[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]





  UNFUNDED MANDATES--A FIVE-YEAR REVIEW AND RECOMMENDATIONS FOR CHANGE

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

                             JOINT HEARING

                               before the

                 SUBCOMMITTEE ON ENERGY POLICY, NATURAL
                    RESOURCES AND REGULATORY AFFAIRS

                                 of the

                     COMMITTEE ON GOVERNMENT REFORM

                                and the

                SUBCOMMITTEE ON TECHNOLOGY AND THE HOUSE

                                 of the

                           COMMITTEE ON RULES

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 24, 2001

                               __________

                           Serial No. 107-19

                               __________

  Printed for the use of the Committees on Government Reform and Rules


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

                  U.S. GOVERNMENT PRINTING OFFICE
76-087                     WASHINGTON : 2001


____________________________________________________________________________
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                     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       MAJOR R. OWENS, New York
ILEANA ROS-LEHTINEN, Florida         EDOLPHUS TOWNS, New York
JOHN M. McHUGH, New York             PAUL E. KANJORSKI, Pennsylvania
STEPHEN HORN, California             PATSY T. MINK, Hawaii
JOHN L. MICA, Florida                CAROLYN B. MALONEY, New York
THOMAS M. DAVIS, Virginia            ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
JOE SCARBOROUGH, Florida             ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio           DENNIS J. KUCINICH, Ohio
BOB BARR, Georgia                    ROD R. BLAGOJEVICH, Illinois
DAN MILLER, Florida                  DANNY K. DAVIS, Illinois
DOUG OSE, California                 JOHN F. TIERNEY, Massachusetts
RON LEWIS, Kentucky                  JIM TURNER, Texas
JO ANN DAVIS, Virginia               THOMAS H. ALLEN, Maine
TODD RUSSELL PLATTS, Pennsylvania    JANICE D. SCHAKOWSKY, Illinois
DAVE WELDON, Florida                 WM. LACY CLAY, Missouri
CHRIS CANNON, Utah                   ------ ------
ADAM H. PUTNAM, Florida              ------ ------
C.L. ``BUTCH'' OTTER, Idaho                      ------
EDWARD L. SCHROCK, Virginia          BERNARD SANDERS, Vermont 
------ ------                            (Independent)


                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
                     James C. Wilson, Chief Counsel
                     Robert A. Briggs, Chief Clerk
                 Phil Schiliro, Minority Staff Director

Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs

                     DOUG OSE, California, Chairman
C.L. ``BUTCH'' OTTER, Idaho          JOHN F. TIERNEY, Massachusetts
CHRISTOPHER SHAYS, Connecticut       TOM LANTOS, California
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
STEVEN C. LaTOURETTE, Ohio           PATSY T. MINK, Hawaii
CHRIS CANNON, Utah                   DENNIS J. KUCINICH, Ohio
------ ------                        ROD R. BLAGOJEVICH, Illinois
------ ------

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
                       Dan Skopec, Staff Director
                 Barbara Kahlow, Deputy Staff Director
                        Regina McAllister, Clerk
                 Elizabeth Mundinger, Minority Counsel
                           COMMITTEE ON RULES

                   DAVID DREIER, California, Chairman
PORTER GOSS, Florida                 MARTIN FROST, Texas
JOHN LINDER, Georgia                 TONY P. HALL, Ohio
DEBORAH PRYCE, Ohio                  LOUISE McINTOSH SLAUGHTER, New 
LINCOLN DIAZ-BALART, Florida             York
DOC HASTINGS, Washington             ALCEE HASTINGS, Florida
SUE MYRICK, North Carolina
PETE SESSIONS, Texas
TOM REYNOLDS, New York


                     Matt Reynolds, Staff Director

                Subcommittee on Technology and the House

                     JOHN LINDER, Georgia, Chairman
LINCOLN DIAZ-BALART, Florida         TONY P. HALL, Ohio
PETE SESSIONS, Texas                 ALCEE HASTINGS, Florida
TOM REYNOLDS, New York
DAVID DREIER, California


                       Don Green, Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 24, 2001.....................................     1
Statement of:
    Crippen, Dan L., Director, Congressional Budget Office; and 
      Mitchell E. Daniels, Jr., Director, Office of Management 
      and Budget.................................................    22
    Holman, Steve, Sr., president and chief executive officer, 
      Bay Cast, Inc., chairman, Regulatory Affairs Committee, 
      U.S. Chamber of Commerce; and William L. Kovacs, vice 
      president, Environment, Technology & Regulatory Affairs, 
      U.S. Chamber of Commerce...................................    79
    Mannweiler, Paul S., Indiana State Representative and 
      immediate past president, National Conference of State 
      Legislatures; and Dr. Raymond C. Scheppach, executive 
      director, National Governors' Association..................    49
Letters, statements, etc., submitted for the record by:
    Crippen, Dan L., Director, Congressional Budget Office, 
      prepared statement of......................................    25
    Daniels, Mitchell E., Jr., Director, Office of Management and 
      Budget, prepared statement of..............................    39
    Holman, Steve, Sr., president and chief executive officer, 
      Bay Cast, Inc., chairman, Regulatory Affairs Committee, 
      U.S. Chamber of Commerce, prepared statement of............    82
    Kovacs, William L., vice president, Environment, Technology & 
      Regulatory Affairs, U.S. Chamber of Commerce, prepared 
      statement of...............................................   103
    Linder, Hon. John, a Representative in Congress from the 
      State of Georgia, prepared statement of....................     4
    Mannweiler, Paul S., Indiana State Representative and 
      immediate past president, National Conference of State 
      Legislatures, prepared statement of........................    51
    Ose, Hon. Doug, a Representative in Congress from the State 
      of California, prepared statement of.......................    10
    Otter, Hon. C.L. ``Butch'', a Representative in Congress from 
      the State of Idaho, prepared statement of..................    12
    Portman, Hon. Rob, a Representative in Congress from the 
      State of Ohio, prepared statement of.......................    19
    Scheppach, Dr. Raymond C., executive director, National 
      Governors' Association:
        Information concerning preemption........................    67
        Prepared statement of....................................    60
    Tierney, Hon. John F., a Representative in Congress from the 
      State of Massachusetts, prepared statement of..............    15

 
  UNFUNDED MANDATES--A FIVE-YEAR REVIEW AND RECOMMENDATIONS FOR CHANGE

                              ----------                              


                         THURSDAY, MAY 24, 2001

        House of Representatives, Subcommittee on Energy 
            Policy, Natural Resources and Regulatory 
            Affairs, Committee on Government Reform, joint 
            with the Subcommittee on Technology and the 
            House, Committee on Rules,
                                                    Washington, DC.
    The subcommittees met, pursuant to notice, at 10:36 a.m., 
in room 2154, Rayburn House Office Building, Hon. Doug Ose 
(chairman of the Subcommittee on Energy Policy, Natural 
Resources and Regulatory Affairs) presiding.
    Present from the Subcommittee on Energy Policy, Natural 
Resources and Regulatory Affairs: Representatives Ose, Otter, 
and Tierney.
    Present from the Subcommittee on Technology and the House: 
Representatives Linder and Sessions.
    Staff present from the Subcommittee on Energy Policy, 
Natural Resources and Regulatory Affairs: Dan Skopec, staff 
director; Barbara Kahlow, deputy staff director; Regina 
McAllister, clerk; Elizabeth Mundinger, minority counsel; and 
Jean Gosa, minority assistant clerk.
    Staff present from the Committee on Rules: Seth Webb, 
professional staff member; Don Green, staff director of 
Subcommittee on Technology and the House; and Adam Jarvis, 
clerk.
    Mr. Ose. I want to call this meeting to order. I want to 
ask unanimous consent that the rules of the Rules Committee 
apply to today's joint hearing. Without objection, so ordered.
    I also ask unanimous consent, when he is able to join us, 
that Mr. Portman be able to participate in today's hearing. 
Without objection, so ordered.
    I want to call on the gentleman from Georgia for his 
opening statement.
    Mr. Linder. Thank you, Mr. Chairman. Thank you, Chairman 
Ose, for calling the joint hearing of our two subcommittees to 
order. I look forward to our hearing this morning for a couple 
of reasons.
    First, it is the inaugural hearing of the Rules 
Subcommittee on Technology and the House for the 107th 
Congress. At the start of this Congress, we slightly altered 
the subcommittee's name to reflect the fact that we will 
continue to be active in longstanding areas of the 
subcommittee's original jurisdiction, such as unfunded 
mandates, and we will also look into higher profile issues, 
such as examining how the technological advances of recent 
years affect the House as an institution and the legislative 
process.
    In this respect, I am pleased that the subcommittee's first 
hearing in this Congress will take a look at the success story 
that we have had with regard to unfunded mandates reform over 
the past 5 years.
    Second, I look forward to working with you, Chairman Ose, 
in your capacity as the chairman of the Government Reform 
Subcommittee on Energy Policy, Natural Resources and Regulatory 
Affairs. Our subcommittees share jurisdiction over certain 
portions of the Unfunded Mandates Reform Act.
    As such, I believe that we share the common goal of today's 
hearing; namely, highlighting the success of UMRA over the last 
5 years in reducing the number and scope of enacted laws that 
contain unfunded mandates and raising the consciousness level 
of our Members of the House and its standing committees, and 
our staffs, about unfunded mandates earlier in the legislative 
process so as to maximize our ability to either eliminate or 
greatly reduce unfunded mandates before such measures come to 
the House floor.
    I believe that the key to our success over the last 5 years 
in either eliminating unfunded mandates from being enacted into 
law or greatly reducing their scope and cost has been the 
change that UMRA made to the rules governing the consideration 
of certain legislation on the House floor.
    Specifically, Section 425 of the 1974 Congressional Budget 
Act establishes a point of order that lies against authorizing 
legislation contained in an unfunded intergovernmental mandate 
exceeding $56 million.
    Furthermore, Section 426 of the Congressional Budget Act 
establishes a point of order that lies against a rule governing 
consideration of a measure containing an unfunded 
intergovernmental mandate exceeding this level, if the rule 
waives the initial point of order with respect to the 
underlying authorizing legislation.
    In other words, with these two procedural safeguards, the 
full House of Representatives is required to debate, consider 
and ultimately pass judgment on either underlying legislation 
seeking to enact an unfunded mandate exceeding $56 million, or 
a rule that seeks to waive this point of order.
    This represents a sharp break from the practices that were 
in effect prior to UMRA's enactment; namely, routinely moving 
legislation through the House of Representatives without even a 
moment's consideration as to whether or not it contained an 
unfunded intergovernmental mandate.
    Given these difficult hurdles to overcome, is it any 
surprise that the CBO found in an annual report submitted in 
January 1997, February 1998, February 1999 and March 2000 that 
the number of legislative measures with unfunded 
intergovernmental mandates exceeding these levels were very, 
very small, usually about 1 percent of the legislation that the 
CBO reviewed under UMRA? And, the number of bills with such 
unfunded intergovernmental mandates that were finally enacted 
into law was an even smaller subset of these groupings.
    Stated differently, in the years since UMRA was enacted, 
more than 99 percent of the legislation that we the Congress 
have enacted into law contained either no unfunded mandates at 
all or unfunded mandates that did not exceed UMRA's threshold 
levels.
    I appreciate the fact that Dan Crippen is with us. Nice to 
see you again. He will release the report and I look forward to 
his remarks, as well as the testimony of OMB Director Mitchell 
Daniels. I also look forward to the other witnesses we will 
hear from this morning, including the National Governors' 
Association, the National Conference of State Legislatures, and 
the U.S. Chamber of Commerce, all of which will talk about 
their experience with UMRA and unfunded mandates over the last 
5 years.
    Mr. Chairman, thank you for the opportunity to make this 
statement. Today's hearing will be insightful, and I look 
forward to my subcommittee working with your subcommittee in 
the future.
    [The prepared statement of Hon. John Linder follows:]

