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AED Washington Insights Newsletter

AED Washington Insights

July 2011

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Prepared by Christian A. Klein, AED Vice President of Government Affairs
and the AED Washington team

In this Issue:


Success! AED Scores Major Victory as House Passes Bill to Rein In EPA

On July 13, the House passed a bipartisan bill to halt the Environmental Protection Agency's (EPA) attack on state authority under the Clean Water Act (CWA). The Clean Water Cooperative Federalism Act (H.R. 2018) passed 239-184 following an intense AED-led lobbying campaign.

The bill has major implications for equipment distributors around the country. In recent years, the Obama EPA has used the CWA permitting process to block coal mines in Appalachia. However, quarries, farmers, and commercial, residential and infrastructure construction projects also receive CWA scrutiny and are potentially affected by EPA's abuse of its authority.

"AED commends Chairman Mica and Ranking Member Rahall for their leadership on this important legislation," said AED President and CEO Toby Mack. "For the construction equipment industry, which lost 37 percent of its workforce during the recession, the EPA has only made matters worse by burdening job creators and raising regulatory obstacles to economic growth. H.R. 2018 will put people back to work by reigning in an out of control EPA that is stifling projects across the country."

AED helped lead an ad hoc coalition of 121 organizations urging swift action on the measure. In a July 12 letter, the coalition urged all members of Congress to pass the legislation to "help put people back to work and create new jobs . . . by restoring the proper balance between EPA and the states in regulating the nation's waters."

The legislation, which now awaits action in the Senate, would:
  • Amend the CWA to restore the long-standing balance between federal and state partners in regulating the nation's waters
  • Preserve the system of cooperative federalism established under the CWA, which gives states primary responsibility for water pollution control
  • Prevent EPA from second-guessing or delaying a state's CWA permitting and water quality certification decisions if EPA has already approved a state's program.
Bipartisan cooperation, particularly on environmental issues, is rare in Washington's charged partisan environment. The fact that the senior Democrat on the Transportation & Infrastructure Committee played a lead role in winning passage shows just how excessive the EPA's powers have become.

Despite the success in the House, the bill's future is far from certain. President Obama has threatened to veto the legislation should it pass the Senate, a remote possibility itself.

Thanks to all who used AED's grassroots action site, www.AEDAction.org to urge your representative's support for the bill. AED will continue to work with our partners and lawmakers on both sides of the aisle to secure Senate passage and turn the Clean Water Cooperative Federalism Act into law.



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Highway Reauthorization Takes Center Stage on the Hill, but Outlook Still Uncertain

The week of July 4 is usually quiet in Washington, D.C. Not this year. Lawmakers cancelled their planned recess to focus on the debt ceiling, stayed in town and generated a flurry of activity on the highway reauthorization front. But, activity doesn't necessarily mean progress. Here's a quick look at what's been happening:

On July 6, Senate Environment & Public Works Chairwoman Barbara Boxer (D-CA) held a press conference to outline her highway and transit bill. She also sounded alarm bells about the consequences of congressional inaction on surface transportation reauthorization or letting highway and transit investment levels drop.

Highway Reauthorization Takes Center Stage on the HillBoxer said that the EPW Committee's bill (the text of which hasn't been made public) will authorize $109 billion over the next two years. That's essentially current funding ($41 billion per year) plus an inflation adjustment. The problem is that's about $12 billion more than the Highway Trust Fund (HTF) is expected to receive in user fee (gas tax, etc.) revenues over the next two years, leaving the Senate Finance Committee with the difficult task of making up the difference in the middle of the worst budget environment in memory. Boxer has proposed using the draw-down of troop levels in Iraq and Afghanistan as an offset, pointing out that the wars are costing taxpayers $12 billion per month. That's a long shot.

