Washington Report (June 2024)

WIOA Reauthorization Hearing

On June 12, the Senate Health, Education, Labor and Pensions (HELP) Committee held a hearing to receive input on the Workforce Innovation and Opportunity Act (WIOA), our nation’s bedrock statute that authorizes and funds workforce development and apprenticeship programs around the country. Recall that the House earlier this spring passed WIOA reauthorization legislation (A Stronger Workforce for America Act-H.R. 6655) by an overwhelming margin with broad bipartisan support. While a comprehensive Senate WIOA reauthorization bill has not been unveiled, several “marker” bills have been introduced and we have been told that Senate HELP Committee staff have been in active discussions with their counterparts in the House. While not always the case, holding a hearing typically means that introduction of a comprehensive bill is imminent. We are close to the process and will update you on this effort as soon as we know more.

During the hearing, it was evident that Senators are eager to move on a reauthorization bill that makes needed changes to WIOA. The statute has not been renewed since 2014 and both witnesses and Senators noted that the economy and status of the workforce has changed considerably over the last decade. Another common theme from witnesses is that WIOA needs more funding. When factoring inflation, Congress has steadily cut investments in workforce programs, career and technical Education, and adult education programs over the past twenty years and the U.S. is ranked near the bottom of all OECD countries in spending on workforce development.

One witness noted that only 175,831 individuals received training services under WIOA in program year 2022—a relatively small group for what is supposed to be the federal government’s premier training program. As a point of contrast, six million Pell grants were provided to students under the Higher Education Act for the 2022-2023 academic year. It was pointed out that Pell grants have led to far more training opportunities for qualified individuals, are far easier to access and provide much more significant support. It was also noted that the appropriations for WIOA formula programs should be increased, but a much greater share of those funds should be used for training services in conjunction with the critical wraparound support that make it possible for potential employees to utilize these training services.

The importance of industry and sector partnerships was also a point of emphasis among the witnesses. A common theme was that Congress should support industry or sector partnerships that help businesses engage in the public workforce system. Each local community has a local economy and employers in those communities are best able to identify what skills and training are needed and what trends are emerging in a given industry. A witness from the Chicago Jobs Council had this to say—"We never want to train people for jobs that no longer exist or have declined while we’re working on developing training programs. It’s critical to involve employers on the front end to ensure that does not happen. Industry or sector partnerships bring together local businesses, unions and worker organizations, community colleges, training providers, and community organizations to develop industry-specific workforce strategies and provide training that supports local and regional demand.”

Farm Bill

Last week, Ranking Member of the Senate Agriculture, Nutrition and Forestry Committee John Boozman (R-AR) introduced a summary of the Republican version of Farm Bill reauthorization legislation. What was unveiled appears to be similar to the House Farm Bill reauthorization legislation that passed out of committee earlier this spring. Notably for WIA, the bill would bolster both the Community Wood and Wood Innovation Programs that strive to accelerate deployment of building projects utilizing mass timber and other innovative wood products. 

Senator Boozman’s release of this summary is seen as an attempt to jump start negotiations with Committee Chairman Debbie Stabenow (D-MI). Democrats and Republicans have been far apart on negotiations, particularly around spending on supplemental nutrition assistance programs and reprogramming Inflation Reduction Act funding into the bill’s conservation programs.

The Farm Bill extension that was enacted last year expires September 30. It is difficult to envision a scenario where a comprehensive Farm Bill is forged in the coming weeks to meet that deadline. We expect another extension and action on this front possibly after the election or more likely in 2025.

European Union Deforestation Regulation (EUDR)

A relatively little known, but draconian mandate was enacted in the EU that threatens to preclude any wood product made in the U.S. from being sold into the EU market beginning January 1, 2025. Known as the EUDR, the law requires wood products manufacturers (and manufacturers of other commodities like pulp and paper) to provide exact geolocation data indicating the precise area in which trees were harvested to produce the product. No U.S. producer can meet this level of tracing granularity and trade groups have been sounding the alarm. In recent months there have been numerous calls to delay implementation of the EUDR, with perhaps the loudest calls for delay coming from within the EU itself. Some government officials and many industry groups have become alarmed that implementation challenges will undermine the competitiveness of European industry and contribute to inflationary pressures in the food sector. EUDR also applies to soy, palm oil, cattle, cocoa, coffee and rubber.  

The first signs of internal dissent came in March in a letter sent to the European Commission signed by six European wood industry organizations calling for EUDR implementation delay. Signatories to this letter were the European Confederation of Woodworking Industries (CEI-Bois), the European Furniture Industries Confederation (EFIC), the European Organization of the Sawmill Industry (EOS), the European Panel Federation (EPF), the European Timber Trade Federation (ETTF), and the European Federation of the Parquet industry (FEP). This was followed by a similar letter signed by 19 wood trade organizations in France sent to the French Environment Minister.

