    [House Hearing, 106 Congress]
    [From the U.S. Government Publishing Office]

                     H.R. 2245, THE FEDERALISM ACT OF 1999

    =======================================================================

                                    HEARING

                                   before the

                   SUBCOMMITTEE ON NATIONAL ECONOMIC GROWTH,
                   NATURAL RESOURCES, AND REGULATORY AFFAIRS

                                     of the

                         COMMITTEE ON GOVERNMENT REFORM
                            HOUSE OF REPRESENTATIVES

                           ONE HUNDRED SIXTH CONGRESS

                                 FIRST SESSION

                                       ON

                                   H.R. 2245

       TO ENSURE THE LIBERTIES OF THE PEOPLE BY PROMOTING FEDERALISM, TO
    PROTECT THE RESERVED POWERS OF THE STATES, TO IMPOSE ACCOUNTABILITY FOR
       FEDERAL PREEMPTION OF STATE AND LOCAL LAWS, AND FOR OTHER PURPOSES

                                   __________

                                 June 30, 1999

                                   __________

                               Serial No. 106-29

                                   __________

           Printed for the use of the Committee on Government Reform

         Available via the World Wide Web: http://www.house.gov/reform

                                     ______

                         U.S. GOVERNMENT PRINTING OFFICE
    59-530 CC                    WASHINGTON : 1999

                         COMMITTEE ON GOVERNMENT REFORM

                         DAN BURTON, Indiana, Chairman
    BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
    CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
    CHRISTOPHER SHAYS, Connecticut       ROBERT E. WISE, Jr., West Virginia
    ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
    JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
    STEPHEN HORN, California             PAUL E. KANJORSKI, Pennsylvania
    JOHN L. MICA, Florida                PATSY T. MINK, Hawaii
    THOMAS M. DAVIS, Virginia            CAROLYN B. MALONEY, New York
    DAVID M. McINTOSH, Indiana           ELEANOR HOLMES NORTON, Washington,
    MARK E. SOUDER, Indiana                  DC
    JOE SCARBOROUGH, Florida             CHAKA FATTAH, Pennsylvania
    STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
    MARSHALL ``MARK'' SANFORD, South     DENNIS J. KUCINICH, Ohio
        Carolina                         ROD R. BLAGOJEVICH, Illinois
    BOB BARR, Georgia                    DANNY K. DAVIS, Illinois
    DAN MILLER, Florida                  JOHN F. TIERNEY, Massachusetts
    ASA HUTCHINSON, Arkansas             JIM TURNER, Texas
    LEE TERRY, Nebraska                  THOMAS H. ALLEN, Maine
    JUDY BIGGERT, Illinois               HAROLD E. FORD, Jr., Tennessee
    GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
    DOUG OSE, California                             ------
    PAUL RYAN, Wisconsin                 BERNARD SANDERS, Vermont
    HELEN CHENOWETH, Idaho                   (Independent)
    DAVID VITTER, Louisiana

                          Kevin Binger, Staff Director
                     Daniel R. Moll, Deputy Staff Director
               David A. Kass, Deputy Counsel and Parliamentarian
                          Carla J. Martin, Chief Clerk
                     Phil Schiliro, Minority Staff Director

       Subcommittee on National Economic Growth, Natural Resources, and
                               Regulatory Affairs

                      DAVID M. McINTOSH, Indiana, Chairman
    PAUL RYAN, Wisconsin                 DENNIS J. KUCINICH, Ohio
    BOB BARR, Georgia                    TOM LANTOS, California
    LEE TERRY, Nebraska                  PAUL E. KANJORSKI, Pennsylvania
    GREG WALDEN, Oregon                  BERNARD SANDERS, Vermont
    HELEN CHENOWETH, Idaho               HAROLD E. FORD, Jr., Tennessee
    DAVID VITTER, Louisiana

                                   Ex Officio

    DAN BURTON, Indiana                  HENRY A. WAXMAN, California
                        Marlo Lewis, Jr., Staff Director
                   Barbara Kahlow, Professional Staff Member
                           Gabriel Neil Rubin, Clerk
                         David Sadkin, Minority Counsel

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on June 30, 1999....................................     1
        Text of H.R. 2245............................................     5
    Statement of:
        Blue, Daniel T., Jr., North Carolina State Representative,
          president, National Conference of State Legislatures;
          Clarence E. Anthony, mayor, South Bay, FL, president,
          National League of Cities; Javier M. Gonzales,
          commissioner, Santa Fe County, NM, second vice president,
          National Association of Counties; and Raymond C. Scheppach,
          executive director, National Governors' Association........    17
        Stevens, Nye, Director, Federal Management and Workforce
          Issues, General Government Division, General Accounting
          Office.....................................................   101
    Letters, statements, etc., submitted for the record by:
        Anthony, Clarence E., mayor, South Bay, FL, president,
          National League of Cities, prepared statement of...........    38
        Baker, John S., professor, prepared statement of.............   125
        Blue, Daniel T., Jr., North Carolina State Representative,
          president, National Conference of State Legislatures,
          prepared statement of......................................    19
        Gonzales, Javier M., commissioner, Santa Fe County, NM,
          second vice president, National Association of Counties,
          prepared statement of......................................    51
        Kucinich, Hon. Dennis J., a Representative in Congress from
          the State of Ohio, prepared statement of...................    94
        McIntosh, Hon. David M., a Representative in Congress from
          the State of Indiana:
            Letters dated June 29 and 30, 1999.......................     2
            Prepared statement of....................................    13
        Moran, Hon. James P., a Representative in Congress from the
          State of Virginia, prepared statement of...................    84
        Scheppach, Raymond C., executive director, National
          Governors' Association, prepared statement of..............    65
        Stevens, Nye, Director, Federal Management and Workforce
          Issues, General Government Division, General Accounting
          Office:
            Information concerning Executive Order 13083.............   123
            Prepared statement of....................................   104

                     H.R. 2245, THE FEDERALISM ACT OF 1999

                                  ----------

                            WEDNESDAY, JUNE 30, 1999

                      House of Representatives,
     Subcommittee on National Economic Growth, Natural
                     Resources, and Regulatory Affairs,
                                Committee on Government Reform,
                                                        Washington, DC.
        The subcommittee met, pursuant to notice, at 10 a.m., in
    room 2247, Rayburn House Office Building, Hon. David M.
    McIntosh (chairman of the subcommittee) presiding.
        Present: Representatives McIntosh, Ryan, Terry, Walden,
    Kucinich, and Ford.
        Also present: Representatives Moran of Virginia, and
    McCarthy of Missouri.
        Staff present: Marlo Lewis, Jr., staff director; Barbara
    Kahlow, professional staff member; Luke Messer, counsel;
    Gabriel Neil Rubin, clerk; David Sadkin, minority counsel; and
    Ellen Rayner, minority chief clerk.
        Mr. McIntosh. The Subcommittee on National Economic Growth,
    Natural Resources, and Regulatory Affairs will come to order. A
    quorum being present, I would like to now ask unanimous consent
    that all Members' and witnesses' written statements be included
    in the record. Without objection, so ordered.
        I also ask unanimous consent that my colleagues, Messrs.
    Moran, Portman, Condit, Castle, Davis, and Mrs. McCarthy, all
    of whom are original cosponsors of H.R. 2245, the Federalism
    Act of 1999, be able to participate in today's hearing. Without
    objection, so ordered.
        I also ask unanimous consent that those six Members'
    written statements be included in the record. Without objection
    so ordered.
        Finally, I want to inform the Members that I will hold the
    hearing record open until July 16th so that we can receive
    written comments after the close of today's hearing. Yesterday,
    we received a letter of support for the bill from the National
    Association of Towns and Townships, which comprises about one-
    third of all local elected officials nationally. In addition,
    we have a letter that we received today from six of the major
    State and local organizations, and I would ask unanimous
    consent that those two letters be included in the record.
    Without objection, so ordered.
        [The information referred to follows:]

        [GRAPHIC] [TIFF OMITTED]59530.001

        [GRAPHIC] [TIFF OMITTED]59530.002

        [GRAPHIC] [TIFF OMITTED]59530.003

        Mr. McIntosh. I want to thank Mr. Terry and Mr. Walden for
    coming today. Mr. Kucinich is on his way. Being Wednesday
    morning, there are a lot of different hearings that are going
    on, so you'll see Members come and go. The six Members who
    wanted to join us have all indicated they will be here at some
    point or another, and we'll be able to hear from them when they
    are here. Mrs. McCarthy was here earlier, and I saw Mr. Moran
    in the hall.
        Let's get started with this hearing. I think it's an
    incredibly important subject. The purpose of today's hearing is
    to discuss the need for federalism legislation in general and
    the Federalism Act of 1999 specifically.
        H.R. 2245, introduced by Congressmen Moran, Portman,
    McCarthy, Castle, Condit, Davis, and myself, is a bipartisan
    bill to promote and preserve the integrity and effectiveness of
    our Federal system of government and to recognize the
    partnership that exists between the Federal Government and
    State and local governments in the implementation of various
    Federal programs. This hearing will allow key State and local
    elected officials, the General Accounting Office, and a
    professor who is an expert in federalism, although I understand
    the professor won't be able to join us today, but his testimony
    will be made part of the record. He had a family emergency and
    is not able to be here. But it will allow us to discuss the
    need for federalism legislation and H.R. 2245 specifically.
        [The text of H.R. 2245 follows:]

    106th CONGRESS
    1st Session
                                   H. R. 2245

       To ensure the liberties of the people by promoting federalism, to
    protect the reserved powers of the States, to impose accountability for
      Federal preemption of State and local laws, and for other purposes.

                                     ______

                        IN THE HOUSE OF REPRESENTATIVES

                                 June 16, 1999

      Mr. McIntosh (for himself, Mr. Moran of Virginia, Mr. Portman, Ms.
        McCarthy of Missouri, Mr. Castle, Mr. Condit, and Mr. Davis of
      Virginia) introduced the following bill; which was referred to the
     Committee on Government Reform, and in addition to the Committees on
    Rules, and the Judiciary, for a period to be subsequently determined by
    the Speaker, in each case for consideration of such provisions as fall
               within the jurisdiction of the committee concerned

                                     ______

                                     A BILL

       To ensure the liberties of the people by promoting federalism, to
    protect the reserved powers of the States, to impose accountability for
      Federal preemption of State and local laws, and for other purposes.

        Be it enacted by the Senate and House of Representatives of the
    United States of America in Congress assembled,

    SECTION 1. SHORT TITLE.

        This Act may be cited as the ``Federalism Act of 1999''.

    SEC. 2. FINDINGS.

        The Congress finds the following:
                (1) The Constitution created a strong Federal system,
            reserving to the States all powers not expressly delegated to
            the Federal Government.
                (2) Preemptive statutes and regulations have at times been
            an appropriate exercise of Federal powers, and at other times
            have been an inappropriate infringement on State and local
            government authority.
                (3) On numerous occasions, the Congress has enacted
            statutes and Federal agencies have promulgated rules that
            expressly preempt State and local government authority and
            describe the scope of the preemption.
                (4) In addition to statutes and rules that expressly
            preempt State and local government authority, many other
            statutes and rules that lack an express statement by the
            Congress or Federal agencies of their intent to preempt and a
            clear description of the scope of the preemption have been
            construed to preempt State and local government authority.
                (5) In the past, the lack of clear congressional intent
            regarding preemption has resulted in too much discretion for
            Federal agencies and uncertainty for State and local
            governments, leaving the presence or scope of preemption to be
            litigated and determined by the Federal judiciary, producing
            results sometimes contrary to or beyond the intent of the
            Congress.
                (6) State and local governments are full partners in all
            Federal programs administered by those governments.

    SEC. 3. PURPOSES.

        The purposes of this Act are the following:
                (1) To promote and preserve the integrity and effectiveness
            of our federalist system of government.
                (2) To set forth principles governing the interpretation of
            congressional intent regarding preemption of State and local
            government authority by Federal laws and rules.
                (3) To recognize the partnership between the Federal
            Government and State and local governments in the
            implementation of certain Federal programs.
                (4) To establish a reporting requirement to monitor the
            incidence of Federal statutory, regulatory, and judicial
            preemption.

    SEC. 4. DEFINITIONS.

        In this Act:
                (1) Definitions in 5 u.s.c. 551.--The definitions under
            section 551 of title 5, United States Code, shall apply.
                (2) Bill.--The term ``bill'' includes a joint resolution.
                (3) Director.--The term ``Director'' means the Director of
            the Congressional Budget Office.
                (4) Local government.--The term ``local government'' means
            a county, city, town, borough, township, village, school
            district, special district, or other political subdivision of a
            State.
                (5) Public officials.--The term ``public officials''--
                        (A) means elected officials of State and local
                    governments; and
                        (B) includes the following national organizations
                    that represent such officials:
                                (i) The National Governors' Association.
                                (ii) The National Conference of State
                            Legislatures.
                                (iii) The Council of State Governments.
                                (iv) The United States Conference of
                            Mayors.
                                (v) The National League of Cities.
                                (vi) The National Association of Counties.
                                (vii) The International City/County
                            Management Association.
                (6) State.--The term ``State''--
                        (A) means a State of the United States and an
                    agency or instrumentality of a State;
                        (B) includes--
                                (i) the District of Columbia and any
                            territory of the United States, and an agency
                            or instrumentality of the District of Columbia
                            or such territory; and
                                (ii) any tribal government and an agency or
                            instrumentality of such government; and
                        (C) does not include a local government of a State.
                (7) Tribal government.--The term ``tribal government''
            means an Indian tribe as that term is defined under section
            4(e) of the Indian Self-Determination and Education Assistance
            Act (25 U.S.C. 450b(e)).

