Joint Hearing of the Rules Subcommittee on Technology and the House and
the Government Reform Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs
Hearing on "Unfunded Mandates - A Five-Year Review and Recommendations for Change."
Immediate Past President, National Conference of State Legislatures
Indiana House of Representatives
Mr. Chairmen, distinguished members of the subcommittees, I am Paul Mannweiler, immediate past president of the National Conference of State Legislatures and a member of the Indiana House of Representatives. Thank you for the opportunity to testify before you about the successes of the Unfunded Mandates Reform Act of 1995 (UMRA) and issues still requiring further action. I believe the first five years of implementing UMRA provide valuable instruction for its continued implementation.
The National Conference of State Legislatures represents the legislatures of the 50 states and the nation's commonwealths and territories. Since its inception, NCSL has been outspoken about the need to maintain and strengthen our federal system of government and to enhance intergovernmental relations. Most of NCSL's policies and advocacy activities focus on preserving state authority, providing flexibility to carry out state-federal partnerships, strengthening intergovernmental relations and avoiding costly unfunded federal mandates. Naturally, we are strong supporters of the Unfunded Mandates Reform Act. Title I of UMRA has deterred and reduced the number and magnitude of unfunded mandates imposed through legislation on state and local governments. Title II, on the other hand, has had little effect.
Title I: Legislative Accountability and Reform
The Unfunded Mandates Reform Act has raised awareness of the problems associated with unfunded federal mandates, improved federal accountability and enhanced consultation between the federal government and states and localities. Overall, the National Conference of State Legislatures is pleased with the implementation and effectiveness of Title I of UMRA, regarding Legislative Accountability and Reform. That said, I would like to provide an overview of key components of UMRA and suggestions for strengthening these components.
The positive effects UMRA has had on the legislative process and on federalism are often intangible and not easily measured. When UMRA was introduced in 1995, concerns were raised that UMRA would obstruct the legislative process, would impede expeditious movement of legislation and would weaken congressional authority to address pressing concerns. None of these concerns have materialized into real threats to the legislative process. In fact, Title I of the Act has provided a host of intangible benefits to both the Congress and to states and localities—not the least of which is increased communication between members of Congress and their staff with state and local officials and their representative national organizations on issues related to the imposition of unfunded federal mandates.
Intergovernmental Cost Estimates provide powerful information and create awareness of unfunded mandates. Cost estimates, prepared by the State and Local Government Cost Estimates Unit of the Congressional Budget Office, provide essential information illuminating the cost of federal unfunded mandates on state and local government. These estimates have significantly reduced the number of unfunded federal mandates passed by Congress. A score above the threshold defined in the law will often compel a member of Congress to make adjustments in legislation to avoid the appearance of an unfunded federal mandate. The work of the State and Local Government Cost Estimates Unit is laudable. NCSL appreciates the commitment and expertise of the staff at CBO.
NCSL believes the work of the Unit would be enhanced by more timely access to bills and joint resolutions that may impose unfunded federal mandates. While UMRA stipulates that CBO prepare a cost estimate for each bill or joint resolution reported by any committee, the speed at which legislation may move through the legislative process often precludes the meaningful development and use of these statements. Statements are often required for use during the next stage of the legislative process so quickly that there is often insufficient time for state and local officials and their designated representatives to provide meaningful assistance to the CBO in arriving at cost estimates.
For example, in preparing the cost estimate for H.R. 1, providing for reauthorization of the Elementary and Secondary Education Act, earlier this month, the Unit had less than 24 hours to prepare its estimate. Consequently state and local elected officials and their representative national organizations had only a few hours in which to assist CBO staff with its cost estimate. Perhaps on a minor issue this amount of time would have been sufficient to address the impact on state and local government. Given the magnitude of the potential impact H.R. 1 will have on state and local governments, additional time was warranted.
Every effort should be made to forward bills and resolutions that have a high probability of committee review, and which are thought to contain unfunded intergovernmental mandates, to CBO for review prior to committee consideration.