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    Mr. Ose. I thank the gentleman from Georgia. I want to 
explore a couple of things here. I know Mr. Tierney has an 
opening statement. I have an opening statement. Mr. Otter, do 
you have an opening statement?
    Mr. Otter. Yes.
    Mr. Ose. Mr. Sessions, do you have an opening statement?
    Mr. Sessions. Mr. Chairman----
    Mr. Ose. I am just trying to determine whether or not you 
have one.
    Mr. Sessions. The answer is, it would be brief.
    Mr. Ose. OK. The question I have for the members is whether 
or not--given the vote and the time value for our witnesses, 
whether we ought to just submit our statements for the record 
so when we come back from the vote, we can go straight to the 
witness testimony.
    Mr. Tierney. No objection on the minority side.
    Mr. Ose. Would that be agreeable to the majority side?
    All right, without objection we will submit our statements 
for the record. I appreciate that.
    [The prepared statements of Hon. Doug Ose, Hon. C.L. 
``Butch'' Otter, Hon. John F. Tierney, and Hon. Rob Portman 
follow:]

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    Mr. Tierney. Mr. Chairman.
    Mr. Ose. Yes, Mr. Tierney.
    Mr. Tierney. I am happy to submit my statement into the 
record and only ask unanimous consent also to include the GAO 
report in the record. I think there is confusion as to what 
that report says, and I would like to make sure that it is in 
there for that purpose----
    Mr. Ose. Without objection.
    Mr. Tierney [continuing]. And also to include some 
testimony and views by witnesses and members in opposition to 
the legislation that would create a point of order against 
legislation that imposes private-sector mandates and other 
relevant materials.
    Mr. Ose. Without objection, so ordered.
    Mr. Tierney. Thank you.
    [Note.--The GAO report entitled, ``Unfunded Mandates, 
Reform Act Has Had Little Effect on Agencies' Rulemaking 
Actions,'' GAO/GGD-98-30, may be found in subcommittee files. 
The report may also be obtained from GAO by calling 202-512-
6000.]
    Mr. Ose. We are going to go ahead and recess so we can go 
vote. All our statements are going to be in the record. So when 
we get back here, we are going to hear from the both of you.
    [Recess.]
    Mr. Ose. Again, welcome everybody. I appreciate your 
joining us. We have three panels today testifying before us. 
Our first panel is composed of the Director of the 
Congressional Budget Office and Director of the Office of 
Management and Budget. That would be Mr. Dan L. Crippen and Mr. 
Mitchell E. Daniels, Jr., respectively, and we are very 
grateful for your joining us. And, let's see, Mr. Crippen, you 
are listed first, so we are going to give you the opportunity 
to proceed first. If you could summarize your statement, 
keeping it to 5 minutes, then we could get to our questions 
quickly.
    Mr. Crippen.

 STATEMENTS OF DAN L. CRIPPEN, DIRECTOR, CONGRESSIONAL BUDGET 
   OFFICE; AND MITCHELL E. DANIELS, JR., DIRECTOR, OFFICE OF 
                     MANAGEMENT AND BUDGET

    Mr. Crippen. Mr. Chairman. Mr. Chairman, and members of the 
subcommittees--I underline the plural nature of subcommittees. 
It is rare to appear before two at a time--I am pleased to be 
here today to discuss our report of the Unfunded Mandates 
Reform Act's first 5 years. In our view, UMRA has achieved its 
primary objective. It has informed the Congress about mandates 
included in legislation. That information has prompted a number 
of bills to be changed so as to reduce or eliminate the cost of 
mandates, and a few mandates, albeit ones that were less 
costly, were funded along the way.
    Since 1996, CBO has provided mandate cost statements for 
nearly all the bills reported by authorizing committees. It has 
also given information about mandates to Members and 
congressional staff at other stages in the legislative process.
    Over the past half decade, several patterns about Federal 
mandates and their costs have become clear, as these two 
posters suggest, Mr. Chairmen. Most of the legislation that the 
Congress considered between 1996 and 2000 did not contain 
Federal mandates as defined by UMRA. Of the more than 3,000 
bills and other legislative proposals we reviewed during that 
period, 12 percent contained intergovernmental mandates and 14 
percent contained private-sector mandates.
    Most of those mandates would not have imposed costs greater 
than the thresholds set by UMRA. Only 32 bills with 
intergovernmental mandates over these 5 years had annual costs 
of $50 million or more, and some 100 of the bills with private-
sector mandates had costs of more than $100 million. Few of the 
bills with either kind of mandate, however, contained Federal 
funding to offset the costs.
    Although the percentage of bills containing a Federal 
mandate stayed fairly constant over the past 5 years, the 
percentage of bills with mandates over the statutory thresholds 
declined. Bills with intergovernmental mandates above the 
threshold decreased from 2 percent in 1996 to less than 1 
percent in 2000, and bills with private-sector mandates above 
the threshold dropped from 6 percent in 1996 to about 1 percent 
in 2000.
    Last observation, Mr. Chairmen: Few mandates with costs 
over the UMRA thresholds were enacted in the past 5 years. Only 
two intergovernmental mandates with annual costs of at least 
$50 million became law. Sixteen private-sector mandates with 
costs over the $100 million threshold were enacted.
    Mr. Chairmen, before I conclude, I want to take this 
opportunity to report on behalf of my colleagues here today and 
the rest of CBO that this is not particularly easy stuff. 
Determining what constitutes a mandate under the act can be 
complicated. For example, the law defines a mandate as ``an 
enforceable duty, except, . . . a duty arising from 
participation in a voluntary Federal program.''
    Very often, those distinctions between what is voluntary 
and what is mandatory are far from clear. Even when we 
determine that a legislative proposal contains a mandate, we 
face numerous challenges in estimating the cost. In some cases, 
accurately determining how many State and local government 
entities or entities in the private sector would be affected by 
a mandate is next to impossible. In other cases, the entities 
that will be subject to a particular mandate are diverse and 
would not be affected uniformly. In other instances, it may be 
impossible to estimate the cost of a mandate at the legislative 
stage, before regulations to implement it have been developed.
    Fortunately, UMRA requires us to determine whether the cost 
of complying with mandates would exceed specific thresholds. 
If, however, it required us to provide more detailed estimates 
for each mandate, we would have a much tougher time and expend 
considerably more resources. Unlike our estimates of impacts on 
the Federal budget, for which we have extensive models, data, 
history, and experience, it takes a considerable amount of time 
to put together just the relevant data in many of these cases. 
Frankly, we probably couldn't do it without the help of the 
affected governments and industries, who you will be hearing 
from today.
    Despite these mitigating factors, you can imagine the 
effort required to examine every bill reported from every 
committee, and some that are not, to determine whether a 
mandate is included and then estimate its cost. As you can see 
from the list in our report, there are at least 28 people, well 
over 10 percent of our work force, who get involved in one way 
or another in mandates assessment. In budgetary parlance, we 
dedicate 16 full time equivalents and over $2 million a year to 
mandates assessment.
    It is a big effort and may well be worth it. Clearly the 
law and its requirements have changed the way Congress thinks 
about mandates, although it has not always altered the outcome 
for those with large costs.
    Thank you, Mr. Chairmen.
    [The prepared statement of Mr. Crippen follows:]

