[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]




 
               UNFUNDED MANDATES AND REGULATORY OVERREACH

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

                                HEARING

                               before the

                SUBCOMMITTEE ON TECHNOLOGY, INFORMATION
                POLICY, INTERGOVERNMENTAL RELATIONS AND
                           PROCUREMENT REFORM

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 30, 2011

                               __________

                           Serial No. 112-20

                               __________

Printed for the use of the Committee on Oversight and Government Reform


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



                  U.S. GOVERNMENT PRINTING OFFICE
67-619                    WASHINGTON : 2011
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202ï¿½09512ï¿½091800, or 866ï¿½09512ï¿½091800 (toll-free). E-mail, [email protected].  

              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana                  ELIJAH E. CUMMINGS, Maryland, 
JOHN L. MICA, Florida                    Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania    EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio              CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York          GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona               MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho              DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania         BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee          PETER WELCH, Vermont
JOE WALSH, Illinois                  JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina           CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida              JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                     Robert Borden, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director

   Subcommittee on Technology, Information Policy, Intergovernmental 
                    Relations and Procurement Reform

                   JAMES LANKFORD, Oklahoma, Chairman
MIKE KELLY, Pennsylvania, Vice       GERALD E. CONNOLLY, Virginia, 
    Chairman                             Ranking Minority Member
JASON CHAFFETZ, Utah                 CHRISTOPHER S. MURPHY, Connecticut
TIM WALBERG, Michigan                STEPHEN F. LYNCH, Massachusetts
RAUL R. LABRADOR, Idaho              JACKIE SPEIER, California
PATRICK MEEHAN, Pennsylvania
BLAKE FARENTHOLD, Texas


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 30, 2011...................................     1
Statement of:
    Cutler, Joni, South Dakota State Senator; Raymond J. Keating, 
      chief economist, Small Business & Entrepreneurship Council; 
      and John C. Arensmeyer, founder & CEO, Small Business 
      Majority...................................................    10
        Arensmeyer, John C.......................................    31
        Cutler, Joni.............................................    10
        Keating, Raymond J.......................................    20
Letters, statements, etc., submitted for the record by:
    Arensmeyer, John C., founder & CEO, Small Business Majority, 
      prepared statement of......................................    33
    Cutler, Joni, South Dakota State Senator, prepared statement 
      of.........................................................    12
    Keating, Raymond J., chief economist, Small Business & 
      Entrepreneurship Council, prepared statement of............    22
    Lankford, Hon. James, a Representative in Congress from the 
      State of Oklahoma, prepared statement of...................     2


               UNFUNDED MANDATES AND REGULATORY OVERREACH

                              ----------                              


                       WEDNESDAY, MARCH 30, 2011

                  House of Representatives,
   Subcommittee on Technology, Information Policy, 
Intergovernmental Relations and Procurement Reform,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:13 p.m., in 
room 2154, Rayburn House Office Building, Hon. James Lankford 
(chairman of the subcommittee) presiding.
    Present: Representatives Lankford, Kelly, Chaffetz, 
Walberg, Labrador, Farenthold, and Connolly.
    Staff present: Ali Ahmad, deputy press secretary; Molly 
Boyl, parliamentarian; Sharon Casey, senior assistant clerk; 
Katelyn E. Christ, research analyst; Linda Good, chief clerk; 
Hudson T. Hollister, counsel; Ryan Little, manager of floor 
operations; Justin LoFranco, press assistant; Mark D. Marin, 
senior professional staff member; Kristina M. Moore, senior 
counsel; Kristin L. Nelson, professional staff member; Brian 
Quinn and Donald Sherman, minority counsels; and Cecilia 
Thomas, minority counsel/deputy clerk.
    Mr. Lankford. The committee will come to order.
    The opening statements for myself and our ranking member, 
Mr. Connolly, I am going to have submitted for the record in 
writing so we can go ahead and just move on as quickly as we 
can. I do have one letter that I am also asking for unanimous 
consent to be able to submit it for the record, a letter to 
Doug Elmendorf. With no other reason to deny that, I would 
assume that we can receive that by unanimous consent on that.
    [The prepared statement of Hon. James Lankford follows:]