    SEC. 5. DEFERENCE TO STATE MANAGEMENT PRACTICES.

        (a) Expenditure and Accounting of Federal Funds.--A State shall
    expend and account for covered Federal grant funds in accordance with
    requirements and procedures under the laws of the State governing State
    expenditure of and accounting for State funds, subject to any
    requirement that expressly applies under any other Federal statute.
        (b) Use, Management, and Disposal of Personal Property Acquired
    With Federal Funds.--A State shall use, manage, and dispose of personal
    property acquired with covered Federal grant funds in accordance with
    requirements and procedures under the laws of the State governing State
    use, management, and disposal of personal property acquired with State
    funds, subject to any requirement that expressly applies under any
    other Federal statute.
        (c) Procurement With Federal Funds.--In procuring any personal
    property or service with covered Federal grant funds, a State shall
    follow the same requirements and procedures that apply under the laws
    of the State governing State procurement with State funds, subject to
    any requirement that expressly applies under any other Federal statute.
        (d) Definitions.--In this section:
                (1) Covered federal grant funds defined.--The term
            ``covered Federal grant funds'' means amounts provided as
            Federal financial assistance, other than assistance under a
            grant program to which the Grants Management Common Rule (53
            F.R. 8034) does not apply on the date of the enactment of this
            Act.
                (2) Personal property.--The term ```personal property''
            means property other than real property.

    SEC. 6. PERFORMANCE MEASURES.

        Section 1115 of title 31, United States Code, is amended by adding
    at the end the following:
        ``(g) The head of an agency may not include in any performance plan
    under this section any agency activity that is a State-administered
    Federal grant program, unless the performance measures for the activity
    are determined in cooperation with public officials.''.

    SEC. 7. REQUIREMENTS FOR AGENCY RULEMAKING.

        (a) Notice and Consultation With Potentially Affected State and
    Local Governments.--Not later than the date of publication of an
    advance notice of proposed rulemaking for a rule promulgated by an
    agency, or the equivalent date if such notice is not published, the
    head of the agency shall notify and consult with public officials who
    may potentially be affected by the rule for the purpose of identifying
    any preemption of State or local government authority that may result
    from issuance of the rule.
        (b) Identification of Preemption and Federalism Impacts.--
                (1) In general.--The head of an agency shall--
                        (A) publish with each proposed rule issued by the
                    agency a proposed federalism impact assessment under
                    paragraph (2);
                        (B) publish with each interim final rule issued by
                    the agency a proposed federalism impact assessment
                    under paragraph (2); and
                        (C) publish with each final rule issued by the
                    agency a final federalism impact assessment under
                    paragraph (2).
                (2) Federalism impact assessment.--A proposed or final
            federalism impact assessment under this subsection shall
            include with respect to the proposed, interim final, or final
            rule concerned an identification of--
                        (A) any provision of the rule that is a preemption
                    of State or local government authority;
                        (B) the constitutional basis for each such
                    preemption;
                        (C) any provision of statute under which the rule
                    is issued that is an express preemption of State or
                    local government authority, and any provision of any
                    other statute that expressly states that the Congress
                    intended such preemption;
                        (D) any provision of the rule that establishes a
                    condition for receipt of grant funds that is not
                    related to the purpose of the grant program under which
                    the funds are provided;
                        (E) any other provision of the rule that impacts
                    State or local governments, including any provision
                    that constitutes a Federal intergovernmental mandate
                    (as that term is defined in section 421 of the
                    Congressional Budget and Impoundment Control Act of
                    1974);
                        (F) any regulatory alternatives considered by the
                    agency;
                        (G) the estimated costs that will be incurred by
                    state and local governments as a result of issuance of
                    the rule; and
                        (H) the extent of the agency's consultations with
                    public officials who may potentially be affected by the
                    rule.
        (c) Publication.--The head of an agency shall include, in a
    separately identified part of the preamble to each proposed rule,
    interim final rule, and final rule published by the agency in the
    Federal Register, a summary of the proposed or final (as applicable)
    federalism impact assessment prepared under this section.

    SEC. 8. LEGISLATIVE REQUIREMENTS.

        (a) In General.--The report accompanying any bill of a public
    character reported from a committee of the Senate or House of
    Representatives, or the joint explanatory statement accompanying a
    conference report on any such bill, shall include a statement that--
                (1) identifies each section of the bill or conference
            report that constitutes an express preemption of State or local
            government authority, or asserts that the bill does not contain
            any such section; and
                (2) describes the constitutional basis for any such
            preemption;
                (3) sets forth the reasons for each such preemption; and
                (4) includes the federalism impact assessment by the
            Director under subsection (b).
        (b) Federalism Impact Assessment by Congressional Budget Office.--
                (1) Provision of bill or conference report to director.--
            When a committee of the Senate or the House of Representatives
            orders reported a bill of a public character, and before a
            conference committee files a conference report thereon, the
            committee or conference committee shall promptly provide the
            bill to the Director and shall identify to the Director each
            section of the bill that constitutes a preemption of State or
            local government authority.
                (2) Federalism impact assessment.--(A) For each bill of a
            public character reported by any committee of the Senate or the
            House of Representatives, and for each conference report
            thereon, the Director shall prepare and submit to the committee
            or conference committee a federalism impact assessment that
            describes the preemptive impact of the bill or conference
            report thereon on State and local governments, including the
            estimated costs that would be incurred by State and local
            governments as a result of its enactment.
                (B) In the case of a bill or conference report that
            authorizes a Federal grant program, the federalism impact
            assessment shall also identify any provision that establishes a
            condition for receipt of funds under the program that is not
            related to the purposes of the program.
        (c) Absence of Committee Report or Statement of Managers.--In the
    absence of a committee report or joint explanatory statement in
    accordance with subsection (a) accompanying a bill or conference report
    thereon, respectively, the committee or conference committee shall
    report to the Senate and the House of Representatives a statement
    described in subsection (a) before consideration of the bill or
    conference report.

    SEC. 9. RULES OF CONSTRUCTION RELATING TO PREEMPTION.

        (a) Statutes.--No Federal statute enacted after the effective date
    of this Act shall preempt, in whole or in part, any State or local
    government law, ordinance, or regulation, unless the statute expressly
    states that such preemption is intended or unless there is a direct
    conflict between such statute and a State or local law, ordinance, or
    regulation so the two cannot be reconciled or consistently stand
    together.
        (b) Rules.--No Federal rule issued after the effective date of this
    Act under any provision of law enacted after that effective date shall
    preempt, in whole or in part, any State or local government law,
    ordinance, or regulation, unless the statute under which the rule is
    issued, or another statute, expressly states that such preemption is
    intended.
        (c) Favorable Construction.--Any ambiguity in this Act, or in any
    other Federal rule issued or Federal statute enacted after the date of
    the enactment of this Act, shall be construed in favor of preserving
    the authority of State and local governments.

    SEC. 10. REPORTS ON PREEMPTION.

        (a) Office of Management and Budget Information.--Promptly after
    the expiration of the second calendar year beginning after the
    effective date of this Act, and every 2 years thereafter, the Director
    of the Office of Management and Budget shall submit to the Director of
    the Congressional Budget Office information describing each provision
    of interim final rules and final rules issued during the preceding 2
    calendar years that preempts State or local government authority.
        (b) Congressional Research Service Information.--Promptly after the
    expiration of the second calendar year beginning after the effective
    date of this Act, and every 2 years thereafter, the Director of the
    Congressional Research Service shall submit to the Director of the
    Congressional Budget Office information describing Federal and State
    court decisions issued during the preceding 2 calendar years that
    preempt State or local government authority.
        (c) Congressional Budget Office Report.--
                (1) In general.--Not later than the adjournment sine die of
            each Congress, the Director of the Congressional Budget Office
            shall submit to the Congress a report on the extent of
            preemption of State and local government authority--
                        (A) by Federal laws enacted during the previous
                    session of Congress; and
                        (B) by judicial or agency interpretations of
                    Federal statutes issued during such session, using--
                                (i) information regarding agency rules
                            submitted by the Office of Management and
                            Budget under subsection (a); and
                                (ii) information regarding Federal and
                            State court decisions submitted by the Director
                            of the Congressional Research Service under
                            subsection (b).
                (2) Content.--The report under paragraph (1) shall
            contain--
                        (A) a cumulative list of Federal statutes
                    preempting, in whole or in part, State or local powers;
                        (B) a summary of legislation enacted during the
                    previous session preempting, in whole or in part, State
                    or local government authority;
                        (C) a summary of rules of agencies promulgated
                    during the previous session of Congress preempting, in
                    whole or in part, State or local government authority;
                    and
                        (D) a summary of Federal and State court decisions
                    issued during the previous session of Congress
                    preempting, in whole or in part, State or local
                    government authority.
                (3) Availability.--The Director shall make the report under
            this subsection available to--
                        (A) each committee of the Congress;
                        (B) each Governor of a State;
                        (C) the presiding officer of each chamber of the
                    legislature of each State; and
                        (D) other public officials and the public through
                    publication in the Congressional Record and on the
                    Internet.

    SEC. 11. LIMITATION ON APPLICATION WITH RESPECT TO PROHIBITIONS AGAINST
                        DISCRIMINATION.

        This Act shall not apply with respect to any section of a bill, or
    any provision of a Federal regulation or statute, that establishes or
    enforces any statutory prohibition against discrimination on the basis
    of race, color, religion, sex, national origin, age, handicap, or
    disability.

    SEC. 12. EFFECTIVE DATE.

        This Act shall take effect 90 days after the date of the enactment
    of this Act.

