[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
REDUCING RED TAPE: THE NEW OIRA ADMINISTRATOR'S PERSPECTIVE
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
JULY 24, 2013
__________
[GRAPHIC] [TIFF OMITTED]
Small Business Committee Document Number 113-032
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HOUSE COMMITTEE ON SMALL BUSINESS
SAM GRAVES, Missouri, Chairman
STEVE CHABOT, Ohio
STEVE KING, Iowa
MIKE COFFMAN, Colorado
BLAINE LUETKEMER, Missouri
MICK MULVANEY, South Carolina
SCOTT TIPTON, Colorado
JAIME HERRERA BEUTLER, Washington
RICHARD HANNA, New York
TIM HUELSKAMP, Kansas
DAVID SCHWEIKERT, Arizona
KERRY BENTIVOLIO, Michigan
CHRIS COLLINS, New York
TOM RICE, South Carolina
NYDIA VELAZQUEZ, New York, Ranking Member
KURT SCHRADER, Oregon
YVETTE CLARKE, New York
JUDY CHU, California
JANICE HAHN, California
DONALD PAYNE, JR., New Jersey
GRACE MENG, New York
BRAD SCHNEIDER, Illinois
RON BARBER, Arizona
ANN McLANE KUSTER, New Hampshire
PATRICK MURPHY, Florida
Lori Salley, Staff Director
Paul Sass, Deputy Staff Director
Barry Pineles, Chief Counsel
Michael Day, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Sam Graves.................................................. 1
Hon. Nydia Velazquez............................................. 2
WITNESS
Hon. Howard Shelanski, Administrator, Office of Information and
Regulatory Affairs, Office of Management and Budget,
Washington, DC................................................. 3
APPENDIX
Prepared Statement:
Hon. Howard Shelanski, Administrator, Office of Information
and Regulatory Affairs, Office of Management and Budget,
Washington, DC............................................. 17
Questions and Answers for the Record:
Questions and Answers submitted by Hon. Sam Graves to Hon.
Howard Shelanski........................................... 22
Questions and Answers submitted by Hon. Chris Collins to Hon.
Howard Shelanski........................................... 27
Questions and Answers submitted by Hon. Richard Hanna to Hon.
Howard Shelanski........................................... 27
Questions and Answers submitted by Hon. Tim Huelskamp to Hon.
Howard Shelanski........................................... 28
Questions and Answers submitted by Hon. Donald Payne to Hon.
Howard Shelanski........................................... 31
Additional Material for the Record:
Memo from Richard Ginman, Director, Defense Procurement and
Acquisiton Policy.......................................... 31
REDUCING RED TAPE: THE NEW OIRA ADMINISTRATOR'S PERSPECTIVE
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WEDNESDAY, JULY 24, 2013
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 1:00 p.m., in Room
2360, Rayburn House Office Building. Hon. Sam Graves [chairman
of the Committee] presiding.
Present: Representatives Graves, Chabot, Luetkemeyer,
Hanna, Huelskamp, Schweikert, Collins, Rice, Velazquez, Chu,
Hahn, Meng, Schneider, and Barber.
Chairman GRAVES. Good afternoon, everybody. We will call
this hearing to order.
I am very pleased today to welcome Howard Shelanski, who is
the new administrator of the Office of Information and
Regulatory Affairs. The Office of Information and Regulatory
Affairs is charged with the critical role of reviewing
significant regulations and overseeing agencies' review of
existing regulations.
Over the last four years, regulatory burdens have increased
at an astonishing rate, and major rules alone have added nearly
70 billion in new regulatory costs. In fiscal year 2012, more
than 3,800 final rules were issued. While expanding the
regulatory state in an unprecedented way, President Obama has
also directed federal agencies to review their existing
regulations. He issued two executive orders--one in 2011 that
required agencies to draft and finalize retrospective review
plans, and another in 2012 that requires federal agencies to
produce retrospective review progress reports. Agencies were
ordered to give special consideration to initiatives that would
reduce regulatory burdens on small businesses. This makes sense
because small businesses are disproportionately burdened by
regulatory costs. Furthermore, in survey after survey, small
businesses regularly cite concerns about the complexity and
burden of red tape. The need to reevaluate our regulatory
structure is clear.