    [GRAPHIC] [TIFF OMITTED] T7619.001
    
    [GRAPHIC] [TIFF OMITTED] T7619.002
    
    [GRAPHIC] [TIFF OMITTED] T7619.003
    
    [GRAPHIC] [TIFF OMITTED] T7619.004
    
    [GRAPHIC] [TIFF OMITTED] T7619.005
    
    [GRAPHIC] [TIFF OMITTED] T7619.006
    
    [GRAPHIC] [TIFF OMITTED] T7619.007
    
    Mr. Lankford. Basic ground rules of the hearing: each of 
you has been asked to submit a written statement for the 
record. We have also asked you to prepare an oral opening 
statement no longer than 5 minutes so we can allow time for 
questions and discussion after your statement.
    You will see on your desk a series of lights and a clock 
which will count down from 5 minutes. I know you all have been 
briefed on this already. After the entire panel has given their 
oral statements, we will have a few questions for you. We will 
do those questions in 4-minute increments and get a chance to 
clip through that as well. We will be strictly enforcing the 
time today. Obviously, we have a very tight schedule; it has 
been interrupted by votes. So we are grateful that you are here 
and that you have taken a significant amount of time to prepare 
your testimony.
    Do you have any questions about going through the oral 
portion of this?
    [No response.]
    Mr. Lankford. Thank you. I would like to now read the 
mission statement of our committee, and then we will swear you 
in.
    As the Oversight and Government Reform Committee, we exist 
to secure two fundamental principles: first, Americans have a 
right to know that the money Washington takes from them is well 
spent and, second, Americans deserve an efficient, effective 
government that works for them. Our duty on the Oversight and 
Government Reform Committee is to protect these rights. It is 
our solemn responsibility to hold government accountable to 
taxpayers because taxpayers do have the right to know what they 
get from their government. We will work tirelessly in 
partnership with citizen watchdogs to deliver the facts to the 
American people and bring genuine reform to the Federal 
bureaucracy. This is the mission of the Oversight and 
Government Reform Committee.
    We have three witnesses that we are receiving testimony 
from today. The Honorable Joni Cutler is a member of the South 
Dakota State Senate, representing the 14th District of South 
Dakota, serves on the Executive Committee of the National 
Conference of State Legislatures. Prior to her service in the 
State Senate, Senator Cutler served in the South Dakota State 
House of Representatives for 8 years. Thanks for being here.
    Mr. Raymond Keating is the chief economist at the Small 
Business & Entrepreneur Council and serves as an adjunct 
professor in the Business School at Downing College.
    And Mr. John Arensmeyer is the founder and CEO of the Small 
Business Majority. Prior to that he was the chief operating 
officer of a multimedia business and an attorney in New York.
    Thank you all for being here. It is our typical practice 
here that we swear in guests when they come, so if you would 
please rise and raise your right hands.
    [Witnesses sworn.]
    Mr. Lankford. Thank you very much. Let the record reflect 
that all witnesses answered in the affirmative.
    Please be seated.
    I would like to receive the testimony first from Joni 
Cutler. Please, you have 5 minutes. Thank you.

STATEMENTS OF JONI CUTLER, SOUTH DAKOTA STATE SENATOR; RAYMOND 
J. KEATING, CHIEF ECONOMIST, SMALL BUSINESS & ENTREPRENEURSHIP 
COUNCIL; AND JOHN C. ARENSMEYER, FOUNDER & CEO, SMALL BUSINESS 
                            MAJORITY

