Obama Affirms Importance of State Policy Innovation By Making California Emissions Rules a National Standard

Obama Affirms Importance of State Policy Innovation By Making California Emissions Rules a National Standard

Thursday, May 21, 2009



Obama Affirms Importance of State Policy Innovation By Making California Emissions Rules a National Standard

The Obama administration announced on Tuesday a comprehensive national standard aimed at improving fuel economy and auto emissions through the implementation of tough new rules for tailpipe emissions and higher fuel efficiency standards for new vehicles, based largely on standards already adopted by California and other states, illustrating how state policy can drive national change.  

New Federal Standard:  The new standards will start in 2012 and gradually increase each year until they hit established targets in 2016.  According to the administration, the new rules will produce the environmental equivalent of removing 177 million cars from the roads over the next 6 1/2 years.  "The status quo is no longer acceptable," Obama said, warning that the American appetite for oil comes at a "tremendous price."  As a result of the new standards, cars and light trucks sold in the United States will be roughly 30 percent cleaner and more fuel-efficient by 2016, four years ahead of the schedule established by Corporate Average Fuel Economy (CAFE) standards.  The average mandated fleet fuel efficiency standard will be 35.5 miles per gallon.  While consumers will initially pay about $1,300 more for new cars, $700 due to previously approved mileage standards and $600 from the new standards just announced, it is projected that they can expect to save $2,800 over the life of a car in lower fuel costs. 

State Action Leading to National Change:  In marked contrast to the Bush administration EPA which rejected California's request for a waiver to impose tougher emission standards, President Obama used California’s progressive state action, and the adoption of California's standards by at least thirteen other states and the District of Columbia, as a jumping off point for a national policy. The end result is a plan that was agreed to by the federal government, states and the auto industry.  The new policy imposes strong regulations, implemented in a reasonable manner, that will help us address one of the world’s biggest sources of greenhouse-gas emissions, vehicles.

The Obama plan gives California and the 13 other states essentially what they wanted, except with a more phased-in approach. In exchange for accepting a more gradual approach, the law will apply to all 50 states and states that are currently struggling to fund basic programs will be saved the hardship of having to create standards and enforcement procedures.  According to the Washington Post, while "sources close to the administration say the EPA will still grant a waiver to California at the end of June, California will not exercise the waiver in light of the new national standards."  State action and the threat of multiple standards in different states helped push the auto industry to accept federal reforms, since a national standard, according to David McCurdy of the Alliance of Automobile Manufacturers, would provide "clarity and predictability." 

In Related Action, Obama Ends Routine Bush Preemption of State Laws in Federal Regulations:  On Wednesday, the White House emphasized its new commitment to respecting state regulatory rules by issuing a broad Memorandum on Preemption to all heads of executive departments and agencies, ordering them to avoid the preemption language routinely included in Bush-era regulatory preamble statements or in codified regulations unless there is "full consideration of the legitimate prerogatives of the States and with a sufficient legal basis for preemption."  As President Obama states in the opening of the memorandum:

The Federal Government's role in promoting the general welfare and guarding individual liberties is critical, but State law and national law often operate concurrently to provide independent safeguards for the public. Throughout our history, State and local governments have frequently protected health, safety, and the environment more aggressively than has the national Government.

This memorandum codifies the commitment, highlighted in the auto emissions decision, to move beyond a narrow view that state legislative and regulatory action is in conflict with federal authority.  Instead the new administration is pursuing a collaborative approach where states can enact more aggressive consumer, environmental and worker protections and act as a model for national minimum standards, which will act as a floor while allowing additional protections by individual states.



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CHIP Expansion in Texas Highlights Continued State Health Coverage Advances

Texas has both the highest rate and the greatest number of uninsured children of any state.  21.8% of all kids in the state, representing over 1.5 million children, lack health coverage.  This is more more than the entire populations of 14 different US States.  Addressing this problem, Texas lawmakers are poised to take a large and bi-partisan bite out of the number of uninsured children.  HB 2962, sponsored by Rep. Garnet Colemanwill expand the state's CHIP program to an additional 80,000 children.  The bill, which passed the House 87 to 55 and is on to the Senate, will create sliding scale premiums for children in families with incomes between 200% and 300% of federal poverty (premiums will not exceed 5% of net family income) and a full-cost buy-in option for children in families between 300% and 400% of poverty.  The full cost buy-in option will be available to children who had lost CHIP coverage because growth in family income made them ineligible and who do not have access to employer coverage. 