Inaction could cost 490,000 jobs
Boxer also used the news conference as an opportunity to focus attention on the negative economic consequences of Congress's failure to put a new multiyear highway and transit bill in place this year. Due to the looming HTF revenue shortfall, unless Congress reauthorizes surface transportation programs and finds a new way to pay for them, annual spending will fall from around $41 billion per year to approximately $27 billion. Boxer cited a new analysis from the Federal Highway Administration (FHWA) illustrating the job losses in each state if investment levels fall to that level. The FHWA document estimates that 490,000 jobs could be lost nationwide in 2012 alone.

"The Senate is working on an approach that will immediately jumpstart the economy, but we are running out of time and must act quickly," Boxer said. "In contrast, the House has signaled that it intends to go in a direction that will result in overwhelming job losses in the construction sector, which has been devastated during the economic downturn."

The House hits back
On July 7, House Transportation & Infrastructure (T&I) Committee Chairman John Mica (R-FL) held a press conference to outline his own reauthorization plan. In contrast to Boxer's proposal, Mica would authorize highway and transit programs for six years (through FY 2017), but reduce annual funding to a level consistent with the revenues deposited into the HTF, which could mean a 30 percent cut. The total value of the package would be $230 billion.

Because of revenue shortfalls, over the past three years Congress has transferred approximately $35 billion in funding from the General Fund into the HTF. Mica clearly doesn't believe that's sustainable. In defending the decision to move a six-year plan with lower funding, Mica said that state Departments of Transportation and public transit agencies need the predictability of a longer-term transportation bill to plan major projects. He also pointed to House Rule 21, which he said "clearly states that we can only authorize programs within the limit of the trust fund."

Mica also discussed other planned program improvements, including consolidating or eliminating approximately 70 Department of Transportation programs, further streamlining the project delivery process, better leveraging existing federal resources, and attracting more private sector infrastructure investment.

What does it mean?
While we're glad to see the leaders of the two key committees finally talking about the highway bill, we're not much further along in the process today than we were last week. Here's why:

First, neither chairman has unveiled legislative language, which means there's nothing yet for the committees to mark up (however, we could see draft language from either or both sides of Capitol Hill any day). Second, the differences between the two proposals are enormous and point to challenges to come in conference even if both houses pass their own bills. Third, at least publicly, the process has thus far lacked the bipartisan cooperation between the committee chairmen and their minority party counterparts that has characterized past reauthorizations. Fourth, any discussion about outlays is an academic exercise until the debt ceiling issue is resolved and we know what future federal spending will look like. Fifth, there are other key players in the process who aren't making highways a priority: House and Senate leaders need to schedule floor time and the House Ways & Means and Senate Finance committees need to weigh-in on the bills. There's no indication yet of that happening. In other words, we've got a long way to go.

While we are pleased to see the process moving forward, we remain concerned about ensuring a program funded at the levels necessary to meet our national needs. AED isn't giving up on a highway bill this year, but with fewer than 75 days left before the fiscal year ends on Sept. 30, the clock is rapidly running down. It's up to all of us who will be impacted by this issue to make it a priority. If we don't, the highway program will again lapse and House leaders have made clear their unwillingness to use future extension bills to shore it up. That could leave us with the worst of both worlds: a $27 billion annual funding program and no long-term certainty.

For the sake of our industry, take a minute to visit AEDaction.org and urge your representatives and senators to make a robust highway bill a priority.

AED is also curious to hear our members' take on the question of funding versus certainty. Given the choice, which do you consider the lesser of two evils: A two-year bill at current investment levels or the certainty of a six-year bill that spends less? Let us know your thoughts at aeddc@aednet.org.



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AED PAC Fundraising Aims to Continue 2010 Momentum

After the incredible success AED PAC enjoyed in 2010, we're working to keep that momentum in the 2012 elections. AED PAC supports candidates who are committed to strengthening federal infrastructure programs, protecting small businesses, and ensuring fair regulatory policies.