                    STATEMENT OF JONI CUTLER

    Ms. Cutler. Thank you, Mr. Chairman. Good afternoon, 
Chairman Lankford, Ranking Member Connolly, and distinguished 
members of the Subcommittee on Technology, Information Policy, 
Intergovernmental Relations and Procurement Reform. I am 
Senator Joni Cutler, a member of the South Dakota Senate. I am 
also a member of the Executive Committee of the National 
Conference of State Legislatures, on whose behalf I am 
testifying.
    NCSL is a bipartisan organization representing the 50 State 
legislatures and the legislatures of our Nation's commonwealth, 
territories, and District of Columbia. I am very appreciative 
of this opportunity to testify on the States' experience with 
unfunded and underfunded Federal mandates.
    This hearing is particularly timely for three reasons: 
First, legislative, regulatory and fiscal burdens the Federal 
Government imposes on State and local governments are often 
overlooked and frequently underappreciated; second, we have 
just celebrated the 16th anniversary of the enactment of the 
Unfunded Mandates Reform Act and have learned much about its 
effectiveness and drawbacks that I will share with you today; 
third, Congress and the administration are embarking on an 
effort to rein in annual deficits and manage the national debt, 
and that effort will unavoidably put on the table State-Federal 
partnerships, intergovernmental relationships, and basic issues 
regarding fiscal federalism.
    In 1995, NCSL and our fellow State and local organizations 
hailed bipartisan passage and enactment of UMRA. That law 
enhanced the visibility of potential unfunded Federal mandates 
and cost shifts, and in some instances changed the nature of 
the discussions leading to passage of Federal legislation. It 
has led to the development of an able division within the 
Congressional Budget Office that produces vital 
intergovernmental mandate analysis and an annual report on 
UMRA. UMRA's procedural hammer, or more so the threat of using 
this hammer, has seemingly acted to douse some efforts to 
impose unfunded mandates and shift costs to States and 
localities.
    A reading of any annual CBO report on UMRA shows how few 
mandated actions exceed the law's threshold. However, UMRA's 
limitations make it a candidate for improvement and 
strengthening, and legislation accomplishing such originating 
in this subcommittee would be very helpful. UMRA's limits will 
not serve the essential conversation needed to address reduced 
future Federal funding or discretionary mandatory programs. Its 
limits and loopholes, much the result of negotiations that took 
place 16 years ago, omit many mandates in the eyes of State 
legislators and other State and local elected officials. These 
omissions include new conditions of grants in aid, reduction of 
Federal funds without commensurate reduction in program or 
administrative requirements, sanctions for failure to comply 
with unfunded mandates, and creation of underfunded national 
expectations.
    Therefore, NCSL is urging a three-pronged approach to 
improve UMRA, broaden cooperation and discussion on State and 
Federal programs. First, NCSL's policy supports legislation 
that would correct UMRA's limitations. For example, H.R. 2255 
from the 111th Congress serves as an excellent example of 
bipartisan-sponsored legislation that would enjoy support from 
me and my fellow lawmakers if offered again in the 112th 
Congress.
    Such legislation needs to include open-ended entitlements 
in any mandatory or entitlement program with capped Federal 
funding participation in the definition of an unfunded mandate. 
It should also eliminate program exclusions in the underlying 
current statute and include new conditions imposed through 
older programs under the definition of a mandate. It must also 
include conditions of grants in aid. And among several points 
made in my written testimony, a revised UMRA law should require 
Federal reimbursement to State and local governments for costs 
imposed on them by any new Federal mandates for as long as the 
mandate exists.
    Second, the House and Senate budget resolutions for fiscal 
year 2012 should contain general instructions to appropriators 
and committees of jurisdiction to avoid creating or expanding 
existing unfunded or underfunded mandates. I urge this 
subcommittee's membership to prod your leadership and budget 
committee chairs to include this instruction in the fiscal year 
2012 and subsequent year budget resolutions.
    Third, finally, there are several pending reauthorizations 
before the 112th Congress. For the most part, committees other 
than Oversight and Government Reform have jurisdiction over 
them; however, any effort to reauthorize an existing program, 
such as No Child Left Behind, the Temporary Assistance for 
Needy Families Block Grant, and the SAFETEA-LU transportation 
program should be seen as an opportunity for this subcommittee 
to explore, repeal, or minimize the provisions that shift costs 
to States. They should also be seen as opportunities to provide 
program and administrative savings for all levels of government 
simultaneously, while maintaining essential public services.
    Mr. Chairman and Ranking Member Connolly, NCSL offers to 
work together with you to address what are hopefully mutual 
concerns regarding these authorizations. Mr. Chairman, thank 
you for inviting me and the National Conference of State 
Legislatures to testify before you today. I look forward to 
responding to questions subcommittee members may have.
    [The prepared statement of Ms. Cutler follows:]

    [GRAPHIC] [TIFF OMITTED] T7619.008
    
    [GRAPHIC] [TIFF OMITTED] T7619.009
    
    [GRAPHIC] [TIFF OMITTED] T7619.010
    
    [GRAPHIC] [TIFF OMITTED] T7619.011
    
    [GRAPHIC] [TIFF OMITTED] T7619.012
    
    [GRAPHIC] [TIFF OMITTED] T7619.013
    
    [GRAPHIC] [TIFF OMITTED] T7619.014
    
    [GRAPHIC] [TIFF OMITTED] T7619.015
    
    Mr. Lankford. Thank you very much.
    Mr. Keating.

