Bob Graham

Mr. GRAHAM

Mr. GRAHAM. Would that indicate that if there were in the underlying bill that is now before the Senate also measures which effected revenues that the bill would similarly be subject to a constitutional point of order?

Mr. GRAHAM. Mr. President, I have a further parliamentary inquiry.

Mr. GRAHAM. The letter from the Congressional Budget Office, submitted to Chairman Warner on February 12, 1999, on page 9, indicates that there has been an effect in the change of receipts as a result of provisions which are in the underlying bill. The question is, would that make the underlying bill subject to the same constitutional point of order as effecting revenue?

Mr. GRAHAM. Point of order, Mr. President. There was also, I believe, no provision in the unanimous-consent agreement we accepted that would have sanctioned the constitutional point of order against the amendment. Mr. WARNER addressed the Chair.

Mr. GRAHAM. Further parliamentary inquiry, Mr. President. Would a motion asking unanimous consent that a constitutional point of order be available be in order?

Mr. GRAHAM. Mr. President, I ask unanimous consent that I be allowed to raise a constitutional point of order.

Mr. GRAHAM. Mr. President, parliamentary inquiry.

Mr. GRAHAM. I thank the Chair. Mr. President, I have some remarks to make on the bill itself, and I would like to join in commending my good friend, Senator Warner, for the leadership that he has already provided to raise America's attention to the status of our military, to the demands that are being placed upon it around the world, and the need to be able to recruit and retain the best quality American men and women in order to sustain those missions. I am pleased that Senator Warner and his committee, as well as the President, have sent forward proposals to assist us in dealing with this issue. I stand ready to support serious and responsible proposals. Also, I must, however, join in many of the comments that have just been made by our colleague from Oklahoma, Senator Nickles, about specific components of this proposal which are troubling. But it is to a different set of issues that I want to direct my attention, and that is the issue of fiscal discipline in this legislation because I fear that this bill ignores the budgetary rules and principles of fiscal responsibility which we have relied upon to guide us to this first balanced budget that we have had in over 30 years. I am concerned that as we take the action that is called for in this bill we would be reverting to a path of history which got this country into very serious trouble. It was in the early 1980s, Mr. President, that we had then a Republican in the White House and we had Democrats in control of the House of Representatives. Both parties decided that they wanted to support a tax cut for the American people. It was very popular. The result was that the Republican President and the Democratic House of Representatives got into a frenzy to see who could one-up the other in terms of the larger tax cut. And the consequence was that we had a tax cut which went beyond what either side had initially thought was prudent and which some 15 years later resulted in the United States having almost a $6 trillion deficit--a $6 trillion national debt. I hear echoes of that 1980s debate here today as we have the President offering one set of proposals for significant enhancement in military compensation and pension and retirement, and now we have a Congress of another party outbidding the President in those same areas of compensation and pension and retirement. The echoes I hear today are not just from the early 1980s. They are from as recent as last October. We will recall we adjourned, for all practical purposes, but still with a major piece of undone business in October of 1998, and that undone business was a substantial number of the appropriations bills which had not passed through the normal process of consideration in the two Houses, conference committees, and final vote and signature into law by the President. And so during the days of October when most of us were back in our home States, we had this gigantic, what Senator Byrd has referred to as a monstrosity of an appropriations bill, and inserted into that monstrosity was the most monstrous, in my opinion, of its provisions which was an emergency spending provision. Emergency spending under the Budget Act has always been given special consideration because we are dealing with a narrow set of unexpected events that had traumatic adverse consequences on some of our people. It might be a flood or a hurricane or an earthquake or other type of disaster. The special provision of that emergency appropriation is unlike all other spending in the Federal Government; it didn't have to meet the rules of fiscal discipline. You didn't have to find an offset, another source of spending to reduce or a tax to increase to pay for emergency spending. But we have been fairly disciplined in the use of that emergency appropriation provision, and it had served the Nation well until October of 1998 when out of this monstrous appropriations bill comes an emergency spending provision of almost $22 billion--$22 billion of emergency spending, a third to a half of it in items that had never been of the type that had warranted emergency spending designation. But when we came back here for a 1-day session in mid-October we were faced with the prospect of voting up or down on this monstrosity, including the emergency spending, or throwing the Government into fiscal chaos. And so reluctantly many of us, including myself, voted for that provision. We did a very serious error to our Nation's commitment to fiscal responsibility through that legislation and particularly through the emergency appropriation. What concerns me, Mr. President, is that was the last act of the 105th Congress. Now what is about to be the first act after having completed our role as triers in an impeachment trial, what is our first legislative act of the 106th Congress? It is going to be to pass legislation that is even to a greater degree than that emergency appropriation an unfunded expenditure of the Federal Government. We are proposing to pass a bill which at the time it was introduced had slightly over $14 billion of unfunded direct outlays or reductions in receipts and which now by virtue of amendments adopted in the committee and on the floor has added another $2.5 billion of unfunded costs. Mr. President, I would read from the report issued by the Congressional Budget Office to Chairman John W. Warner on February 12, 1999, on page 9 of the report, which I understand has been printed in the Record, the section called ``Pay-As-You-Go Considerations.'' I quote: Section 252 of the Balanced Budget and Emergency Deficit Control Act of 1985 sets up pay-as-you-go procedures for legislation affecting direct spending or receipts. The net changes in outlays and governmental receipts that are subject to pay-as-you-go procedures are shown in the following tables. For the purposes of enforcing pay as you go procedures, only the effects in the current year, the budget year, and the succeeding four years are counted. Mr. President, in that chart it indicates that as the bill was first considered in committee, there was $14.051 billion unfunded outlays or reductions in Federal receipts. So we have legislation here which carries with it serious historical baggage, and we know exactly where that baggage took us in the 1980s. Frankly, Mr. President, we don't want to go back there again. There is another consequence, and that is who is going to pay for this baggage in this legislation. It is said, well, we have a surplus now. Let's pay it out of the surplus. Well, the fact is the only surplus we have is the surplus which has been generated by the Social Security trust fund, a trust fund which is generating more in receipts than in outflows. So, when we talk about paying for this through the surplus, let us understand that we are paying for this by a direct raid against the Social Security system, since it is only through Social Security that any surplus exists. Mr. President, this is a terrible idea. To pass this legislation without paying for it is irresponsible. It is unfunded spending. It is a raid on Social Security. It is a clear path back to the out-of- control deficits and constant growth in our national debt that we have experienced for the last 20 to 30 years. This bill is a test at the very beginning of the 106th Congress. Can we be trusted to save Social Security? Can we be trusted to manage, with discipline, the surplus that we have? Are we going to spend every cent that we can get our hands on, and do it in a way that risks the future of Social Security? This bill violates the very principles of fiscal responsibility that were created to achieve the balanced budget at which we have now so late arrived. Where is the fiscal discipline? Why are we violating the pay-as-you-go principle, which the Congressional Budget Office has so clearly indicated we are--this principle that has kept us in line and allowed us to achieve a balanced budget? Why are we spending the Social Security surplus before we save Social Security first? The mantra of 1998 was ``Save Social Security First,'' and we understood that what that meant was that we were committed to secure the Social Security system for three generations, so that some of the young people who have just joined us in the gallery, when they get ready to retire, they would have a Social Security system. Why have we so quickly moved away from the principle of a secure Social Security system to the year 2075 before we spend any of the Social Security surplus? Why did we violate that principle in October of 1998? Why are we about to violate that principle again in February of 1999? We have heard some things about the surplus. We have heard that over the next 15 years we are going to have a surplus of approximately $4.7 trillion, and we have heard that surplus is roughly 62 percent made up of Social Security surpluses, 38 percent made up of general revenue. Let me tell you a couple of things about those numbers that maybe we have not fully appreciated. First, the $4.7 trillion depends upon a whole set of economic assumptions holding up for 15 years. I would like you to test your confidence in that by going back to the year 1984, and seeing what the projections were to the year 1999 and then test how accurate those projections were. We have some considerable confidence in the general range of the Social Security surpluses because they are based on a percentage of payroll tax; they are based on outlays to a fairly known and predictable group of American beneficiaries of Social Security. It is the non-Social Security side of the surplus that is the question mark. What we are doing, by spending the Social Security-generated surplus now, is asking every current and future Social Security beneficiary to be willing to take the risk that those estimates of what the general revenue surplus will be 10, 12, 15 years from now will prove out to be accurate. That is a risk that I am not prepared to ask current and future Social Security beneficiaries to assume. There is a second aspect about those numbers. There is an assumption that this division of 62 percent/38 percent is a fairly consistent allocation. Wrong. If we divide the 15-year period over which this projection has been made into three 5-year components, here is what we find out: In the first 5 years, from 1999 to the year 2003, depending on whether you are using CBO numbers or Treasury estimates, between 90 and 97 percent of that surplus is Social Security--90 to 97 percent in the next 5 years is going to come exclusively from Social Security. In the next 5 years, from 2004 to 2008, approximately two-thirds of the surplus will be from Social Security. It is only when you get in the years past the year 2009 that Social Security becomes less than half of the source of the surplus. And that occurs largely because, in the year 2013, Social Security goes negative; that is, annual receipts will be less than the annual outlays. What we are proposing now is, in the very first year, when more than 100 percent of the surplus is Social Security--and that is because we are still running a deficit in our general revenue accounts--we are going to start drawing this surplus down. Just as we did in October of 1998 to pay for nonemergency emergencies, we are now going to be doing it to pay for this unfunded compensation package. Mr. President, I think there is a responsible thing to do, and that responsible thing to do is to pay for it. If this is an important national issue, if the security of our country is at risk because of deficient compensation, we should recognize that fact. We should not ask our grandparents to pay for it by reducing Social Security; we should all be prepared to pay for it. Mr. President, it is my intent to offer an amendment which will cover the original unfunded amount of this legislation and the unfunded components that have been added by amendment in committee, and now on the floor. I believe those numbers come to approximately $16.5 billion. I have asked the staff to confirm that those numbers are correct. If they are correct, I will offer an amendment which has three provisions--two of them are extensions of excise taxes which have now lapsed. They are primarily in the Superfund area. And the third is a tax provision which was offered and adopted by Senator Coverdell, as part of other legislation during the 105th Congress, and relates to the taxation of foreign source income. Those three provisions would produce the amount of revenue necessary to cover the $16.5 billion over the next 10 years of the unfunded component of this legislation. Once I have verified the correctness of the numbers, I will submit that amendment. Mr. President, this will give us an opportunity to be responsible in two ways. We would be responsible to our national security by providing the kind of compensation program that would attract and retain the quality Americans that we need in order to defend our Nation and advance our national interests around the world. We would be responsible to this and future generations of Americans by saying we will pay for these costs, not ask that they be added to the already enormous credit card debt that our grandchildren are eventually going to have to be paying as a result of the previous absence of discipline. So, we have an opportunity to redeem ourselves, and as the first act of the 106th Congress, not to set an example of wasteful lack of discipline, but, rather, of fiscal maturity, of fiscal responsibility, which I believe will be very well received by all of our fellow Americans. Privilege of the Floor Mr. President, I ask unanimous consent to allow Mr. Erik Lieberman and Ms. Rebecca Schwalbach to have the privilege of the floor during the pendency of this bill.