I would be remiss if I did not mention the monthly meetings for staff of organizations representing state, local and tribal governments organized by the CBO State and Local Government Cost Estimates Unit. These meetings, while not formally defined in UMRA, provide a valuable collaborative opportunity for our staff to discuss legislation that may contain unfunded federal mandates and preemption of state authority, with both CBO and state and local staff bringing issues to the table. Further, these monthly meetings provide an opportunity for state and local staff to forward information and contacts that are useful to CBO staff in completing cost estimates. These meetings provide an excellent model for consultation under Title II.
The true value of the "point of order" is in its role as a deterrent. While the unfunded federal mandates point of order has been infrequently used in the House and has never been used on the Senate floor, the true value of an UMRA point of order lies in its role as a deterrent to the imposition of unfunded federal mandates. While we cannot attest with any certainty or conclusive evidence that the point of order has reduced the number of unfunded mandates enacted by the Congress, anecdotal evidence of UMRA's deterrent role, particularly threats that a point of order may be raised against legislation, have improved the process of consultation among Congress, CBO and states and localities. The nation's state legislators believe that the threat of a point of order against a legislative proposal has caused members and staff to rethink and revise many proposals that would have likely imposed unfunded federal mandates on the states in excess of the threshold set in the law.
Broad exceptions and exclusions, as well as interpretations of law, expose state and local government to potentially large unfunded mandates not addressed in UMRA. Many of the broad exceptions and exclusions defined in UMRA have the effect of eliminating from the review process many legislative proposals that shift costs to the states and preempt state authority. I draw your attention to a few examples that illustrate our concerns. The definition of "federal intergovernmental mandate" requires that provisions impose an "enforceable duty" on state and local government. Enforceable duty, however, is not defined under the law. Further, it is rare that interpretations of what constitutes "enforceable duty" err on the side of state and local government. Thus, many legislative proposals considered by Congress that would impose a cost shift or preemption go unaddressed under UMRA.
Recently, NCSL joined the National Governors' Association in opposition to a provision in the Senate reconciliation bill, that would reduce and eventually eliminate the state pick-up portion of the federal estate tax on a schedule inconsistent with repeal of the federal portion of the tax. The Senate bill would eliminate the state tax over five years, while keeping the federal portion of the tax in place for ten years. Both groups had hoped to raise a point of order against the provision, estimating the cost to states of the accelerated repeal in excess of $50-100 billion over ten years. The accelerated elimination of the state portion of the tax, to our understanding, was designed to provide additional resources for other provisions of the Senate bill. Although the provision was anticipated to cost state governments revenues far in excess of the thresholds set in UMRA, it was ruled not to violate UMRA because the accelerated repeal does not constitute an enforceable duty on the states! Since 1924, the states have shared revenues resulting from the estate tax with the federal government. The loss of this revenue to the states, should the Senate prevail in conference, will create a severe long-term disruption in state fiscal systems. Given the eventuality of the loss, NCSL has argued that any reduction or repeal be accomplished equitably and proportionately—as the House bill, H.R. 8, does.
This example provides clear evidence that while UMRA, as enacted and enforced, addresses a multitude of cost shifts and preemptions of state law, under its current construction, it cannot address all significant and costly shifts to the states resulting from congressional action.
Similarly, in response to the uncertainty surrounding the 2000 presidential election, dozens of bills addressing election reform have been introduced in the 107th Congress. All of the bills require states to radically alter current election procedures. While none of these bills has been scored by CBO, many of these proposals would require states to investment millions, perhaps billions, of dollars in order to comply with the provisions contained in the bills.
NCSL is concerned that the exclusion of bills which enforce the constitutional rights of individuals, particularly voting rights, may be used to usurp the role of states and localities in election management and may provide opportunities to impose burdensome and costly unfunded mandates on the states.
Further, provisions related to Social Security and payroll taxes are excluded from consideration under UMRA. NCSL remains concerned that, as the federal government explores options for reforming Social Security and extending the solvency of the program, opportunities to shift the cost of solvency and reform to the states will become increasingly attractive. Chiefly, NCSL is concerned that the federal government will extend mandatory Social Security coverage to newly hired state and local employees. Such an action by the federal government would result in a cost shift to state and local governments in excess of $25 billion over five years, again well in excess of the thresholds defined in UMRA.
Given the underlying success of UMRA, I believe it is worthy of our collective attention to assess whether the exclusions were excessive and perhaps unnecessary.