                STATEMENT OF RAYMOND J. KEATING

    Mr. Keating. Chairman Lankford, Ranking Member Connolly, 
and members of the committee, the Small Business and 
Entrepreneurship Council is pleased to provide testimony today 
regarding the Unfunded Mandates Reform Act and how it relates 
to small business and the economy. My name is Raymond Keating. 
I am chief economist with SBE Council, a nonpartisan, nonprofit 
advocacy, research, and training organization dedicated to 
protecting small business and promoting entrepreneurship. SBE 
Council works with leaders at local, State, Federal, and 
international levels to improve the environment for 
entrepreneurship and enhance competitiveness.
    Unfortunately, government too often erects obstacles to 
improving the climate for entrepreneurship and to enhancing the 
competitiveness of U.S. business, including regulations and 
mandates that raise costs, diminish incentives and resources 
for risk-taking, reduce opportunities and/or create 
uncertainty.
    I am also an adjunct professor at the Business School at 
Dowling Collect in New York. In the MBA Program I frequently 
teach public sector economics, in which I emphasize the 
importance of understanding the incentives at work not just in 
the private sector, but in the public sector as well. And, in 
fact, powerful incentives exist within the governmental and 
political spheres when it comes to imposing mandates, given the 
ability to take governmental actions while others deal with the 
cost.
    It is also critical to understand that the costs of 
regulations and mandates fall much harder on small businesses. 
Small businesses often lack adequate resources both in terms of 
dollars and staff to deal with the additional costs that come 
with governmental mandates.
    For good measure, the taxes needed to fund 
intergovernmental mandates come from small businesses and their 
customers.
    Given the powerful incentives at work and often substantial 
costs, it is important to have some kind of institutional 
checks and balances in the system when it comes to unfunded 
mandates.
    UMRA, which SBE Council supported, is one of those 
counterbalancing measures. It has been beneficial by providing 
additional information about the direct costs of unfunded 
Federal mandates, injecting the issue of costs further into the 
debate, and discussion is a positive development from the small 
business perspective. However, problems do exist or, more 
accurately, shortcomings. I will name three very quickly.
    First, new regulations being proposed under the Dodd-Frank 
Wall Street Reform and Consumer Protection Act have the 
potential to restrict access to and raise the cost of capital 
and credit for small business owners; proposed Federal Reserve 
rules regarding interchange fees, for example, could make a 
currently challenging problem much worse for small businesses. 
Yet, the independent regulatory agencies that will be issuing 
these rules and are issuing these rules are exempt from UMRA.
    Second, the FCC voted in December to impose net neutrality 
regulations on Internet broadband providers. The FCC inserting 
itself into pricing and operational decisions would have 
consequences for investment and innovation in broadband, with 
small businesses likely experiencing negative consequences as 
consumers, content providers, and app entrepreneurs, for 
example. But the FCC is another independent agency not covered 
by UMRA.
    Third, the Patient Protection and Affordable Care Act 
included unfunded mandate burdens far exceeding the thresholds 
in UMRA. Those costs affect, either directly or indirectly, 
small businesses. Unfortunately, recognition that this massive 
health care measure did exceed the threshold levels of UMRA 
meant little in terms of legislative reality, which raises some 
question about UMRA's ultimate impact.
    I would like to just quickly note six problems and 
limitations that require some remedies. First, among the most 
glaring and troubling is that the law does not cover a large 
swath of Federal mandates, including rules issued by 
independent regulatory agencies. No. 2, shortcomings with 
UMRA's point of order provisions need to be remedied by having 
both informational and substantive points of order apply to 
legislative and agency mandates on both government and the 
private sector.
    Third, problems regarding costs must be remedied. Indirect 
costs impacting such areas as prices, risk-taking, economic 
growth and employment need to be considered. Fourth, when it 
comes to agency mandates, an independent entity such as the 
GAO, a separate entity within OMB, or an independent office 
should have responsibility for evaluating the cost of such 
mandates. Fifth, the judicial review included in UMRA lacks 
teeth, to say the least, and offers no real incentives to 
challenge agencies or for agencies to deal more legitimately 
with UMRA requirements.
    Sixth, UMRA needs to be built upon or amended to establish 
means for evaluating the effectiveness, the actual cost, and 
the emergence of unintended consequences of existing 
regulations and mandates. Requiring sunsetting and periodic 
evaluation of existing regulations and mandates makes sense 
given the realities of a dynamic economy. Along with this, a 
required congressional vote on all rules, mandates and 
regulations being proposed would enhance accountability.
    SBE Council appreciates the opportunity to provide input to 
the committee, and I look forward to your questions.
    [The prepared statement of Mr. Keating follows:]

    [GRAPHIC] [TIFF OMITTED] T7619.016
    
    [GRAPHIC] [TIFF OMITTED] T7619.017
    
    [GRAPHIC] [TIFF OMITTED] T7619.018
    
    [GRAPHIC] [TIFF OMITTED] T7619.019
    
    [GRAPHIC] [TIFF OMITTED] T7619.020
    
    [GRAPHIC] [TIFF OMITTED] T7619.021
    
    [GRAPHIC] [TIFF OMITTED] T7619.022
    
    [GRAPHIC] [TIFF OMITTED] T7619.023
    
    [GRAPHIC] [TIFF OMITTED] T7619.024
    
    Mr. Lankford. Thank you very much.
    I now recognize Mr. Arensmeyer. Thank you.