Mr. GRAHAM. Mr. President, if I may? Mr. Chairman, it is my intention, as soon as we verify the additional unfunded amendments which we have in committee and on the floor, and therefore have a total of the extent of unfunded outlays under S. 4, to then offer an amendment which will be sufficient to cover the full extent of those unfunded items. I have not yet sent up that amendment.

Mr. GRAHAM. Mr. President, further inquiry.

Mr. GRAHAM. The specific nature of a constitutional point of order was that the amendment that I had offered would have effected taxation and therefore required that this measure be originated in the House of Representatives, is that correct?

Mr. GRAHAM. I have not yet sent up that amendment. Amendment No. 27 (Purpose: To amend title 38, United States Code, to expand the list of diseases presumed to be service-connected with respect to radiation- exposed veterans)

Mr. GRAHAM. Mr. President, earlier this afternoon I made some remarks consistent with those that have just been made by the Senator from Michigan concerning the fact that we were, as the first legislative action of the 106th Congress, about to pass a bill that was substantially unfunded, therefore creating not only the risk to the surplus, which today is a 100-percent Social Security surplus, but also establishing a dangerous precedent for future actions. Having so recently arrived at a balanced budget, we should not fritter that away the first opportunity that we have in this Congress. There are a number of ways we can pay for this. We can pay for it by an amendment that would take funding from some other sources of the Federal Government, reduce those in the amount equivalent to balance the expenditure in this proposal. There has been no such amendment offered. Another way is to raise taxes to a level sufficient to offset the additional spending. Mr. President, I indicated that it was my intention to offer such an amendment. I now send that amendment to the desk.

Mr. GRAHAM. Mr. President, I ask unanimous consent that the reading of the amendment be dispensed with.

Mr. GRAHAM. Mr. President, the reason for the delay is an attempt to get as close a verification as possible as to just what is the unfunded amount in this legislation. The best number available to us through the staffs of the majority and minority of the committee is $16.5 billion over the next 10 years. The amendment I am offering will raise $17.9 billion over that period. It consists of four items. The first is a reinstatement of the environmental tax imposed on corporate taxable income and deposited in the hazardous substance Superfund. This was a tax that was in effect up until 3 years ago, when it lapsed. There have been proposals to reestablish this tax as part of a Superfund reform bill. The controversy has been more on what the nature of that reform bill will be than the extension of the tax itself. So I am proposing that we extend this tax and, frankly, hope that before this Congress is over the committee upon which the Presiding Officer and the chairman of the Armed Services Committee sit will in fact produce a reformed Superfund bill. The second item is a reinstatement of the excise taxes which also lapsed and which would, but for that, have been deposited in the hazardous substance Superfund bill. Both of those would be reinstated as of June 30, 1999. The third item is a modification of the foreign tax credit carry- over. This was the provision the Senate adopted last year in legislation that was offered by Senator Coverdell of Georgia. It did not become law. Under the current law, if a corporation has a tax credit based on payment of taxes in a third country, the company can get a 3-year carry-back--that is, can apply that foreign tax credit for 3 past corporate tax years--or can carry it forward for 5 years. This would adjust that by providing there would only be a 1-year carry-back but would give a 7-year carry-forward. The third is a reinstatement of the oil spill liability trust fund excise tax with an increase in the trust fund ceiling to $5 billion. This would be through September 30 of the year 2009. Those four measures, as I indicated, over the 10-year period from 1999 through 2008, would raise a total of $17.979 billion and would fully cover the projected cost of this legislation. I urge the adoption of this amendment so that we can achieve the dual purpose of seeing that we provide the compensation for our service personnel while at the same time maintain the fiscal discipline which we are so proud and pleased has brought us to the first balanced budget in 30 years, an objective that we do not want to frivolously lose. Mr. President, I ask unanimous consent to have printed in the Record a table reflecting the estimated revenue effects of possible revenue offsets for this bill.