Last week in The Washington Post, there was a story that
ran on the front page about a magician from my home state of
Missouri. This magician uses a Netherland dwarf rabbit in his
magic shows for kids and the Department of Agriculture has
determined that the magician must carry a license for his
rabbit, pay an annual fee, and submit to surprise inspections
of his home. In addition, under a new rule finalized just last
year, he is required to have a written plan detailing how he
will take care of the rabbit in the event of an emergency or
disaster. This rabbit disaster plan, which is being prepared
with professional assistance, is 28 pages long so far.
If this story was not on the front page of the newspaper I
would have thought it was a joke, but this is no laughing
matter. This kind of story about regulatory overreach is
unfortunately all too common today. Congress gives regulators
an inch and a lot of times they do take a mile and the result
is poorly thought out, unnecessary regulations that unduly
burden small businesses.
Today, Administrator Shelanski has joined us to discuss
agency retrospective review efforts, and I look forward to
hearing whether the agencies' efforts are resulting in
meaningful reductions in regulatory burdens, particularly for
small businesses. And I also look forward to hearing how Mr.
Shelanski plans to scrutinize new regulatory proposals to
ensure that any negative impacts on small businesses are
minimized.
And with that I turn to Ranking Member Velazquez for her
opening statement.
Ms. VELAZQUEZ. Thank you, Mr. Chairman.
Small businesses are critical to the economy, creating
nearly 70 percent of net new jobs and generating more than 50
percent of GDP. While their contributions are essential to
putting a real dent in the nation's unemployment rate,
regulatory costs threaten to undermine this important role.
While credible estimates of these costs are hard to come by,
over the last seven years this committee has extensively
examined the impact of regulations on small firms. During this
time, it has become clear that although these rules provide
significant benefits to the public, they are, in fact, creating
very real challenges for a wide range of smaller companies.
President Obama addressed this matter head-on by issuing
Executive Orders 13563 and 13610. Together, these mandates have
the potential to bring real relief to small businesses across
the country. They call for the careful reassessment--a
retrospective analysis--of regulations that are in place. After
this evaluation has been undertaken, agencies will be in a
position to streamline, modify, or eliminate rules that do not
make sense in their current form or under existing
circumstances. Specifically, agencies are directed to
prioritize initiatives that will produce significant cost
savings and reductions in paperwork burdens. As a result, small
businesses will face fewer headaches in dealing with federal
regulations.
In May, this committee heard from agencies on their
progress in implementing these orders. We learned for the most
part that agencies are taking these requirements more seriously
than they have in the past, particularly when it comes to the
section 610 requirements in the Regulatory Flexibility Act.
Several agencies, from Treasury to Labor to DOT, have already
issued final rules that will reduce burdens on businesses.
Other changes, like those to the FAR, will help small
businesses directly by reducing government bureaucracy.
During today's proceedings, I am particularly interested in
hearing whether these moves indicate a long overdue change to
agency behavior. All too often, similar efforts have been just
a flash in the pan as agencies' compliance with previous calls
for regulatory reduction faded quickly.
While the president's initiatives are welcome, we cannot
overlook the importance of the Regulatory Flexibility Act as
well. It has provided an overarching structure for agencies to
work within, limiting the impact of their rules on small
businesses. With efforts currently underway in the Judiciary
Committee to revise this important statute, we must ensure that
any changes do not undermine its effectiveness. This means not
heaping on the SBA's Office of Advocacy--who implements the
RFA--with responsibilities beyond its capacity. As a result of
the sequester, this office is already struggling to make due
with less and adding more duties makes little sense. The truth
is that taxpayers will be stuck with another bill or more
likely no additional funding will be provided and the office
will be unable to carry out these obligations effectively.
Instead, we should be considering changes to the RFA in the
area that are most glaring, rather than rewriting the entire
act. This includes ensuring periodic reviews become a regular
part of the regulatory process and that agencies cannot evade
their responsibility under the act. It also means broadening
the panel process, but in a way that makes sense in the current
fiscal environment.
With Administrator Shelanski here today, I am eager to not
only hear about agency implementation of the retrospective
review plans, but also what step, if any, should be taken to
improve the RFA. Reducing regulatory burden is a laudable, if
elusive, goal. It is something that Congress, the
administration, and the private sector must work towards and
constantly improve as the regulatory environment evolves. With
this in mind, I am hopeful that these most recent executive
orders will be a break from past efforts. Reversing these
trends are essential, not only to small business, but to the
economy overall.