                                       -

        Mr. McIntosh. I want to welcome four State and local
    elected officials who represent key organizations. They are,
    first of all, North Carolina State Representative Dan Blue, who
    is the president of the National Conference of State
    Legislatures. Dan has been with us before at this committee,
    and I welcome you back. Thank you for coming up to Washington
    today. The second is South Bay, FL, Mayor Clarence Anthony, who
    is president of the National League of Cities. The third is
    Santa Fe, NM, County Commissioner Javier Gonzales, who is the
    second vice president of the National Association of Counties.
    And the fourth is Mr. Raymond Scheppach, who is the executive
    director of the National Governors' Association.
        I also want to welcome Nye Stevens, who is Director of
    Federal Management and Work Force Issues in the General
    Accounting Office. As I mentioned, unfortunately Professor John
    Baker will not be here, but I would ask unanimous consent that
    his testimony be included into the record.
        Finally, the Office of Management and Budget was invited to
    testify to express the Clinton administration's views on H.R.
    2245. However, instead of testifying today, the administration
    decided to submit a statement for the record, and again, I
    would ask unanimous consent that that statement be included in
    the record.
        In May 1998, to give some background, President Clinton
    issued Executive Order 13083, which revoked President Reagan's
    Executive Order 12612, on federalism, and President Clinton's
    own Executive Order 12875. The Reagan order provided many
    protections for State and local governments and reflected great
    deference to State and local governments. It also set in place
    operating principles and required discipline for the executive
    branch agencies to follow in all of their decisionmaking which
    would affect State and local governments. The Reagan order was
    premised on the recognition of the competence of State and
    local governments and their readiness to assume even greater
    responsibilities in our national political scheme of
    government.
        In August 1998, after a July hearing before the
    subcommittee and the outcry from the seven major national
    organizations that represent State and local governments,
    President Clinton indefinitely suspended Executive Order 13083
    and agreed to work with these national organizations on a
    substitute order. This was an outcome that the subcommittee
    greatly welcomed.
        Now, since January 1999, the administration has held
    several meetings with elected State and local officials and the
    national organizations that represent them to discuss a
    replacement Executive order. We understand from the
    representatives of those groups that the administration
    continues to want to rescind President Reagan's federalism
    Executive order and replace it with an Executive order that
    does not include many of the needed protections for State and
    local governments. As a consequence, the State and local
    representatives approached Congress and asked for a permanent
    legislation to protect their interests.
        Now, after a series of meetings that really began last
    February and have gone on since then, a bipartisan group of
    Members together with those national organizations and their
    leaderships reached agreement on the substance of the
    legislation to include provisions most needed and desired by
    them to promote and preserve federalism.
        You know, as James Madison wrote in Federalist No. 45, the
    powers delegated to the Federal Government are defined and
    limited. Those which are to remain in the State governments are
    numerous and indefinite. Nonetheless, the political authority
    of the States has been challenged through legislation passed by
    Congress, regulations issued and other decisions made by the
    executive branch, and judicially imposed mandates. There needs
    to be an appropriate balance between the powers and duties of
    the Federal Government and those of the State and local
    governments.
        In the past, the absence of clear congressional intent
    regarding preemption of State and local authority has resulted
    in too much discretion for Federal agencies and uncertainty for
    State and local governments, leaving the presence or scope of
    preemption to be determined by litigation in the Federal
    judiciary.
        The Federalism Act of 1999 has a companion bill in the
    Senate, S. 1214, the Federalism Accountability Act of 1999.
    Both of these bills seek to redress this problem of encroaching
    Federal power. They would first promote and preserve the
    integrity and effectiveness of our federalist system of
    government; second, set forth principles governing the
    interpretation of congressional intent regarding preemption of
    State and local government authorities by Federal laws and
    Federal rules; third, recognize the partnership between the
    Federal Government and the State and local governments in the
    implementation of certain Federal programs; and fourth,
    establish a reporting requirement to monitor the incidence of
    Federal statutory, regulatory and judicial preemption.
        The Federalism Act of 1999 establishes new principles for
    both the legislative branch and the executive branch before
    either imposes requirements that preempt State and local
    authority or have other impacts on State and local governments.
        I want to pause here to let the representatives of the
    State and local governments know we heard you loud and clear
    last year at the hearing where you brought forth in this
    subcommittee the problem that it's not only the executive
    action but also actions taken here in Congress that we need to
    be mindful of when we try to preserve the federalism principle.
    And so, this act is crafted to apply to both the executive and
    the legislative branch in the future.
        H.R. 2245, which builds on the Unfunded Mandates Reform
    Act, requires that the report accompanying any bill identifying
    each section of that bill constitutes an expressed preemption
    of State and local authority and the reasons for such
    preemption. The report also must include a federalism impact
    assessment prepared by the Congressional Budget Office which
    estimates the costs on State and local governments. Similarly,
    the bill requires executive branch agencies to include a
    federalism impact assessment in each proposed, interim final
    and final rule that is published. The federalism impact
    assessment must identify any provision that is a preemption of
    State or local government authority and the expressed statutory
    provision authorizing such preemption, the regulatory
    alternatives considered, and the impacts and the costs on State
    and local governments.
        The bill establishes new rules of construction relating to
    preemption. These include that no new Federal statute or new
    Federal rule shall preempt any State or local law regulation
    unless the statute expressly states that such preemption is
    intended. This will, I believe, go a long way to prevent some
    of the costly and unnecessary litigation that's arisen about
    the issue of preemption.
        Any ambiguity shall be construed in favor of preserving the
    authority of State and local governments. Besides instituting
    this new discipline for the legislative and executive branches
    and for providing new rules of construction for the judiciary,
    the bill also includes other provisions to recognize the
    special competence of the States in partnership with the State
    and local governments and the Federal Government. The bill
    reflects respect for the States, in deference to the knowledge,
    experience, and authority of State and local elected officials.
    Specifically, the bill provides deference to State management
    practices for financial management, property, and procurement
    involving certain Federal grant funds. The bill also requires
    that, for State-administered Federal grant programs, the
    executive branch agencies must cooperatively determine program
    performance measures with State and local officials and the
    seven major national organizations that represent them.
        Let me say that the McIntosh-Moran-Portman-McCarthy-Castle-
    Condit-Davis bill is truly a bipartisan bill. It's a product of
    the work with the seven major State and local interest groups,
    the National Governors' Association, the National Conference of
    State Legislatures, the Council of State Governments, the U.S.
    Conference of Mayors, the National League of Cities, the
    National Association of Counties, and the International City/
    County Management Association. And so, with that, I am pleased
    today to open this hearing on this legislation.
        [The prepared statement of Hon. David M. McIntosh follows:]

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        Mr. McIntosh. Let me now ask if my colleague Mr. Terry
    would like to make any opening statement before we move to the
    first panel.
        Mr. Terry. To introduce myself to the panel, I'm an 8-year
    member of the City Council in Omaha, NE, and an 8-year member
    of the League of Cities. One of the fundamentals of my
    philosophy is empowerment of local communities, counties, and
    State governments as opposed to the Federal Government. So this
    is a type of measure that we in Congress must take to protect
    the rights to govern in the local communities--those
    governments which can best deliver the services and represent
    the constituents because they are truly closer to the people.
        That's one of the reasons why I ran for this job. On the
    city government I was tired of the Federal Government dictating
    everything we did, from the type of road projects to our water
    quality, which of course is extremely high anyway. So I enjoy
    engaging in this type of discussion and, with H.R. 2245,
    engaging in this type of battle.
        I appreciate what you've done, Mr. Chairman, and let the
    games begin.
        Mr. McIntosh. Thank you, Mr. Terry. I particularly
    appreciate your perspective having served on local government.
        Let me also mention at this point that Mr. Kucinich will
    have an opportunity to give his statement, and we'll put that
    into the record as soon as he is able to be with us.
        But, let's move forward with the first panel. I mentioned
    in my introduction who they were, but Representative Blue,
    Mayor Anthony, and Commissioner Gonzales, as well as Mr.
    Scheppach, please come forward and join us now.
        I would ask each of you to remain standing for a minute.
    The rules of our full committee are that we must ask each of
    the witnesses to be sworn in. So, don't feel that you're being
    singled out for that in any way. But if you would please take
    the oath with me.
        [Witnesses sworn.]
        Mr. McIntosh. Thank you. Let the record show that each of
    the witnesses answered in the affirmative, and the committee
    has already agreed to put your full remarks into the record, so
    I would ask you to share a summary of those, emphasize
    particular points with us today, and then we can get into the
    question-and-answer period.
        Representative Blue, again, thank you for joining us again
    at the hearing and with this committee. Share with us a summary
    of your remarks, if you would.

        STATEMENTS OF DANIEL T. BLUE, JR., NORTH CAROLINA STATE
        REPRESENTATIVE, PRESIDENT, NATIONAL CONFERENCE OF STATE
       LEGISLATURES; CLARENCE E. ANTHONY, MAYOR, SOUTH BAY, FL,
       PRESIDENT, NATIONAL LEAGUE OF CITIES; JAVIER M. GONZALES,
       COMMISSIONER, SANTA FE COUNTY, NM, SECOND VICE PRESIDENT,
      NATIONAL ASSOCIATION OF COUNTIES; AND RAYMOND C. SCHEPPACH,
          EXECUTIVE DIRECTOR, NATIONAL GOVERNORS' ASSOCIATION

        Mr. Blue. Thank you very much, Mr. Chairman. I appreciate
    the opportunity to appear before you again to talk about a
    subject which, a little less than three decades ago when I got
    into it in law school I thought was some inane, obscure topic
    that I would never deal with again. But for the last 12 or 14
    years, I have been on behalf of the National Conference of
    State Legislatures dealing with the issue of federalism, and we
    have gone through a great evolution in that process since the
    mid-1980's.
        On behalf of the National Conference of State Legislatures
    I'm here to support H.R. 2245, the Federalism Act of 1999,
    because it is a bill that deals comprehensively with the
    problem of Federal preemption of State law.
        As a result of Federal preemption, Mr. Chairman, we believe
    that a large part of the policy jurisdiction of State
    legislatures has been lost, and when we lose that, we lose the
    capacity for self-government, local self-government. One of the
    advantages we feel very strongly about federalism is that the
    laws will be adopted to conform with local needs and
    conditions. They will reflect regional and community values,
    and we believe that local diversity at the State level and the
    local governments is ignored when these laws are preempted and
    replaced with a one-size-fits-all national policy without some
    of the thought, we think, that is embraced by H.R. 2245
    entering the deliberation.
        A second advantage that we believe, Mr. Chairman, of
    federalism is that it allows greater responsiveness and
    innovation. When States are preempted, States and localities
    are preempted, they can't serve as laboratories of democracy,
    and we believe very strongly, certainly from the standpoint of
    States, that 50 different approaches to problem resolution will
    yield the most effective for those different States that are
    looking at it.
        We thank you for first generally identifying the problem of
    preemption, and we thank you for a workable bill that we think
    allows us to achieve our objective, some of which you have
    already articulated. We think that the Federalism Act of 1999,
    H.R. 2245, addresses the preemption problem in three ways;
    three ways we think are very important. First, by providing
    Congress with more information about the preemptive impact of
    legislative proposals, I think that we sensitize Congress and
    the Members of Congress to the impacts of what they do and how
    we have an encroachment on constitutional authority of States,
    and also on the encroachment on States being willing to try
    different solutions to problems.
        We think the second part of the bill, the fact that it
    provides for rules of construction urging courts to limit
    findings that preemption is implied, goes a long way because,
    as you know, the major problem with preemption is not when it's
    been expressly found by the Congress. I'll readily acknowledge
    that I believe very much in the supremacy clause of the
    Constitution, and I know that when Congress acts in an area, if
    it determines that it's in the national interest or there is
    some reason that it ought to do it, then it clearly has the
    right to since the Ogden decision. But the one thing we find
    great difficulty with is this whole concept of implied
    preemption when Congress has not clearly indicated where it
    wants to go, and, in fact, some of the novel and creative
    theories that the courts have come up with over the years to
    find preemption. So we think that the bill providing for rules
    of construction regarding this implied preemption will go a
    long way toward addressing the problems that we've identified,
    particularly over the last 12 or 14 years.
        And third, the bill by providing notice and consultation
    procedures in the Federal administrative process we believe
    will encourage Federal agencies to first acknowledge that
    federalism is a concept that has life, but also will make them
    take into account federalism and preemption issues more fully
    as they engage in the rulemaking process.
        So, Mr. Chairman and Mr. Terry, when we look at the various
    aspects of the bill section by section, we're certainly
    encouraged that we do have a vehicle to address these issues
    that we've identified, to seriously address the issue of
    preemption at all levels of the Federal Government, and we
    appreciate the fact that this is a bipartisan effort. I don't
    think that federalism is something that wears a Republican or
    Democratic label, a liberal or conservative label, but is one
    that truly acknowledges what the Founding Fathers intended when
    they created this system of government which we all say that we
    cherish and believe in.
        Thank you very much for giving me the opportunity to
    testify this morning.
        Mr. McIntosh. Thank you, Representative Blue. I appreciate
    that very, very much.
        [The prepared statement of Mr. Blue follows:]

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        Mr. McIntosh. Mayor Anthony.
        Mr. Anthony. Thank you very much, Mr. Chairman. I'm pleased
    to be here this morning on behalf of my colleagues and the
    National League of Cities. The Federalism Act of 1999, H.R.
    2245, truly embraces and preserves the cherished principles of
    federalism and promotes a new Federal, State and local
    partnership in respect to the implementation of Federal
    programs.
        I'd like to thank the committee for having us today to
    share our perspective on behalf of the big seven. It truly
    provides us with an opportunity to create a new partnership
    that has never existed between all levels of government, and I
    applaud you for that perspective here today.
        The National League of Cities is the oldest and largest
    municipal organization, and we thank you for bringing us here
    today on behalf of our membership. What truly brings us here is
    nothing less than the pervasive and imminent threat of
    preemption by the Federal Government. It is the National League
    of Cities' highest priority to put a meaningful check on this
    preemption of State and local authority.
        Allow me to cite you a few of the invasive actions the
    Federal Government has taken in just the last few months. First
    and foremost, the legislation signed into law last October
    which impedes States' and local governments' ability to tax
    sales and services over the Internet in the same manner as all
    other sales and services are taxed, despite the fact that no
    such limitations would apply to the Federal Government, is one
    example. There also has been a bill moving quickly through the
    House of Representatives called the Religious Liberty
    Protection Act of 1999, which is a massive preemption of State
    and local zoning and land use laws. This bill, if enacted into
    law, would chill a city's ability to apply neutral zoning laws
    that impede an entire community equally to religious land uses
    like churches and synagogues. Current law preempts municipal
    authority over siting of group homes and preempts a
    municipality from applying zoning, environmental, health and
    safety statutes to railroads. These are, again, examples of
    preemption that exist today.
        NLC and other members of the big seven State and local
    government groups have been negotiating with the administration
    on a new Executive order on federalism that will replace the
    existing order. We hope this new Executive order will serve to
    enhance the legislation you are considering this morning and
    promote our common goals to work together as partners. NLC,
    however, believes that legislation is still needed.
        Does that mean I'm to stop? I'm sorry. I'm new at this.
        Mr. McIntosh. The lights are there to guide you, but
    actually your testimony is very important to us, Mr. Anthony.
    Take the time you need.
        Mr. Ford. Can we follow that rule, too, Mr. Chairman?
        Mr. McIntosh. We're going to be a little more strict with
    ourselves, although I went way over with my opening statement,
    so any time you need.
        Mr. Anthony. Let me turn now to H.R. 2245. I do apologize.
    I'm kind of learning the rules right now.
        This bill provides cities nationwide with the viable means
    for alleviating many of the problems associated with Federal
    preemption of local laws. Mr. Chairman and members of the
    committee, we at the local level want to help create a dynamic
    federalism. We believe neutral accountability between and among
    the various levels of government is a good thing.
        H.R. 2245 represents one of the most important efforts to
    fundamentally rethink the nature and relationship of the
    Federal system. For example, section 4 of the bill defines a
    public official as including the national associations of the
    big seven. And I think this is important because oftentimes we
    as local government officials are not able to travel to
    Washington, and our voices are heard through the big seven.
        Section 7 of the bill requires notice and consultation with
    State and local elected officials and their representatives,
    and, again, that is a very key provision of this bill.
        I agree with Representative Blue as it relates to the rules
    of construction. We clearly support that section.
        I will stop my comments right now. Thank you so much, Mr.
    Chairman, and I look forward to answering any questions.
        [The prepared statement of Mr. Anthony follows:]