Title II: Regulatory Accountability and Reform
Title II, regarding Regulatory Accountability and Reform, requires administrative agencies to consult with state and local government officials and their designees and provides for regulatory accountability and reform. It has been only marginally effective in reducing costly and administratively cumbersome regulations on states and localities.
We have three primary concerns related to Title II:
- Enforcement of Title II has been non-existent.
- Agency consultation with state and local elected officials and their designated representatives is haphazard and inconsistent.
- Agency compliance in preparing and disseminating federalism assessments is rare.
The National Conference of State Legislatures believes that all of these shortcomings merit attention. We maintain that each of these deficiencies is repairable without further statutory changes at this time.
Consultation. The consultation process can, and should be, improved dramatically. State and local governments should expect no less than a uniform and predictable process for consultation throughout all federal agencies. Consultation is inconsistent across agencies. Approaches vary. Levels of commitment vary. There are, however, enough worthwhile practices across federal agencies to create the foundation for a uniform consultation process.
Consultation must include collaboration with state elected officials and their representative national organizations. Too often, agencies have ignored elected officials and their representative national organizations and focused instead on outreach to state and local agency representatives. State and local elected officials clearly bear the burden of addressing the fiscal impacts of federal unfunded mandates and must be included in consultation.
Additionally, too often federal agencies have assumed that mere notice of proposed rulemaking constitutes consultation. While we appreciate the opportunity to participate in stakeholder meetings and receive updates on the regulatory process from agency staff, these updates do not sufficiently address the role of state and local governments as partners with the federal government. State and local government elected officials and their national representative organizations are not merely another interest group. We are partners. We should be consulted throughout the regulatory process to respond to agency proposals and provide feedback on various options for implementing regulations.
NCSL does not believe that consultation is meaningful only if state and local government get exactly what they want. One of the best examples of agency consultation that improved over time involves proposed and final rules related to the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), which implemented regulations for the TANF program. As you may recall, the interim TANF regulations were not well-received by state government officials and their representative national organizations. NCSL felt, as did others, that the interim rules strayed from congressional intent and were far more prescriptive than necessary. Following the release of the interim rules, the Department of Health and Human Services worked diligently to understand and address the concerns of state and local elected officials and their representative national organizations. The final rules related to TANF provide an excellent example of one agency's attempt to participate in meaningful consultation with the states. Did we get everything we wanted? No. Does NCSL believe the process worked? Absolutely.
On the other hand, the Environmental Protection Agency (EPA) in 1996 and 1997 repeatedly refused to address our concerns regarding implementation of revised ozone and particulate matter standards. Although, we did not address the substance of these revisions because of regional and other differences that divided our organization, we were unanimous in the call for more thorough cost-benefit analysis and for attention to Title II's intent regarding unfunded regulatory mandates.
Federalism Assessments: Title II requires agencies to prepare and disseminate assessments as to the cost of proposed regulations on state and local government. A February 1998 report by the Government Accounting Office confirmed what state and local governments already knew to be true—these assessments are rarely, if ever, done. In order for Title II to truly assist in managing the imposition of unfunded federal mandates and preemption on the states these assessments must be completed.
The National Conference of State Legislatures suggests that the role of the OMB be expanded in order to ensure agency compliance in preparing federalism assessments and in communicating with state and local government. NCSL further recommends that this enforcement authority provide regular opportunities for consultation on proposed regulations with state and local elected officials and their representative national organizations, akin to the monthly meetings organized by the CBO. And, all of us must make the regulatory agenda manageable. Major rules and others borne out of legislation in which states have a primary role are those of priority concern to the NCSL.
The National Conference of State Legislatures supports the efforts of Congress and the Bush administration to address the shortcomings of UMRA. In particular, NCSL welcomes the administration's Interagency Working Group on Federalism, which we hope will address many of the concerns we have raised with regard to Title II. It is our intention to provide this group with recommendations, a process we started on February 27, 2001—one day after the president announced the group's formation. NCSL believes, at this time, that the problems associated with Title II can be fixed without legislative changes—but only with a strong and enduring commitment from the administration. Should the working group not address the concerns we have raised, we would be happy to work with you and your staff to draft legislation that might address our concerns.
I thank you for the opportunity to share our experiences with regard to the first five years of implementation of the Unfunded Mandates Reform Act. I look forward to responding to your questions.
