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."
Chairman, Government Reform Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs
In defending the new Constitution, James Madison wrote, "The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State." He further noted, "The powers delegated by the proposed Constitution to the federal government are few and defined."
This original concept of "few and defined" powers has eroded over the last 200 years. Today, the twin powers of Spending and the Commerce Clause have magnified the Federal government’s meddling far beyond our founding fathers’ wildest imaginations. Mandates flow out of Washington like a thousand streams.
In some cases mandates are imposed directly by Congress, such as the minimum wage, health insurance portability, and clean air. Some mandates, however, come not from Congress, but out of agencies. For example, last year, the Environmental Protection Agency (EPA) issued a new rule designed to help clean our rivers, lakes and streams - popularly known as the TMDL (Total Maximum Daily Load) rule. According to the National Governors’ Association (NGA), the TMDL rule will cost State governments between $1 and $2 billion simply to conduct the surveys required by the new EPA rule. Another example is Labor’s ergonomics rule, which was intended to protect workers’ health. Labor estimated that the rule would cost $4.5 billion annually but others estimated it would cost up to $100 billion annually - all of it a mandate and none of it funded by the Federal government.
In 1995, after an outcry about the unfairness and burden of unfunded mandates, Congress enacted the Unfunded Mandates Reform Act (UMRA). The Act was designed to ensure that the Federal government fully considers the effects of unfunded mandates - which levy new Federal requirements without Federal funding - before imposing them on State and local governments or the private sector. The Act established new procedures for both the Legislative and Executive Branches.
One of the principal questions facing us today is, after five years of experience, how well is UMRA working? Today’s hearing will reveal the relative effectiveness of the provisions governing Congress, and the ineffectiveness of the provisions governing the Executive Branch.
In 1998, the General Accounting Office (GAO) issued a report on UMRA. GAO found that there were no written statements (including cost-benefit analyses) for 80 of the 110 economically significant rules issued during the first two years under UMRA. GAO also found that none of the four agencies - Agriculture, Health and Human Services (HHS), Transportation and EPA - examined changed their intergovernmental consultation process as a result of the passage of UMRA. I think the title of the report GAO report pretty well sums it up: "Unfunded Mandates - Reform Act Has Had Little Effect on Agencies’ Rulemaking Actions."
Part of the reason for this "little effect" may be due to OMB’s guidance and ineffective oversight. OMB’s early guidance to the agencies was minimal and, worse, not enforced. For example, OMB’s guidance states that "[i]ntergovernmental consultation should take place as early in the regulatory process as possible ... before publication of the notice of proposed rulemaking." Several of today’s witnesses will discuss their experience with late or no consultation.
More disconcerting has been the fact the OMB oversight has not improved since the 1998 GAO report. For example, last summer, OMB approved EPA’s costly TMDL rule. But, on July 28, 2000, GAO determined that EPA had incorrectly determined that its TMDL rule contained no intergovernmental or private-sector mandate of $100 million or more. Why did OMB turn a blind eye to such an obvious unfunded mandate? Several witnesses today will discuss recent rules with unfunded mandates not recognized by the agencies.
Also, OMB appears not to have rejected intergovernmental and private-sector proposed rules which did not include a reasonable number and range of regulatory alternatives or which did not provide a traditional cost-benefit analysis so that the agency could "select the least costly, most cost-effective or least burdensome alternative," as UMRA intended. Witnesses today will discuss if the alternatives they identified were fully analyzed or accepted by the agencies.
To date, CBO has issued four annual reports on experience under UMRA. These reports revealed 29 bills from 1996-1999 with an intergovernmental mandate over $50 million. Only two of these were enacted: an increase in the Federal minimum wage and a cap on the Federal contribution for administration of the Food Stamps program. There were 94 bills in the same four-year period with a private-sector mandate over $100 million. Of these, 16 were enacted.
To date, OMB has issued five annual reports on agency compliance with UMRA. These reports revealed from 13 to 17 proposed or final rules each year with a mandate over $100 million. EPA had more rules than all other agencies combined. Transportation imposed the next most, followed by HHS, Labor, Energy, and Agriculture.
Ultimately the central issue of unfunded mandates comes down to the allocation of scarce resources. This issue of allocating resources reminds me of how to divide the last piece of cake between my two daughters. There is always much less griping if I let one daughter cut the cake but let the other one choose the first piece. Implicit in this process is the principle that the decision-maker - the one cutting the cake - bears some cost when the decision is made.
I look forward to the testimony of our witnesses on how UMRA can work better. Panel I includes CBO Director Dan Crippen, who will testify about the Legislative Branch, and OMB Director Mitchell Daniels, who will testify about the Executive Branch. Panel II includes: Paul Mannweiler, Indiana State Representative and Immediate Past President, National Conference of State Legislatures; and Raymond Scheppach, Executive Director, NGA. Panel III includes: Scott Holman, President and Chief Executive Officer, Bay City, Inc., Bay Cast, Michigan and Chairman, Regulatory Affairs Committee, U.S. Chamber of Commerce; and William Kovacs, Vice President, Environment and Regulatory Affairs, U.S. Chamber of Commerce.