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        Mr. McIntosh. Thank you, Mayor Anthony. Let me share with
    you your observation about the importance of legislation rather
    than relying on Executive orders is very helpful to us because
    that will be one question that Members will ask: Do we really
    need to pass this bill, or can it be handled in another manner?
    So I in particular appreciate your insight into that as well as
    the need to have representatives of the seven associations
    participate in the consultation.
        I'm very mindful that you have a lot on your plate as an
    official in local government and city mayor, and that the less
    time you need to spend here working with us in Washington is
    more time you can help your constituents at home. So I
    appreciate that insight as well and doubly appreciate your
    coming up today and spending the time.
        Let me mention Mr. Ford and Mr. Moran have joined us. Shall
    we continue and at the end----
        Mr. Moran. I would like to hear from the distinguished
    panelists, and then maybe we can have a word to say. Thank you
    very much, Mr. Chairman, though, for the opportunity.
        Mr. McIntosh. Great. Appreciate that for both of you.
        Commissioner Gonzales, thank you for coming. You probably
    have traveled the farthest today. So welcome. Feel free to
    share with us a summary of your testimony, and we'll put the
    entire remarks into the record.
        Mr. Gonzales. Thank you, Mr. Chairman and members of the
    committee. Once again, thank you for inviting the National
    Association of Counties to testify on certainly one of our
    highest priorities, federalism and the preemption of State and
    local authority. And I will be brief, Mr. Chairman.
        Preemption of local authorities is a growing concern to
    America's counties. Efforts of the Federal Government and
    Congress to dictate policy implementation of traditional county
    responsibilities and functions undermines the concept of
    federalism and are contrary to the constitutional framework
    underlying Federal, State, and local relations.
        Mr. Chairman, I wish to congratulate you and the cosponsors
    of H.R. 2245, the Federalism Act of 1999. We at the counties
    believe the bill will help to achieve a necessary balance in
    respecting the supremacy clause of the Constitution while also
    addressing the rights of State and local governments to
    exercise local discretion.
        H.R. 2245 is a natural and necessary sequel to the
    enactment of the unfunded mandates reform. It helps to clarify
    when preemption is necessary while maintaining adequate
    reporting requirements and controls. The National Association
    of Counties fully supports the purposes of this legislation:
    First, to promote and preserve the integrity and effectiveness
    of our federalist system of government; second, to provide
    principles governing the interpretation of congressional intent
    regarding preemption of State and local government authority by
    Federal laws and rules; third, to recognize the Federal, State
    and local partnership; and last, to establish reporting
    requirements to monitor the incidence of Federal statutory,
    regulatory, and judicial preemption.
        We are also pleased with the definition of public officials
    which includes all our national organizations such as NACo that
    represent public officials. NACo supports the requirements set
    forth in section 7 of the bill for early consultation with
    State and local public officials and the identification of
    preemption and federalism impacts. NACo supports the
    accountability required under section 8 of the legislation.
    Under this section, Mr. Chairman, the executive and legislative
    branches are required to identify any preemptions to be
    proposed in legislation and their impact on State and local
    governments.
        We also support section 10 of the bill which requires that
    preemption reports be prepared by OMB and CBO after every
    Congress. Finally, the rules of construction as proposed in
    section 9 of the legislation would effectively help to preserve
    the authority of State and local government laws and
    regulations. By specifically requiring that a proposed statute
    express intent to preempt, courts will have the benefit of
    clear and concise language declaring this purpose. Likewise, if
    there's no language to that effect, the courts may be able to
    discern fairly that there was no intent to preempt, which helps
    to reduce interpretive decisions to that effect.
        I wish to take the opportunity to comment on another piece
    of legislation that Mayor Anthony spoke about which is pending
    on the House calendar for debate and is relevant to our
    purposes here today. This is the Religious Liberty Protection
    Act, H.R. 1691. NACo strongly supports the right to the free
    exercise of religion, Mr. Chairman, as guaranteed by the first
    amendment of the Constitution. We fear, however, that the bill
    may have far-reaching consequences by essentially preempting
    local ordinances on zoning, civil rights, child abuse
    protection and a myriad of other State and local laws when a
    person or institution claims to be professing religious
    beliefs. This legislation is much too broad in potential scope
    and effect and opens the door to unnecessary litigation. In
    addition to land use decisions, State and local governments
    could be called into question by religious groups for enforcing
    child abuse protections when removing children from homes where
    religious practices are used for excessive discipline, a
    refusal to pay for child support, a rejection of adequate and
    appropriate health care, parental neglect of their children's
    education because of purported religious beliefs.
        Mr. Chairman, we should be sensitive to the religious
    rights of our citizens as contained in the first amendment.
    However, we also need to be vigilant in maintaining support for
    the public safety, health and welfare and our ability to govern
    while striking a balance between all people's rights.
        As pertaining to the President's Executive order, Mr.
    Chairman, together with the national organizations representing
    State and local governments, NACo has entered into serious
    negotiations on a new federalism Executive order with the
    administration. After the administration indefinitely suspended
    Executive Order 13083, we had meaningful debate on the need for
    the administration to propose a new Executive order and over
    the nature and substance of such an order. The administration
    has negotiated in good faith in dealing with this issue and has
    agreed to many provisions that help strengthen the Federal,
    State and local relationship. We are continuing discussions
    while working with you, Mr. Chairman, to ensure that the
    federalism issues are enforced at the executive, legislative,
    and judicial levels of government.
        In closing, Mr. Chairman, NACo appreciates the opportunity
    to testify before you today in support of H.R. 2245, and we
    look forward to its enactment. Thank you.
        Mr. McIntosh. Thank you very much, Commissioner. I do
    appreciate again your taking time out from your work at home to
    come here and share those with us. They're very helpful in that
    testimony.
        Mr. Gonzales. Thank you, Mr. Chairman.
        [The prepared statement of Mr. Gonzalez follows:]

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        Mr. McIntosh. Our final witness for this panel is Mr. Ray
    Scheppach, who is with the National Governors' Association. I
    appreciate your coming today and sharing with us a view of the
    Nation's Governors.
        Mr. Scheppach. Thank you, Mr. Chairman. I appreciate being
    here on behalf of the Nation's Governors on the Federalism Act
    of 1999. I want to thank you and the six sponsors for
    introducing this bill.
        I'm often asked when I give speeches about the State of
    federalism in the United States today. I would argue in a
    couple of major areas we've made some significant progress. In
    another area, however, I think we're essentially going
    backward, and that third area may well become much more
    important than the progress we've made in the other two areas.
    In terms of areas that we've made progress, we've clearly gone
    over the last 5 or 6 years into a major so-called devolution
    revolution. And if you look at what's happened on the spending
    side of the Federal budget, I think States had actually gained
    a considerable amount of flexibility in terms of programs. I'll
    point to welfare reform, some additional Medicaid flexibility,
    children's health, the highway bill, education flexibility and
    tobacco recoupment; and on the regulatory side, a couple of
    areas such as unfunded mandates and safe drinking water. So
    that's a fairly significant list of very positive changes, I
    think, in terms of devolution over the last couple of years.
        The second area I think that we've made some significant
    progress is in the courts. Again, over this timeframe, the New
    York case on compacts of low-level nuclear waste, the seminal
    shift of the last two or three decisions by the court in terms
    of State sovereignty. Although our majority seems to be
    relatively fragile, I think they are important decisions coming
    out of the courts.
        The third area, however, is this little area of preemption,
    and I think we've got to look to some extent at what's happened
    recently and project what we think is going to happen, given
    some of the changes that are taking place in the economy.
        Over the last several years, we've seen an acceleration in
    preemption. There's a fairly long list, but I'll just point to
    several of them: The Internet Tax Freedom Act and the
    Telecommunications Act of 1996 were pretty significant. A lot
    of the trade agreements, such as NAFTA, have preempted a lot of
    State authority. The National Securities Markets Improvement
    Act of 1996 did a fair amount of preemption. It's not
    restrained, however, to Congress. The administration through
    Executive order has preempted. We can point to the CHIP
    program, which allowed for waiver activities, but the
    administration has chosen not to provide any waivers. You can
    look to an area such as the rules for bypass in Indian gaming
    whereby the Secretary's prior promulgated rule that would
    essentially allow tribes to come directly to the Federal
    Government and bypass the compacting process. So we see it both
    in the Congress and in administrative agencies.
        I would argue that as we look forward, there are a number
    of trends that are taking place that I believe are going to
    make this preemption problem much more significant over the
    future. Those three trends are essentially--in our domestic
    economy, we are in the process of deregulating most industries,
    and that is a major trend. Second of all, the rate of
    technological change is accelerating; and third, we are really
    being fully integrated into the world economy. What all those
    three changes mean is that business wants uniformity and
    consistency with respect to the rules and regulations under
    which it operated. They need it to some extent to compete in a
    global environment. Those are legitimate needs, but those
    legitimate needs crash up against State sovereignty in many
    areas.
        When you look at what's on the congressional plate right
    now, it's pretty significant in terms of potential additional
    preemption. Financial services would preempt banking and
    insurance regulations. Electric utility deregulation would
    preempt States. There are probably 15, 16 different areas in
    technology alone from digital signatures to privacy to a number
    of areas that will preempt, and as previously mentioned, a
    number of areas in land use and zoning.
        So as you project the need for businesses' uniformity with
    what's going on now and what we can expect, I think that this
    is a growing problem that we all need to be pretty concerned
    about.
        You might ask what are the costs of that to our sort of
    democratic system and our economic system. I would point to
    three that I think are fairly significant. It was previously
    mentioned that the ability to innovate and experiment will be
    substantially reduced at the State and local level. If you look
    at what the impact of that is, very seldom does the Congress
    actually go into a new area and legislate. I hate to say it,
    but you generally follow what has become effective at the State
    and local area. If you look at welfare reform, we had 35 States
    under waivers move forward in welfare reform. So to eliminate
    that, I think, is going to eliminate your ability to really
    decide what is effective policy and what isn't effective
    policy, and I think that is a real significant loss.
        Second, the Federal Government does not protect consumers
    very well. There are many instances where after elimination of
    State regulation, you don't put in place Federal regulation. I
    can point in the health care area to ERISA. There is basically
    no consumer protections in ERISA. The Federal preemption
    eliminates consumer protections at the State level.
        The third area I point to is the ability of Governors to
    modify economic development approaches and strategies. I
    laughingly say that in rural America, we're going to have an
    ATM card machine under a garage. That's going to be the banking
    in rural areas if, in fact, Governors and local representatives
    have no ability to work with the private sector to ensure that
    services are provided across the board. So I think there are
    some fairly significant costs if we continue to allow this
    preemption.
        Let me say that the national Governors strongly supports
    the Federalism Act of 1999. I think its focus is really on
    three things that are relatively simple and should not be
    particularly burdensome to the Congress. I think that first it
    puts a spotlight on potential preemptions, and it allows State
    and local representatives to sit down with congressional people
    to work out what is the best way. The second, if there's
    ambiguity, it has deference to States as opposed to Federal
    laws, which I think is a plus. And third, it merely does the
    scorekeeping. After the fact, after a 2-year period, CBO, in
    fact, looks back and tallies up what's happened with respect to
    administrative orders, judicial decisions, and congressional
    action. So I think it's a relatively simple bill,
    straightforward, not particularly burdensome, and yet may
    really have a fairly substantial impact.
        We look back at the unfunded mandates bill, many of us at
    the time never thought that it would work as effectively as it
    does. The number of points of order on the floor of the House
    and Senate have been fairly minor. But really what's happened
    is that Congress has found more effective ways of doing what
    they used to do with mandates. And so I think it has been quite
    powerful.
        There's two areas that I would mention by which we think
    the bill could be strengthened, one area in the disclosure
    priorities. We think they could be expanded above and beyond
    costs to look at specific impacts on economic development,
    consumer protections and enforcements as far as the impact
    statements; and second, perhaps go back and see whether a point
    of order might be possible in the bill. Again, the issue, I
    think, was very important in the unfunded mandates bill.
        I thank you, Mr. Chairman. Governors support the bill, and
    we look forward to proceeding to markup. Thank you, Mr.
    Chairman.
        Mr. McIntosh. Thank you very much, Mr. Scheppach.
        [The prepared statement of Mr. Scheppach follows:]