Mr. GRAHAM. Mr. President, if the plan is to stack this and other amendments, could we have a period of 3 or 4 minutes prior to the vote on those stacked amendments to review them with our colleagues before they vote?

Mr. GRAHAM

Mr. GRAHAM. ``We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are Life, Liberty, and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed.'' Those words were a radical declaration when spoken in 1776. Never before had it been asserted that the purpose of government was to secure the individual freedoms and liberties of its citizens. To the contrary, previous governments existed for the opposite purpose; to control the people and suppress their aspirations. Eleven years after the Continental Congress approved these revolutionary sentiments--and after a violent war which severed the colonies' tie to King George III--many of the same individuals who had declared independence gathered again in Philadelphia to secure those rights so recently and tenuously won. The governmental structure they constructed during those weeks in the oppressive summer heat was far from simple. But its complexity wasn't an accident, or simply a result of the diverse geographical and economic interests represented at the Constitutional Convention. As our colleague Senator Patrick Moynihan has so aptly observed, our government was the first to insert conflict as a conscious element, to achieve inefficiency by design. Our nation's founders had personal knowledge of and experience with English history, in which both Kings and Parliaments had at times exerted excessive power over the people. They realized that liberty would be enhanced if political power was divided instead of centralized. Unlike other forms of democracy, where a no confidence vote of the national legislature can bring down a government at any time, the Framers took great pains to establish a delicate balance of powers--and a careful system of checks and balances--between the nation and the states and among the executive, legislative, and judicial branches of the federal government. They created a structure in which every branch would have the strength needed to keep excessive power from flowing into the hands of any other branch and thus threatening the liberties of the people. This determination to achieve balance is reflected in the discussion of impeachment and removal from office in Article I, Section 3 of the Constitution. By requiring action from both houses of Congress, and mandating a two-thirds Senate majority for removal, the Framers purposely made it difficult for Congress to undo the results of a properly constituted Presidential election--one of the most disruptive acts imaginable in a democracy--and relieve a President of his or her constitutional duties. The Framers wisely recognized that impeachment, when improvidently used, could create an overbearing Congress from the ruins of a destabilized and delegitimized Presidency. But the Framers' attention to balance was not limited to the procedures of impeachment. They also made clear their belief that impeachment and removal from office should only be an option in situations in which a President becomes a threat to the government and the people it serves. We see this in their small number of enumerated offenses--Treason, Bribery, other High Crimes and Misdemeanors--and in their commentary. For example, at the Constitutional Convention in 1787, George Mason said that the term ``high crimes and misdemeanors'' referred to ``great and dangerous offenses'' and ``attempts to subvert the Constitution.'' Mr. Chief Justice, the President's self-indulgent actions were immoral. Disgraceful. Reprehensible. History should--and, I suspect, will--judge that William Jefferson Clinton dishonored himself and the highest office in our American democracy. But despite their disreputable nature, President Clinton's actions should not result in his conviction and removal from office. After careful objective study of each article presented by the House of Representatives, I have concluded that the charges against the President do not meet the high constitutional standards established by the Framers. Removal of this President on the grounds established by the House Managers would upset the delicate balance of powers so meticulously established 212 years ago. Mr. Chief Justice, the Framers set high standards for removal because they understood that the office of the Presidency would be held by imperfect human beings. They assembled a government that could withstand personal failings. We should be outraged that William Jefferson Clinton's personal failings debased himself and his office. But they did not cause permanent injury to the proper functioning of our government. He did not upset the constitutional balance of powers. I hope that the Chief Justice, my colleagues, and the American people will not misinterpret my comments. While it has not been proven that President William Jefferson Clinton committed the high crimes and misdemeanors required for removal from office, he is not above the law. His acquittal in this impeachment trial is not exoneration. The framers made this clear in Article I of the Constitution. They established that an impeached President, even if convicted and removed from office, would still ``be liable and subject to Indictment, Trial, Judgement, and Punishment, according to law.'' When this President leaves office, he could face sanction or conviction for his actions. Mr. Chief Justice, during the questioning phase of this trial, I sought assurances from the President, through White House Counsel Mr. Charles Ruff, that he would not attempt to circumvent this judicial process by seeking a pardon for his actions. Counsel Ruff responded as follows: I have stated formally on behalf of the President in response to a very specific question by the House Judiciary Committee that he would not, and, indeed, we have said in this Chamber, and we have said in other places, that the President is subject to the rule of law like any other citizen and would continue to be on January 21, 2001, and that he would submit himself to whatever law and whatever prosecution the law would impose on him. He is prepared to defend himself in that forum at any time following the end of his tenure. And I committed on his behalf, and I have no doubt that he would so state himself, that he would not seek or accept a pardon. I take Counsel Mr. Charles Ruff at his words. Once the President leaves office, he will be subject to the same prosecutorial and judicial review that all Americans face. Mr. Chief Justice, now that we are at the end of this divisive and unpleasant experience, what have we learned? We have learned that the Constitution works. The Framers made it clear that the President should only be impeached and removed from office in cases where he becomes a threat to the government and the governed. The President's acquittal will uphold the sanctity of the office and prevent a weakening of the balance of powers that protects our individual rights and liberties. We have reaffirmed the principle that no man is above the law. While I believe that the President is not guilty of high crimes and misdemeanors in this court of impeachment, he will be subject to legal sanction in other forums when he becomes a private citizen. Mr. Chief Justice, the President's misdeeds will affect his standing in history. But they do not justify the first removal of a President of the United States from the office to which he was elected by the American people. When my name is called on the roll, I will vote ``not guilty'' on both articles of impeachment.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I am proud to join Senator McConnell and other colleagues in launching an initiative to increase Americans' access to college education. Today we are introducing the College Savings Act of 1999. This bill would allow states to offer prepaid college tuition and savings programs on a tax exempt basis. These programs have flourished in the face of spiraling college costs. According to the College Board, between 1980 and 1997, tuition at public colleges increased 107 percent, while the median income increased just 12 percent. The cause of this dramatic increase in tuition is the subject of significant debate. But whether these increases are attributable to increased costs to the universities, reductions in state funding for public universities, or the increased value of a college degree, the fact remains that financing a college education has become increasingly difficult. Although the federal government has increased its aid to college students over the years, it is the states who have engineered innovative ways to help its families afford college. Michigan implemented the first prepaid tuition plan in 1986. Florida followed in 1988. Today 43 states have either implemented or are in the process of implementing prepaid tuition plans or state savings plans. Mr. President, prepaid college tuition plans allow parents to pay prospectively for their children's higher education at participating universities. States pool these funds and invest them in a manner that will match or exceed the pace of educational inflation. This ``locks in'' current tuition prices and guarantees financial access to a future college education. Prior to 1996, the IRS had indicated that it would treat the state entity that held and invested the funds as a taxable corporation. In addition, the IRS stated its intent to tax families annually on earnings on amounts transferred to a state program. In the Small Business Jobs protection Act, The 104th Congress did two things: (1) it said that provided the program met certain standards, the state program would be tax exempt. (2) Congress also said that families could not be taxed on earnings on an account until a distribution is made from the state plan to the family or the applicable college. At that point, student beneficiary could be taxed on the earnings. The following year, in the Taxpayer Relief Act, The 105th Congress clarified that this deferral of taxation applied not only to prepaid tuition but also to prospective payments for room and board. Senator McConnell and I believe that The 106th Congress must go one step further. Distributions from these accounts should be 100 percent tax free. Students should be able to enroll in college without fear of them having to pay taxes on the money accrued. We believe that these programs should be tax free for numerous reasons. First, for most families, they have in essence purchased a service to be provided in the future. The accounts are not liquid. The funds are transferred from the state directly to the college or university. Under current policy, the student is required to find other means of generating the funds to pay the tax. Second, Congress should make these programs tax free in order to encourage savings and college attendance. No longer is a student's question ``Will I be able to go to college?'' but instead ``Where will I go to college?'' Third, making these accounts tax free is good education fiscal policy. For states that do set up programs where they guarantee a tuition price by selling contracts, the existence of these programs puts downward pressure on education inflation. Perhaps most importantly, prepaid tuition and savings programs help middle income families afford a college education. Florida's experience shows that it is not higher income families who take most advantage of these plans. It is middle income families who want the discipline of monthly payments. They know that they would have a difficult time coming up with the funds necessary to pay for college if they waited until their child enrolled. In Florida, more than 70 percent of participants in the state tuition program have family incomes of less than $50,000. I am pleased to have this opportunity to join my colleagues in support of good tax policies which enhance our higher education goals. Prepaid tuition plans deserve our support through enactment of legislation that would make them tax-free for American families and students.