by Larry Jones
June 11, 2001

Testifying before a joint House panel on May 24, Congressional Budget Office (CBO) Director Dan Crippen told members of the panel that since the enactment of the Unfunded Mandates Reform Act (UMRA) in 1995, only two unfunded mandates with annual cost exceeding $50 million for state and local governments have been enacted. The two were an increase in the minimum wage in 1996 and a reduction in federal funding to administer the Food Stamp program in 1997. Under the law, CBO is required to conduct a cost estimate on bills approved by authorizing committees in Congress. A point of order can be raised by any member on the House or Senate floor against a bill that contains an unfunded federal mandate that imposes a cost of $50 million or more on state and local governments. Unless members vote to waive the point of order, no further action can be taken on the bill. The Conference of Mayors was a strong supporter of UMRA and played a key role in urging its enactment.

Crippen told the panel that most of the legislation "Congress considered between 1996 and 2000 did not contain federal mandates as UMRA defines them." During that time the CBO reviewed a total of 3059 bills and other legislative proposals. Of that total, only 355 (or 12%) contained intergovernmental mandates or mandates on state and local governments and only 32 (or 1 %) included mandates with costs exceeding the $50 million threshold. He explained that "over half of the intergovernmental mandates that CBO identified were explicit preemptions of state or local authority."

Crippen also told the panel that a total of 2949 bills and other proposals were reviewed containing private sector mandates and of that total, 422 (14 percent) contained private sector mandates. Of the private sector mandates, only 100 (3 percent) contained mandates with costs that exceeded the $100 million threshold set for the private sector. Sixteen private sector mandates with cost exceeding the threshold were enacted. According to the CBO's report, UMRA has been an effective tool for flagging and perhaps curtailing legislative mandates. Members of Congress have become more sensitive to bills containing legislative mandates. As proof Crippen, explained that "In some cases, lawmakers have altered legislative proposals to reduce the cost of federal mandates before enacting them. Four intergovernmental and five private sector mandates that CBO identified as having costs over the thresholds when they were approved by authorizing committees were amended before enactment to bring their cost below the thresholds."

Federal agencies, which are responsible for reviewing federal rule and regulations to determine the impact of new mandates on state and local governments and the private sector, have not been so successful in implementing Title II of UMRA. Under Title II, federal agencies are not only required to prepare mandates impact statement on new regulations but to consult with state and local governments to find the lest burdensome and most cost effective alternative for accomplishing the objectives of the rules. White House Office of Management and Budget Director Mitchell E. Daniels, Jr. told members of the panel that "Unfortunately, experience to date suggests that the Executive Branch's implementation of the Unfunded Mandates reform Act has not moved Federal agencies significantly closer to accomplishing these objectives. Indeed, it seems that Title II of the Act has been regarded by some agencies as a perfunctory exercise, rather than an opportunity to work in good faith with our non-federal partners."

In its five annual reports to Congress on the implementation of Title II, Daniels noted that OMB has reviewed eighty rules in the 5 years since the enactment of UMRA that have required the preparation of a mandates impact statement. "It's hard to imagine that only eighty regulations had significant impact on State, local, or tribal governments, or the private sector," Daniels said. He added "In fact, it appears that agencies have attempted to limit their consultative process, and ignored potential alternative remedies, by aggressively utilizing the exemptions outlined in the Act."

To demonstrate the problem, Daniels provided an example of a new regulation (known as the Total Maximum Daily Load) issued by the Environmental Protection Agency last June which requires states to develop and implement plans to clean up impaired waters. He said EPA estimated the cost of complying with the additional planning requirements at $23 million, which is below the threshold to be considered an unfunded mandate. He pointed out, however, that "EPA completely excluded from its analysis the costs of the pollution control measures that will be imposed by the new regulation. Compliance costs are expected to run in the billions of dollars per year for the private sector and local governments. Yet, EPA moved forward without deference to the requirements of the Act. This is just one flagrant example of an agency evading the cost-benefit analysis requirements set forth under the Act."

To address the problem, Daniels said one of his priorities would be to identify and close any loopholes that may have been created by agencies' interpretation of the Act. He told panel members he was prepared to make the following commitments: do more to involve state and local governments, including their elected officials and Washington representatives, early in the rulemaking process; bring more uniformity to the consultation process to help both agencies and intergovernmental partners know when, how and with whom to communicate; and enforce UMRA to ensure that agencies are complying with both the letter and the spirit of the law.