Labor-Health and Human Services, Energy and Water Development, Military Construction-Veterans Affairs, and the Legislative Branch.  The departments covered by these bills would not be subject to any sort of shutdown in fiscal year 2019.

Farm Bill Reauthorization

This week, House and Senate lawmakers overwhelmingly approved a much anticipated Farm Bill rewrite.  The compromise legislation (HR 2), unveiled on December 10 by the bicameral conference committee, would reauthorize for five years the nation’s agriculture and nutrition assistance programs.  The measure, which would authorize $867 billion in mandatory spending over the next ten years, had been held up for weeks over disputes on a number of issues ranging from proposed new work requirements for Supplemental Nutrition Assistance Program (SNAP) recipients to forest management reform to the legalization of industrial hemp.

It should be noted that the authorization for programs covered by the 2014 Farm Bill lapsed on September 30.  According to USDA, the legislation’s expiration did not directly impact farmers and ranchers.  In fact, the commodity programs under the law run on a crop-year schedule.  Dairy supports were the first commodity scheduled to expire on December 31.  However, a prolonged delay in programmatic authority would have had a negative effect on a variety of conservation and agriculture programs.  With regard to SNAP, or CalFRESH, as it’s known in California, the program is an “appropriated entitlement,” meaning it does not rely on the Farm Bill for continuing programmatic authority.  Therefore, benefits were not impacted by the expiration of the previous Farm Bill.

While House conservatives were determined to expand new work requirements for SNAP recipients, the compromise bill abandoned nearly all of the proposed changes.  Under the initial House-passed legislation, all able-bodied adults without children under age six would have been required to work at least 20 hours per week and/or be engaged in a work-related program.  The first failure to do so for more than one month would have resulted in the loss of SNAP benefits for one year, while a second failure would have resulted in the denial of benefits for a period of three years.

The House-passed measure also would have restricted categorical eligibility for SNAP to only those individuals receiving TANF cash assistance or other TANF supports, such as child care.  Under current law, there are other ways of becoming eligible for SNAP, such as receiving aid through a state assistance program or Supplemental Security Income (SSI).  Additionally, the GOP House bill would have effectively eliminated the use of the standard utility disallowance.  Instead, it would have required SNAP participants to submit utility bills and would count any Low-Income Home Energy Assistance Program (LIHEAP) benefits when determining SNAP benefits. 

The final 2018 Farm Bill will not increase work requirements for SNAP beneficiaries.  Conference negotiators also rejected provisions that would have reduced county administrative flexibility, including using the eligibility for other federal programs as a proxy when determining whether an applicant qualifies for SNAP benefits.  The final measure also rejected a proposal to give states the option of using private sector contractors to process and determine eligibility for SNAP.  The conference report emphasizes that only public sector employees may conduct those determinations.

Forest management reform was another sticking point that emerged in the final weeks of negotiations.  The original House bill included several measures aimed at expediting approvals for logging in national forests through the expanded use of categorical exclusions (CE).  House and Senate Democrats expressed concerns that the CE’s were overly broad and would undermine the National Environmental Policy Act (NEPA).  In the end, nearly every proposed CE was dropped from the final package, except for certain forest management activities with the primary purpose of protecting, restoring, or improving habitat for the greater sage-grouse or mule deer. 

While many of the more ambitious reforms were left on the cutting room floor, the final package does include several modest changes.  For example, it expands the Good Neighbor Authority to allow counties and tribes to enter into agreements to conduct restoration activities on forest lands. Under current law, only state governments are eligible to enter into the cooperative agreements.

Aside from minor changes to SNAP and various forestry programs, the 2018 Farm Bill legalizes the industrial cultivation of hemp and will allow farmers to grow and sell the crop as an agricultural commodity.  Hemp also will become eligible for crop insurance coverage.  It should be noted that the legislation limits the concentration of tetrahydrocannabinol (THC), the chemical that is responsible for the psychological effects of cannabis, to 0.3 percent.  By comparison, THC levels in cannabis often range anywhere from 15 to 20 percent, on average.  The final legislation also bars any individual convicted of a drug-related felony from producing hemp for 10 years.  However, it exempts farmers that are already growing hemp under existing research authority.