Additional Provisions to Ensure Access and Outreach: The bill authorizes additional financial exclusions in determining eligibility, including child support payments and assets in college savings plans so that parents are not penalized for investing in their child's future education.  Additionally, the bill will improve outreach and education to help ensure more eligible children are enrolled. Lastly, the legislation requires the State to take any actions necessary to qualify the state for the temporary increase in federal Medicaid funding available through the stimulus package.  Currently, Texas receives $2.65 from the federal government for every state dollar it spends on children's health care.  Unfortunately, the state has turned away over $1 billion in federal matching funds because of its relatively meager CHIP program.  Texas has the 4th lowest rate of children covered by employer-based insurance, which makes this initiative and the creation of a more robust CHIP program absolutely vital to improving options for coverage for all children in the state.

Other States Act on Kids Health Care: Despite state budget deficits, caused in large part by the economic downturn, many states have acted this year to expand and improve state health care programs for kids.  In fact, the economic downturn and rising unemployment means that now is precisely the time when state's need to step in and ensure access to coverage for children and families.  State CHIP expansions include:

  • Iowa lawmakers approved a $7.5 million CHIP expansion that proponents say will extend coverage to 53,000 uninsured kids and fulfill the legislature's multi-year commitment to ensure all Iowan children have health coverage (SF 389)
  • Montana lawmakers pushed back a conservative effort to phase in a voter-approved expansion of CHIP and progressives were able to achieve full implementation of the plan to insure 30,000 additional kids. 
  • Washington legislators passed HB 2128 to confirm the state's goal of ensuring all kids have health coverage by 2010.  The measure officially named the state's kids program, Apple Health for Kids.  Its new provisions streamline enrollment measures (of the 75,000 uninsured children in WA, almost half are eligible but don't know it), take advantage of the federal re-authorization of the State Children's Health Insurance Program, and modify some requirements for a twin program that will start by 2010 allowing families above 300% of poverty to buy Apple Health coverage for their children.
  • Kansas lawmakers approved a budget that increases funding for CHIP and expands coverage to children in families with incomes up to 250% of poverty. 
  • Arkansas lawmakers enacted an expansion of ARkids, from 200% to 250% of poverty, enabling the CHIP program to cover an additional 8,000 children.
  • In related action, New Jersey, which has CHIP eligibility to 350% of poverty, is mailing a new one-page application to families who indicated on the state tax return that they have children who are likely eligible for coverage.  The state's goal is to cover an additional 350,000 uninsured kids.  

These actions highlight that despite the economic crisis, many state leaders recognize that investing in the health of our children is key to the long-term economic and social prosperity of our country.

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New York Attorney General Uncovers National Pay-to-Play Scandal

New York's Attorney General, Andrew Cuomo, is in the midst of a two-year investigation into kickbacks paid to state political staff in exchange for the opportunity to profitably manage the investments of New York State's public pension fund.  That investigation has now prompted a national effort with a multi-state task force and the Securities and Exchange Commission working together to uncover rampant pay-to-play abuses.  Nationally there is over $2 trillion in US public pension assets.

Pay-to-play in the public pension fund context takes two forms - campaign contributions and direct kickbacks.  The New York AG's investigation began as an investigation of kickbacks paid to key staff in the office of Former Comptroller Alan Hevesi.  One former top aide of Hevesi's, Hank Morris, has been indicted on over one hundred charges related to $15 million in payments he received from money managers looking for public pension fund business. One of the "middle men" who arranged the payments has now plead guilty to securities fraud.

Regulatory Failure Leads to Predictable Problems: Beyond the charges in New York, the investigation has unveiled a wild west of unregistered "placement agents" who charge money managers to market their services to pension funds.  It appears that half of these agents are not registered with the federal government as required by law.  And it is this basically unregulated business that has been fertile ground for kickback schemes.  The other side of the corruption that has been uncovered is garden variety campaign contribution pay to play where donors to the public officials that run the pension funds are used to gain access to fund business.  In 1999 the SEC dropped plans to prohibit campaign contributions from those seeking business with a public pension fund.  The proposed restriction was in response to a series of previous pay to play incidents, and observers at the time predicted more problems when the SEC backed off from implementing the rule.