                STATEMENT OF JOHN C. ARENSMEYER

    Mr. Arensmeyer. Thank you, Mr. Chairman. Good afternoon, 
Chairman Lankford, Ranking Member Connolly, and members of the 
committee. Small Business Majority is a nonpartisan small 
business advocacy organization founded and run by small 
business owners. We represent the 28 million Americans who are 
self-employed or own businesses of up to 100 employees. Our 
organization uses scientific opinion and economic research to 
understand and represent the interests of all small businesses.
    I ran two small businesses for 15 years and have run a 
nonprofit organization for the past 5. Other members of our 
senior team have long careers as entrepreneurs. As such, we are 
well aware there are times when small businesses are 
overburdened by government regulation and that regulation often 
affects small businesses more than big businesses. This is why 
we support President Obama's initiative to review government 
regulation on business and we support the Small Business 
Administration's role in monitoring compliance of the 
Regulatory Flexibility Act. We share the view that any 
regulations that impact small businesses should be carefully 
scrutinized and we support the requirements already in the 
Unfunded Mandates Reform Act that require government to analyze 
and report on the impacts of new regulations.
    That said, there is a legitimate role for government in 
passing laws that address private sector business activity. 
Business owners are pragmatic, bottom line-oriented, and 
preventing or delaying all regulation that might in some way 
affect small business would be shortsighted and could actually 
remove an important tool that can stimulate small business 
innovation and contain costs. Indeed, our research has shown 
that small business supports government as a facilitator and an 
arbiter that sets rules of the road.
    The effects of legislation on the private sector should be 
carefully considered as each bill is being debated, not by a 
blanket one-size-fits-all approach. The first items on Small 
Business's list of concerns are the need for customers and 
finding ways to deal with burdensome expenses. In many cases 
government can help. I am going to focus on two successful 
examples of this, the Patient Protection and Affordable Care 
Act and the Clean Air Act.
    The No. 1 problem we hear from small businesses about is 
the cost of health care. Small businesses want to offer health 
coverage, but our scientific bipartisan survey show that 86 
percent of them cite cost as the biggest barrier. A major study 
that we conducted found that, without reform, small employers 
would pay $2.4 trillion over the next 10 years, costing us 
178,000 jobs and $52.1 billion in profits. This crisis 
compelled Congress to take action. The status quo was just 
simply unacceptable.
    The Affordable Care Act addresses all these issues and 
more. While reducing the Federal deficit by more than $200 
billion over the next 10 years and more than $1 trillion over 
10 years after that. Our research shows that 4 million small 
businesses, that is 84 percent of all businesses, are eligible 
for tax credits in the law and that 33 percent of them tell us 
in the scientific polling we have done that they are more 
likely to cover their employees because of the tax credits and 
the marketplaces that are being set up under the law starting 
in 2014.
    For example, Mark Hodash, owner of Downtown Home and 
Garden, in Ann Arbor, Michigan, qualified for a $15,000 tax 
credit this year. Knowing he had that credit gave him the 
confidence to add another person to his staff. His new 
employee, who was unemployed previously, now has a job and is 
contributing to the economy by paying taxes and buying goods.
    Government support to the clean energy sector of the 
economy is also providing much-needed aid to small business. 
Indeed, without a strong government role in setting goals and 
standards, we will never successfully compete in the 
interconnected 21st century global economy that is becoming 
more and more centered on innovative clean energy solutions.
    Over the last 40 years, the Environmental Protection Agency 
has proven itself as much a protector of the economy as of the 
public's health. Indeed, during the last two decades under the 
Clean Air, gross domestic product has increased 64 percent, 
while emissions of the most common air pollutants have declined 
by 41 percent. Between 2010 and 2015 alone, capital investments 
in pollution control and new generation will generate an 
estimated 1.46 million jobs. And the EPA's clean air standards 
for automobiles are projected to save owners $3,000 per 
vehicle, this amount rising to $7,400 for 2017 to 2022 model 
vehicles. This will have a substantial benefit for small 
business owners, especially for those businesses who rely on 
transportation.
    Our bipartisan polling shows that 61 percent of small 
businesses agree that moving the country to clean energy is a 
way to restart the economy and make their businesses more 
competitive. A majority supports an active role for government 
in this process. For example, the Clean Air Act and Regulating 
Greenhouse Gases helps Cody Metcalf, President of LED light 
distributor WinderLumen LED in Windermere, Florida. Cody says 
if someone is paying attention to greenhouse gases, then there 
is more demand for our product.
    As these examples show, a constructive partnership between 
business and government can provide economic opportunity and 
can help entrepreneurs cut some of the unnecessary and onerous 
costs of doing business. Wielding a legislative hammer, rather 
than employing a judicious and precise scalpel risks squashing 
a role for government that is often a boon to small business.
    Thank you.
    [The prepared statement of Mr. Arensmeyer follows:]