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    Mr. Ose. Thank you, Mr. Crippen. Joining us now is the 
Director of Office of Management and Budget, Mr. Mitchell 
Daniels.
    Mr. Daniels. Thank you, Mr. Chairman. Mr. Chairman, a 
review of the experience to date suggests that the executive 
branch's implementation of the Unfunded Mandates Reform Act has 
been imperfect at best. Title II of the act has been regarded 
by some agencies as a perfunctory exercise, not as an 
opportunity to work in good faith with our non-Federal 
partners. Just this week, White House staff attended a meeting 
of the Governors' Washington representatives and asked which 
agencies were doing a good job consulting with the States, and 
the answer was none, that no Federal agency is consulting with 
State and local governments in the methodical way intended when 
the law was developed. States and localities report that many 
agencies think simply informing them of a rulemaking action is 
the equivalent of consultation, that consultation processes 
lack uniformity, does not occur early enough in the rulemaking 
process, and, on the rare occasions when consultation does 
occur, agencies often contact State and local counterparts, not 
the elected officials or chief appointed officials accountable 
to the public for running their respective governments.
    This will not be accepted practice in this administration. 
We will require agencies to submit the dates at which 
stakeholders were contacted, and prior to review by the Office 
of Information and Regulatory Affairs of any new regulations, 
if there has not been adequate consultation as called for by 
the act, OMB will return regulations to the originating agency 
for completion of this responsibility.
    As OMB has noted in five annual reports to the Congress, 80 
rules have required the preparation of a mandate's impact 
statement in those 5 years. This number strains credulity. In 
fact, it appears that agencies have attempted to limit 
consultative processes and ignore potential remedies by 
aggressively utilizing or interpreting exemptions outlined in 
the act.
    Let me cite one graphic example. Last June, the EPA issued 
a new regulation known as the total maximum daily load. It 
required States to develop and implement plans to clean up 
impaired waters, a reasonable and appropriate goal. But the 
agency estimated the incremental costs of compliance at $23 
million per year, and, therefore, the regulation was not 
considered an unfunded mandate under the act.
    But EPA completely excluded from its analysis the cost of 
pollution control measures that will clearly be imposed by the 
new regulation. These compliance costs are expected to run into 
the billions of dollars per year for the private sector and 
local governments, but EPA moved forward without deference to 
the requirements of the act. GAO, in reporting on the act's 
first 2 years in 1998, noted that there was a limited direct 
impact of the act on the agency's rulemaking, to say the least.
    On behalf of the administration, I am prepared to make the 
following commitments to address these shortcomings: We will do 
more to involve State and local governments early in the 
rulemaking process. We will bring more uniformity to the 
consultation process. States and localities should have a clear 
point of contact in each agency, and agencies must understand 
that consultation means more than making a telephone call the 
day before an action is published in the Federal Register.
    Third, we will enforce the Unfunded Mandates Reform Act to 
ensure that agencies are complying with both the letter and the 
spirit of the law. I will direct, through OIRA, to return a 
rule not in compliance to the agency from whence it came. If an 
agency is unsure whether a rule contains a significant mandate, 
it should err on the side of caution and prepare a mandate's 
impact statement prior to issuing a regulation.
    Mr. Chairman, the administration is committed to securing 
greater involvement with our intergovernmental partners in 
Federal decisionmaking and, more fundamentally, strict 
adherence to the letter of the statute you have passed.
    President Bush has noted that federalism will be a priority 
in this administration, and we look forward to developing this 
partnership in concert with the Congress and making sure that 
it is a successful one. Thank you.
    [The prepared statement of Mr. Daniels follows:]