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I am proud to join Senator McConnell and other colleagues in launching an initiative to increase Americans' access to college education. Today we are introducing the College Savings Act of 1999. This bill would allow states to offer prepaid college tuition and savings programs on a tax exempt basis. These programs have flourished in the face of spiraling college costs. According to the College Board, between 1980 and 1997, tuition at public colleges increased 107 percent, while the median income increased just 12 percent. The cause of this dramatic increase in tuition is the subject of significant debate. But whether these increases are attributable to increased costs to the universities, reductions in state funding for public universities, or the increased value of a college degree, the fact remains that financing a college education has become increasingly difficult. Although the federal government has increased its aid to college students over the years, it is the states who have engineered innovative ways to help its families afford college. Michigan implemented the first prepaid tuition plan in 1986. Florida followed in 1988. Today 43 states have either implemented or are in the process of implementing prepaid tuition plans or state savings plans. Mr. President, prepaid college tuition plans allow parents to pay prospectively for their children's higher education at participating universities. States pool these funds and invest them in a manner that will match or exceed the pace of educational inflation. This ``locks in'' current tuition prices and guarantees financial access to a future college education. Prior to 1996, the IRS had indicated that it would treat the state entity that held and invested the funds as a taxable corporation. In addition, the IRS stated its intent to tax families annually on earnings on amounts transferred to a state program. In the Small Business Jobs protection Act, The 104th Congress did two things: (1) it said that provided the program met certain standards, the state program would be tax exempt. (2) Congress also said that families could not be taxed on earnings on an account until a distribution is made from the state plan to the family or the applicable college. At that point, student beneficiary could be taxed on the earnings. The following year, in the Taxpayer Relief Act, The 105th Congress clarified that this deferral of taxation applied not only to prepaid tuition but also to prospective payments for room and board. Senator McConnell and I believe that The 106th Congress must go one step further. Distributions from these accounts should be 100 percent tax free. Students should be able to enroll in college without fear of them having to pay taxes on the money accrued. We believe that these programs should be tax free for numerous reasons. First, for most families, they have in essence purchased a service to be provided in the future. The accounts are not liquid. The funds are transferred from the state directly to the college or university. Under current policy, the student is required to find other means of generating the funds to pay the tax. Second, Congress should make these programs tax free in order to encourage savings and college attendance. No longer is a student's question ``Will I be able to go to college?'' but instead ``Where will I go to college?'' Third, making these accounts tax free is good education fiscal policy. For states that do set up programs where they guarantee a tuition price by selling contracts, the existence of these programs puts downward pressure on education inflation. Perhaps most importantly, prepaid tuition and savings programs help middle income families afford a college education. Florida's experience shows that it is not higher income families who take most advantage of these plans. It is middle income families who want the discipline of monthly payments. They know that they would have a difficult time coming up with the funds necessary to pay for college if they waited until their child enrolled. In Florida, more than 70 percent of participants in the state tuition program have family incomes of less than $50,000. I am pleased to have this opportunity to join my colleagues in support of good tax policies which enhance our higher education goals. Prepaid tuition plans deserve our support through enactment of legislation that would make them tax-free for American families and students.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I rise today to introduce the Central American and Caribbean Relief Act of 1999. I am joined in this by my colleagues Senators DeWine, Coverdell, Domenici, Landrieu, Dodd, Hatch, Frist, Mack, and Hagel. This bill is a comprehensive disaster relief package that will help our Caribbean and Central American neighbors recover from the devastation caused by Hurricane Georges and Hurricane Mitch. This past fall, two hurricanes ravaged our neighbors in Central America and the Caribbean, causing death and destruction that has not been seen in this hemisphere in over 200 years. First, Hurricane Georges hit the Puerto Rico, the Dominican Republic, Haiti, the Florida Keys, and the Gulf Coast of the United States in September of 1998, with a ferocity that resulted in 250 deaths and more than $1 billion in damage. Only a month later, Hurricane Mitch attacked Central America, killing more than 10,000 people and leaving 3 million homeless. Hurricane Mitch unleashed a series of destructive forces--floods, mudslides, disease--that have affected the lives of 3.2 million residents in five nations. In Honduras alone, over 30 percent of the population was displaced by Mitch. To put this in perspective, had the U.S. suffered comparable levels of damage, 80 million of our citizens would have been displaced. The scale of this disaster is truly astounding. I had the opportunity to see this destruction for myself when I visited the region in January. I witnessed whole villages that were completely washed away, families crammed into open-air shelters, and children playing among the concrete remanents of bridges and buildings. I saw field after field destroyed by the heavy rains. The losses in the agricultural sector were staggering. In Honduras alone, an estimated 70% of the crops were destroyed, including 90% of the country's banana and grain crops. Because agriculture employs approximately half of the regional workforce, these losses have resulted in tremendous economic disruption. The Central American and Caribbean Relief Act is a comprehensive plan that will help these struggling nations get back on their feet and rebuild their economies. First, the bill will expand the current trade benefits provided under the Caribbean Basin Initiative. During my recent visit to the region their was unanimous agreement, from the Presidents of the countries to members of the private sector, the CBI enhancement is the number one priority of their economic recovery plan. History shows that expanding trade with the Caribbean Basin helps our own economy, expanding U.S. exports to the region at the same time that we build important trading relations with our closest neighbors. Any disaster relief package that does not include CBI enhancement falls far short of the mark. The second part of this package will continue and expand current humanitarian and disaster assistance activities in the region. This will help to rehabilitate agricultural production, rebuild bridges and roads, provide much needed housing, clear landmines, restore safe water and health care, and help prevent similar disasters in the future. This is a continuation of the heroic efforts that the U.S. Government has already undertaken in response to these hurricanes. U.S. forces have been there since the day the disaster struck, rescuing hundreds from certain death, moving 30 million pounds of relief supplies, and helping rebuild the regions critical infrastructure. By working to improve economic development of the region, we will help prevent needless environmental damage, strengthen the development of democracy in the region, and protect against the proliferation of narcotics trafficking. An investment in the long-term recovery of the region, which is so important to the United States both economically and politically, will produce benefits for the entire Western Hemisphere. The bill includes the following initiatives: $600 million to expand funding for humanitarian efforts to meet needs for health, water/sanitation, road reconstruction, agricultural restoration, agricultural microcredit, food, shelter, disaster mitigation and other emergency relief; Enhancement of the Caribbean Basin Initiative (CBI) to give the nation of Central America and the Caribbean the opportunity to quickly expand their economies and expand the manufacturing sector while they rebuild their agricultural base; $16 million for bilateral debt forgiveness for Honduras; A micro-credit initiative targeted at reviving agricultural production in the region; $150 million to replenish Defense Department funds depleted in the immediate aftermath of the disaster, including the humanitarian relief fund that supports landmine detection and removal; $70 million to expand New Horizons, a Department of defense program in the region that builds housing and roads, provides medical care, health services, and clean water to affected areas; Authorization of an OPIC direct equity pilot program to assist U.S. businesses in the region, develop low income housing, and rebuild damaged infrastructure; and $25 million for the Central American Emergency Trust Fund to be applied against multilateral debt and provide external financing needs. As we move forward to address the devastation of this event, the choice facing the United States is clear: we can continue to provide emergency assistance to the region for the foreseeable future and prepare for waves of refugees, or we can act to implement a comprehensive disaster recovery program that will rebuild the economies of the affected nations, allowing them to provide for themselves. The choice is simple, because helping these nations recovery is in our own interest. Failure to act will hurt ourselves and our neighbors. The Central American and Caribbean Relief Act is an important opportunity for the United States to lend a hand to neighbors in need and help them get back on their feet. Mr. DeWINE. Mr. President, today, the Senator from Florida, Mr. Graham and I are introducing The Central American and Caribbean Relief Act of 1999. We are joined in this effort by the following original co-sponsors: Mr. Coverdell, Mr. Domenici, Ms. Landrieu, Mr. Dodd, Mr. Hatch, Mr. Mack, Mr. Frist, and Mr. Hagel. This important legislation is both timely and vital. I urge my colleagues to join us as co-sponsors and to work with us to pass it as soon as possible. Last year, several of our neighboring countries suffered serious catastrophic natural disasters. First, Hurricane Georges struck Puerto Rico, the Dominican Republic and Haiti resulting in hundreds dead and billions of dollars in damage. These countries were just starting to recover when Hurricane Mitch rolled through various countries in Central America. Hurricane Mitch left unspeakable devastation with over 9,000 dead, another 9,000 still missing, and millions homeless. The physical devastation will take decades to repair in Honduras