Federal law prohibits AED PAC from soliciting contributions or encouraging participation from the general public. Only senior executives and owners of AED member companies who have given written consent for solicitation are eligible to participate. As a matter of policy, AED does not accept contributions from individuals it may not solicit. If you haven't yet filled out the consent form, please do so as soon as possible.

You can download the solicitation consent form and a list of companies who have given consent here.

If you have any questions about AED PAC, please contact AED Director of Government Affairs Crystal Maguire, 703-739-9513.

2011 AED PAC Contributors

Chairman's Circle ($2,500)
Dale A. Leppo, Leppo Rents/Bobcat of Akron
Donna Y. Stephenson, Yancey Bros. Co.
James E. Stephenson, Yancey Bros. Co.

Capitol Club ($1,000)
Walter Berry, Berry Companies, Inc.
Michael Brennan, Brandeis Machinery & Supply Co.
Dan Butler, Butler Machinery Co.
R. Christopher Gaylor, Power Equipment Co.
Lawrence F. Glynn, CMW Equipment
Dennis J. Heller, Stephenson Equipment, Inc.
Robert Henderson, Associated Equipment Distributors
Dennis E. Kruepke, McCann Industries, Inc.
Charles Leis, Brandeis Machinery & Supply Co.
Chris MacAllister, MacAllister Machinery Co., Inc.
Robert O. Mullins, ROMCO Equipment Co.
Joseph A. Paradis, III, Brandeis Machinery & Supply Co.
Kenneth E. Taylor, Ohio CAT
Dennis Vander Molen, Vermeer MidSouth, Inc.

Washington Team ($500)
Kayden W. Bell, Arnold Machinery Co.
Roy H. Hunt, Roy Hunt Equipment, LLC
Ed I. Weisiger, Jr. Carolina CAT




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Debt Limit Negotiators Target LIFO

As talks continue over raising the national debt-limit, some Democratic negotiators have proposed eliminating the "last in, first out" (LIFO) accounting method as a possible revenue raiser.

Companies in a range of inventory-intensive industries have used LIFO since the 1930s to manage inflation's impact. LIFO takes into account the greater costs of replacing inventory, providing a more accurate measure of the financial condition of the business and the income to which tax should apply. The accounting practice ensures that companies are not forced to pay taxes on "phantom income" attributable solely to an increase in the value of inventory.

President Obama proposed repealing LIFO in his 2012 budget. LIFO repeal also surfaced during the National Commission on Fiscal Responsibility and Reform's 2010 deliberations. AED estimates that 40 percent of its members use LIFO and that they collectively have $2.8 billion in combined LIFO reserves. Repeal would therefore cost equipment distributors more than $900 million in retroactive tax liability.

As a leader in the LIFO Coalition, AED will work with our coalition partners to oppose any repeal efforts. In the meantime, visit the LIFO Coalition's website, www.savelifo.org. The site was built and is maintained for the coalition by AED.

Also, you can send a note to your lawmakers and the Administration urging them to protect LIFO by clicking here.



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Administration Proposes Pro-Union Rules

Confirming the business community's worst fears, the National Labor Relations Board (NLRB) and the Department of Labor (DOL) are again using the rulemaking process to circumvent Congress and implement big labor's policy priorities.

On June 21, the NLRB issued a notice of proposed rulemaking (NPRM) that would alter existing regulations to speed up unionization elections. The proposed rule reduces the amount of time employees and employers may communicate prior to the election and limits the opportunity for full hearings on key issues such as voter eligibility, appropriateness of the unit, and election misconduct. Most union elections take place within two months of a filed petition. The NPRM would shorten the timeframe to as little as two weeks.

"The NLRB and Department of Labor's recent action is the latest attempt to implement the spirit of the Employee Free Choice Act through the rulemaking process," said AED President & CEO Toby Mack. "These regulations would further tip the scale in favor of unionization at the expense of employers and employees."