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        Mr. McIntosh. Let me now turn to Mr. Moran, who is one of
    the original cosponsors, and thank you for joining us today in
    this committee. Thank you for your work. Mr. Ford had told me
    earlier you didn't have a statement. Is that----
        Mr. Ford. I defer to my distinguished colleague.
        Mr. Moran. If you want to make some comments, we'd all like
    to hear them.
        Mr. Ford. I defer to you. You're cosponsor of the
    legislation.
        Mr. McIntosh. He's worked a lot in this area. I appreciate
    your coming, Jim, and share with us your comments.
        Mr. Moran. Well, thank you very much, Mr. Chairman, and
    thank you, Mr. Ford. I am proud to be able to join my
    colleagues in addition to you, Rob Portman, Karen McCarthy, Tom
    Davis, Gary Condit, Mike Castle, in cosponsoring the Federalism
    Act, and the comments from the panel today certainly give us
    some confidence that this may have some tracks and make a
    profound difference in the way that we define the relationship
    between the Federal Government and States and localities.
        One of the great features of our federalist system of
    government is the innovation and flexibility with which State
    and local governments seek out and respond to pressing public
    needs and concerns. That really is a major factor in the
    greatness of this economy and this society. Invariably a new
    approach is adopted and tested in a county or State. If it
    succeeds, others try it. If it fails, it's easily abandoned.
    It's not so easy for the Federal Government to test a new
    policy or abandon a failed one, particularly the latter.
        Unfortunately, this innovation and creativity at the State
    and local level is too often being stifled by actions of the
    Federal Government. With many new Federal laws or regulations,
    we pay a price by foreclosing or displacing local and State
    ability to address the same concern. These Federal initiatives
    are often so pervasive that they occupy the field. The courts
    have consistently held that the Federal presence is so great
    that State regulation in the same field is banned. Tougher
    State regulations and even regulations that merely complement
    the new Federal initiative can be ruled null and void, and have
    been.
        A number of examples. Just yesterday we reached an
    agreement on the conference on Y2K legislation. This is
    critically important. It needs to be passed right away. But I'm
    told that even in my own State of Virginia, the Y2K legislation
    that was passed is tougher, and so we've got a problem. We are
    probably going to have a problem with some of the banking
    legislation on privacy laws, for example.
        One of the major examples is that when Congress amended the
    Employment, Retirement, and Income Security Act [ERISA], to
    exempt employer-provided health care plans from State
    regulations, it did so for the sake of economic efficiency. A
    large multistate firm like IBM or General Electric or General
    Motors that self-insures, for example, should not have to
    comply with 50 different State laws on health care. I tend to
    agree, but given the stalemate that we've reached in Washington
    on health care reform and the fact that more than 16 percent of
    our population, about 40 million people, still lack basic
    health care, I think that many of us would welcome State or
    local efforts to expand coverage to underinsured people.
        So while most of the criticism of legislation like this has
    been directed at people saying that this legislation is too
    conservative coming from the right wing, here's an example
    where that is just to the contrary. Much of what we're doing at
    the Federal level is actually precluding much more progressive
    legislation that could be accomplished at the State level.
    Options to expand health coverage are extremely limited at the
    State level now because too great a share of their population
    is exempt from State regulation because of ERISA.
        It's not just health care. How many mayors would love to
    see their industrial brownfields revitalized, but they have to
    await congressional action, which never seems to come. It's
    been years we've been talking about that, never doing anything,
    and it's obvious to anybody watching it that something would
    have been done if it hadn't been for the Federal Government
    precluding action because we have been--we stopped everything
    in its tracks, saying, hold on, we're going to get legislation
    that's going to preempt everything you're going to do. We're
    going to provide the money and so on, and meanwhile all we get
    is stalemate, and nothing is happening.
        The Federalism Act we introduced last week seeks to protect
    and enhance our Federal system of government. It sets forth a
    process and discipline that's intended to make Federal
    decisionmakers simply more sensitive to State and local
    concerns and prerogatives.
        Mr. Moran. In many ways it is analogous to NEPA, requiring
    an impact assessment before Federal action can occur. It
    doesn't bar Federal action, but it helps to identify the
    potential impact of Federal action on State and local
    governments and hopefully identify ways to mitigate against the
    Federal action's most harmful impacts.
        I would be the first to admit that much of the legislation
    that Congress considers does include some type of Federal
    preemption. It is difficult to find a law that we pass that
    doesn't have some form of Federal preemption. So this is pretty
    important legislation, and you are going to hear a lot about it
    if it gets enacted. And obviously it is going it ruffle a lot
    of feathers. But I support strong national standards for
    cleaner air and water, fair labor standards, national public
    health standards. But given the Congress' right under the
    supremacy clause, we should have a procedure to ensure that
    Congress is both well informed and held accountable for major
    actions that preempt State and local governments.
        We also need to set forth a process that provides the
    courts with greater clarity on congressional intent when legal
    disputes arise between Federal and State law, and so much of
    this now is going into the court system. Even the recent
    Supreme Court decision, that has profound implications. It was
    mentioned by the panel. But I think it demands some reaction
    from the Congress, particularly a clarification. And this
    legislation would provide this. This would make it clear
    exactly what we intended, that if there is preemption, we knew
    exactly what we were doing, we had our eyes open when we went
    into it. And the requirement that we lay it out in report form,
    that we justify why we are doing it, we explain what we are
    doing, we are showing we knew what we were doing when we did
    it, all of that seems very constructive.
        So I know it is not perfect. I think there is going to need
    to be some judicial review limitation. We talked about that.
    And eventually--the chairman remembers we compromised on that
    with the Unfunded Mandate Reform Act. We may go through the
    same process with this legislation.
        And the requirement for an agency--Mr. Ford was pointing
    out that it gives him concern, it gives me concern in terms of
    the practicality that an agency has to consult with every
    public official affected by the legislation. Well, that is
    impractical and it is unrealistic. But if we can get a process
    together where we consult with the big seven so that we know
    and leave it to you to consult with the State and locals
    affected, that is doable. But that is the kind of thing that
    needs to be worked out.
        I look forward to reviewing all of the testimony here
    today, Mr. Chairman, and I think that a lot of the problems
    that might be identified are solvable. We can limit the
    potential for nuisance lawsuits. We can address the scope of
    judicial review. We can enable the Congress to be more
    responsible, more accountable, more constructive with this
    legislation and that's why I support it, and I appreciate you
    having the hearing today.
        Thank you, Mr. Chairman.
        [The prepared statement of Hon. James P. Moran follows:]