I yield back the balance of my time. Thank you.
Chairman GRAVES. Thank you.
The Honorable Howard Shelanski was confirmed as the
administrator of the Office of Information and Regulatory
Affairs on June 27, 2013. Mr. Shelanski has both a Ph.D. in
Economics and a law degree from the University of California at
Berkeley. He served in several positions at the Federal Trade
Commission, most recently as the director of the Bureau of
Economics. Mr. Shelanski has worked for the Federal
Communications Commission and the Council of Economic Advisors
at the White House, and he has also taught and practiced law
and clerked for several notable jurists, including Supreme
Court Justice Scalia.
Mr. Shelanski, thank you for taking the time to be here.
Your written testimony will be entered into the record in its
entirety, and I look forward to hearing your oral testimony.
STATEMENT OF HOWARD SHELANSKI, ADMINISTRATOR, OFFICE OF
INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND
BUDGET
Mr. SHELANSKI. Thank you very much, Mr. Chairman, Ranking
Member Velazquez, and members of the Committee. Thank you for
the opportunity to appear before you today.
As Chairman Graves just mentioned, I was recently confirmed
as the administrator of the Office of Information and
Regulatory Affairs, known as OIRA, at the Office of Management
and Budget, and I am honored to be serving in this role. And I
look forward to speaking with you today about the topic of
retrospective regulatory review, and in particular, its
benefits for small businesses.
Retrospective review is critical to ensuring that our
regulatory system is modern, streamlined, and does not impose
unnecessary burdens on the American public. Even regulations
that were well crafted when first promulgated can become
unnecessary over time as conditions change. Retrospective
review of regulations helps to ensure that those regulations
are continuing to promote health, safety, welfare, and well-
being of Americans without imposing unnecessary costs.
Recognizing the importance of this effort, in January 2011,
the president issued executive order 13563, called ``Improving
Regulation and Regulatory Review.'' Among other things, that
executive order asks executive departments and agencies to
review existing regulations and to streamline, modify, or
repeal regulations and reduce unnecessary burdens and costs. As
a result of that executive order, executive departments and
agencies produced more than two dozen plans with over 500
regulatory reform initiatives. Just a small fraction of the
rules already finalized will produce billions of dollars of
savings in the near term. In subsequent executive orders, the
president took the additional steps of directing agencies to
emphasize reforms that produce significant, quantifiable
savings, and of asking the independent regulatory agencies to
develop their own regulatory review plans.
The administration's retrospective review efforts are
already producing significant results. For example, the
Department of Health and Human Services (HHS) finalized rules
to remove unnecessary regulatory and reporting requirements on
hospitals and other health care providers, saving more than $5
billion over the next five years. The Department of Labor
finalized a rule to simplify and to improve hazard warnings for
workers, producing net benefits of more than $2.5 billion in
savings over the next five years while increasing safety. The
Department of Labor also finalized a rule that will remove
approximately $1.9 million annual hours of redundant reporting
burdens on employers, and save more than $200 million in costs
over five years. The Environmental Protection Agency finalized
a rule to eliminate the obligation for many states to require
air pollution vapor recovery systems at local gas stations
since modern vehicles already have effective air pollution
control technologies. The anticipated five-year savings are
over $400 million.
Our retrospective review efforts have focused especially on
benefitting small businesses. The Department of Transportation
retrospective review plan alone identifies over two dozen
initiatives to save money for small businesses and local
governments. For example, one of DOT's initiatives would codify
regulations to prevent duplicative requirements for air carrier
drug and alcohol testing programs, which would be particularly
helpful for small carriers. The Department of Defense issued a
new rule to accelerate payments on contracts to as many as
60,000 small businesses, improving their cash flow. And the
Small Business Administration is changing its rules to adopt a
single electronic application to reduce the paperwork required
of certain lenders, which will in turn benefit small business
borrowers.
This past winter, agencies focused their retrospective
review updates on paperwork burden reduction. Many of the
initiatives stemming from this effort will save substantial
money for small businesses. For example, the Internal Revenue
Service announced a simplified method for claiming the home
office deduction, which will save taxpayers, particularly those
with home-based small businesses, over 1.6 million hours and
several million dollars in out-of-pocket costs per year.