and Nicaragua. And these countries are not alone: Guatemala, El Salvador, and Belize have suffered as well. Mr. President, many senior officials in our government have visited these devastated regions--and I applaud their interest and exhaustive efforts. I have visited this region numerous times within the past year and I plan to go back. I applaud the extraordinary displays of teamwork, compassion, and generosity exhibited by the citizens of Ohio, as well as all Americans, in their effort to help the victims of Hurricane Mitch. Their unselfish donations to organizations such as the Northeast Ohio Salvation Army and the Ohio Hurricane Relief for Central America as well as the many other national and local relief agencies serve as an inspirational reminder of the global human community spirit we Americans so often display. And we certainly do not want to forget the quick response provided by our men in uniform, including Ohio's own 445th Air Reserve Wing, in saving lives and tackling the daunting task of helping to rebuild that region's infrastructure. My concern, however, is that once Hurricane Mitch fades out of the headlines, there's a risk that this vitally important region itself will also disappear off America's sometimes limited radar screen of foreign policy attention. The time has come not to address the devastation that has passed, but to begin the development that is important to our hemisphere's future. That is why the Central America and Caribbean Relief Act is so important. This act would provide (1) trade opportunities to help the region restore itself economically; (2) emergency assistance--feeding programs, and important and necessary infrastructure improvements; and (3) limited bilateral and multilateral debt reduction. Mr. President, let me take a moment to comment on the highlights of this bill. First, this bill would provide several trade and investment initiatives. It will afford current beneficiaries of the Caribbean Basin Initiative similar treatment already afforded Mexican products under the North American Free Trade Agreement. It is important that these countries become more fully integrated into the international trading system, which also would benefit the U.S. through expanded export opportunities. The bill also would authorize additional funding for the Overseas Private Investment Corporation to enhance the ability of private enterprise to make its full contribution to the region's rebuilding and development process. Second, this bill would provide bilateral assistance. I fully support the replenishment of funds exhausted by the Department of Defense in their humanitarian relief efforts. It is very important that our military's efforts in this area continue and that they maintain sufficient resources to effectively deploy against future natural disasters. We also included language based on the innovative ``Africa Seeds of Hope'' law, which I wrote and Congress passed last year. This language would authorize a micro-credit initiative targeted at reviving agricultural production in the region. This means that financial tools and resources would go directly to farmers and small businesses and bypass Government middlemen. Finally, this bill would provide much needed debt relief. This debt relief clearly makes sense especially when keeping in mind that in many cases, the infrastructure these countries are paying for is precisely what has been destroyed by Hurricane Mitch--they are paying for what no longer exists. Mr. President, let me explain why America should take the lead on this relief. Before the hurricanes, the people of Central America were emerging from a decade of civil war. Democracy has finally taken hold, but is not yet irreversible. The United States invested billions in the 1980s to expel communism from Central America. We succeeded. That investment--that partnership for democracy in Central America now hangs in the balance. In the 1980s, it was fundamentally important to the entire hemisphere that Central America be a seedbed of reliable trading partners--not revolutionaries or brutal autocrats. The President's National Bipartisan Commission on Central America, chaired by Henry Kissinger, released a detailed report in 1984 that expressed our basic challenge. We needed then, and still need today, a comprehensive Central America policy--one that responds not to fleeting crises but to the basic needs of the region and the United States. These needs do not change. They are the same three principles that formed the core of the philosophy of the Kissinger report: ``Democratic self-determination * * * encouragement of economic and social development that fairly benefits all * * * (and) cooperation in meeting threats to the security of the region.'' This report recognized how free markets and free societies work to strengthen each other. U.S. policy has made excellent progress on all of these counts, but Hurricane Mitch provides a pointed reminder of how fragile--and reversible--the progress can be. History offers us a sober reminder that from misery, despair, and joblessness springs oppression. We must not forget that the seeds of the 1979 Sandinista Revolution in Nicaragua sprouted from the wreckage of the 1972 Managua earthquake. Indeed, it is only now that the old city center is being rebuilt where mangled, vacant buildings still stand as witness to Somoza's failed dictatorship. Mr. President, today Nicaragua faces a new natural disaster--greater than that of 1972. The infrastructure in the northern provinces, the locus of revolutions throughout this century, is washed away. In Honduras, the government is confronted with thousands of miles of roads where not one bridge is left undamaged or undestroyed. At the devastated banana plantations of Honduras, 12,000 jobs hang in the balance. The tax base is non-existent because the businesses that provided the jobs are destroyed. The task facing these governments is enormous, and the resources to address these problems are meager. People who cannot feed their families will turn to any source for assistance. Unless we partner with the people of Central America in the name of progress, the alternatives are clear. The pressure to emigrate to the United States could increase. Colombia's drug traffickers could oblige by putting dollars into their hands. And anti-democratic elements could use the devastation to serve their self-interests. A peasant who has seen his home blown away and his employment gone will look for work wherever it is available. We saw a massive upsurge in migration during the tumultuous 1980's. The same is beginning to happen now. The number of Central Americans detained and expelled at Mexico's southern border has doubled recently. Mexican officials worry that this increase could be the beginning of a prolonged, large scale migration of Central Americans through Mexico to the United States. Furthermore, a farmer who has seen his crop destroyed, and the only road to his markets washed away, will be liable to support revolutionary demagogues who vow convincingly that they can repair it. If the current elected governments are unable to repair the roads and give temporary assistance, that same farmer could become part of the next popular insurgency. Central America is full of former revolutionaries who are capable of exploiting Mitch's misery to rebuild new insurgencies that will tax the resources of the current governments. Promises easily made by fast- talking demagogues can lead to future problems of the kind that we addressed and resolved in the 1980s. Mr. President, the challenge we face in Central America remains the same as that posed by the Kissinger report: Do we want Central America to be our partner in building up a prosperous hemisphere--or a hotbed of revolutionary unrest? The choice is not entirely our own, but we can--and should--have a huge influence on behalf of freedom, prosperity, and stability. We must send an unmistakable signal to our Southern neighbors that our regional commitment is not tentative or fleeting. The U.S. has to seize the initiative over the long-term future of Central America--because if we don't, events will. Mr. President, the Central American and Caribbean Relief Act is in our economic and national security interests. We must act and we must act now.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I rise today to introduce the Central American and Caribbean Relief Act of 1999. I am joined in this by my colleagues Senators DeWine, Coverdell, Domenici, Landrieu, Dodd, Hatch, Frist, Mack, and Hagel. This bill is a comprehensive disaster relief package that will help our Caribbean and Central American neighbors recover from the devastation caused by Hurricane Georges and Hurricane Mitch. This past fall, two hurricanes ravaged our neighbors in Central America and the Caribbean, causing death and destruction that has not been seen in this hemisphere in over 200 years. First, Hurricane Georges hit the Puerto Rico, the Dominican Republic, Haiti, the Florida Keys, and the Gulf Coast of the United States in September of 1998, with a ferocity that resulted in 250 deaths and more than $1 billion in damage. Only a month later, Hurricane Mitch attacked Central America, killing more than 10,000 people and leaving 3 million homeless. Hurricane Mitch unleashed a series of destructive forces--floods, mudslides, disease--that have affected the lives of 3.2 million residents in five nations. In Honduras alone, over 30 percent of the population was displaced by Mitch. To put this in perspective, had the U.S. suffered comparable levels of damage, 80 million of our citizens would have been displaced. The scale of this disaster is truly astounding. I had the opportunity to see this destruction for myself when I visited the region in January. I witnessed whole villages that were completely washed away, families crammed into open-air shelters, and children playing among the concrete remanents of bridges and buildings. I saw field after field destroyed by the heavy rains. The losses in the agricultural sector were staggering. In Honduras alone, an estimated 70% of the crops were destroyed, including 90% of the country's banana and grain crops. Because agriculture employs approximately half of the regional workforce, these losses have resulted in tremendous economic disruption. The Central American and Caribbean Relief Act is a comprehensive plan that will help these struggling nations get back on their feet and rebuild their economies. First, the bill will expand the current trade benefits provided under the Caribbean Basin Initiative. During my recent visit to the region their was unanimous agreement, from the Presidents of the countries to members of the private sector, the CBI enhancement is the number one priority of their economic recovery plan. History shows that expanding trade with the Caribbean Basin helps our own economy, expanding U.S. exports to the region at the same time that we build important trading relations with our closest neighbors. Any disaster relief package that does not include CBI enhancement falls far short of the mark. The second part of this package will continue and expand current humanitarian and disaster assistance activities in the region. This will help to rehabilitate agricultural production, rebuild bridges and roads, provide much needed housing, clear landmines, restore safe water and health care, and help prevent similar disasters in the future. This is a continuation of the heroic efforts that the U.S. Government has already undertaken in response to these hurricanes. U.S. forces have been there since the day the disaster struck, rescuing hundreds from certain death, moving 30 million pounds of relief supplies, and helping rebuild the regions critical