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        Mr. McIntosh. Thank you, Mr. Moran, and thank you, again,
    for all of your hard work in this area. We really do appreciate
    it.
        Mr. Ford, did you want to add to that?
        Mr. Ford. Yes, sir. I won't be long, Mr. Chairman. I thank
    you and I thank my colleague Congressman Moran. I want to
    support this legislation, and I appreciate all the comments and
    the hard work that the panelists have put forward and certainly
    my colleagues, McIntosh, Moran, McCarthy, and Rob Portman, for
    whom I have great affection because he is a University of
    Michigan graduate like myself. Even though he is in the wrong
    party, he is one heck of a guy.
        I support the legislation for a number of reasons just to
    echo to the extent I can what Mr. Moran has said. The
    flexibility and innovation and creativity we are seeing at the
    State and local levels around the country, I think we ought to
    unleash and really allow you guys to move and do the good work
    you are doing without fear of preemption by the Federal
    Government. I was a supporter of the Ed flex legislation that
    we passed recently that really untied the hand of State
    lawmakers and State education policymakers to do what is best
    for their students, to allow their teachers and superintendents
    to do the good work that all of us here want them to do.
        I come from a State, from Tennessee, where we run our own
    State Medicaid program. We call it TennCare. But for the fact
    that we receive a waiver from HCFA, we would not be able to do
    the things that we are doing. It has its strengths and
    weaknesses, but we were one of the very first States to have a
    comprehensive, or all or nothing, State Medicaid program and as
    the director is shaking his head, he is aware of some of the
    successes that we have had and some of the failures. But
    nonetheless I think it is an improvement from what we had. We
    are saving the government--saving the taxpayers money and we
    are covering with expanded coverage for more people. But some
    people question the quality of the care, and those are issues
    that we will have to address.
        But I also come from the school of thought that the Federal
    Government is not our enemy. I think so often we forget the
    environment and health and safety. And where I am from in this
    Nation we had an ugly history in how we dealt with people who
    look like me and two of the panelists and a lot of women in
    this room. And the Federal Government has been an instrumental
    force in ensuring that rights and liberties are afforded to all
    people. So I do think that we ought to be careful as we talk
    about the intrusive and the burdensome regulations and policies
    passed and enacted and promulgated by the Federal Government.
        The concerns I have have been raised by Mr. Moran. Section
    5, I don't think is that big of a concern for me. I think that
    many of the agencies are already assessing to determine whether
    or not these rules are, what type of burden or what type of
    impact they will have on States. So I disagree with some of the
    opponents on that front. But with regard to section 7 and the
    judicial review issues I do think that those issues perhaps can
    be worked out. I am encouraged by Mr. Moran's remarks and my
    relationship with Mr. McIntosh leads me to believe that he is
    more than willing to try to work through some of those issues,
    and I imagine the panelists, based on your comments, you are
    eager to see this legislation enacted and I would hope that
    eagerness would translate into a willingness to work with all
    folks who want to see this thing passed.
        I also have concerns about what the Supreme Court recently
    did. How it is interpreted I think leaves a lot open--or how it
    can be interpreted, Mr. Chairman. I think it leaves a lot open
    and I think we ought to be careful and realize that the people
    in our districts elected us to do a job too, and not just to
    give all the power back to State and local governments. As much
    as I would want them to have the ability to do with what they
    are doing, whether it is what Governor Engler is doing, or
    whether it is what Governor Davis is doing, whether it is what
    Mayor Rendell is doing or Mayor Riordan, I want all of those
    local officials to have that flexibility to do good things. But
    nonetheless we were elected to do a job too, and I am one who
    is proud to say I am glad I have this job and I am hopeful that
    the people continue to let me do it and I hope to continue to
    make an impact for the people in Memphis and around the
    country.
        I yield back the balance of my time.
        Mr. McIntosh. Let me say, Representative Ford, we have
    worked well together and you are absolutely right. I would like
    to continue to work with you on this and the other bills that
    we are working on to make sure we have a truly bipartisan
    approach. And specifically, you mentioned the concern about
    civil rights, which I think we all share. The bill has an
    explicit provision that says those bills will not be affected
    by it because that is a purview of the Federal Government, as
    it should be after the amendments passed to the Constitution
    after the Civil War in which the Federal Government was given
    authority to make sure that everyone's rights were protected in
    that area. So I appreciate your cognizance and input into that
    in particular, and we share that same goal.
        Let me just mention two things before we get to
    questioning. And in fact you can debit this from my questioning
    time so that my colleagues have a chance as well. But from the
    testimony, it appeared a couple of things that I think are
    important to distill. One is that the federalism principle cuts
    across party lines and it cuts across ideological lines.
    Several of the examples that were mentioned were ideas that
    conservatives liked but yet they preempted State and local
    authorities. Others were ideas that liberals like but preempted
    State and local authority. And I think all of us would be good
    to step back and remember that there was a lot of wisdom in the
    Founding Fathers in establishing a federalist system of
    government where each of our political or ideological
    preferences needs to be put in check here nationally and we
    need to focus on making sure that we allow the laboratories to
    continue to experiment and find solutions to our problems.
        The second was that I think there are ways in which we can
    deal with what is perhaps the strongest argument against
    federalism, and that is the economic argument that we need
    standardization. One of the ways to do that is a model that has
    been around for quite a long time and that is the uniform
    commercial code that is not a Federal act at all, but it is
    adopted in all 50 States and provides a great deal of
    standardization for commercial transactions. And I think it
    would serve us well here in Washington to remember that many of
    the problems we face today could be addressed in that type of
    uniform State effort and encourage more of it.
        The second is a provision that I put into an amendment I
    brought to the floor a couple of weeks ago addressing the issue
    of teacher liability. And we had a strong bipartisan vote for
    this in the House. In fact, I think we had exactly 300 votes
    for it. There was a provision that I thought was very important
    that said any State law that went beyond the protection for
    teachers against lawsuits would automatically continue to be in
    effect and that any State that wanted to adopt a different set
    of protections or no protections at all could decide to waive
    the provisions and opt out of the whole protection scheme. So
    what we effectively did was put in what I think of as a gap-
    filling measure at the Federal level, but we left total
    discretion for the States to address the issue in a different
    manner if they thought that was better.
        And, I think we should--and I would hope that one effect of
    our bill today would be that in future legislation, Congress
    would look to that type of provision where we could legislate a
    policy preference, but still create the flexibility for the
    States to opt out or have different solutions to it. So that as
    Mr. Ford said, we have to do our job and address many of these
    questions, but we could at the same time recognize that perhaps
    our solution doesn't fit every scenario or every State or every
    need for every community and explicitly allow that to occur,
    rather than an implicit preemption because we have legislated
    at the Federal level.
        So I think there are ways in which we can strive to reach
    uniformity without the heavy hand of Washington coming in and
    dictating what State and local governments need to do on these
    policy questions.
        With that, let me ask each of the panelists several
    questions regarding the bill. But the first one was does your
    organization support the specific requirements for agency
    rulemaking, such as required early consultation and
    identification of preemption of State and local government
    authority and the other federalism impacts which are required
    by section 7? You are welcome to expand on it but if I could
    ask each of you for the record to state if your association
    supports those provisions.
        Mr. Blue. The National Conference of State Legislatures,
    Mr. Chairman, generally supports those provisions. However, I
    think as Mr. Moran and Mr. Ford pointed out and as you
    acknowledged, and as all of us experience in legislating, we
    know that as various members start responding and reacting to
    legislation, part of what we do as legislators is try to
    accommodate the concerns that they express as long as we can
    preserve the basic intent of what the proposed legislation
    seeks to accomplish. So as a general proposition, we do. We
    know that there are some things that need some fine-tuning and
    stuff, and, Mr. Chairman, we know that you will make the
    opportunity available to us to work with you as you start doing
    that kind of fine-tuning to the bill prior to markup.
        Mr. McIntosh. Absolutely. Let me say categorically that as
    we consider changes to the bill, one of the things that I would
    want to do is keep the coalition together that we have
    developed with all of the seven organizations and the
    bipartisan cosponsors, so that we can consider those suggested
    improvements and perhaps compromises. But thank you, Mr. Blue.
        Mayor Anthony.
        Mr. Anthony. Mr. Chairman, the National League of Cities
    agrees with Representative Blue. Consultation during the
    rulemaking process is the most critical time to have the big
    seven weigh in, because after that it is, as you know, more
    difficult. And it is vital that cities know what exact impacts
    are going to have on city governments and the rules that are
    being promulgated must again have consultation at that stage
    and not after.
        Mr. McIntosh. Exactly. Thank you. Mr. Gonzales.
        Mr. Gonzales. Mr. Chairman, briefly, the National
    Association of Counties supports it.
        Mr. Scheppach. Yes, NGA supports it. And I would just
    stress the fact that the legislation is important because it
    affects independent agencies where the Executive order does
    not. So I think it is important from that standpoint. And my
    sense is that some of the decisions that of the FCC and other
    independent commissions are going to be more important over
    time.
        Mr. McIntosh. Very good point. Very good point. The need
    for legislation.
        The other aspect on the federalism impact assessments, and
    GAO will testify later, but they have shared their written
    testimony with me, and they will be pointing out that
    oftentimes the agencies have ignored the requirements in the
    Executive order to prepare those federalism impact assessments.
        Given that, would you all I guess agree or disagree that
    that is an important part of the legislation, the requirement
    that those be done as part of the regulatory process?
        Mr. Blue. We would.
        Mr. Anthony. Yes.
        Mr. Gonzales. Yes.
        Mr. Scheppach. Yes.
        Mr. McIntosh. Does your organization support that the
    bill's specific requirements be subject to judicial review as
    part of the Administrative Procedures Act, as to whether the
    agency has used its discretion appropriately or acted
    arbitrarily?
        Mr. Blue. I think, Mr. Chairman, that this is one of the--
    certainly one of the most vexing parts of it because as I said
    in my prepared comments, getting a handle on administrative
    rulemaking and ensuring that there is an acknowledgment of the
    federalism impact is a very difficult thing to do. We don't
    want to hamstring the ability of you or the agencies to
    effectively do what Congress authorizes them to do. But at the
    same time, we think it is very critical that there be some way
    to ensure that they are complying with the requirements that
    Congress imposes on them.
        Let me simply say that some modified form of judicial
    review certainly is needed with respect to the administrative
    agencies. We have had success in working with in a limited way
    what we have in UMRA. But I would suggest that there is some
    kind of solution, Mr. Chairman, that would address the problems
    raised by the Justice Department, yet at the same time assure
    that those things we are trying to achieve with this
    legislation indeed are achieved.
        Mr. McIntosh. I think there were eight different areas
    where we were trying to ensure the agencies had to respond, and
    I'll just mention them briefly so that we have got them on the
    record: Any preemption of State and local authority; the
    Constitutional basis for preemption; the express statutory
    provision authorizing regulatory preemption; any crossover
    sanction, a provision that establishes a condition for the
    receipt of funds that isn't related to the purpose of the
    program; any other impacts on the State and local governments;
    all regulatory alternatives that they must be considered; the
    costs that would be incurred by State and local governments;
    and, the extent of consultation with State and local public
    officials.
        Now, in the testimony one of you I think mentioned that we
    might want to go beyond just the costs but also disclose the
    impact, Mr. Scheppach, I think mentioned that impacts on
    economic development as well, and so we will consider that.
        But adding that language perhaps or further defining that
    we want to make sure costs include that concept. Are there any
    other--I guess, Mr. Blue, you said you thought we should work
    in terms of making sure there is some judicial review. Are
    those the factors that you would want to make sure were subject
    to review?
        Mr. Blue. I think, again as Mr. Moran said, modifying it so
    that you address the legitimate concerns and interests so that
    we don't basically shut down all administrative agency
    activity, these are factors that I think are important, and it
    may very well be something other than a full APA kind of
    review, but some kind of review that either prods an agency to
    go back and look at things and tell us what they used in
    arriving at where they are. I would be reluctant, Mr. Chairman,
    because of my experiences with agencies in North Carolina, to
    say that you would stop them in their track from a judicial
    standpoint.
        Mr. McIntosh. To be candid with you, we thought we were
    being pretty kind to them because they have to follow the APA
    requirements anyway. At one point we thought about a separate
    judicial review provision that would have created a separate
    right of action. I'll have to look more closely at the Justice
    Department's letter but maybe we need to return to that type of
    provision if they are not happy with the APA standard of
    review. We thought we were doing them a favor by not creating a
    separate form of action. Maybe they don't like that.
        Mr. Blue. We are experiencing--experimenting, rather, in my
    State, with a modified form of review in our Administrative
    Procedure Act. There may be some lessons that we learn from
    that that may be helpful. I certainly, again, Mr. Chairman, and
    NCSL, as well as the other organizations, and we are all pretty
    much in lock step on this, would welcome the opportunity to
    work with you to resolve these issues, to get some form of
    review that ensures that we can, in fact, achieve what we think
    is very important with limiting to some degree just to
    disregard the federalism principles in some of the rulemaking
    process.
        Mr. Anthony. I agree with Representative Blue because the
    implied preemptions are the most dangerous preemptions and that
    is why judicial review has become one of the most important
    elements to our organizations to dialog with you about, to help
    come up with some kind of language that would include it in the
    legislation.
        Mr. McIntosh. I appreciate that. Commissioner Gonzales.
        Mr. Gonzales. I don't want to take more time, Mr. Chairman,
    other than that we concur with what the legislatures and the
    cities have indicated.
        Mr. McIntosh. Mr. Scheppach.
        Mr. Scheppach. I would just say that some judicial review,
    particularly of the process, I think is important. And my
    understanding is that there was a SBREFA, which was a Small
    Business Act that was done in the last couple of years as an
    example of a way in which you may be able to get at the
    process.
        Mr. McIntosh. Yes, although I have some familiarity with
    that, the agencies tended to exempt themselves from it, and EPA
    in particular on their particulate and NAAQS rule said this
    doesn't apply to us. That rule ended up being thrown out by the
    courts for other reasons, but we had a hearing right here and I
    think it was in this room, in fact, where the general counsel
    from EPA said, well, I'm expecting to get sued anyway so they
    will throw in a SBREFA count. So we need to look closely about
    whether that has been enough of an enforcement mechanism to
    really make the agencies pay attention.
        There are some provisions that are making their way through
    right now to strengthen that and so maybe a strengthened SBREFA
    would be the solution that we could use. We will look at that
    and work with all of you to make sure that there is an
    effective judicial review provision, but one that resolves any
    of the questions that have come up and are with our supporters.
        Let's turn now to the legislative requirements. Mr.
    Scheppach, you mentioned that you thought it would be good to
    try to keep a point of order in the bill. Let me just ask your
    colleagues on the panel if they agree with that.
        Mr. Blue. The National Conference agrees totally with Mr.
    Scheppach on that. I think that some kind of point of order,
    similar to the one in UMRA, would again focus Congress on the
    issue of preemption. We thoroughly have enjoyed the success
    that we at least think we have realized from the point of order
    provision in UMRA. And so, Mr. Chairman, we are in full
    agreement with Mr. Scheppach on that.
        Mr. McIntosh. OK.
        Mr. Anthony. Ditto.
        Mr. Gonzales. Yes, sir.
        Mr. McIntosh. From a Member's perspective it helps focus
    the issue very clearly because you are going to have it debated
    on the floor and you have to focus as you are writing
    legislation whether or not you will be subject to a point of
    order. So I think the point is very well taken and we will work
    with you as we move toward a markup to try to see what we can
    do on that.
        Mr. Kucinich, welcome.
        Mr. Kucinich. Mr. Chairman, you said the magic word. I am
    in a markup in Education, but I just wanted to be here.
        Mr. McIntosh. Maybe you and I can pair up there. Would you
    like to make any statement at this point?
        Mr. Kucinich. I have a statement that I would like to
    submit for the record.
        [The prepared statement of Hon. Dennis J. Kucinich
    follows:]

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    [GRAPHIC] [TIFF OMITTED]59530.065