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    Mr. Ose. Thank you, Mr. Daniels. I want to thank you for 
your clear and unequivocal statements. I had read your 
testimony last night. I am most appreciative of your efforts.
    I am going to recognize the gentleman from Georgia for 5 
minutes.
    Mr. Linder. Mr. Crippen, it is nice to see you again. I am 
pleased with your testimony and the success of UMRA. But one 
thing that wasn't clear to me was how many of the unfunded 
mandates, now that we have our eye focused on that, get caught 
at the subcommittee level and committee level and never get 
anywhere?
    Mr. Crippen. There are a fair number, Mr. Linder. We find 
that sometimes in consultation before legislation is introduced 
or marked up, as you suggest, we give informal assessments and 
advice about how we would look at things, as we do on the 
Federal cost side, too. But in this case, particularly, it has 
been quite notable that we have seen mandates disappear or be 
reduced below the threshold levels before the bills are further 
processed.
    Mr. Linder. Is it further true that most of the unfunded 
mandates that reach the floor against which a point of order is 
asserted ultimately pass?
    Mr. Crippen. Yes, they do, certainly in the House. The 
Rules Committee has been diligent, I must say, in making sure 
that if a point of order could lie, it is allowed to. That is 
to say, these points of order are not waived.
    Mr. Linder. That's right.
    Mr. Crippen. And that even though the rule may provide for 
waiving all other points of order, this point of order is not 
waived. So I think it is due to the Rules Committee's diligence 
in allowing the UMRA points of order to be raised that they 
have been voted on. Ultimately, the legislation involved has 
passed. But at a minimum, Members are made to confront the 
mandate that is in the legislation.
    Mr. Linder. And, while it is not perfect, it is a huge 
improvement over what we did have in terms of just ignoring the 
amount of dollars we are burdening States with or private 
businesses with?
    Mr. Crippen. Absolutely. It is much more information. And, 
I am a great believer that the more information you have, the 
better decision you can make. Clearly, mandates have been 
included in legislation since the beginning of the republic, 
but we are now only beginning to try to quantify them. Clearly, 
representatives of the other governments have in the past tried 
to promote this understanding but didn't have the rules behind 
them to do so.
    Mr. Linder. Mr. Daniels, you have said something this 
morning that is the most encouraging thing I have heard in 
years here, and that you are willing to look at even the EPA's 
respecting its imposition of costs down the road and ask it to 
pay attention to this rule. The TMDL is only a small part of 
it. EPA is proposing to impose co-permitting on feedlots, for 
example, and chicken growers, which will have huge costs, huge 
costs.
    In fact, I represent a lot of chicken growers where the 
integrators bring the chicks to them, and they put up $500,000, 
$2 million for the buildings and grow these chicks out and turn 
them back to the integrators, and if the EPA forces the 
integrators, such as Gold Kist, for example, to assume an equal 
risk in respect of any pollution on the ground of that farmer, 
that farmer's land, I believe the integrators are going to walk 
away from that instantly, build their own chicken houses, and 
those folks all through north Georgia are going to be without 
any way to pay off their loans. These are a huge imposition of 
costs.
    In Georgia the EPD does a wonderful job working with--not 
as an adversary but as a partner with businesses in cleaning up 
our environment. We have done a great job and the EPA tends to 
ignore that. If you are going to enforce the following of these 
mandate rules by the EPA, it will be the most well-received 
message Georgia can have.
    Mr. Daniels. Thank you, Congressman. To me, the comments 
and commitments that I have articulated this morning are not 
remarkable or, you know, really particularly praiseworthy, and 
I would just say two things. First of all, fundamentally they 
stem from a simple respect for the law and obligation to 
implement and enforce it faithfully. And that would be the case 
whether or not we agreed with the thrust of this policy, which 
the President, you know, clearly does as an advocate of 
federalism.
    Second, I selected an example from the EPA, but I don't 
mean to single out any particular agency. I have an equally 
graphic example drawn to our attention by State and local 
information officers just in the last few days that has to do 
with HIPAA, the Health Insurance Portability and Accessibility 
Act, perhaps the most expensive rule, certainly one of them, 
promulgated in recent--the rules attached to that act in recent 
years. And, here too, we can find no evidence of sufficient 
compliance. So I don't mean to pick on any one agency, but the 
rule will be applied even-handedly and to all.
    Mr. Linder. Mr. Daniels, I appreciate that. This is my 9th 
year and to have someone from the administration tell me that 
they are going to respect the rules of law is breathtaking, and 
I am grateful.
    Thank you, Mr. Chairman.
    Mr. Ose. Thank you, Mr. Linder. I recognize the gentleman 
from Idaho, Mr. Otter.
    Mr. Otter. Well, thank you, Mr. Chairman. Mr. Daniels, for 
a person who spent 14 years as a lieutenant Governor of a 
western State that has had all manner of agents come to harass 
our citizens and then eat out their substance, it is indeed a 
pleasure to hear that sort of directive from the office of the 
executive.
    I would perhaps ask that both of you participate in this. 
So feel free to jump in wherever you see fit. But, you know, in 
the private sector, I was chief executive officer and other 
capacities in the private sector for 30 years, and, if I 
disobeyed the IRS laws or the EPA laws or affirmative action or 
the Labor Department or Health and Welfare, you name it, I went 
to jail, and not only that, my company was held economically 
responsible. In some cases, I was held personally economically 
responsible.
    It seems to me, as I have heard so many times on the floor 
of legislative bodies, the only thing that is going to make 
this work is to have teeth in it. Would there be some 
satisfaction for your particular duties and responsibilities if 
these agency heads that sought to purposely mislead could go to 
jail or could be held personally and financially responsible? 
The TMDL loading 80,000 streams and tributaries to what is 
called navigable waters in a very loose sense of the U.S. 
Government, would cost the State of Idaho well in excess of $50 
million a year, let alone $23 billion a year for the entire 
United States. That is drastically misleading. If I, as the 
president of my company, had misled any government agency to 
that extent, I could be--you know, they could be pumping 
sunlight to me right now, and perhaps I should have voted the 
other way on correctional institutions.
    But, what I want to know is can we put some teeth into this 
thing. You know, I could have at least gotten fired by my board 
of directors if I would have subjected the company to that kind 
of economic cost. What can we do?
    Mr. Daniels. You or me?
    Mr. Crippen. I will start and you can think about it.
    Mr. Otter. Perhaps I should have asked this at another 
venue.
    Mr. Crippen. Probably, because we could both go to jail, 
and we don't want to. In fact, we refer often to the 
enforceability of the Budget Act, because it frustrates us 
sometimes when Congress will do what Congress wants to do. We 
say there are no go to jail provisions.
    I am not sure how you would make it more enforceable in the 
way you have described. One thing, though, that I think 
Congress can do a better job of is simply oversight. You know, 
that is the role that Congress is designed to play over the 
executive branch, and clearly, when you don't have any 
cooperation, it is very difficult to do, but----
    Mr. Otter. Mr. Crippen, I would love that with the EPA. I 
would love that. I would love that sort of attitude, but, if it 
is so important for us to govern in that way, why isn't it 
important, then, for us to be governed that way as well?
    Mr. Crippen. Well, I would like to think that in your 
encounters with Federal agencies, you would get some benefit of 
the doubt. I am not sure that is always the case. But how to 
make government officials follow your intent, whether it is the 
letter of the law or not, has always been an issue and a 
problem for many Congresses and administrations. I don't know 
how to make people do what they would otherwise not do in that 
context, but I do think that you can help the process by 
thorough and extensive oversight. That is my only solution in 
our constitutional framework.
    Mr. Daniels. Congressman, first I move to say again, as I 
did with Congressman Linder, that while I appreciate your 
generous comments, I don't think they are particularly 
warranted. You know, where I am from, you don't get a merit 
badge for obeying the law. It is just expected behavior, and I 
think that is the answer to your question. I believe it is a 
matter of accountability, and it is principally, I think, the 
responsibility of the executive branch to hold its officers 
accountable for faithful, sincere compliance with this or any 
other applicable statute. I think you can count on President 
Bush, particularly in an area to which as a former Governor and 
an advocate of federalism, to pay close attention and to hold 
his officers accountable.
    Mr. Otter. Well, I am glad to hear you say that, Mr. 
Daniels, and I come to this question from a peculiar 
perspective and a personal perspective, and I just had a 6-year 
running battle with the EPA and the Army Corps of Engineers on 
a modification of a half acre of swamp on my property to a 2.9-
acre wetland, and the cost for that was $137,500 initially, and 
we now got it down to $50,000 because I didn't break the law. 
What I didn't do was fill out all the permit requests that I 
didn't know I needed. But anyway, I make that point, because 
the Army Corps of Engineers and the EPA consorted to do the 
very same thing in the State of Idaho in violation of State 
laws and State values, and yet suffered no consequences. Nobody 
went to jail. Nobody even got busted from sergeant to corporal, 
and so it seems just a little bit arrogant, maybe even King 
George the IIIrd-ish for us to be treating the citizens, the 
governed, this way. I want to do all I can in my short time 
here to make sure that if we are going to pass a law, then we 
better be prepared to enforce it and obey it.
    Thank you.
    Mr. Ose. Is the gentleman finished? The gentleman has 
finished the statement? Oh, you are looking for a response?
    Mr. Otter. No. I was just making--well, you can respond to 
that if you want. Thank you. Thank you, Mr. Chairman.
    Mr. Ose. Turn off your mic, if you would, please. There you 
go. All right.
    Mr. Daniels, I want to explore something. It is more of the 
arcane area. Under section 205, UMRA requires an agency to 
identify a reasonable number of regulatory alternatives, trying 
to make sure that the least costly, most cost-effective or 
least burdensome alternative is utilized. How is it that OMB is 
going to enforce that particular requirement?
    Mr. Daniels. I don't have a better answer than to say that 
we will insist on sound and complete analysis that makes costs 
and benefits as transparent and as credible as they can be and 
then weighs them as the law and good common sense suggest that 
they should be.
    Mr. Ose. Which means that if they do not meet the standards 
OMB sets, they get returned to the agency for further work?
    Mr. Daniels. Yes. I think it will be our hope that this 
will happen rarely, and I hope that by being clear about our 
expectations and by working directly in advance with the 
agencies, just as we will insist in appropriate cases they work 
with States and localities, that the work will be done to 
appropriate standards from the beginning. I would hope it would 
be a rare instance in which the time at which OIRA is reviewing 
the rule, that deficiencies only then show up.
    Mr. Ose. One of the things that I have always been 
intrigued by is that it is not always--or the preferred 
alternative is not necessarily the least expensive in terms of 
the long-term consequences. One of the requirements under UMRA 
is to attach an explanation of how you got to a determination 
of the best alternative, if you will.
    Do you have any standards yet developed, or is that a case-
by-case consideration?
    Mr. Daniels. Well, I certainly don't have an answer for you 
this morning, Mr. Chairman. I think standards will probably 
only take us so far in an area in which the variety of subject 
matter is almost infinite. We hope for the prompt confirmation 
of Dr. John Graham, who was approved yesterday in the Senate 
committee, and clearly this will be among his very first tasks.
    Mr. Ose. I do want to followup on that specific point, 
because I know that OMB is really struggling with the lack of 
confirmed appointees, and to the extent that I can help you 
with any of that and recognize the problem, I would be happy to 
lend what little weight my office has on this.
    Another question that I want to ask has to do with--and I 
presume your answer is going to be very similar--the changes 
from, say, July 2000 to July 2001 in how you go about 
determining what needs to be sent back or what is adequate. Do 
you have any developed standards for that or agency regulatory 
proposals or, again, is that a case-by-case basis?
    Mr. Daniels. Well, none beyond the general guidance I tried 
to offer this morning, that we will want interpretations made 
fairly and where it is a close call, we will want to err on the 
side of observing the requirements of the act. I don't see the 
downside, you know. We have everything to gain in terms of 
better informed rules, and, you know, only our own efforts to 
expend against that gain. So that will be my guidance to Dr. 
Graham, and he will have to fill in the details.
    Mr. Ose. OK. Mr. Linder for 5 minutes.
    Mr. Linder. I would like to get both of you to comment on 
this. In the past year, we passed a similar unfunded mandates 
bill with respect to mandates on private businesses with the 
threshold being $100 million. It passed the House. It failed 
in--it didn't move in the Senate.
    Mr. Crippen, first, what is your comment? Do you think we 
should pursue an unfunded mandates legislation on private 
businesses as well as intergovernmental?
    Mr. Crippen. We now, Mr. Linder, provide our estimate of 
the private-sector impacts when a mandate is included. Perhaps 
part of the difference in the effectiveness is that no points 
of order lie. That has been considered in the House in the past 
couple of years and certainly could not hurt to have a point of 
order lie against a bill that exceeds the privte-sector 
threshold, as much as it does with State and local mandates.
    I expect, too, that part of the reason that the unfunded 
intergovernmental mandate has been more effective in some 
ways--that is, we see less of them and we talk about them 
more--is the effectiveness of the governmental organizations, 
in keeping everyone abreast and helping us in how we think 
about the impact.
    So it is a combination of things that have made the 
intergovernmental impact statements better and more effective, 
I think. Obviously, the private sector is bigger and it is 
harder ti estimate impacts. And, there is a different 
constitutional relationship that the Congress has with the 
private sector. But certainly, expanding the point of order to 
apply to such a mandate would be useful, particularly if the 
diligence of the Rules Committee continues.
    The Senate has never raised a point of order, even against 
intergovernmental unfunded mandates. So most of the action is 
in your body, but as I said, I can't imagine that allowing a 
point of order to lie could hurt anything. I mean, it would 
help enforce the intent.
    Mr. Linder. Mr. Daniels, do you have a comment on that?
    Mr. Daniels. I think it would be presumptuous of me to 
advise the Congress on this point. I do think it is imperative 
that, before our legislators vote, they have credible evidence 
of the consequences, and it appears to me that, through Dan's 
good offices and perhaps others, that information is available, 
but I think I will confine my remarks to the area of 
accountability in which I feel an acute responsibility.
    Mr. Linder. Thank you.
    Mr. Ose. Mr. Otter.
    Mr. Otter. Thank you, Mr. Chairman. Mr. Crippen, you said 
during your testimony that you were many times unable at the 
legislative stage to assess what the cost was going to be, 
either local or State governments, and that it was probably 
more at the promulgation of the rules and the regulation stage 
that those should be assessed. Is there anything--is there any 
mechanism that we have available to us that when the rules and 
regulations--I understand the point of order on the floor at 
the legislative stage, but is there anything available to us 
other than just simple oversight to assess at the rules and 
regulations stage what these are going to cost?
    Mr. Crippen. That comment, Mr. Otter, applies mostly to the 
private-sector impacts. But you have available an additional 
authority, the regulatory review ability the Congress passed a 
couple of years ago. In fact, you exercised that authority this 
year for the first time, the ability to review and change or 
revoke or revise a regulation. So you have that ability as 
well.
    It is simply a case where Congress needs to delegate to an 
expert agency the implementation of legislation in the 
regulatory process. It is impossible for us to say how this is 
going to work, and that is precisely what Director Daniels has 
committed to you today--to do a better job in the regulatory 
process of analyzing the mandates, making sure that assessment 
gets done when they make regulations.
    Mr. Otter. Thank you.
    Mr. Daniels, in a possible deterrent to misleading--
purposely misleading--underbidding, so to speak, we had a 
tremendous example of that in the Coeur d'Alene mining region 
of Idaho, where the EPA said in 3 years and for $28 million 
they could clean up the Superfund site, and that was $280 
million and 17 years ago. I know that was before the Unfunded 
Mandates Reform Act, but that was an ability or perhaps an 
example of their ability to estimate things.
    Could we make the agencies live within a percentage of 
their estimate? Let's say, OK, you have got 10 percent more 
than what you say, and that is it. That is all you are going to 
get. You are not going to get any more. Is there some way that 
we can bring some truth, maybe even more important, some 
integrity back into our system of government?
    Mr. Daniels. I think the integrity that is important is in 
the data. I am sure it is not in the people involved. Let's 
postulate that everyone is behaving in good faith, but the data 
must have integrity so that we all know--that all parties know 
the real costs that are about to be imposed. To me this is a 
mission of taxpayer protection, if we are talking in the 
intergovernmental context. A rule, once promulgated by the 
Federal Government, that mandates activity by a State has 
imposed a tax, very directly on the citizens of that State, and 
it ought to be--the amount of that and the fact of that ought 
to be held up to scrutiny, just as it would be if you were 
voting here on an explicit Federal tax increase.
    The same is true, incidentally, on the private-sector side 
in which I believe ours is a consumer protection mission, 
because these rules, all of which pursue important goals, do so 
at a real cost to consumers, and, therefore, I think it is the 
integrity of the data on which a decision is finally made that 
is most important to get it right and to hold it up in plain 
view for the inspection of all stakeholders.
    Mr. Otter. Do we have any exit interviewing on the rules 
and regulations that we promulgated and how close we were to 
assessing the actual value? Have we done any audits on--we 
passed this rule 5 years ago, and here is what we estimated it 
was going to cost and here is what it actually cost?
    Mr. Daniels. I believe there have been a number of analyses 
done by scholars and by independent actors. It is an 
interesting question that I will have to reserve to find out 
how recently, if at all, the Federal Government has sort of 
audited the consequences of its own actions, but that is a 
great suggestion and one we will take up.
    Mr. Otter. Thank you. Thank you, Mr. Chairman.
    Mr. Ose. Thank you, Mr. Otter.
    Mr. Daniels, going back to section 204 on the meaningful 
and timely input from local and State governments on any 
proposed regulatory proposals, do you have any or have you 
developed yet any standards by which OMB might respond to--I 
think what your testimony characterized as inadequate 
consultation with such levels of government, or are those under 
development?
    Mr. Daniels. Again, I hope we can operate mainly in a 
preventative mode by being very, very clear with agencies that 
this is expected, what is expected, and as I mentioned, putting 
them on notice that we would like an accounting of their 
observance of these rules to accompany the rule itself.
    I would hope that if we are simply plain spoken enough 
about that, that behavior will adapt where it needs to and that 
we won't have to too often be in the position of marking 
something incomplete or, even further, suggesting some 
criticism or sanction of the accountable officers.
    Mr. Ose. One of the things in your testimony they thought 
was most appropriate--or most telling was the early and 
frequent visits with local and State governments, and I would 
heartily encourage that under UMRA just so that we can make 
sure we have an adequate understanding of the impact of 
anything we do here.
    Mr. Daniels. I quite agree, although I want to add that I 
think all parties need to use some common sense, and I have had 
these conversations already, and, again, this morning with some 
representatives of State and local governments. We want to find 
the right balance point. We don't seek to introduce further 
undue delay in the process of advancing public policy, and we 
would not want to find, for whatever reason, people using this 
quite appropriate procedural step to just simply slow down or 
impede a rule that they opposed for substantive reasons. But it 
ought to be possible to apply common sense and to--in the cases 
where rules are significant--and here I think the eye of the 
beholder rule ought to have some application, and where in the 
eyes of Governors or other key officials a rule seems destined 
to impose substantial costs, then we ought to engage on it and 
do so early. And I have to believe that can be done without 
being unduly burdensome or time-consuming on anybody.
    Mr. Ose. Mr. Linder, Mr. Otter, anything further?
    I want to thank both of you for appearing today. I 
appreciate your taking the time to come down, and I know, Mr. 
Daniels, you are very humble in terms of your remarks, but I 
must say, speaking for the others, it is a pleasure to have an 
unequivocal commitment to complying with UMRA. And, I thank you 
for that.
    Mr. Daniels. Yes.
    Mr. Ose. Thank you, Mr. Crippen.
    We are going to now call up our next panel of witnesses. 
Joining us in the second panel is the Honorable Paul S. 
Mannweiler. He is an Indiana State Representative and immediate 
past president of the National Conference of State 
Legislatures; and Dr. Raymond C. Scheppach, who is the 
executive director of the National Governors' Association.
    Gentlemen, if you would summarize your testimony in 5 
minutes each, then we will be able to get to questions. The 
gentleman from Indiana.