The SEC is now reconsidering the rule, but the State of New York is already using its power to rein in these corrupt practices.  Placement agents and fees have now been banned in New York.  And just days ago, Carlyle Group, the second largest private equity firm in the nation settled with the Attorney General for $20 million. Carlyle admitted paying more than $12.3 million in fees to a company that employed Hank Morris.  In addition, Carlyle partners and employees contributed $78,000 in campaign contributions to Hevesi.  The firm has agreed to adopt a new code of conduct barring most campaign contributions to pension fund officials in What the NY AG called "a revolutionary agreement."

Investigations Now Active in Four States:  These investigations and action have lead to a wave of revelations of dubious conduct across the country.  In fact, some of the "placement firms" appear to have operated in many states.  California's Public Employee Retirement System has moved to require disclosure of placement agents, as is being considered by many other states .  New Mexico is also investigating pay to play in its pension system. That investigation has snared Gov. Richardson's former Chief of Staff, who has been accused in a lawsuit of pushing state officials to make certain mortgage-related securities.  Additionally, New Mexico and Connecticut have fired Aldus Equity Partners, and investment firm that allegedly took part in another multimillion dollar kickback scheme.  The SEC filed charges against the company last month.

As the multi-state task force gets up and running, observers expect that these investigations will continue to spread across the country.  With little oversight and trillions of dollars in the pension systems, this has been a scandal waiting to happen.  And once again the states have had to take the lead in bringing people to justice, because the feds, as is their habit, have been asleep at the switch.

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Research Roundup

The Economic Crisis: Racial Disparities and Trade Dislocations

  • Sounding the Alarm: Update on the Economic Downturn - The Economic Policy Institute examines the deterioration of the economy and the outlook ahead, showing the substantial rise in labor market distress and poverty overall, but especially for minorities. Higher unemployment will likely drive child poverty to 27%—up from 18% in 2007—and black child poverty will likely exceed 50%.
  • Race and Recession: How Inequity Rigged the Economy and How to Change the Rules - This Applied Research Center report examines the role of racial disparities in propelling the economic recession and the steps policymakers must take to effectively address racial and economic inequality.
  • Trade Adjustment Assistance: New Opportunities for Ohio Workers - This Policy Matters Ohio paper outlines how changes in the TAA program within the federal recovery plan have expanded access for service workers to help due to trade dislocations, and outlines recommendations for improvements in outreach efforts to increase participation in the program.

Closing Corporate Loopholes: Obscure Tax Provision of Federal Recovery Package Could Widen State Budget Gaps: States Can Avoid Revenue Loss by “Decoupling” - States could lose up to $5.5 billion in business income tax revenues because of an obscure tax provision called  “cancellation of debt income” (CODI) which was passed in the federal stimulus package, but states can avoid that revenue loss if they join Florida, Maryland and Minnesota in decoupling state tax laws from that exemption.

Ensuring Effective Teachers for All Students -  This Center for American Progress paper outlines six strategies that states should work on to ensure that schools with large concentrations of low-income and minority students. have access to effective teachers.

Parents' Health Care and Paid Sick Leave

  • Making Parents' Health Care a Priority - While children's health care coverage has gotten the strongest policy support, this report by the National Center for Children in Poverty emphasizes that access to health care by parents is actually the key predictor of access to health care for children.  This policy brief argues for replacing the patchwork coverage available to parents with an integrated policy guaranteeing coverage.
  • Contagion Nation: A Comparison of Paid Sick Day Policies in 22 Countries - Of 22 major developed countries examined in this Center for Economic and Policy Research study, the U.S. is the only country that does not guarantee paid sick leave for long-term illness.

Global Warming and Green Jobs

Electoral Competition and Low Contribution Limits - This Brennan Center for Justice study examines the effects of low contribution limits in state legislative races.  "The research on which this report is based was inspired by a 2006 U.S. Supreme Court decision that overturned low contribution limits. The data presented here refutes the Court’s assumptions that low contribution limits damage challengers and shows that the lowest contribution limits, those set at $500 or below, enhance challengers’ ability to campaign against incumbents in state legislative races.


The Stateside Dispatch is written and edited by:

Nathan Newman, Interim Executive Director
Caroline Fan, Immigration and Workers' Rights Policy Specialist
Julie Schwartz, Broadband and Economic Development Policy Specialist
Christian Smith-Socaris, Election Reform Policy Specialist
Adam Thompson, Health Care Policy Specialist
Julie Bero, Executive Administrator and Outreach Associate
Austin Guest, Communications Specialist
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Marisol Thomer, Outreach Coordinator

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