        Mr. McIntosh. OK. We will gladly do that. We have unanimous
    consent to do exactly that.
        We are now just at the question phase with our first panel
    and they have given several suggestions about the legislation,
    and I was checking out in particular provisions for them.
        The next one I wanted to check with you all on was the
    crossover sanctions. Basically does your organization support
    the bill's requirement that they identify provisions that
    establish a condition for the receipt of funds under a Federal
    grant program that is not--and let me emphasize the ``not''--
    related to the purpose of the program? These are known as
    crossover sanctions and it is a way in which the agencies have
    used Federal grantmaking power to try to influence policy in
    areas outside of the particular grant. My preference would be
    to disallow that altogether. What the bill does is require them
    to at least identify that that is what they are up to in the
    federalism impact assessment. Mr. Blue.
        Mr. Blue. That has been one of our biggest gripes at the
    State legislative level. And so certainly, even in a limited
    form, we support this crossover sanction provision. We
    constantly ask how can we be forced to do things unrelated to
    the legislation anyhow and so the crossover sanction----
        Mr. McIntosh. The word extortion comes to mind, doesn't it?
        Mr. Anthony. Yes, we definitely support the bill's
    requirement to identify the crossover sanction. This again is
    about an equity issue for cities throughout the Nation because
    whatever is passed down to the State level then has to be
    really implemented by the city halls and county halls of this
    Nation.
        Mr. Gonzales. I concur with Mr. Anthony, Mr. Chairman,
    absolutely.
        Mr. Scheppach. Yes, I concur also. I mean the number of
    times that I have seen sanctions against highway money is quite
    astronomical.
        Mr. McIntosh. Exactly. All in the name of good causes but
    once again we should allow our colleagues at the State and
    local level to do their causes as is their proper role in our
    government.
        Another area was the rules of construction, and this is a
    parallel to the judicial review, but essentially it says that
    when the legislation is ambiguous, that there will be most
    favorably constructed in terms of deferring to the State and
    local governments rather than preempting. This hasn't always
    been the case in the history of our country with the courts
    sometimes going so far as to actually imply preemption in
    congressional acts that were not even considered by the
    legislative branch here in Washington.
        So we decided it would be important to specify clearly what
    type of rule of construction we favored in Congress, which was
    granting the maximum deference to the States. Does your
    organization support that particular section which I think is
    in section 9?
        Mr. Blue. We do, Mr. Chairman. I might add one proviso. I
    think that again when we get to implied preemption, we don't
    seriously question the ability to preempt. When it is
    expressed, of course, we can't, or when you have got a direct
    conflict. Courts are going to find a way to get into direct
    conflict resolution anyhow in the area of preemption. But
    whether it comes to ambiguity and gray and fuzzy areas we
    believe enough in our process and what we do as State
    legislatures to think that it ought to be deferred to. And I am
    sure my brethren at the county and city level think likewise.
        Mr. McIntosh. Great.
        Mr. Anthony. And I agree with Representative Blue. The
    courts have also in the last few months talked about the fact
    that in Alden v. Maine, Congress has vast power but not all
    power. And I think that clearly section 9 of this bill would
    help us in looking at and supporting that language.
        Mr. McIntosh. I think the courts will pay attention to what
    we do legislatively. We have a theory of separation of
    government, but we also live in a world where we read the
    newspapers and I did study under Professor Scalia before he
    became a judge and then a justice, and at some point as we were
    discussing the theoretical ability for the government to use
    the commerce clause, he said, ultimately the courts can only
    hold out so long in interpreting a particular provision if the
    popular will as expressed by the legislative and executive
    branch is pushing in a certain direction. So, I think it is
    helpful for us to reinforce those good decisions that the
    courts are coming up with in this legislation. Commissioner
    Gonzales.
        Mr. Gonzales. Again, the counties concur with the cities on
    the merits as they pertain to the rules of construction.
    Certainly that is important to all of us to that they exist.
        Mr. Scheppach. NGA supports the provision.
        Mr. McIntosh. Good. I appreciate that. And, then a couple
    of the other ones that I wanted to quickly talk with you about
    was the deference to State management practices, which is in
    section 5, and in section 6, the cooperative determination of
    performance measures. These two are not as widely debated but I
    think they are important on a day-to-day level in which the
    agencies interact with the States and foster that true
    partnership.
        Any comments or do your associations support those
    provisions?
        Mr. Blue. I would defer to Mr. Scheppach and the Governors
    on that, Mr. Chairman. Of course, we wrestle a lot with our
    executive branches on some of these issues but again as part of
    the overall effort by these seven organizations to be on one
    accord, I think that the Governors have a much greater feel for
    this than legislators do.
        Mr. Scheppach. Yes, I would say we support the two
    provisions and I would say particularly the performance is
    getting to be a much bigger issue now because most Federal
    agencies now are moving toward performance measures. And we
    were on three or four big entitlement programs, about 600
    categorical grants of well over $225 billion of programs. They
    are all moving toward performance evaluations. To have an
    agency go out by itself and determine how we are to perform is
    inappropriate. This is getting to be a bigger issue. We have
    had some positive experiences with the administration and some
    negative ones with respect to some agencies. We think this is
    important.
        Mr. McIntosh. Mr. Gonzales, do you concur?
        Mr. Gonzales. Yes, we do.
        Mr. Anthony. We do.
        Mr. McIntosh. Let me turn to Mr. Kucinich. I will have one
    other question at the end, which is do you have any other
    changes but we will get to that.
        Mr. Kucinich. I appreciate that, Mr. Chairman. I have a few
    brief questions and then I will have to return to the markup.
    First of all, I want to thank all of the witnesses for being
    here this morning. As a former mayor, I can certainly
    appreciate your interest in legislation that would ensure that
    local and State officials are consulted on matters that affect
    their interest. I am concerned, however, that this bill may
    overreach in some of its attempts to reach these goals. For
    example, according to the General Accounting Office, ``This
    bill will require federalism impact assessments for all
    proposed and final rules.''
        Now, to a mayor--from mayor to mayor here, Mayor Anthony,
    is that your understanding of the bill as far as the impact
    statements?
        Mr. Anthony. Yes, that is my understanding, Congressman.
        Mr. Kucinich. The bill, from my reading of it, the bill
    doesn't distinguish between substantive rules and rules that
    GAO describes as ``administrative'' or ``routine.'' And I'm
    concerned that it might have the potential to tie up agency
    resources on kind of noncontroversial, nuts and bolts issues.
    Let me give an example.
        I came across a rule that was published in the June 2nd
    Federal Register that would keep a drawbridge in Panama City,
    FL, closed for 2 hours on July 4th to prevent a traffic jam
    leaving the city's fireworks display. Now, the temporary rule
    was issued at the request of the city, yet this rule would
    clearly fall under section 7 of the bill. So is this the kind
    of rule that you had in mind when this legislation was proposed
    or envisioned, Mayor?
        Mr. Anthony. Well, of course not because that to me is a
    specific area of the State of Florida, for example, that does
    not have far-reaching effect on all cities throughout the
    Nation.
        However, I would think that consultation requirement and
    other issues related in this bill should apply to that rule and
    Congress and the proposer, Congressperson who proposed the
    legislation, would follow the rules of H.R. 2245.
        Mr. Kucinich. Did you know, this month I think there were
    about four other drawbridge rules issued at the request of
    local governments to complete bridge repairs and maintenance.
    But without any limitations on judicial review, any aggrieved
    party affected by the bridge closing whether it would be
    recreational boaters, commercial shippers, a city hundreds of
    miles downstream, would be entitled to challenge this rule in
    court by claiming that this agency's federalism assessment was
    deficient.
        Mayor, are you aware that this bill could allow this type
    of legal intervention or lawsuit?
        Mr. Anthony. I am now, in regards to the way in which you
    are applying it to those examples, yes.
        Mr. Kucinich. And if I may add, my concern again is that
    the same issues would affect literally thousands of
    noncontroversial routine rules each year. Whether they are
    talking about drawbridge regulations to FAA airworthiness
    directives to Securities and Exchange Commission recordkeeping
    rules.
        Just from your experience as a mayor, do you have any
    suggestions for how we could avoid these assessments and
    lawsuits for thses kinds of noncontroversial rule? Any ideas?
        Mr. Anthony. Congressman, I do. I think that if you look at
    and pick out those small rules that clearly are specific to
    areas, local concerns, and use those as examples, of course I
    find it very difficult to say that you are not correct in those
    bills--those rules that you are sharing.
        But as a national representative of the League of Cities, I
    must say to you that the national policies that we are
    dialoguing here, the Internet Freedom Tax Commission, issues
    related to telecommunication generally, have been--has had
    major impact on national proportion to cities throughout this
    Nation without true consultation with local governments. Can I
    give you the answer of how those specific rules should go
    through the process as all major rules? No, I can't, sitting
    here.
        One of my--one recommendation that I would have for you,
    Congressman, is perhaps as it goes through the process, that
    Congress should not adopt such narrowly focused rules for
    specific areas of the country or cities. But other than that, I
    cannot tell you how it would be handled through this process.
        Mr. Kucinich. Thank you, and I want to thank the chairman
    for his indulgence and I wish you well as you try to work out
    these difficulties. I know the Chair's concern is to try to
    make the government work better. I think we are all trying to
    do that and I appreciate the effort. Thank you very much.
        Mr. Anthony. And Congressman, may I say to you mayor to
    mayor, I do appreciate the questions. But if you really think
    about it, those bridge rules were promulgated with local
    government input because the local government did request the
    bridge closure. So, in fact, if we did apply it through
    consultation, it would meet that--one of those requirements.
        Mr. Kucinich. It is always good to know that sometimes when
    you ask for something, you get a little bit more.
        Mr. Anthony. I know. I'm sorry.
        Mr. McIntosh. And let me say thank you, Mr. Kucinich.
    Although I think the problem you identified there on the whole
    can be one that will be self-policing essentially in that, if
    it truly is not noncontroversial, there won't be somebody who
    has an interest to come in and challenge that regulation. But,
    if you have got a city downstream, that mayor may think that it
    is important that the bridge not be left open, and then you
    would want the agency issuing that regulation to have
    considered their concerns as well as the city. So I think it
    sorts itself out in requiring them to think about the
    federalism impact where it is noncontroversial, nobody is going
    to challenge on how they did it. Where it is controversial,
    they have to make sure they do it correctly.
        Mr. Kucinich. Thank you, Mr. Chairman. I think it would be
    wonderful if we had a bill that was noncontroversial and helped
    us sort out controversy.
        Mr. McIntosh. We are working on that. Thanks, Dennis, I
    appreciate your coming today and look forward to you joining us
    on this bill at the appropriate moment.
        Mr. Kucinich. It is always a pleasure to be here, Mr.
    Chairman.
        Mr. McIntosh. The last question I do have for this panel is
    really an open-ended one. You mentioned the point of order
    earlier. Are there any other amendments or changes that you
    would like us to consider? And as I said earlier, the record
    will be kept open until July 16th so, if there are some written
    proposals your organization would like to submit, we will also
    receive those.
        Mr. Blue. Thank you, Mr. Chairman, and again thank you for
    your gracious manner in which you have allowed us to discuss
    with you and talk about the issues that were of concern to us
    up to this point.
        The point of order is, I think, something that would
    strengthen the bill and as other thoughts occur to us during
    the time that the record is open, we will get them to you, and
    again, we know that you will make yourself or your staff
    available to discuss those with us. Thank you very much.
        Mr. McIntosh. Thank you.
        Mr. Anthony. Mr. Chairman, I agree. The only issue again is
    the point of order issue that we would like to see added as a
    part of this legislation. But let me take a point of personal
    privilege and thank you so much on behalf of the big seven,
    specifically the National League of Cities. Your sensitivity
    and assistance, even with your colleague here this morning, is
    much appreciated. I think it is our responsibility to help you
    at this point get this legislation through the process and
    we're committed to doing that. And as I have noticed, there are
    more and more mayors, county commissioners, State reps,
    Governors, that are now in Congress and we need to pull our
    resources together to make sure that we are successful along
    with you. And we really do appreciate your sensitivity.
        Mr. McIntosh. Thank you. I appreciate that. And I will be
    calling on you to help as we move through the markup phase
    which I would like to move to rapidly to gather that kind of
    support with my other colleagues.
        Mr. Anthony. If I am not stuck at a bridge somewhere, I
    will help.
        Mr. McIntosh. Thank you.
        Mr. Gonzales. Mr. Chairman, we have no amendments to offer
    and concur with what the legislatures and the cities have
    indicated. Also, again, to thank you. I assure you that local
    governments across America are faced with huge challenges as we
    approach the new millennium, and certainly we need Congress'
    support in bringing down barriers to allow us to be innovative
    and to offer real solutions to individuals whose lives we
    impact on a daily basis, and certainly your efforts in bringing
    this legislation forward certainly is going to hopefully
    provide the tools or at least the accountability to make sure
    that we work in concert to assure the health and safety of our
    citizens. It is a privilege to work on this legislation and
    support it and actively support it as it proceeds through the
    Congress. And you can count on the counties's support as this
    goes forward.
        Mr. McIntosh. Thank you. Appreciate that.
        Mr. Scheppach. No, Mr. Chairman, I mentioned the two things
    you are aware of: The point of order and expanding the
    information and the impact statement. Other than that, the
    Governors appreciate you taking leadership on this and having
    this hearing. We thank you.
        Mr. McIntosh. Thank you. And I will, Mayor Anthony,
    definitely take you up collectively in helping to gather
    cosponsors as we move forward to make this legislation become
    in fact an act passed by the Congress and signed by the
    President. Thank you all, appreciate it very much.
        Let me now call the second panel, which is a representative
    from the General Accounting Office, Mr. Nye Stevens. Mr.
    Stevens, let me ask you to also take the oath.
        [Witness sworn.]

      STATEMENT OF NYE STEVENS, DIRECTOR, FEDERAL MANAGEMENT AND
        WORKFORCE ISSUES, GENERAL GOVERNMENT DIVISION, GENERAL
                           ACCOUNTING OFFICE

        Mr. Stevens. Mr. Chairman, I will try to match the previous
    panel in brevity as I summarize our work that relates to the
    bill you are considering today, and then I would respond to any
    questions you may have on it.
        I would like to talk about implementation of the Reagan
    Executive order on federalism that you mentioned in recent
    years, talk also about the impact of the regulatory provisions
    of the Unfunded Mandates Reduction Act of 1995, and then
    comment on one agency's experience in cooperatively setting the
    kind of performance measures and goals that are contemplated in
    section 6 of the bill.
        For at least the past 20 years, Mr. Chairman, and certainly
    as exemplified by the panel that just spoke, State and local
    governments have expressed strong concerns about regulatory
    preemption of traditionally non-Federal functions and the
    burgeoning costs of complying with Federal regulations and
    mandates. And the centerpiece of the Reagan administration's
    response to this concern was the promulgation in 1987 of an
    Executive order which required agencies to determine which of
    their proposed rules had sufficient implications for the
    relationships among levels of government to warrant the
    preparation of a federalism assessment which would spell out
    the effects and the costs and the various burdens associated
    with the rule on State and local governments.
        I think it is fair to say, Mr. Chairman, that the impact of
    this requirement and the Executive order at least in recent
    years has been minimal. The Office of Management and Budget has
    never issued implementing guidance or instructions and we found
    that the federalism assessments are rarely being prepared or
    the requirements to make them even acknowledged. We did a
    search of the 11,414 final rules that were issued in the 33
    months leading up to the beginning of this year and we found
    that only 3,000 of them even mentioned or acknowledged the
    Executive order in the preamble to the rules.
        The Environmental Protection Agency didn't even do that. It
    never once mentioned the Executive order in the 1,900
    regulations that it issued during this period.
        But even when the order was mentioned, it was almost always
    sort of a boilerplate assertion that there were no federalism
    implications so nothing had to be done about analyzing or
    justifying them. The bottom line is that of the 11,400 rules
    issued from April 1996 through last year, only 5 actually had a
    federalism assessment associated with it.
        Now, you might argue that most of these rules were routine
    and administrative and unlikely to have federalism implications
    as your last point of dialog with the other panel considered.
    So we did another cut and we looked at the 117 rules that were
    designated as major, usually because they involved costs of
    more than $100 million on the economy, and only one of these
    had a federalism assessment associated with it. It was the rule
    associated with the sale of cigarettes and smokeless tobacco
    products to children.
        This was in spite of the fact that the effects on State and
    local governments for 37 of those rules, were well recognized
    in the unified agenda that is put out semiannually and that 21
    of them said in their preambles that they would have the effect
    of preempting any State or local laws on the subject.
        And we took one more step with the major rules. We took
    them to the big seven organizations, several of whom you just
    heard from, and asked them to look at the rules and give us
    their opinion on whether they thought they should have had
    federalism assessments. Four of them agreed to look at all 117
    of these major rules and at least one of the four said that in
    their view a Federal assessment did seem to be warranted for 79
    of those 117 rules.
        Now, one reason for the very minimal effect the Executive
    order seems to have had on the regulatory process is the leeway
    that an agency is given to interpret its terms and this is one
    area of things the subcommittee might want to concentrate on in
    considering whether to set a similar requirement in statute.
    EPA's guidance on the order sets a very high threshold for what
    Federal implications are. For example, a rule would have to
    affect all or most of the States in order to be covered and it
    would have to have a purely institutional rather than a
    financial impact to be covered.
        It would have to have that impact on State and local
    governments to bring it under the Executive order's terms and
    none of the 1,900 rules that EPA issued seemed to have been
    able to surmount that very high set of hurdles.
        In commenting on our findings on this work, Mr. Chairman,
    OMB said that adherence to the Executive order was probably
    affected by the fact that during the period of our review they
    were considering their own Executive order on federalism, the
    one that you had a hearing on and that was later rescinded.
    None of the agencies actually mentioned that to us as a factor
    when we talked to them about it. And in any case, the Executive
    order seems to have been developed in a closed enough sense
    that it probably didn't affect the thousands of people in the
    bureaucracy working on these 11,000 rules, so we didn't find
    that terribly convincing.
        OMB also said that passage of the Unfunded Mandates Reform
    Act of 1995, or UMRA, was a more important vehicle for
    considering State and local government effects than the
    federalism Executive order. We happen to have also looked at
    the regulatory provisions of UMRA, not the legislative review
    provisions, during its first 2 years and we found that that too
    had very little effect on the rulemaking process in the
    agencies. Many of the rules did not have a notice of proposed
    rulemaking that triggered the law, others didn't reach a
    threshold of the $100 million in expenditures, which is a more
    exacting threshold than $100 million in costs, needed to
    trigger the UMRA regulatory requirements.
        The requirement that agencies develop an intergovernmental
    review process or consultation process appears to have been
    applied in only four rules at EPA and none in any of the other
    agencies.
        The consultation provision in the bill in H.R. 2245,
    section 6 seems to have more teeth in it than the UMRA one and
    it forbids agencies from including in their annual performance
    plans under the Results Act any performance goals or measures
    that have not been developed in cooperation with public
    officials. The Office of Child Support Enforcement learned this
    lesson the hard way as is spelled out in one of our reports. It
    only became a successful partnership between the Federal and
    the State governments when OCSE began to include State and
    local officials in the planning process. And having done that,
    and done that fairly well, we believe it could now be a model
    for the kind of intergovernmental cooperation that section 6
    seems to contemplate.
        I will stop there and respond to any questions you may have
    on the work.
        [The prepared statement of Mr. Stevens follows:]