STATEMENTS OF PAUL S. MANNWEILER, INDIANA STATE REPRESENTATIVE 
  AND IMMEDIATE PAST PRESIDENT, NATIONAL CONFERENCE OF STATE 
LEGISLATURES; AND DR. RAYMOND C. SCHEPPACH, EXECUTIVE DIRECTOR, 
                NATIONAL GOVERNORS' ASSOCIATION

    Mr. Mannweiler. Thank you, Mr. Chairman, distinguished 
members of the subcommittees. I appreciate this opportunity to 
appear before you and speak on UMRA. Having been a member of 
the General Assembly in Indiana for 20 years and either been 
the speaker, co-speaker or the minority leader over a 14-year 
period, I have to comment that when I first came to the 
legislature, it seemed like every time Indiana would come into 
session we had to figure out how to pay for some program which 
the Federal Government had passed in a previous session, and 
during that period of time, the State legislatures, NCSL, would 
publish a mandate, monitor on a monthly basis and send it out 
to State legislators, and sometimes that would be 15 to 30 
pages long just informing State legislators about mandates that 
were pending in Congress. And during that period, people became 
very upset to the point where they talked about a 
Constitutional Convention to try to bring some balance back 
into the Federal system.
    I would have to say all that has subsided because of UMRA. 
I think particularly my executive summary of my testimony would 
be Title I has worked very well, mainly and partly because of 
the Congressional Budget Office being the gatekeeper and the 
enforcer. And, Title II has not worked very well, and having 
heard Director Daniels' comments this morning, I was very 
pleased by his comments. I also have to say that I am not 
surprised, because Mitch and I worked together in Mayor Lugar's 
office in 1970 or 1968 when we were in college. I have known 
him a long time and was not surprised by his comments.
    Just quickly on Title I, I think the predictions when this 
bill was passed that this would end Western Civilization as we 
knew it, that it would tie up legislation, that it would impede 
legislation expeditiously moving through Congress has not 
occurred. I think it has been used sparingly, and someone said 
this morning that I believe there have been 11 occurrences 
where the point of order has been utilized in the House. It has 
never been utilized in the Senate. But I think that the point 
of order has served as a deterrent to legislators. Once they 
receive that intergovernmental cost estimate, they then work 
with State and local officials to try to reduce the effect of 
the legislation which they are proposing.
    I think Mr. Crippen made the comment and also Director 
Daniels, that as long as you have the essential information, 
you are going to make a much better decision. That has been my 
experience at the State level. I think that has been the 
experience under UMRA, that when you have this important 
information, you then will make a better decision, and I think 
that compels the Members to look at those intergovernmental 
cost estimates.
    One suggestion we would have in this area would be timely 
access, and I just give you the example last month on H.R. 1, 
the Elementary and Secondary Education Act, there was less than 
24 hours for local and State governments to come up and help 
with that cost estimate. So we think that this is a very good 
program and have been very, very much in favor of it.
    Under Title II, we do have a new administration. We have 
had three primary concerns. The enforcement has really been 
nonexistent over the first 5 years. Agency consultation, many 
times they send us notice of regulatory changes, and they 
consider that to be equal to consultation. And, as I said, if 
OMB would act--or excuse me, if Director Daniels' agency would 
act as sort of the gatekeeper in the White House on this 
regulation, as he has indicated this morning, we think that has 
gone a long way to solving some of the problems which we have 
had.
    The agencies sometimes--for example, on TANF's last 
implementation of regulations under TANF, we had a great deal 
of participation and consultation with State and local 
governments. Other times we get almost absolutely no 
consultation. So we think with the support or the efforts very 
much of Congress, what they have done, this Intergovernmental 
Working Group on federalism which the President has announced 
is something we are very encouraged by, and I would just like 
to thank you for this opportunity to share our experiences at 
the State level with you this morning. Thank you.
    [The prepared statement of Mr. Mannweiler follows:]

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    Mr. Ose. Thank you. Is it Representative Mannweiler? Is 
that how you are addressed?
    Mr. Mannweiler. Correct.
    Mr. Ose. Dr. Scheppach for 5 minutes.
    Mr. Scheppach. Thank you, Mr. Chairman. I am grateful for 
the opportunity to appear before you on behalf of the Nation's 
Governors on the 5-year review of the Unfunded Mandates Reform 
Act. Essentially we are very pleased, particularly with what 
has happened around Title I. Much credit is due, not only to 
the two committees, but also to the superb work of CBO. The 
very threat of a CBO report has engendered committees to reach 
out to us before the fact instead of after. It has essentially 
changed the nature of the intergovernmental discussions in a 
very positive way.
    However, we must also admit that the scope of UMRA is 
relatively restricted. Let me give you three examples of 
legislation that would have had a major impact on State and 
local governments but are exempted from the definition. The 
first is in the Senate tax bill that was recently passed, there 
is a provision that takes the State estate tax credit and 
accelerates it and phases it out, much more quickly than the 
Federal estate tax. This cost States $75 billion over 10 years.
    Provisions like this swamp the impacts on the expenditure 
side of mandates if it were ever to end up in the final bill. 
It was exempt from any kind of CBO estimate.
    Second, Medicaid, which is our Nation's primary health and 
long-term care program for the elderly and low-income 
individuals, currently serves 40 million people at a cost to 
both the State and Federal Government of over $200 billion. 
Yet, Medicaid is exempt from UMRA. The problem is, is that 
about 50 to 60 percent of the benefits are considered optional 
benefits. Technically that is true, and so, if you have an 
unfunded mandate, the view of CBO, and I think it is consistent 
with the legislation, says that you can go back and adjust some 
of those voluntary or optional benefits.
    That may be true technically, but politically it is very 
hard to go back, for example, in Medicaid, and cut the 
pharmaceutical benefit of a particular program. So in reality, 
those are not really optional benefits. They are mandatory.
    I would argue if you look over time in dollar impacts, most 
of mandates of the last 15 to 20 years have, in fact, been in 
Medicaid.
    The third example was one that was mentioned previously, 
and that is the whole question of HIPPA. There, again, I think 
the intent of the legislation was very positive, which was to 
develop forms that were consistent in the health care area. 
However, we now feel that it is probably the largest unfunded 
mandate out there, and yet because it is a modification, again, 
to Medicaid and to some extent, SCHIP, it also is exempt from 
the legislation.
    So in these three areas that have been exempted, they all 
have huge impacts. So, again, if you look at Title I, we would 
argue that the intent of the law has worked very, very 
effectively, but we have to remember that it is a relatively 
narrow definition.
    Potential modifications to Title I: From a federalism 
standpoint, the world has shifted considerably over the last 5 
years. Essentially the nature of mandates has changed, and 
preemption of State regulatory authority has now superseded 
mandates as a major problem.
    Specific changes are as follows that you may want to 
consider: First, recent legislative proposals such as the 
Internet tax moratorium and the Senate proposed accelerated 
repeal of State credit on a State tax indicate that the Federal 
Government will increasingly intrude or restrict State tax 
sources. For well over 200 years, Congress has respected the 
sovereign right of States to enact their own revenue systems. 
Recent tax initiatives in Congress are changing this critical 
precedent.
    Second, Medicaid-related programs are becoming an 
increasing proportion of both State and Federal funding. To 
continue to exempt this program substantially reduces the 
effectiveness of UMRA.
    Third, the Federal Government is increasingly preempting 
State and regulatory authority when no costs are involved. From 
health care to banking to telecommunications, State regulatory 
power is being widely preempted in the name of interstate 
commerce. This is a scary trend for our federalism form of 
government. So I think, if you are going to look at this 
legislation in terms of Title 1, those are three broad areas 
that you may want to consider for modification.
    I pretty much agree with other comments about Title II. 
This section of the law has been ineffective at best and a 
failure at worst. There has been relatively no consultation 
with State and local governments with respect to agency rules 
and regulations. However, we are hopeful. President Bush has 
created a task force on federalism. We will be working with him 
closely. He has indicated that he will be having a new 
Executive order released prior to August 26th.
    So our hope is to work with the President in terms of some 
overall guidelines that we might provide to the administration, 
I think there is three areas. First, enforcement is the key. 
Executive orders by the last three administrations have never 
been enforced. They sounded good on paper, but agencies rarely 
complied with the directives.
    Second, there needs to be several staff members within 
either the Office of Management and Budget or the White House 
who will meet on a regular basis with State and local 
governments and enforce any Executive order. The CBO model has 
worked quite effectively, but I think the key is that there is 
a small staff whose responsibility is to coordinate and make 
sure the reports are submitted.
    Third, the activity must be highly focused or targeted. For 
example, we are most interested in the top 20 to 40 legislative 
initiatives. The seven State and local groups will be willing 
to sit down with the new administration and agree on which ones 
where consultation is necessary. We do not want to impede their 
work. We really want to have it highly focused on those areas, 
with significant costs to State and local governments.
    Thank you, Mr. Chairman. I would be happy to answer any 
questions.
    Mr. Ose. Thank you, Dr. Scheppach.
    [The prepared statement of Mr. Scheppach follows:]