infrastructure. By working to improve economic development of the region, we will help prevent needless environmental damage, strengthen the development of democracy in the region, and protect against the proliferation of narcotics trafficking. An investment in the long-term recovery of the region, which is so important to the United States both economically and politically, will produce benefits for the entire Western Hemisphere. The bill includes the following initiatives: $600 million to expand funding for humanitarian efforts to meet needs for health, water/sanitation, road reconstruction, agricultural restoration, agricultural microcredit, food, shelter, disaster mitigation and other emergency relief; Enhancement of the Caribbean Basin Initiative (CBI) to give the nation of Central America and the Caribbean the opportunity to quickly expand their economies and expand the manufacturing sector while they rebuild their agricultural base; $16 million for bilateral debt forgiveness for Honduras; A micro-credit initiative targeted at reviving agricultural production in the region; $150 million to replenish Defense Department funds depleted in the immediate aftermath of the disaster, including the humanitarian relief fund that supports landmine detection and removal; $70 million to expand New Horizons, a Department of defense program in the region that builds housing and roads, provides medical care, health services, and clean water to affected areas; Authorization of an OPIC direct equity pilot program to assist U.S. businesses in the region, develop low income housing, and rebuild damaged infrastructure; and $25 million for the Central American Emergency Trust Fund to be applied against multilateral debt and provide external financing needs. As we move forward to address the devastation of this event, the choice facing the United States is clear: we can continue to provide emergency assistance to the region for the foreseeable future and prepare for waves of refugees, or we can act to implement a comprehensive disaster recovery program that will rebuild the economies of the affected nations, allowing them to provide for themselves. The choice is simple, because helping these nations recovery is in our own interest. Failure to act will hurt ourselves and our neighbors. The Central American and Caribbean Relief Act is an important opportunity for the United States to lend a hand to neighbors in need and help them get back on their feet. Mr. DeWINE. Mr. President, today, the Senator from Florida, Mr. Graham and I are introducing The Central American and Caribbean Relief Act of 1999. We are joined in this effort by the following original co-sponsors: Mr. Coverdell, Mr. Domenici, Ms. Landrieu, Mr. Dodd, Mr. Hatch, Mr. Mack, Mr. Frist, and Mr. Hagel. This important legislation is both timely and vital. I urge my colleagues to join us as co-sponsors and to work with us to pass it as soon as possible. Last year, several of our neighboring countries suffered serious catastrophic natural disasters. First, Hurricane Georges struck Puerto Rico, the Dominican Republic and Haiti resulting in hundreds dead and billions of dollars in damage. These countries were just starting to recover when Hurricane Mitch rolled through various countries in Central America. Hurricane Mitch left unspeakable devastation with over 9,000 dead, another 9,000 still missing, and millions homeless. The physical devastation will take decades to repair in Honduras and Nicaragua. And these countries are not alone: Guatemala, El Salvador, and Belize have suffered as well. Mr. President, many senior officials in our government have visited these devastated regions--and I applaud their interest and exhaustive efforts. I have visited this region numerous times within the past year and I plan to go back. I applaud the extraordinary displays of teamwork, compassion, and generosity exhibited by the citizens of Ohio, as well as all Americans, in their effort to help the victims of Hurricane Mitch. Their unselfish donations to organizations such as the Northeast Ohio Salvation Army and the Ohio Hurricane Relief for Central America as well as the many other national and local relief agencies serve as an inspirational reminder of the global human community spirit we Americans so often display. And we certainly do not want to forget the quick response provided by our men in uniform, including Ohio's own 445th Air Reserve Wing, in saving lives and tackling the daunting task of helping to rebuild that region's infrastructure. My concern, however, is that once Hurricane Mitch fades out of the headlines, there's a risk that this vitally important region itself will also disappear off America's sometimes limited radar screen of foreign policy attention. The time has come not to address the devastation that has passed, but to begin the development that is important to our hemisphere's future. That is why the Central America and Caribbean Relief Act is so important. This act would provide (1) trade opportunities to help the region restore itself economically; (2) emergency assistance--feeding programs, and important and necessary infrastructure improvements; and (3) limited bilateral and multilateral debt reduction. Mr. President, let me take a moment to comment on the highlights of this bill. First, this bill would provide several trade and investment initiatives. It will afford current beneficiaries of the Caribbean Basin Initiative similar treatment already afforded Mexican products under the North American Free Trade Agreement. It is important that these countries become more fully integrated into the international trading system, which also would benefit the U.S. through expanded export opportunities. The bill also would authorize additional funding for the Overseas Private Investment Corporation to enhance the ability of private enterprise to make its full contribution to the region's rebuilding and development process. Second, this bill would provide bilateral assistance. I fully support the replenishment of funds exhausted by the Department of Defense in their humanitarian relief efforts. It is very important that our military's efforts in this area continue and that they maintain sufficient resources to effectively deploy against future natural disasters. We also included language based on the innovative ``Africa Seeds of Hope'' law, which I wrote and Congress passed last year. This language would authorize a micro-credit initiative targeted at reviving agricultural production in the region. This means that financial tools and resources would go directly to farmers and small businesses and bypass Government middlemen. Finally, this bill would provide much needed debt relief. This debt relief clearly makes sense especially when keeping in mind that in many cases, the infrastructure these countries are paying for is precisely what has been destroyed by Hurricane Mitch--they are paying for what no longer exists. Mr. President, let me explain why America should take the lead on this relief. Before the hurricanes, the people of Central America were emerging from a decade of civil war. Democracy has finally taken hold, but is not yet irreversible. The United States invested billions in the 1980s to expel communism from Central America. We succeeded. That investment--that partnership for democracy in Central America now hangs in the balance. In the 1980s, it was fundamentally important to the entire hemisphere that Central America be a seedbed of reliable trading partners--not revolutionaries or brutal autocrats. The President's National Bipartisan Commission on Central America, chaired by Henry Kissinger, released a detailed report in 1984 that expressed our basic challenge. We needed then, and still need today, a comprehensive Central America policy--one that responds not to fleeting crises but to the basic needs of the region and the United States. These needs do not change. They are the same three principles that formed the core of the philosophy of the Kissinger report: ``Democratic self-determination * * * encouragement of economic and social development that fairly benefits all * * * (and) cooperation in meeting threats to the security of the region.'' This report recognized how free markets and free societies work to strengthen each other. U.S. policy has made excellent progress on all of these counts, but Hurricane Mitch provides a pointed reminder of how fragile--and reversible--the progress can be. History offers us a sober reminder that from misery, despair, and joblessness springs oppression. We must not forget that the seeds of the 1979 Sandinista Revolution in Nicaragua sprouted from the wreckage of the 1972 Managua earthquake. Indeed, it is only now that the old city center is being rebuilt where mangled, vacant buildings still stand as witness to Somoza's failed dictatorship. Mr. President, today Nicaragua faces a new natural disaster--greater than that of 1972. The infrastructure in the northern provinces, the locus of revolutions throughout this century, is washed away. In Honduras, the government is confronted with thousands of miles of roads where not one bridge is left undamaged or undestroyed. At the devastated banana plantations of Honduras, 12,000 jobs hang in the balance. The tax base is non-existent because the businesses that provided the jobs are destroyed. The task facing these governments is enormous, and the resources to address these problems are meager. People who cannot feed their families will turn to any source for assistance. Unless we partner with the people of Central America in the name of progress, the alternatives are clear. The pressure to emigrate to the United States could increase. Colombia's drug traffickers could oblige by putting dollars into their hands. And anti-democratic elements could use the devastation to serve their self-interests. A peasant who has seen his home blown away and his employment gone will look for work wherever it is available. We saw a massive upsurge in migration during the tumultuous 1980's. The same is beginning to happen now. The number of Central Americans detained and expelled at Mexico's southern border has doubled recently. Mexican officials worry that this increase could be the beginning of a prolonged, large scale migration of Central Americans through Mexico to the United States. Furthermore, a farmer who has seen his crop destroyed, and the only road to his markets washed away, will be liable to support revolutionary demagogues who vow convincingly that they can repair it. If the current elected governments are unable to repair the roads and give temporary assistance, that same farmer could become part of the next popular insurgency. Central America is full of former revolutionaries who are capable of exploiting Mitch's misery to rebuild new insurgencies that will tax the resources of the current governments. Promises easily made by fast- talking demagogues can lead to future problems of the kind that we addressed and resolved in the 1980s. Mr. President, the challenge we face in Central America remains the same as that posed by the Kissinger report: Do we want Central America to be our partner in building up a prosperous hemisphere--or a hotbed of revolutionary unrest? The choice is not entirely our own, but we can--and should--have a huge influence on behalf of freedom, prosperity, and stability. We must send an unmistakable signal to our Southern neighbors that our regional commitment is not tentative or fleeting. The U.S. has to seize the initiative over the long-term future of Central America--because if we don't, events will. Mr. President, the Central American and Caribbean Relief Act is in our economic and national security interests. We must act and we must act now.