In July 2013, agencies submitted to OIRA their latest
updates of their retrospective review plans pursuant to
executive orders 13563 and 13610. Although OIRA is still
reviewing the plans and the full updates are not yet public, I
can report that many of the initiatives highlighted in the
updated plans benefit small businesses. For example, the
Department of Housing and Urban Development is drafting a final
rule that would create alternative, more streamlined financial
statement reporting requirements for small supervised lenders.
The rule would also eliminate duplicative reporting
requirements for lenders who already report to federal
agencies. In addition, the Federal Aviation Administration is
proposing a rule to update, simplify, and streamline rules of
practice and procedure for filing and adjudicating complaints
against federally assisted airports. Small businesses would
particularly benefit from this rule which would decrease the
time spent on processing complaints by allowing parties to file
electronically.
Retrospective review is crucial to ensuring that we have a
well-functioning regulatory system, and moving forward I will
look for further ways to institutionalize retrospective review
of regulations and to ensure that retrospective review
continues to produce significant cost savings for small
businesses and for the American people.
Thank you for your time. I would be happy to answer any
questions.
Chairman GRAVES. Thank you very much, Administrator.
We are going to start with Representative Luetkemeyer. You
can start with questions.
Mr. LUETKEMEYER. Okay. Thank you, Mr. Chairman. And thank
you, Mr. Shelanski, for being here today.
I have a few questions here with regards to the Department
of Labor is coming out with some rules and has been coming out
with some rules and I am going to kind of use those as perhaps
a template for how you go about your rulemaking process here.
In 2010, they came out with a rule with regards to broker-
dealers and investment advisors and they withdrew the rule
again in 2011. I do not know if you are familiar with it or not
but it had to with the liability exposure, that they could be
exposed to as a result of this rule with regards to the broker-
dealers and investment advisors, how they advised their
clients. And now it is DOL's intent to repropose the rule. In
fact, you may have the rule already to review because they were
going to try to deal with it in 90 days. You have to have it
within 90 days of the rule being implemented and they are
trying to get it by the first of October. So you may have it
already, I am not sure. But regardless, I guess my concern is,
number one, since they pulled the rule back and they are now
going to repropose it, I assume you will get it before they do
come out with a final ruling. Is that correct?
Mr. SHELANSKI. Yes, sir. That is correct.
Mr. LUETKEMEYER. Okay. And they have to go through the
entire process of showing a cost-benefit analysis, what kind of
problem is there to solve, what their solution is. That is all
part of the regular process of going about this; is that
correct?
Mr. SHELANSKI. Yes. So the review process at OIRA is very
much exactly what you just described. When the regulation comes
to OIRA for review, one of the jobs of the office is to make
sure that the prescriptions of the relevant executive orders
have been followed. And one of the, I think, centerpieces of
the executive orders under which OIRA operates is cost-benefit
analysis. And so any rule that comes to OIRA, whether it will
be the reproposed fiduciary or any other regulation, where
allowable by law will be subject to this kind of cost benefit.
Mr. LUETKEMEYER. Okay. Whenever they give you the cost-
benefit analysis, do you look at it and ever tell them, ``Hey,
this is a bunch of bunk. You guys are all blowing smoke at us.
This does not work. I want you to go back and actually do an
analysis that makes sense?''
Mr. SHELANSKI. This is, in fact, very much at the heart of
what OIRA does. OIRA does not in the first instance do original
cost-benefit analysis. It reviews what the agencies have done,
but it reviews it rigorously and critically so information can
emerge during the OIRA review process that suggests either that
the cost-benefit analysis was inadequate or should be done in a
different way, or as in many cases, that it was, in fact, done
very well. But OIRA does adopt a very critical analysis of
that.
Mr. LUETKEMEYER. Okay. In this situation there also is a
situation here where the SEC is trying to also make a rule
under a different structure, under different guidelines,
different authority, and the two rules could be in conflict and
there needs to be some collaboration here. Do you force them to
collaborate? What happens when they are in conflict with each
other?
Mr. SHELANSKI. Mr. Luetkemeyer, thank you very much for
that question because I think that gets to a very important
issue. I absolutely share your concern and OMB shares your
concern with duplicative or conflicting regulations. And one of
the very important roles of OIRA, in addition to reviewing what
the agency analysis is, is where appropriate to convene other
agencies that might have duplicative or conflicting rules.