Numerous Congressional letters have been sent to U.S. Trade Representative Tai urging her and her team to work with her EU counterparts to head off any trade disruptions that the EUDR would certainly cause if allowed to take effect next year. WIA is monitoring the issue and will keep you apprised of developments.

Congressional Outreach

Presidential election years typically result in a shortened Congressional calendar to allow Members of Congress ample time to campaign and 2024 is proving to be no exception to this rule. Last week, the House was in recess. The Senate was in session for a couple of days but then left town in advance of the Juneteenth federal holiday and will not be returning to Washington until July 8. The Republican National Convention is in mid-July and both Houses are out that week as well. Moving into August, Members of Congress will be taking their annual month-long August recess where they will be back in their states and districts. They return to Washington after Labor Day and are here through September but then leave again for the entire month of October through the November election. The bottom line is there are just not a lot of days left in the 118^th Session of Congress for lawmakers to legislate. To borrow a line from the infamous Yogi Berra, “It’s gettin late early.”

What this means is we are likely looking at a scenario yet again where meaningful action on our policy priorities is punted to the Lame Duck session of Congress following the election or into 2025. Our federal advocacy efforts will proceed unabated, however, and we continue to meet with key staff in the House and Senate to discuss pathways for enactment of our policy deliverables. One benefit of Members of Congress being back in their states and districts for prolonged periods of time is that it affords ample opportunities for facility tours. For the next few months, federal lawmakers up for reelection in November will be seeking out photo opportunities with local job creators and their employees. Now is the time to make your voices heard by inviting your Representative or Senator to tour your operation and having a conversation about what Congress can do—or not do—to help your business. If you are interested in setting up a tour at your manufacturing site with a Member of Congress, WIA staff stands ready to assist you in this effort. 

Tax

Earlier in June, Rep. Brad Wenstrup (R-OH) introduced the S-Corporation Modernization Act of 2024 (H.R. 8614). The legislation, which has been introduced in previous Congresses, seeks to make improvements to the S-Corporation tax model which over 5 million small businesses across the country currently utilize. In short, the bill authorizes reforms to help S corporations operate more easily, which would improve their ability to raise capital. 

One of its key provisions modifies the passive income rules. The tax code currently imposes an additional tax on S corporations that previously converted from being a C corporation (typically utilized by larger companies) if more than 25 percent of the S corporation’s income is passive in nature (such as rents, royalties, dividends, interest and annuities). This provision would implement a 2001 recommendation by the Joint Committee on Taxation (JCT) that this threshold be increased to 60 percent and that the rules be changed so that an S corporation paying this tax does not lose its S corporation status. 

Another provision addresses S corporation individual retirement account (IRA) shareholders. Specifically, language in the bill would permit individuals to own shares in an S corporation through an IRA. Current law allows for IRA ownership of S corporation stock, but only if the S corporation is a bank and the stock was held by the IRA as of October 22, 2004. As under current law, the IRA would be required to pay Unrelated Business Income Tax on its share of the S corporation’s income. A significant percentage of banks are currently organized as S corporations. 

There are a number of other provisions in the legislation, text for which is not yet available as it was just introduced. Rep. Wenstrup sits on the House Ways & Means Committee, which is the panel with sole jurisdiction over tax policy in the lower chamber. We expect this bill to be in the mix next year when tax policy deliberations intensify in advance of the tax policy “cliff” that looms at the end of 2025.

Federal Forest Management

A few weeks ago, Senators Cynthia Lummis (R-WY), John Barrasso (R-WY), John Thune (R-SD) and Mike Rounds (R-SD) sent a letter to U.S. Forest Service Chief Randy Moore criticizing the Service for reductions in the federal timber sale program. That letter may be found here.

The Senators point out that, without a dependable supply of logs, sawmills in proximity to national forests are closing across the country. The letter correctly notes that there is more standing timber on the Black Hills National Forest than there was in the 1970s and 80s and that reduction in forest management only results in wildfire outbreaks and disease and insect infestation in overstocked stands. The letter closes with the following questions to Chief Moore with a June 28 deadline for the Service to respond--

• What is the Forest Service doing to increase timber harvest levels on the Black Hills National Forest?
• What are the main drivers of the timber target shortfalls since 2018?
• What resources does the agency need to increase timber harvest levels on the Black Hills National Forest? If the agency needs additional funding, please provide a specific amount and breakdown of how it will be used to increase timber harvest levels above 63,000 CCF.
• How many years will it take for the agency to ramp up to harvest levels to meet the collaboratively identified 120,000 CCF target?
• Will the agency commit to preventing further economic harm to the forest products industry by providing a consistent supply of timber?