Mr. GRAHAM

Mr. GRAHAM. Thank you Mr. President. Mr. President, I rise today along with Senator Hutchison and 21 original cosponsors--Republicans and Democrats--to introduce legislation designed to prevent the federal government from seizing the State settlement proceeds negotiated with the tobacco industry. Just over 1 year has passed since the State of Florida received an ominous warning from the federal government which said in essence: ``Prepare to hand over half of your money or we will be prepared to withhold your Medicaid funds.'' This action was a slap in the face to States like Florida--a State which spent countless hours and millions of dollars preparing to wage war against the tobacco industry in court--with no guarantee of success and with no assistance from anyone--including the federal government. The State of Florida specifically asked the Federal Government to assist us, to join in a joint lawsuit. We the States will assume the responsibility of suing the tobacco industry for the Medicaid and other nonspecific medical program costs. The Federal Government will assume the responsibility for Medicare, the Veterans Administration, and other Federal health program costs. What was the response to that request for joint action? ``Not interested.'' In fact, only after it became clear that States were going to be successful in their lawsuits did the federal government become interested in the State settlements. And so the Health Care Financing Administration sent collection notices to States based on a twisted reading of an obscure provision in Medicaid law--section 1903(D) of the Social Security Act. Mr. President, I ask unanimous consent that a copy of a letter dated November 3, 1997, from Ms. Sally K. Richardson, Director, Center for Medicaid and State Operations to the State Medicaid director of each of the 50 States be printed in the Record immediately after my remarks.