    [GRAPHIC] [TIFF OMITTED] T7619.025
    
    [GRAPHIC] [TIFF OMITTED] T7619.026
    
    [GRAPHIC] [TIFF OMITTED] T7619.027
    
    [GRAPHIC] [TIFF OMITTED] T7619.028
    
    [GRAPHIC] [TIFF OMITTED] T7619.029
    
    [GRAPHIC] [TIFF OMITTED] T7619.030
    
    [GRAPHIC] [TIFF OMITTED] T7619.031
    
    Mr. Lankford. Thank you very much.
    Based on our prior agreement that I had with the ranking 
member, I am going to recognize myself for 4 minutes, and we 
will do 4 minute questioning time on that.
    Senator Cutler, thank you for being here. Thank all of you 
for being here, in fact, and for your testimony, both written 
and oral. I would like to also add that if anyone else wants to 
be able to submit a statement, that they can certainly do that 
in writing and we will receive those for the next 7 days.
    Senator Cutler, you talk about statutory caps, for 
instance, and talk about when caps are added, you would like to 
have some basic statutory relief that would offset that; that 
it may be a situation where you are not looking for additional 
funds, but looking for additional offsets. Can you elaborate 
more on that, what you mean?
    Ms. Cutler. Well, I think, really, if I could make one 
point and have one takeaway point for you today, it would be 
that in all of this what we are really looking for is the 
difference between theory and effect, really, the idea that 
whatever is in the statute should clearly reflect the effect 
that it is going to have on the States, as we struggle so hard 
right now in these times to balance our budgets. So any time we 
have a cap, then we look toward what is it the States would 
have to do to remedy that cap, and we should be able to clearly 
identify through the process what it is that is going to take 
place at a State-by-State level; and that would be so very 
helpful to us in planning our budgets.
    Mr. Lankford. You also made a statement about changing the 
term direct cost or expenditure to a reasonably foreseeable 
direct cost or indirect cost. Can you elaborate a little bit 
more on that as well?
    Ms. Cutler. Thank you, Mr. Chairman. Those indirect costs 
really are described now under the definition as an indirect 
cost, but in reality they still have to come up and take their 
place in our budgets. So by including things that are presently 
exempted, by identifying the cost shifts that any piece of 
legislation may have on shifting the burden of costs to the 
States that they presently don't have, and then adding to the 
definition those changes that are made in the programs that 
presently exist, we will help the States go a long way in 
really planning for taking care and coming into compliance with 
the requirements of the Federal legislation that you pass.
    Mr. Lankford. OK, thank you.
    Mr. Keating, you made some very specific recommendations. 
In one of them you were talking about independent agencies that 
are exempted from UMRA. Any specific examples that you can 
note? I know you have a lot in your opening statement about 
dealing with independent agency. You mention SEC at one point, 
but other examples you can give us on that?
    Mr. Keating. Well, I mentioned the FCC in terms of what 
they are doing in terms of net neutrality regulation; I talked 
about the new consumer protection agency that is being 
developed. These are all going to have clear impacts on the 
small business community, what they are putting forward. Net 
neutrality regulation, it is not just the big broadband 
providers. When you look at all the costs, again, getting to 
all the costs in the equation, it is going to be felt 
throughout the economy and small business and entrepreneurs as 
well.
    Mr. Lankford. Do you see any reason why Congress, when they 
are making a decision about a particular piece of legislation, 
should not be informed even if it affects some independent 
agency, why the lack of information is somehow beneficial?
    Mr. Keating. No, I don't understand that. Quite frankly, I 
would say that there shouldn't be any exclusions here across 
the board because we are talking about information here, and, 
in my view, more information is better. The more information 
you have, the better decisions you can make. So no matter what 
we are talking about, whether it is independent regulatory 
agency or legislation, or all those other areas, quite frankly, 
that are excluded, I don't understand why they should be, why 
they are excluded. We should have more information so we can 
make better, intelligent decisions.
    Mr. Lankford. That would be my perception as well.
    Mr. Arensmeyer, you mentioned several things that became 
regulatory benefits to smaller business, but in your opening 
statement you made several statements about there are some 
burdensome things that government does to small businesses, but 
you didn't mention any in particular. Are there any particular 
areas that you look at and say this does become burdensome for 
us?
    Mr. Arensmeyer. Well, there is always the potential, any 
time you are passing legislation, and we certainly endorse that 
Congress needs to have all the information about potential 
burdens. I mean, obviously, one thing that comes to mind now is 
that the 1089 provision that is in the health care law, it 
should not have been there; it is a burden with not very much 
benefit coming the other way, and we certainly wish that would 
go away as quickly as possible.
    Mr. Lankford. OK. We are working on that.
    Now I would like to recognize the ranking member, Mr. 
Connolly, for 4 minutes of questioning.
