[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:]

    [GRAPHIC] [TIFF OMITTED]59530.004
    
    [GRAPHIC] [TIFF OMITTED]59530.005
    
    [GRAPHIC] [TIFF OMITTED]59530.006
    
    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:]

    [GRAPHIC] [TIFF OMITTED]59530.007
    
    [GRAPHIC] [TIFF OMITTED]59530.008
    
    [GRAPHIC] [TIFF OMITTED]59530.009
    
    [GRAPHIC] [TIFF OMITTED]59530.010
    
    [GRAPHIC] [TIFF OMITTED]59530.011
    
    [GRAPHIC] [TIFF OMITTED]59530.012
    
    [GRAPHIC] [TIFF OMITTED]59530.013
    
    [GRAPHIC] [TIFF OMITTED]59530.014
    
    [GRAPHIC] [TIFF OMITTED]59530.015
    
    [GRAPHIC] [TIFF OMITTED]59530.016
    
    [GRAPHIC] [TIFF OMITTED]59530.017
    
    [GRAPHIC] [TIFF OMITTED]59530.018
    
    [GRAPHIC] [TIFF OMITTED]59530.019
    
    [GRAPHIC] [TIFF OMITTED]59530.020
    
    [GRAPHIC] [TIFF OMITTED]59530.021
    
    [GRAPHIC] [TIFF OMITTED]59530.022
    
    [GRAPHIC] [TIFF OMITTED]59530.023
    
    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:]

    [GRAPHIC] [TIFF OMITTED]59530.024
    
    [GRAPHIC] [TIFF OMITTED]59530.025
    
    [GRAPHIC] [TIFF OMITTED]59530.026
    
    [GRAPHIC] [TIFF OMITTED]59530.027
    
    [GRAPHIC] [TIFF OMITTED]59530.028
    
    [GRAPHIC] [TIFF OMITTED]59530.029
    
    [GRAPHIC] [TIFF OMITTED]59530.030
    
    [GRAPHIC] [TIFF OMITTED]59530.031
    
    [GRAPHIC] [TIFF OMITTED]59530.032
    
    [GRAPHIC] [TIFF OMITTED]59530.033
    
    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:]

    [GRAPHIC] [TIFF OMITTED]59530.034
    
    [GRAPHIC] [TIFF OMITTED]59530.035
    
    [GRAPHIC] [TIFF OMITTED]59530.036
    
    [GRAPHIC] [TIFF OMITTED]59530.037
    
    [GRAPHIC] [TIFF OMITTED]59530.038
    
    [GRAPHIC] [TIFF OMITTED]59530.039
    
    [GRAPHIC] [TIFF OMITTED]59530.040
    
    [GRAPHIC] [TIFF OMITTED]59530.041
    
    [GRAPHIC] [TIFF OMITTED]59530.042
    
    [GRAPHIC] [TIFF OMITTED]59530.043
    
    [GRAPHIC] [TIFF OMITTED]59530.044
    
    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:]

    [GRAPHIC] [TIFF OMITTED]59530.045
    
    [GRAPHIC] [TIFF OMITTED]59530.046
    
    [GRAPHIC] [TIFF OMITTED]59530.047
    
    [GRAPHIC] [TIFF OMITTED]59530.048
    
    [GRAPHIC] [TIFF OMITTED]59530.049
    
    [GRAPHIC] [TIFF OMITTED]59530.050
    
    [GRAPHIC] [TIFF OMITTED]59530.051
    
    [GRAPHIC] [TIFF OMITTED]59530.052
    
    [GRAPHIC] [TIFF OMITTED]59530.053
    
    [GRAPHIC] [TIFF OMITTED]59530.054
    
    [GRAPHIC] [TIFF OMITTED]59530.055
    
    [GRAPHIC] [TIFF OMITTED]59530.056
    
    [GRAPHIC] [TIFF OMITTED]59530.057
    
    [GRAPHIC] [TIFF OMITTED]59530.058
    
    [GRAPHIC] [TIFF OMITTED]59530.059
    
    [GRAPHIC] [TIFF OMITTED]59530.060
    
    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:]