In his dissent to the NPRM, Board Member Brian Hayes summarized the Board's action stating, "The principal purpose for this radical manipulation of our election process is to minimize, or rather, to effectively eviscerate an employer's legitimate opportunity to express its views about collective bargaining."

Additionally, the Department of Labor (DOL) issued an NPRM proposing changes for what constitutes "persuader activity" for reporting under the Labor Management Reporting and Disclosure Act (LMRDA). The DOL proposes to broaden the scope of reportable activities by significantly narrowing its interpretation of the "advice exemption" of the LMRDA. The new rules will deter businesses from seeking outside counsel when presented with a union organizing drive out of fear that even that conversation may trigger disclosure of detailed information about the company's employees and finances – information that will become public.

The public may comment on the proposed rules within 60 days of their June 22 publication in the Federal Register. Click here for the NLRB's summary of proposed changes.



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House Appropriations Committee Approves Substantial Cuts to Water Infrastructure Programs

The House Appropriations Committee approved draft legislation that would dramatically slash funding for the Environmental Protection Agency (EPA). Unfortunately, a nearly $1 billion hit is directed at the EPA's State Revolving Funds (SRFs), which provide investments in water infrastructure projects.

The draft bill would fund the SRF program at 2008 levels: $689 million for the clean water SRF and $829 million for the drinking water SRF, a $967 million reduction from fiscal year 2011 spending levels. In setting funding levels, the committee report expressed concern that, "funding these accounts through regular appropriations is unsustainable" and encouraged examination of "funding mechanisms for the SRFs that are sustainable in the long-term." The cut would eliminate approximately $116 million in equipment market opportunity.

Though the committee's bill is likely to pass the full House in the coming weeks, it is dead on arrival in the Senate. AED is reminding lawmakers of our nation's dire water infrastructure needs, which exceed $600 billion for clean water and drinking water needs. The Association is also continuing its push for lifting the cap on private activity bonds for water infrastructure projects and other innovative financing methods that leverage private investment.

Army Corps Budget Takes Hit
On July 15, the House approved fiscal year 2012 funding for Energy, Water, and Related Agencies Appropriations (H.R. 2354) trimming $89 million in civil works funding for the Army Corps of Engineers from 2011 funding levels.

Despite the cut, the funding level is $195 million above the amount requested by the Obama Administration. The increase in funding is largely attributable to projects dedicated to flood control, including dam safety improvements, and efforts to advance navigation projects and studies. The bill does not fund all of the presidentially requested projects for the Army Corps – redirecting $59 million to navigation and flood control activities.

However, much like the funding measure for the State Revolving Funds (see above) the legislation faces a near certain rejection by the Senate, leaving final Corp funding for fiscal year 2012 uncertain.



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Support Builds for Repealing the Government Contractor Withholding Tax

Efforts to repeal the burdensome 3 percent government contractor withholding tax are gaining ground in Washington.

The repeal legislation in the House, H.R. 674, now has 202 co-sponsors, just 16 shy of a majority of the chamber. Meanwhile, more than a quarter of the Senate is co-sponsoring one, or both, of that chamber's repeal bill's (S. 89, S. 164), indicating the broad bipartisan and bicameral support for eliminating this ill-conceived law.

Created by Sec. 511 of the 2006 Tax Increase Prevention Reconciliation Act, this onerous tax requires federal, state and local government entities whose annual expenditures exceed $100 million to withhold 3 percent of all payments made to any individual or company that provides goods or services to the government. This amount is then sent to the IRS and credited against a government contractor's future tax liability. The law effectively forces contractors to make interest-free loans to the federal government. In some cases, the amount will exceed a business' profit margin. The tax was set to go into effect at the end of 2011, but has been delayed until January 2013.

This groundswell of support for repeal is driven by a barrage of grassroots action from AED and countless other associations and businesses. Are your lawmakers among those backing this common sense reform to the tax code? Click here to send a note to your representative and senators urging them to eliminate this law once and for all.



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