    Mr. Connolly. Thank you, Mr. Chairman.
    Mr. Keating, when Congress passed the Clean Air Act 
amendments of 1990, a lot of small businesses and industries 
claimed that the cost of electricity would skyrocket, putting 
extreme financial pressure on individuals and small businesses' 
electric bills. In fact, did that materialize?
    Mr. Keating. I would have to take a look at exactly the 
provisions you are talking about and what the results of it 
were, so I can't----
    Mr. Connolly. Well, is it your impression that between 1990 
and now electric bills have skyrocketed, putting an undue 
financial burden on small businesses?
    Mr. Keating. I live in New York, so yes, I would have to 
answer yes to that. But I would have to take a look at 
specifically those provisions and see what the results were, 
because you have to obviously factor in a whole host of other 
measures that would come into play in terms of impacting the 
cost.
    Mr. Connolly. Mr. Arensmeyer, is that your impression?
    Mr. Arensmeyer. Our impression is that the opportunities 
that have been created by the environmental regulations of the 
EPA have spurred tremendous boon to new industries in this 
country, new industries that are likely to be able to more 
adequately compete around the world. And all the studies that 
have been done about increased costs have shown that they have 
been small or little, and they are completely offset by 
improvements in energy efficiency that are driven by the desire 
to move toward a more energy-efficient economy.
    Mr. Connolly. I mention it because we heard many of the 
same arguments 20 years ago on Clean Air Act amendments, in 
terms of their impact on small businesses, almost none of 
which, dire predictions, that is, came true. As a matter of 
fact, quite the opposite.
    You brought up health care and the assertion that health 
care imposes onerous regulations on small businesses, requiring 
them to offer health insurance. Do you know what percentage of 
small businesses fall under the 50 employee threshold?
    Mr. Arensmeyer. About 4 percent of businesses in this 
country have over 50 employees, and of those 4 percent, 96 
percent of those already offer insurance.
    Mr. Connolly. So let me get this straight, Mr. Arensmeyer. 
Therefore, 96 percent of all small businesses are exempt from 
these so-called onerous regulations in requiring health care 
coverage for their employees.
    Mr. Arensmeyer. Correct.
    Mr. Connolly. And of the remaining 4 percent of small 
businesses in America, 96 percent already offer health care 
insurance.
    Mr. Arensmeyer. Correct.
    Mr. Connolly. And therefore would also be exempt from this 
onerous regulation since they already provide.
    Mr. Arensmeyer. Yes.
    Mr. Connolly. Thank you.
    The EPA issued a tailoring rule that limits greenhouse gas 
pollution regulations to sources that emit more than 75,000 
tons of carbon dioxide annually. Is there a single small 
business that would have a pollution source exceeding this 
extremely high threshold, Mr. Keating?
    Mr. Keating. I would have to again take a look at the 
details of that, but of course small businesses are going to be 
affected if costs rise for utility firms and manufacturing. So 
even if you see higher costs on larger firms and on utilities, 
that obviously is going to affect small businesses.
    Mr. Connolly. Mr. Arensmeyer.
    Mr. Arensmeyer. My understanding is that limits on the 
traditional emissions, sulfur dioxide, things like that, and 
those completely exempted. There is no possible way any small 
business would fall under those. And with the greenhouse gas 
rules, they have raised that substantially so it kind of 
matches up with the size of the facilities that would be 
covered by the traditional pollutants.
    So basically even under the greenhouse gas rules there is 
no way any small business would be directly impacted by that. 
And the indirect impacts, we have seen figures like half of a 
cent, which is on a unit basis. And when you start to look at 
the energy efficiency across the whole economy, the costs are 
going to come down dramatically as we sort of move in that 
direction.
    Mr. Connolly. Thank you.
    Senator Cutler, real quickly. I also came from local 
government, spent 14 years in local government. Do you see a 
difference between unfunded mandates with respect to State and 
local government, and the regulation of private industry? Are 
those two different things?
    Ms. Cutler. Thank you for the question. I think oftentimes 
there is an overlap. You can't often move one piece without a 
resulting effect on the other piece. So I don't know if I am 
getting to the heart of your question or not, but we certainly 
hear from our local governments often in the legislature 
regarding all of the things that we do and the impact that they 
have, and I think that is part of why we are here today, is to 
say we really need to make sure that all of the work that we 
do, that people clearly understand the impact on their business 
and on State government and on local government.
    Mr. Connolly. Thank you.
    My time is up, Mr. Chairman.
    Mr. Lankford. Thank you.
    I recognize Mr. Farenthold for 4 minutes.
    Mr. Farenthold. Thank you very much.
    I think I want to start off with Mr. Keating. You have 
heard Mr. Arensmeyer's testimony indicating that the Affordable 
Care Act and Clean Air Act have actually created more jobs. 
That goes very much against what I hear from the folks back 
home in South Texas, that the burdens the Affordable Care Act 
would place and that certainly the EPA's overzealous 