    [GRAPHIC] [TIFF OMITTED]59530.061
    
    [GRAPHIC] [TIFF OMITTED]59530.062
    
    [GRAPHIC] [TIFF OMITTED]59530.063
    
    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:]

[GRAPHIC] [TIFF OMITTED]59530.064

[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:]

    [GRAPHIC] [TIFF OMITTED]59530.066
    
    [GRAPHIC] [TIFF OMITTED]59530.067
    
    [GRAPHIC] [TIFF OMITTED]59530.068
    
    [GRAPHIC] [TIFF OMITTED]59530.069
    
    [GRAPHIC] [TIFF OMITTED]59530.070
    
    [GRAPHIC] [TIFF OMITTED]59530.071
    
    [GRAPHIC] [TIFF OMITTED]59530.072
    
    [GRAPHIC] [TIFF OMITTED]59530.073
    
    [GRAPHIC] [TIFF OMITTED]59530.074
    
    [GRAPHIC] [TIFF OMITTED]59530.075
    
    [GRAPHIC] [TIFF OMITTED]59530.076
    
    [GRAPHIC] [TIFF OMITTED]59530.077
    
    [GRAPHIC] [TIFF OMITTED]59530.078
    
    [GRAPHIC] [TIFF OMITTED]59530.079
    
    [GRAPHIC] [TIFF OMITTED]59530.080
    
    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:]

    [GRAPHIC] [TIFF OMITTED]59530.081
    
    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:]
[GRAPHIC] [TIFF OMITTED]59530.082

[GRAPHIC] [TIFF OMITTED]59530.083

[GRAPHIC] [TIFF OMITTED]59530.084

[GRAPHIC] [TIFF OMITTED]59530.085

[GRAPHIC] [TIFF OMITTED]59530.086

[GRAPHIC] [TIFF OMITTED]59530.087

[GRAPHIC] [TIFF OMITTED]59530.088

[GRAPHIC] [TIFF OMITTED]59530.089

[GRAPHIC] [TIFF OMITTED]59530.090

[GRAPHIC] [TIFF OMITTED]59530.091

[GRAPHIC] [TIFF OMITTED]59530.092

[GRAPHIC] [TIFF OMITTED]59530.093

[GRAPHIC] [TIFF OMITTED]59530.094

[GRAPHIC] [TIFF OMITTED]59530.095

[GRAPHIC] [TIFF OMITTED]59530.096

[GRAPHIC] [TIFF OMITTED]59530.097

[GRAPHIC] [TIFF OMITTED]59530.098

[GRAPHIC] [TIFF OMITTED]59530.099

[GRAPHIC] [TIFF OMITTED]59530.100

[GRAPHIC] [TIFF OMITTED]59530.101

[GRAPHIC] [TIFF OMITTED]59530.102

[GRAPHIC] [TIFF OMITTED]59530.103

[GRAPHIC] [TIFF OMITTED]59530.104

[GRAPHIC] [TIFF OMITTED]59530.105

[GRAPHIC] [TIFF OMITTED]59530.106

[GRAPHIC] [TIFF OMITTED]59530.107

[GRAPHIC] [TIFF OMITTED]59530.108

[GRAPHIC] [TIFF OMITTED]59530.109

[GRAPHIC] [TIFF OMITTED]59530.110

[GRAPHIC] [TIFF OMITTED]59530.111

[GRAPHIC] [TIFF OMITTED]59530.112

[GRAPHIC] [TIFF OMITTED]59530.113

[GRAPHIC] [TIFF OMITTED]59530.114

[GRAPHIC] [TIFF OMITTED]59530.115

[GRAPHIC] [TIFF OMITTED]59530.116

[GRAPHIC] [TIFF OMITTED]59530.117

[GRAPHIC] [TIFF OMITTED]59530.118

[GRAPHIC] [TIFF OMITTED]59530.119

[GRAPHIC] [TIFF OMITTED]59530.120

[GRAPHIC] [TIFF OMITTED]59530.121

[GRAPHIC] [TIFF OMITTED]59530.122

[GRAPHIC] [TIFF OMITTED]59530.123

[GRAPHIC] [TIFF OMITTED]59530.124