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        Mr. McIntosh. Thank you. I have to say quite frankly, I was
    shocked and appalled in reading your testimony at how
    inappropriate the agencies have been acting in disregarding
    that Executive order.
        I have got several questions. One, could you provide for us
    some examples of the rules that were identified by the State
    and local government organizations that should have been
    covered by the Executive order to give us a flavor----
        Mr. Stevens. Yes, as you know at least one of the
    organizations thought that 79 of these 117 majors should have
    included a federalism assessment. One of these was an OSHA rule
    on respiratory protection programs, basically respirators and
    breathing protections, and that has a strong effect on local
    governments because firemen are the principal users of these
    things and most of the firemen of course are at the local
    level. OSHA indicated in the preamble to the rule that it would
    require 25 States to adopt a comparable standard within 6
    months and then they also said in the unified agenda earlier
    that the rule would affect State governments, local
    governments, tribal governments and at every other level. But
    they did say that no federalism assessment was required for the
    rule.
        The Council of State Governments, the National Association
    of Counties, the National League of Cities all disagreed for
    the obvious reason that this, as you know, would have major
    effects on the States and that the firemen to whom it was
    primarily directed are primarily local employees.
        There was also the NAAQS rule, the one that you mentioned
    yourself. Although the standards had to be implemented by the
    States, EPA did not mention the Executive order in their rule.
    The National Association of Counties said that the indirect
    costs of complying with new permits and revising existing
    permits in developing regulatory enforcement changes would be
    substantial on them. But the level of cost does not seem to
    have mattered to EPA. It wasn't one of those standards that
    they even considered the amount of money that it would cost
    States to implement these things; only institutional
    relationships were within their guidance.
        Mr. McIntosh. Let me followup on that one very quickly.
    Surely some of the 1,900 EPA regulations went directly to
    institutional requirements, because wouldn't they be setting
    out guidelines for their enforcement of different rules?
        Mr. Stevens. Well, it had to meet four standards really,
    that was just one. Whether it had major financial impacts
    wasn't one of the standards. One of the standards was that it
    had to affect many States. A single State or a small cluster of
    States wouldn't have qualified. And, it had to have a direct
    causal effect, be aimed at the States for it to have qualified.
    And also, there is even a sort of a fifth requirement and that
    was that they didn't have to do a federalism assessment
    according to their guidelines if it was traceable to a statute
    or even implied by a statute.
        And it was hard for us to imagine that they put out any
    kind of rule that didn't have at least some relationship to a
    statute. So I guess we--having read those guidelines--were not
    terribly surprised that of those 1,900 none of them really
    passed that test.
        Mr. McIntosh. Exactly. It has been a long time, but I
    remember being one of the staffers reviewing that Executive
    order for President Reagan and I don't recall any of those
    standards being stated there or even considered as something
    that would----
        Mr. Stevens. In fact, one of these is in direct
    contradiction to the Executive order, which is that States
    individually or collectively if they are affected, a federalism
    assessment is in order.
        Mr. McIntosh. And certainly we intended in this to consider
    financial costs as well as institutional effects.
        Mr. Stevens. Yes, and other agencies do. I think EPA is an
    extreme in that case.
        Mr. McIntosh. Do you think that the judicial review
    provisions will help to correct that?
        Mr. Stevens. All I could say in that regard, Mr. Chairman,
    is that we have examined the SBREFA changes that you mentioned
    a moment ago, and I think it is fairly clear from the agency's
    points or from what the agencies tell us, that bringing the
    Regulatory Flexibility Act provisions under judicial review has
    indeed caused the agencies to pay more attention to it. They
    are taking it more seriously knowing that the courts are
    looking over their shoulders. It is not ignored as routinely as
    it in many cases was before. So in that sense, it has had an
    impact, yes.
        Mr. McIntosh. Another question was prompted by your
    statement of OMB's excuse for why nobody is following the
    Executive order, that, well, they are not following it because
    we have been thinking about changing it. Did you have a chance
    or an opportunity to look at the rules under the standards of
    the proposed Executive order that was subsequently suspended to
    see how many of the rules would have been required under that
    new Executive order to address the question of federalism?
        Mr. Stevens. No, we didn't do that, Mr. Chairman. I really
    couldn't talk about that.
        Mr. McIntosh. Would that be something that, without a great
    deal of difficulty, you might check at least some of the most
    egregious examples of where they failed to do it to see if
    perhaps even under the new standard they were contemplating the
    agencies weren't following or doing their duty in terms of
    looking at federalism as a concern?
        Mr. Stevens. That's something we could certainly look at
    and get back to you, Mr. Chairman, on whether that would be
    feasible.
        Mr. McIntosh. Let me just ask a general question. Do you
    have any suggestions--and you have got several wording changes
    you recommend in your written statement, but, in addition to
    those, do you have any specific additions or revisions or
    deletions that you would recommend for the bill?
        Mr. Stevens. Well, we did have a suggestion that bears on
    one of the last questions that you got to with the other panel
    and that is whether all rules should be covered. There is a
    categorization of rules, I think it is in five parts. There is
    ``substantial,'' ``significant,'' and that the bottom category,
    I think there is one called ``routine and frequent'' and a
    category called ``administrative'' that are uncommonly likely
    to cause major effects--to affect relationships between
    governments. And it seems to me that somehow exempting those
    from the process should be possible and probably advantageous
    to avoid just having a boilerplate declaration: ``no federalism
    implications.'' If you write that 11,000 times or however many
    rules there are, you might get so used to writing it out that
    you wouldn't consider it----
        Mr. McIntosh. Start turning it over to other rules. I
    understand that.
        Mr. Stevens. One other matter. We also suggested that a
    determination be made up front as to whether there were
    federalism implications so that an agency would have to commit
    itself, yes or no, which they don't have to do now. If there
    weren't any they would be on record as having said there
    weren't any. But, if there were any, they would have to commit
    to do a federalism impact assessment. Seems to us that would be
    another dividing line that could cut down the paperwork
    associated with this potentially.
        Mr. McIntosh. And, you might make it difficult for them to
    reach that conclusion there are none if the record reflects
    that commenters have indicated there are.
        Mr. Stevens. That is reasonable, yes.
        Mr. McIntosh. Maybe you could do it in a way that says are
    there or have there been any comments saying there would be?
        Mr. Stevens. Well, the regulatory agenda which comes out
    twice a year has a required field: Governments affected. And
    that is one of the things we use because very often it says
    State governments, local governments, tribal governments and
    then when they actually put the rule out they say there are no
    federalism implications.
        Mr. McIntosh. Great. Great. One other matter, on the
    regulatory preemption, do you think the provisions in section 7
    would be sufficient in terms of making the agencies address the
    question of federalism before they issued rules that were
    preempting State and local authority?
        Mr. Stevens. Perhaps. I think it will partly depend on what
    the understanding of preemption comes to be. It is not defined,
    I believe, in the bill. We have seen examples in other
    regulatory matters where, when it is left entirely to the
    agencies to define this, they often do it in terms that allow
    them the greatest administrative flexibility and perhaps a
    clearer understanding of what is preemption and what isn't
    preemption would help. However, that is a major legal question:
    it would cut down on the flexibility to do that.
        Mr. McIntosh. You think a definition of preemption might be
    helpful in foreclosing loopholes that might arise?
        Mr. Stevens. As a nonlawyer I could say that. I imagine it
    is not as easy to do as I suggested.
        Mr. McIntosh. We looked at possible definitions and it is a
    difficult one to tackle. But perhaps there is a way of leaving
    some flexibility but saying these certain things are the core--
    certainly within the core of what preemption is and if you
    regulate in these areas you know that you have preempted or you
    are treading on State and local authority.
        Mr. Stevens. Mr. Copeland of my staff has just given me an
    example of a rule that--no federalism assessment was made for
    this rule, but it's got a whole section on preemption. It says,
    at least one State has passed a law--this is on organ sharing
    and transplants and that sort of thing--``at least one State
    has passed a law that appears to limit organ sharing policies
    and national organ sharing system based primarily on medical
    need with geographical considerations having less weight than
    at present is an allocation criteria and would be thwarted if a
    State required that prior to sharing an organ with any other
    State there would be a written agreement.''
        Over a page of discussion here of preemption, but no
    federalism assessment.
        Mr. McIntosh. No federalism impact. That would be an
    excellent example of where the acknowledgment is that there is
    a federalism concern, is that we should require as a matter of
    law that they move forward.
        Mr. Stevens. Yes.
        Mr. McIntosh. We will look at that question on making sure
    what triggers it. If not explicitly preemption, then maybe we
    need to set some thresholds that these things certainly do fall
    within it. There may be other broader definitions of preemption
    as well.
        I have no further questions. Let me turn to my colleague,
    the vice chairman of the subcommittee, Mr. Ryan. First,
    welcome. And if you would like to put any statement in the
    record or make a statement now would be appropriate.
        Mr. Ryan. I must apologize for being late. I was
    unavoidably detained. But I would like to echo my colleague,
    Harold Ford's support for it and I would like to join my
    colleague Lee Terry, who just announced his cosponsorship, and
    I would ask you to add my cosponsorship to the bill. It is
    unfortunate that the administration is going against the grain
    on federalism, and I hope with this legislation we can reverse
    this trend of Federalizing so many of these functions, and I
    hope we can work to get passage on this bill.
        Thank you.
        Mr. McIntosh. Thank you, Mr. Ryan. I appreciate it. One of
    the things that came out in the testimony earlier from some of
    the State and local officials is that federalism doesn't always
    cut in one direction in terms of philosophy and ideology, but I
    think it is an important overriding principle that we have to
    share the same faith that our Founding Fathers had that the
    States will be, in fact, the right level of government to reach
    a decision on these many of the critical issues, even if some
    of the States wouldn't reach the same decision that you and I
    would on a particular issue.
        I have no other questions, Mr. Stevens. I thank you for
    your study of this, and if it is possible, we are going to keep
    the record open until July 16th, if you could take a look at
    that suspended Executive order and see if even there the
    agencies wouldn't have met that test had that been in effect
    during that 3-year period, which tells me that they were
    completely asleep at the switch at OMB if they weren't even
    giving guidance about whether they were contemplating moving in
    that direction.
        Mr. Stevens. Yes, sir.
        [The information referred to follows:]

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        Mr. McIntosh. Thank you very much. With that the
    subcommittee is adjourned. Thank you.
        [Whereupon, at 12 noon, the subcommittee was adjourned.]
        [The prepared statement of Mr. Baker and additional
    information submitted for the hearing record follow:]
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