enforcement of the Clean Air Act and expansion of it in Texas, 
taking that over from the Texas State government is adversely 
affecting business. Would your members agree with Mr. 
Arensmeyer statement?
    Mr. Keating. No. We have some 100,000 members, and you can 
pick and choose your studies, but if you want to look at the 
greenhouse gas regulations, the overwhelming work that has been 
done on this shows that costs are going to skyrocket in terms 
of the costs of carbon-based energy. There is no way you can 
reduce emissions or cap emissions without, in effect, raising 
the costs of carbon-based energy; that is the reality of it. 
And when you look at how that spreads throughout the economy, 
it is going to be devastating, I would argue a devastating 
impact on small businesses, on our competitiveness.
    And in terms of the Health Care Reform Act, again, our 
members would strongly disagree. You can go down the line, the 
pay or play mandate, the individual mandate, the dictates on 
what exactly is the government going to mandate through these 
exchanges that we have. We keep hearing that we are going to 
have more competition in choice. I think it is more of a 
vehicle for mandates and regulations. So all the way down the 
board I think these issues are major cost worries and they 
certainly create a tremendous amount of uncertainty for small 
business.
    Mr. Farenthold. Thank you very much.
    Senator Cutler, I was wondering if, in your State, it was 
similar to what we experience in Texas, that the delay 
associated with complying with specific Federal regulations, 
and getting things like highway projects or building projects 
permitted through the various agencies really seems to take an 
excessive amount of time. The numbers I hear are between 3 and 
7 years, and drive the costs up significantly. Are you seeing 
that in your State as well?
    Ms. Cutler. Yes. In fact, one example I would like to give 
you is one that we don't often think of, and that is the Adam 
Walsh Sex Offender Registry Notification Act. I have been 
involved in several attempts to find out, through the 
rulemaking process in the Department of Justice, just what the 
responsibilities for coming into compliance would be. And even 
through two administrations and 5 years of extensions to come 
into compliance, I believe there are still, at this point, only 
four States that have been able to come into compliance; and it 
is not because they aren't trying. And States have a lot to 
lose. Their Byrne grant funds hinge on coming into compliance 
with Adam Walsh and SORNA, so it is an example of the very 
thing you are talking about.
    Mr. Farenthold. All right, I have less than a minute left, 
but I want to just do a quick question to each of the members 
of the panel. There are some proposals being bantered around in 
this Congress for perhaps a 24-month moratorium on new Federal 
regulations, just to give businesses time to catch up, catch 
their breath and get going. What would each of you feel about 
that?
    Ms. Cutler. Well, I think 24 months, if that is all it is, 
doesn't go far enough to help us; and I don't mean in terms of 
the time, I mean in terms of the consultation and the dialog 
that needs to go on and the impact of regulations and the input 
from the States in making those rules and regulations.
    Mr. Farenthold. Mr. Keating.
    Mr. Keating. Any kind of break that we can get from 
regulations would be much appreciated, I think, from the 
business community, yes.
    Mr. Arensmeyer. I guess we would feel that one-size-fits-
all is not the way to go, that we strongly endorse that every 
piece of legislation be looked at carefully and analyzed. But 
because so much of what government does is in partnership with 
business, and I have cited two examples, pretty large examples, 
brings benefit, that I think this needs to be looked at on a 
case-by-case basis.
    Mr. Farenthold. Well, I am out of time. Thank you all very 
much.
    Mr. Lankford. Thank you. This is a very important issue for 
us and I know that we have been rushing to get through all 
this. Both your oral and your written statements are vital and 
will obviously be kept in the record, so we will get a chance 
to refer back to them in the days to come. This is our second 
hearing. It is very important that both of you are here. We 
heard from county governments and city governments last time as 
well as oversight. Obviously, UMRA affects State governments 
and affects the private sector as well, specifically noted into 
that law, so it is important to be able to get your 
perspective, and I thank you very much for your time.
    With that, other Members may submit something.
    Mr. Connolly. Mr. Chairman.
    Mr. Lankford. Yes, sir.
    Mr. Connolly. Could I just note for the record that 
obviously, at least on this side of the aisle, we make a 
profound distinction between the issue of unfunded mandates on 
State and local governments and the issue of regulation on 
business? They are two separate animals, they are not related, 
and we believe that if we are going to have hearings on 
unfunded mandates, they should stick to the former, not the 
latter.
    Mr. Lankford. I do. I understand that very well, and we 
have discussed that as well, but obviously UMRA references both 
of them, so we want to have a chance to have hearings based on 
both of them together. So I appreciate very much your time.
    With that, this hearing is adjourned.
    [Whereupon, at 2:46 p.m., the subcommittee was adjourned.]

                                 