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    Mr. Ose. Mr. Linder.
    Mr. Linder. Mr. Mannweiler, you talked about the lack of 
any formal consultation, and then there was recently formed, 
you said an intergovernmental working group on federalism. 
Would you recommend a formalized consultation group, and who 
would do it? How would you arrange that?
    Mr. Mannweiler. Well, our recommendation under Title II 
with administrative regulations has been that the Office of 
Management and Budget act as a gatekeeper, and I think with the 
comments which Director Daniels made this morning, I think that 
would be sufficient enforcement. Obviously that did not occur 
over the past 4 or 5 years, and so if you wanted something in 
States, that may be necessary to have that consultation maybe 
continue.
    Mr. Linder. Isn't it a fact that within the last 5 years, 
Title II was just ignored.
    Mr. Mannweiler. Excuse me?
    Mr. Linder. Isn't it a fact that in the last 5 years Title 
II was just ignored?
    Mr. Mannweiler. Sometimes it has been. It is been a very 
checkered record. As I mentioned, we had a very good record on 
reauthorization of some TANF regulations in which they issued 
the regulations. The State and local government disagreed 
vehemently. They consulted with us and eventually it was 
changed, but on the whole, it has not been very effective.
    Mr. Linder. Dr. Scheppach, give me an example of the 
preemption of State regulatory authority that you are referring 
to.
    Mr. Scheppach. Oh, well, in the whole telecommunications 
area, there has been preemption. We did a report, which I can 
make available to you, that really traces the preemption. We 
did it last year, and it is pretty comprehensive. I would be 
glad to make it available to you.
    Mr. Linder. Please do. You referred to the Congress passing 
a bill----
    Mr. Otter [presiding]. My apologies. Mr. Linder, did you 
want that put in the record?
    Mr. Linder. Good idea. Put it in the record.
    [The information referred to follows:]

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    Mr. Otter. Would you provide that to the committee?
    Mr. Scheppach. I would be happy to.
    Mr. Otter. Thank you.
    Mr. Linder. You made a reference to Congress passing a bill 
prohibiting Internet taxation, but all we passed, as I recall, 
was a bill prohibiting Internet taxation on a per--access to 
the Internet. For example, today, you can still provide--you 
can still impose sales taxes on Internet sales per county, per 
State, just as you can catalog sales. Isn't that correct?
    Mr. Scheppach. No, we can't, because the Supreme Court 
basically said that we could not force out-of-state sellers to, 
in fact, collect the tax. So even though residents have a State 
obligation, you cannot compell sellers----
    Mr. Linder. To pay the tax.
    Mr. Scheppach. You cannot enforce it. So you can't do it on 
mail order or Internet. You are right.
    Mr. Linder. It is just on access, though, to the Internet.
    Mr. Scheppach. That's right. The law that you passed a few 
years ago was just on access. The States actually had about $50 
million taxes on that, which were grandfathered in the 
legislation, but the legislation that was passed by the House 
last year--that was not accepted by the Senate--attempted to 
get rid of the grandfathering. So that is an issue. Plus, the 
problem on the Internet access now is that this is a very big 
issue, because it is not just access. Under the current 
definition, most content that is sold over the Internet would 
in fact be exempt. We have got telephone calls going over the 
Internet now. So it is not a very simple issue, because you 
can't really define access.
    Mr. Linder. Thank you both very much.
    Mr. Otter. I guess the chairman is not back yet, so I guess 
I will go ahead and proceed.
    Mr. Mannweiler, Mr. Speaker, did your State ever bring suit 
against the Federal Government either through Title I or Title 
II to enforce the unfunded mandates?
    Mr. Mannweiler. No. I don't believe that any State, to the 
best of my knowledge, has brought suit under Title I or Title 
II.
    Mr. Otter. Mr. Scheppach, has any State in your 
organization brought----
    Mr. Scheppach. Not to my knowledge. I think the only place 
you can do it is on the procedure of judicial review, which is 
very limited.
    Mr. Otter. It probably would have been ineffective then.
    Mr. Scheppach. That's right. Again, you would be doing it 
after the fact.
    Mr. Otter. See. That is the problem that I have. Being a 
country of laws, rather than individuals, and when the chief 
executive and his department heads ignore a law, absent a clear 
definition of a law in place that says this is the punishment 
for it, what do you do? So, I am perplexed here a little bit, 
because there seems to be--or at least with the last panel, 
there was some reluctance to suggest that perhaps we ought to 
put some teeth in the law for disobeying the law. And would the 
Governors' Association have an opinion on that, Mr. Scheppach?
    Mr. Scheppach. I don't think we have a policy, but that was 
considered the last time, this whole issue of judicial or court 
enforcement. Most administrations of course have opposed it 
because they are afraid it will tie up their decisionmaking 
process, but it is something that we discussed with previous 
administrations.
    Mr. Otter. Mr. Mannweiler, what about State legislatures?
    Mr. Mannweiler. Well, I do not believe we have a policy 
currently on that, but certainly that would be a good way to 
enforce Title II. I mean, we have--as we have said, we have 
seen very good compliance from Title I, particularly because of 
Congressional Budget Office consultation with the national 
organizations such as ours. If there was something to--even if 
you statutorily require consultation, how meaningful is that 
going to be if the spirit is not there to try to resolve some 
differences?
    Mr. Otter. I know what confuses me--or continues to confuse 
me about the entire process is that we have found ways to make 
those in the private sector be responsible for those areas that 
we think, whether it is the environment or whether it is how 
they handled employees or how they treat labor unions and that 
sort of thing. And with great dispatch and tremendous 
enthusiasm, we have been able to go forward and create all 
manner of rule and regulation that has every board room in the 
United States shaking in their boots. Yet we find it impossible 
to make those who we would send out with the integrity of this 
government to be deserving of that integrity.
    That is the thing that I keep driving at. One of the 
reasons is because--I am extremely proud that it was now 
Governor Kempthorne, then Senator Kempthorne that brought the 
whole idea of unfunded mandates to the Congress, and he worked 
at it very hard and was finally successful and it was signed by 
the previous administration as the first Senate bill passed 
that year. He arrived at those conclusions and the necessity 
for that kind of limitation, having served as the mayor of the 
largest--the capital city of Idaho and seeing all the unfunded 
mandates that came at his level of government, and then later 
on, of course, at the State level of government. Now he is 
suffering under the unfunded mandates as Governor of the entire 
State instead of just a single city.
    So I think it is--in some small and modest way, that there 
is something that the Congressman from the First Congressional 
District of Idaho can do to put some teeth into this thing and 
make it workable. I don't think Congress, in all of its wisdom, 
would dare throw out a piece of legislation like this without 
our ability to enforce it. Yet, we have done just that, with a 
false promise, a false floor here to the taxpayers and to the 
local units--those governments we seek as being subservient to 
us as being protected in some way. We need some protection. I 
would appreciate it very much, Mr. Speaker, if the Council of 
State Governments would go to work and put together some 
boilerplate legislation that we could then introduce and 
provide for somebody being held responsible. And generally it 
has got to be the enforcers, so with that, I would now 
recognize Mr. Portman.
    Mr. Portman.
    Mr. Portman. Thank you, Mr. Chairman, for allowing me to 
sit at the dais.
    Mr. Otter. Mr. Portman, Mr. Linder and I have just finished 
our 5 minutes with these witnesses. Mr. Mannweiler represents 
sort of the local units of government, the legislative process, 
and Mr. Scheppach represents the National Governors 
Association, or pretty close to that.
    Mr. Scheppach. Pretty close to that.
    Mr. Otter. Not having been a Governor yet, I am not sure 
what I would have belonged to.
    So Mr. Portman.
    Mr. Portman. Again, thank you, Mr. Chairman, for allowing 
me to be here today. I have had the pleasure of working with 
our panelists, particularly Mr. Scheppach, over the years on 
this issue, and also worked, Mr. Chairman, with your colleague, 
former Senator, now Governor of Idaho on this issue, who was 
the House sponsor of the Unfunded Mandates Reform Act. I was 
the House sponsor, and I think this is a wonderful opportunity 
for us to look back and see what has worked and what hasn't 
with regard to legislation on this, also to have an opportunity 
to talk about Title II and what has worked and not worked in 
the administration, and I think we will have a chance here to 
redouble our efforts to be sure that the cost-benefit analyses 
and the other element of the legislation can be fully 
implemented.
    But, I am very pleased with the fact that when you look 
back over the 5 years or 10 years or 15 years prior to 
enactment and then look over the past 5 years, that you see a 
distinctly different approach to legislating here on the Hill. 
It is not just the fact that we have had fewer mandates come to 
the floor and that we have been able to have fewer mandates, 
therefore, enacted into laws. But more importantly, Mr. 
Chairman, is the fact that every committee now is going through 
this process, providing information to members, and as CBO has 
testified, they get lots of calls from staffers from 
committees, important committees of this Congress, saying how 
can we rewrite this legislation to avoid imposing an unfunded 
Federal mandate as defined under UMRA? And that to me is 
important, as any aspect of this legislation, that it is acting 
to prevent committees from enacting additional unfunded 
mandates through the legislative process.
    So, again, I appreciate your allowing me to be here today. 
I have no further questions for the witnesses, but I really 
want to tell you that this is legislation that I think will--
won't go as far, Mr. Chairman, as perhaps many would like in 
terms of stopping every unfunded mandate, is a good example of 
what we can do up here that really does make a difference in 
our State and local governments. Thank you.
    Mr. Otter. Thank you very much, Mr. Portman, for those 
comments. I, as a State official then and operating for 2 years 
as Governor Kempthorne's lieutenant Governor, I appreciate your 
efforts on behalf of the House. But I also probably would put 
us all on notice in this committee, as Members of Congress, 
that perhaps we should look to more points of order on the 
floor, and the opportunity to bring them up so as to sort of 
offer notice to anybody else that would bring unfunded mandates 
to the floor of the House, that that could happen on a regular, 
and probably more-often basis.
    If there is no further questions of the second panel, Mr. 
Mannweiler, Mr. Scheppach, I thank you very much for being here 
today, and we look forward to receiving the information that we 
requested. Thank you.
    Mr. Mannweiler. Thank you.
    Mr. Scheppach. Thank you, Mr. Chairman.
    Mr. Otter. Our third panel today is going to be Mr. Scott 
Holman, Senior, who is the chief executive officer for Bay 
Cast, Inc., from Michigan, and chairman of the Regulatory 
Affairs Committee of the U.S. Chamber of Commerce.
    With him will be Mr. William L. Kovacs, vice president, 
Environmental and Regulatory Affairs of the U.S. Chamber of 
Commerce.
    Gentlemen, could we get somebody to change the name cards?
    We will momentarily be changing that name card, Mr. Holman, 
so we know who you are. We thank you both very much for being 
here today. Mr. Holman, you have the floor.