There are a number of other programs housed within the Farm Bill that are of interest to California’s counties, including rural development initiatives, conservation programs, renewable energy deployment, support for new farmers/ranchers, and various business development initiatives.  CSAC is in the process of analyzing the rest of the final conference report and will release a comprehensive summary to counties. 

Waters of the United States

On December 11, the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers (Corps) released a much-anticipated proposed rule that will redefine the scope of waterways that are regulated under the Clean Water Act.  The agencies’ proposal represents the latest step in the Trump administration’s effort to replace the controversial Obama-era “Waters of the United States” (WOTUS) regulation.  It should be noted that the agencies have released a prepublication version of the proposed rule, which can be found here.  The official version of the rule is expected to be published in the Federal Register in the coming days.

In broad terms, the Trump administration’s proposal would limit the EPA/Corps’ regulatory authority over waters that are “physically and meaningfully” connected to traditional navigable waters.  According to the agencies, the proposed rule also provides a clear distinction between federal waters and those waters that are subject to the exclusive control of states and Indian tribes. Release of the proposal follows years of (ongoing) litigation over the Obama administration’s 2015 WOTUS rule, which came under fierce criticism from many state and local governments, as well as agricultural interests.

The Trump administration’s proposed rule outlines six categories of waters that would be subject to federal regulatory jurisdiction:

• Traditional Navigable Waters (TNWs) – i.e., large rivers and lakes, tidal waters, territorial seas.
• Tributaries – rivers and streams that flow to TNWs (must be perennial or intermittent, not ephemeral features).
• Certain Ditches – defined as an “artificial channel used to convey water.”  Ditches would be jurisdictional where they are TNWs or subject to the ebb and flow of the tide.  Ditches also may be jurisdictional where they satisfy conditions of the proposed tributary definition and either (1) were constructed in a tributary or (2) were built in adjacent wetlands.
• Certain lakes and ponds – would be jurisdictional where they are TNWs, contribute perennial or intermittent flow to a TNW either directly or through other non-jurisdictional surface waters (as long as those waters convey perennial or intermittent flow downstream), or are flooded by a WOTUS in a typical year.
• Impoundments
• Adjacent Wetlands – i.e., wetlands that physically touch other jurisdictional waters would be considered “adjacent wetlands.”  The proposal also imposes other conditions whereby an adjacent wetland would be considered a WOTUS.

The proposed rule also specifies which bodies of water would NOT fall under the regulatory purview of the agencies (including groundwater, ditches that do not meet prescribed conditions, stormwater control features, etc.).

For additional information regarding the newly proposed WOTUS rule, including several fact sheets, click here.

Opportunity Zones

On December 12, President Trump signed an Executive Order establishing a “White House Opportunity and Revitalization Council.”  Led by the Department of Housing and Urban Development – and consisting of more than a dozen federal departments, agencies, and offices – the Council has been tasked by the president to carry out his administration’s plan to encourage public and private investment in urban and economically distressed areas, including qualified Opportunity Zones.

The impetus for the creation of the new White House Council is the 2017 tax-reform law, which established new “Opportunity Zone” tax incentives.  In short, the program allows prospective investors to form private investment vehicles, known as qualified opportunity funds (QOFs), for the establishment of new businesses or the expansion of existing businesses in disadvantaged communities.  The U.S. Treasury Department has certified and approved 879 census tracts as Qualified Opportunity Zones within the state of California.

Per the president’s Order (found here), the White House Council is required to engage and consult with State, local, and tribal governments regarding the best use of public funds to revitalize distressed communities.  In turn, the Council must recommend policies that would:

• reduce and streamline regulatory and administrative burdens, including burdens on applicants applying for multiple Federal assistance awards;
• help community-based applicants, including recipients of investments from qualified opportunity funds, identify and apply for relevant Federal resources; and,
• make it easier for recipients to receive and manage multiple types of public and private investments, including by aligning certain program requirements.

The Internal Revenue Service is currently in the process of developing proposed regulations and guidance governing the new Opportunity Zones.  In the meantime, the new White House Council will begin work on developing a detailed work plan for how it will accomplish its goals and will issue a subsequent report (within 120 days of the Executive Order) that provides a list of recommended changes to federal statutes, regulations, policies, and programs that would encourage and facilitate investment in qualified Opportunity Zones.