Mr. GRAHAM. Mr. President, I ask unanimous consent that Mr. Matt Barry of our staff be given floor privileges for the remainder of the consideration of this issue during this session of the Senate.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, the federal government is attempting to collect almost $19 billion over 5 years, and, presumably almost $100 billion over the 25 year settlement agreement period, based on a little known provision in Medicaid which was never intended to apply to a lawsuit of this magnitude or character. The regulations interpreting the Statutory language of 1903(D) read as follows: Subpart F--Refunding of Federal Share of Medicaid Overpayments to Providers This Subpart Implements Section 1903(d)(2) (C) and (D) of the Act, which provides that a State has 60 days from discovery of an overpayment for Medicaid services to recover or attempt to recover the overpayment from the provider. The regulation then goes on to define ``overpayment'': Overpayment means the amount paid by a Medicaid agency to a provider which is in excess of the amount that is allowable for services furnished under section 1902 of the act. Mr. President, applying the provisions of this statute which was designed to collect overpayments paid by a Medicaid State agency to a provider, to attempt to apply this provision to the State tobacco lawsuits is absurd. This provision was intended and has been used to apply to billing errors made by providers. As an example, if a State finds that a provider has over billed Medicaid, the State collects the overpayment, then remits the commensurate share back to the federal government. Essentially, the federal government is stating that the revenues from the lawsuits should be interpreted as ``overpayments'' made to medical providers by state Medicaid agencies--that the services rendered by these providers to Medicaid beneficiaries should not have been rendered under the statute. This logic is twisted and absurd. The State lawsuits were not premised on a technical collections process--providers overbilling Medicaid. Rather, they were premised on the fact that the tobacco industry defrauded the taxpayer, violated the State civil racketeering statutes, and subjected the taxpayers to enormous smoking-related illness costs. Further, as an example, Mr. President, the suit of the State of Iowa, which was premised on Medicaid, was thrown out of court, but Iowa is still 1 of the 46 States which will receive their share of the proceeds under the nationwide settlement. How could the Federal Government lay any claim to Iowa's proceeds based on the overpayment provision in Medicaid since the court had specifically thrown out its suit based on Medicaid? The answer is, it cannot. The legislation that Senator Hutchison and my colleagues are introducing today is simple. It clarifies that the overpayment provision does not apply to either the comprehensive settlement agreed to in November of 1998, nor does it apply to any of the State settlements agreed to prior to the comprehensive settlement. Here is what the bill will do. It will prevent the Federal Government from stifling important bipartisan public health initiatives which will be paid for through the settlements. In my State of Florida, for instance, our former colleague and good friend, Democratic Governor Lawton Chiles, provided health insurance to over 250,000 previously uninsured poor children. Just 2 weeks ago, Florida's new Governor, Republican Jeb Bush, announced the establishment of a $2 billion endowment fund which will be named in honor of Governor Chiles. This fund will assure that the tobacco funds will be used exclusively for children's health, child welfare, and seniors' health programs. Mr. President, as you know, Florida is not unique. Other States will be just as innovative and be held to just as high standards of accountability by their citizens for the use of these tobacco settlement funds. It is important that States be given the green light to move forward on important public health initiatives and to do so as soon as possible. If we do not pass this legislation, funds that could otherwise be spent on improving America's health will be tied up in litigation between States and the Federal Government for the foreseeable future. So I urge my colleagues to join us in this effort, to support this legislation, and I urge that it be adopted by this Senate and by the Congress and signed by the President of the United States at the earliest possible date. Exhibit 1 Center for Medicaid and State Operations, November 3, 1997. Dear State Medicaid Director: A number of States have settled suits against one or more tobacco companies to recoup costs incurred in treating tobacco-related illnesses. This letter describes the proper accounting and reporting for Federal Medicaid purposes of amounts received from such settlements that are subject to Section 1903(d) of the Social Security Act. As described in the statute, States must allocate from the amount of any Medicaid-related expenditure recovery ``the pro-rata share to which the United States (Federal government) is equitably entitled.'' As with any recovery related to a Medicaid expenditure, payments received should be reported on the Quarterly Statement of Expenditures for the Medicaid Assistance Program (HCFA-64) for the quarter in which they are received. Specifically, these receipts should be reported on the Form HCFA-64 Summary Sheet, Line 9E. This line is reserved for special collections. The Federal share should be calculated using the current Federal Medicaid Assistance Percentage. Please note that settlement payments represent a credit applicable to the Medicaid program whether or not the monies are received directly by the State Medicaid agency. States that have previously reported receipts from tobacco litigation settlements must continue to report settlement payments as they are received. State administrative costs incurred in pursuit of Medicaid cost recoveries from tobacco firms qualify for the normal 50 percent Federal financial participation (FFP). They should be reported on the Form HCFA-64.10, Line 14 (Other Financial Participation). Only Medicaid-related expenditure recoveries are subject to the Federal share requirement. To the extent that some non- Medicaid expenditures and/or recoveries were also included in the underlying lawsuits, HCFA will accept a justifiable allocation reflecting the Medicaid portion of the recovery, as long as the State provides necessary documentation to support a proposed allocation. Under current law, tobacco settlement recoveries must be treated like any other Medicaid recoveries. We recognize that Congress will consider the treatment of tobacco settlements in the context of any comprehensive tobacco legislation next year. Given the States' role in initiating tobacco lawsuits and in financing Medicaid programs, States will, of course, have an important voice in the development of such legislation, including the allocation of any resulting revenues. The Administration will work closely with States during this legislative process as these issues are decided. If you would like to discuss the appropriate reporting of recoveries with HCFA, please call David McNally of my staff at (410) 786-3292 to arrange for a meeting or conversation. We look forward to providing any assistance needed in meeting a State's Medicaid obligation. Sincerely, Sally K. Richardson, Director.

Mr. GRAHAM. Thank you Mr. President. Mr. President, I rise today along with Senator Hutchison and 21 original cosponsors--Republicans and Democrats--to introduce legislation designed to prevent the federal government from seizing the State settlement proceeds negotiated with the tobacco industry. Just over 1 year has passed since the State of Florida received an ominous warning from the federal government which said in essence: ``Prepare to hand over half of your money or we will be prepared to withhold your Medicaid funds.'' This action was a slap in the face to States like Florida--a State which spent countless hours and millions of dollars preparing to wage war against the tobacco industry in court--with no guarantee of success and with no assistance from anyone--including the federal government. The State of Florida specifically asked the Federal Government to assist us, to join in a joint lawsuit. We the States will assume the responsibility of suing the tobacco industry for the Medicaid and other nonspecific medical program costs. The Federal Government will assume the responsibility for Medicare, the Veterans Administration, and other Federal health program costs. What was the response to that request for joint action? ``Not interested.'' In fact, only after it became clear that States were going to be successful in their lawsuits did the federal government become interested in the State settlements. And so the Health Care Financing Administration sent collection notices to States based on a twisted reading of an obscure provision in Medicaid law--section 1903(D) of the Social Security Act. Mr. President, I ask unanimous consent that a copy of a letter dated November 3, 1997, from Ms. Sally K. Richardson, Director, Center for Medicaid and State Operations to the State Medicaid director of each of the 50 States be printed in the Record immediately after my remarks.