STATEMENTS OF STEVE HOLMAN, SR., PRESIDENT AND CHIEF EXECUTIVE 
     OFFICER, BAY CAST, INC., CHAIRMAN, REGULATORY AFFAIRS 
  COMMITTEE, U.S. CHAMBER OF COMMERCE; AND WILLIAM L. KOVACS, 
 VICE PRESIDENT, ENVIRONMENT, TECHNOLOGY & REGULATORY AFFAIRS, 
                    U.S. CHAMBER OF COMMERCE

    Mr. Holman. Thank you very much, Mr. Chairman, and members 
of the two committees, my name is Scott Holman, and I am owner 
and president and chief executive officer of Bay Cast, Inc. of 
Bay City, MI. My company is a manufacturer of large custom 
steel castings for the automotive tooling, machining, steel 
mill and construction industries. I am also regional vice chair 
of the U.S. Chamber of Commerce and chair of the Chamber's 
Regulatory Affairs Policy Committee. My testimony will focus on 
the private-sector mandate requirements of UMRA.
    UMRA is successful at the congressional level. Rather than 
restating much of what is in my written testimony, let me go 
directly to the U.S. Chamber's suggestions for changes to UMRA. 
Title I of UMRA has been generally successful. However, the 
U.S. Chamber has one recommendation for amending Title I, 
specifically in the 106th Congress by a large margin, the House 
passed the Mandates Information Act sponsored by Representative 
Gary Condit. This legislation would treat private-sector 
mandates the same as intergovernmental mandates. The U.S. 
Chamber supported this bill last year and would once again 
strongly support similar legislation this session.
    Agencies are not held to the same high standards that the 
Congress has set for itself. Under Title II, agencies must 
prepare an UMRA statement for all rules that would impose 
Federal mandates exceeding 100 million to State, local and 
trilateral governments or to the private sector. Moreover, 
section 205 requires that agencies consider several 
alternatives when proposing regulations and select the least 
costly, the most cost-effective or the least burdensome 
alternative.
    Congress clearly intended that regulatory agencies 
comprehensively identify and quantify regulatory mandates in a 
manner similar to CBO analysis of potential legislative 
mandates. In certain instances, however, agency actions have 
prevented the policy of Congress from being achieved, unlike 
Title I, which requires independent CBO statement describing 
potential legislative mandates. Title II does not require an 
independent review of potential regulatory mandates.
    Due to lack of independent review, an agency may 
deliberately underestimate the cost of a proposed rule or 
conclude that UMRA does not apply because of other statutory 
provisions. In these instances, the agency controls both the 
information and the debate and its determination is virtually 
unreviewable. Federal regulatory agencies should not be allowed 
to avoid congressional mandates by mischaracterizing the cost 
of a rulemaking. New provisions should be enacted to address 
this deficiency. To this end, the U.S. Chamber provides the 
following two recommendations for revising Title II of UMRA.
    First, Title II should be amended to establish independent 
analysis of UMRA statements conducted by agencies when 
considering mandates and independent bodies, such as the Office 
of Management and Budget or GAO, should be charged with 
reviewing the agency's mandate analysis.
    The second recommendation is to permit early judicial 
challenges to an agency's failure to prepare UMRA statements 
that accurately estimate costs and benefits. In my written 
testimony, I provide two examples of agency abuse of the UMRA 
process. The first example involves the TMDL water quality 
rule, in which EPA estimated the cost about $23 million a year 
and the cost asserted by the State environmental profession was 
$1.2 billion annually, $1.2 billion, with a B, annually.
    My second example involves EPA's national ambient air 
quality standards. Estimates of annual compliance costs range 
from $45 billion to $150 billion, despite the significant 
mandates, EPA claimed, because the Clean Air Act prohibits EPA 
when setting the NOx from considering the types of estimates 
and assessments described in Section 202. UMRA does not require 
EPA to prepare a written statement under 202. However, nothing 
in the Clean Air Act, UMRA or the Supreme Court decision 
prohibits EPA from fully describing the costs and benefits of 
its regulations for the public debate in this issue. Therefore, 
a multibillion dollar regulation went into effect without 
significant information about the costs, the benefits or the 
alternatives to the proposal.
    Requiring better information through UMRA will have a 
tremendous impact on how agencies develop regulations. For 
example, UMRA section 205 requires that agencies consider many 
alternatives when proposing regulations. From these 
alternatives, section 205 also requires agencies to select the 
least costly, most cost-effective or least burdensome 
alternatives that achieve the objectives of the rule or explain 
why more burdensome options are necessary.
    However, 205 is not operative unless an UMRA analysis, as 
specified in section 202, is required. Therefore, when the 
agencies circumvent section 205 by concluding an UMRA analysis 
is not required or by grossly underestimating the cost of UMRA, 
the agency thwarts the intent of Congress. It is for these 
reasons that the Chamber recognizes that, No. 1, the Mandates 
Information Act be enacted to prevent so that private-sector 
mandates are treated the same as intergovernmental mandates.
    No. 2, that OMB or GAO be authorized to undertake a role in 
Title II of UMRA similar to the CBO rule in Title I of UMRA 
and, No. 3, that agency abuse of UMRA requirements be subject 
to early judicial review.
    Finally, Members of Congress, especially the members of 
these committees, deserve great credit for their leadership and 
generally bipartisan support for several other measures to 
improve the regulatory process. These measures include the 
Truth in Regulating Act, the Congressional Review Act, the 
measures on data access and data quality, and these measures 
require rulemaking to contain a minimum standard of integrity. 
But, the foundation to all of these efforts would be a strong 
UMRA, one that treats mandates in the private sector with the 
same attention and analysis as mandates in the public sector 
are.
    I thank you for letting me testify. I am certainly happy to 
answer any questions, bearing in mind that my expertise is in 
running a foundry and complying with regulations and I may 
defer to Bill on some of the details of which he deals with on 
a daily basis and in the language that he deals with on a daily 
basis.
    Mr. Otter. Thank you very much, Mr. Holman.
    [The prepared statement of Mr. Holman follows:]

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    Mr. Otter. Mr. Kovacs.
    Mr. Kovacs. Thank you, Mr. Chairman and members of the two 
subcommittees. My name is Bill Kovacs, and I am the vice 
president for Environment, Technology and Regulatory Affairs at 
the U.S. Chamber. In that role, I am the primary officer for 
developing Chamber policy in the areas of environment, energy, 
natural resources, agriculture, food safety, regulatory affairs 
and technology. So I see a lot of rulemaking.
    I would like to say I fully concur with both our--the very 
extensive written statement that we have filed--filed by Scott, 
as well as this oral testimony. And I have very little to add. 
However, I would like to say just a few things, just a few 
points, and then I would be willing to take questions along 
with Scott. One is, there were a few statements that were made 
by Director Daniels that, you know, he made fleeting that were 
very, very important. One is the data must have integrity and 
quality.
    We now have the Data Quality Act that was put into the last 
appropriations bill, and that does require integrity in all the 
data that are used and disseminated by the government. That is 
the first time in the history that we have ever had anything 
that requires data quality. And, that includes statistical and 
economic information.
    The second is, he made a point of saying a lot of these 
costs are known very early on in the regulatory process. You 
know, the second the rule comes out, we know what it is going 
to cost. We have committees. We have a very good handle on the 
rule and the agencies do, too, and that information is 
communicated to the agency. So when the agency decides that it 
is not going to present the economic data in a way in which 
might be--might have integrity, they know what they are doing.
    And, third--and we have it as part of our--of our written 
statement, the TMDL example is the case--the case law for this 
issue, because there you can go right from the preliminary rule 
that was filed. You can go into the thousands of pages of 
comments that were filed on the economics of the issue, both by 
the private sector and by the States. You then go into the GAO 
report, the comments by EPA to the GAO report. And, then the 
comments by GAO to the EPA report and then to a final rule, and 
nothing changed in between from the preliminary UMRA assessment 
to the final UMRA assessment, nothing changed. That is the 
textbook example of what it is.
    Mr. Otter, Congress did do something. They at least put in 
a rider on the VA, HUD and military construction 
appropriations, and they did cutoff EPA's ability to fund the 
project, and that may in the end be the ultimate. So thank you 
very much, and I will answer any questions.
    [The prepared statement of Mr. Kovacs follows:]

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    Mr. Otter [presiding]. Thank you very much, Mr. Kovacs, for 
your testimony, and I would ask Chairman Linder to begin his 
questioning.
    Mr. Linder. Mr. Kovacs, did you work through the Chamber 
with the Senate? Trying to get them to take the bill up on the 
calendar when we passed it last year?
    Mr. Kovacs. The truth in regulating?
    Mr. Linder. H.R. 350.
    Mr. Kovacs. Oh, yes.
    Mr. Linder. Did you work with the Senate?
    Mr. Kovacs. I didn't personally, no, but our lobbyists did, 
yes.
    Mr. Linder. And, their response was?
    Mr. Kovacs. We weren't having much luck. Thanks to the help 
of your counsel, at the end of the last session, we were able 
to negotiate getting the Truth in Regulating Act to the Senate. 
But, we had the same difficulties there that we had with UMRA.
    Mr. Linder. When you talk about the integrity of 
information and data quality and, Mr. Holman, you talk about 
agencies deliberately underestimating and their estimates were 
unreviewable. What my ears heard is that you think that we have 
some agencies that are deliberately lying to us. Care to 
comment?
    Mr. Holman. I think not to characterize the intent, but 
certainly at best, they have not taken the care to review all 
of the information available from the agencies, from the public 
sector and even pay attention to it. And proceeded----
    Mr. Linder. Excuse me for interrupting, but I think Mr. 
Kovacs said they had the opportunity to review all that in the 
TMDL rule and they ignored it.
    Mr. Holman. Then the answer to your question is maybe yes.
    Mr. Linder. Has anybody done a real estimate of the costs 
of the new clean air rules? Is there any private-sector cost of 
that?
    Mr. Kovacs. There are--you know, when you talk about 
economic studies, it depends what your assumptions are and I am 
not an economist. But the numbers seem to range from about $45 
billion, which is EPA's number, and they started out at about 
$5 billion and it worked its way up. The Reason Foundation 
estimates that it could go as high as $150 or $160 billion 
annually. These are annual costs.
    Mr. Linder. Per year. Just to make one final point that is 
entirely parochial, we have a--we cannot build any more 
highways because we are under a court order in Atlanta, and so 
we have millions of cars sitting at 15 miles an hour instead of 
going through town and that is probably worse for the 
environment than if they were to move through town. But, we 
have cleaner air than we had 10 years ago, and 10 years ago we 
had cleaner air than we had 20 years ago. But, it seems to me 
that the EPA has discovered a new piece of equipment that 
measures smaller particles, and that becomes a new standard. 
Has anybody taken issue with them on these issue--on that clear 
air rules?
    Mr. Holman. Well, we, too--we in my business as the foundry 
manager, have paid close attention to the particulate matter, 
and where you go from 0.10 to 0.02 particulate matter, you can 
hardly walk through the shop without having that enter the air. 
So that is a very serious problem for us, and I think we became 
involved at the U.S. Chamber with this because of the impact. 
It was--as I understand it--deferred for a while, but it is 
still standing out there waiting for us to deal with that down 
the road. So I still have a concern about that.
    Mr. Kovacs. Congressman, as you very well know, the U.S. 
Chamber was one of the plaintiffs in the litigation, and we 
took the case to the Supreme Court. We won at the U.S. Court of 
Appeals and lost at the U.S. Supreme Court. They reversed and 
indicated that there was no cost-benefit requirement in the 
Clean Air Act. As you know, we worked with you on the amendment 
at the end, which--and this is a perfect example of how you 
have to deal with an agency.
    Congressman Linder is very familiar, but when this case was 
at the Supreme Court and this was it literally a stay in the 
proceedings and the case had not been argued, EPA had decided 
very early on in the--when the case had just been accepted that 
they were going to actually, at that time, designate the 
nonattainment areas prior to a Supreme Court review, and 
Congressman Linder then got another amendment to the EPA's 
budget, which prohibited them from designating until the 
Supreme Court ruled. But the significance of that is, on 
highway funds, for example, the agency could cutoff the funds.
    But, it is far more than highway funds. When you are in 
nonattainment, you also have to live within certain emission 
budgets and tradeoffs, and a lot of times you are not able to 
expand your business if you are in a particular area. Or if you 
do, you are going to have to have a tradeoff with some other 
business. So it has tremendous economic consequences and we 
have been involved in that and we will be involved in the next 
rulemaking, which is going to have to go on very fairly soon.
    Mr. Linder. Thank you both very much.
    Mr. Otter. Mr. Portman.
    Mr. Portman. Thank you, Mr. Otter. I want to thank you, 
gentlemen, for being here today and for the Chamber's work over 
the years on this. Having been cosponsor of the Condit bill--
the Condit/Portman and having testified in the Senate on this 
bill in the efforts to try to move the Senate, I would agree 
with Mr. Linder's analysis, which is, we did not have the 
enthusiasm over there that we had hoped for, and despite some 
hearings, we were never able to move it to the floor. I don't 
know that, with the changes over the last several hours in the 
Senate, we are going to have any more luck. So keep the 
pressure on.
    I am more optimistic and pleased that the administration is 
interested in actually implementing Title II in a way many of 
us hoped it would have been implemented over the last 5 years. 
And sorry, Mr. Chairman, I couldn't be here this morning for 
Mr. Daniels' testimony, but I understand that he made a 
commitment, not only to ensure that Title II is enforced and 
that 205 is followed, but that he would actually require that 
there be a statement even in cases where the threshold might 
not be deemed to be met by the agencies and that he was going 
to insist that the agencies err on the side of more rather than 
less information, which I think is a huge step forward. And I 
just wonder, given your recommendation today of independent 
analysis by OMB or GAO or some other body.
    Then your second point about judicial review, your 
recommendation in those regards, do you think it is necessary 
for us to pursue legislation in those two areas at this point, 
or would you like to wait and see how the new administration, 
in fact, is going to implement Title II to see whether that, 
particularly with regard to your first recommendation, might be 
sufficient?
    Mr. Holman. Do you want me to take that? Personally, I was 
delighted to hear that, and I think that in the short run, that 
is, you know, very, very encouraging. I am anxious to see that 
put into place. It falls in the category of Executive order. 
These things can change. If we were able to put into 
legislation a fair and honest and informed debate, that is in 
there for the long haul, and--but we certainly are delighted to 
hear that the administration is moving in this direction.
    Mr. Portman. Mr. Kovacs.
    Mr. Kovacs. Well, I would certainly concur with Scott's 
comments.
    Mr. Portman. Well, I appreciate that, and I think in the 
past we have always worked with OMB and that was sometimes a 
challenge and this OMB is going to be more interested in 
pursuing this issue with vigor and may even push us a little 
bit as a Congress, which I like. I think, Mr. Chairman, this is 
an issue that the subcommittee might want to take up, and 
having CBO have that independent analysis of our committee 
statements of impact on the public sector side and private-
sector side has been very helpful, and I want to commend CBO 
for the work they've done. They had to staff up. As you can 
imagine, there is a lot of gnashing teeth and nervousness about 
whether CBO would be able to do this. In fact, on the floor we 
had a big debate about whether it was even possible for CBO to 
do it. They indicated they thought they could with some more 
resources. They had done a stellar job in the Rules Committee.
    Mr. Linder has been a champion of this rule and despite the 
fact that the Rules Committee also had many concerns about how 
this would tie up the legislative process and turned out Mr. 
Linder was right. This would work and could work, and I just 
think it might be appropriate to go back now and see whether an 
independent third party could also review any agency actions. 
Judicial review is a very tough issue on the floor. We got into 
some judicial review as you know. It is more of the process 
than merits and that is something that I would certainly be 
vested in taking a look at, trying to expand that judicial 
review to the actual merits of the analysis. But, again, having 
an administration to work would you say is going to make a 
tremendous difference there as well and we look forward to 
their input also.
    Thank you, Mr. Chairman.
    Mr. Otter. Thank you, Mr. Portman, for those final 
comments, and I certainly would agree, and I appreciate both of 
you gentlemen for the work that you have done prior to my 
arrival here, but you can expect an enthusiastic champion at 
your side from now on, another one from Idaho, I might say.
    Gentlemen, you were here during the two previous panels, 
and I am concerned and still befuddled by the fact that we 
should be a Nation of laws, and so even though we might enjoy a 
certain familiarity and a camaraderie and philosophical 
attunement with the President and Chief Executive, I would be 
reticent to--as the Founding Fathers told us not to be, to 
depend on that.
    We can't always expect our champion as--of the Chief 
Executive order to be in the executive mansion, and so I am 
more of an enthusiast of being a government of laws as we were 
intended and not a government of Executive orders. I think we 
can see in the previous administration how that cannot always 
serve, although perhaps their best intents, not the Nation as a 
whole, to the benefit of the Nation as a whole. So I would be 
more interested in the Chamber with your assets, with your 
talents and abilities. And the fact that you have had to suffer 
under a lot of these things, it seems to me that there is no 
better disciple for reform than one that has had to suffer 
under and labor under those kinds of rules and regulations.
    So, I am in hopes that both of you gentlemen will go back 
to your organization and the other organizations that you 
belong to and make no mistake about it. Butch Otter from Idaho 
and the First Congressional District wants clean air, wants 
clean water just like everybody else, but when no assessment 
has been made on what the cost was going to be for arsenic. 
When there was no assessment made of that, to go from 50 parts 
per billion to 10 and a comment was made, well, all we want is 
clean water by one of my colleagues, my freshman colleague. And 
I believe that as well.
    All I am asking is that they understand what that does to 
us in Idaho. I don't want to affect the clean water that is 
being turned on by that tap. In fact, I want that for my 
children and my grandchildren. But, when they voted for that 
bill, they affected 87,000 miles of streams and stream bank in 
my district. 119 water districts, the same amount of sewer 
districts, and they affected lives--the economic and social 
lives. And I say both economic and social, and perhaps 
spiritual, of 700,000 people in my district. How did they do 
that? Because we shut down 23 log mills, and because of that 
lots of lives were lost. Entire cities were closed down, and 
people will have to move away. That affected their social life 
and certainly their spiritual life.
    The horror stories go on and on, and I am concerned that 
unless we actually put something in the law, similar to Mr. 
Holman, if your machinery--if your pollution abatement 
equipment wasn't up and operating, you would shut down that 
entire plant, and until you were given a permit to open that 
plant back up by some government agent, you wouldn't get to do 
it.
    Quite frankly, I think we need that same kind of 
responsible deterrent for the government, and the reason for 
that, I believe, is because it is not Butch Otter who has to go 
and face the people of the State of Idaho every 2 years who 
enforce those laws. It is unelected bureaucrats who do not have 
to stand election, who do not have to go back and ask for their 
job every 2 years.
    I think we need something in the law, and I would certainly 
appreciate it. I appreciate your testimony here today. But, I 
would certainly appreciate it if we could get some kind of 
boilerplate legislation, maybe not this year and maybe not next 
year, but eventually we will see the wisdom of passing and 
restraining the government as much as we want to restrain the 
private property holder.
    So with that, unless you gentlemen have further comments, 
further questions, Mr. Portman, Mr. Linder? Then the committee 
stands adjourned, and I thank you very much for being here.
    [Whereupon, at 12:26 p.m., the subcommittees were 
adjourned.]
    [Additional information submitted for the hearing record 
follows:]

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