Mr. LUETKEMEYER. So do you get them in a room and say,
okay, you guys knock it out? Or do you reject both rules and
tell them to do it over? How do you get to some sort of
resolution here?
Mr. SHELANSKI. Well, there are different processes
depending on the circumstance. The Securities and Exchange
Commission is an independent agency and not subject to OIRA
review. But of course, the Department of Labor is.
Mr. LUETKEMEYER. What rules are going to have an impact on
what you review.
Mr. SHELANSKI. Precisely. I agree with you completely.
And so the job of OIRA, and my job as administrator in that
case, would be to make sure that the Department of Labor, which
is subject to OIRA review, is fully taking account the extent
to which its rules will overlap or interoperate with the
Securities and Exchange Commission's rules.
Mr. LUETKEMEYER. Okay. With regards to looking at the
promulgation of rules, do you ever look at the letters and the
testimony, the comment period, all the stuff that comes in to,
in this case, DOL or whomever, and say this is an unintended
consequence of what you are trying to do. This is what is going
to happen if you do this. And to follow up because I am running
out of time here, do you also look at, in a case of
promulgating rules from a law, do you ever look at the intent
of Congress and what we are trying to get done with this law
and the hearings that we have here and the testimony and the
discussions held on the floor as an indication of where we want
to go with this law so that when they make the rules they do
not take a turn somewhere and go off on a tangent and make sure
they stay within the case I call it, or where they need to be
to make these rules?
Mr. SHELANSKI. So let me answer your questions, starting
with the one you just asked because I think it is a very
important question.
The interpretation of an agency statute and the choice of
policy to the extent there is discretion under that statute is
in the first instance in the province of the department or
agency that is issuing the regulation. OIRA does not set policy
priorities or do the initial legal interpretations for the
agencies; they do that. Now, of course, should there be a
regulation that is not in compliance with the law, that would
be something that we would be very concerned with.
In terms of the comments and the public information that
comes into the rulemaking process itself, that is very much the
kind of information that OIRA looks at and depends on for parts
of its review. Just to give you a hypothetical example, were it
the case that a comment had brought interesting or credible
data to the rulemaking process and that data were not accounted
for in the agency's analysis, that would lead to a question
from OIRA to the agency about why not, and what would the
effect of accounting for that data be? So we are very concerned
that the best available information--technical data, science,
economics--all factor into the rulemaking process, and public
notice and comment is a very important source of that
information.
Mr. LUETKEMEYER. I see my time is up. I appreciate the
Chairman's indulgence. Thank you very much.
Chairman GRAVES. Ranking Member Velazquez.
Ms. VELAZQUEZ. Thank you, Mr. Chairman.
Administrator Shelanski, OIRA's guidance dated October 26,
2011, entitled ``Implementation of Retrospective Review Plans''
stated that the agency's plan should cover existing significant
regulations. That is the case; correct?
Mr. SHELANSKI. Yes, that is correct.
Ms. VELAZQUEZ. However, several agencies have included new
rules unrelated to existing regulations, as well as initiatives
outside of the rulemaking process. So I would like to know what
is your position on that? And do you believe that these in any
way will undermine the intent of the executive order?
Mr. SHELANSKI. Thank you. Thank you very much,
Congresswoman Velazquez.
Let me start by saying that retrospective review in my
view, and I think in the view of the president's executive
orders, should undertake all agency actions that might save
money for the American public and particularly for small
businesses. That could include things that are not rules. For
example, methods of reducing paperwork and things that might
fall outside of reforming or repealing an existing regulation.
And those can be extremely beneficial for small businesses. So
to the extent that it is part of the retrospective review plans
or things working under the retrospective review executive
orders, I do think that it can be appropriate for agencies to
expand their focus beyond----
Ms. VELAZQUEZ. Okay. So let us say that, yes, it could be
appropriate, but do you not believe that the focus of the
review should be on emphasizing those rules, those existing
rules to relieve the burden?
Mr. SHELANSKI. Yes. Yes, I do. That certainly is the focus
of retrospective review. Now, what can be a little bit
complicated in looking at the plans that the agency has put
forward is that often the vehicle for changing a pre-existing
rule is a new rule. And so one might look at them and say,
well, this is supposed to be a retrospective review plan and
instead of seeing the words ``repeal, repeal, repeal,'' we see
new rules. But the effect of those new rules is to modify or
change in some way pre-existing regulations.
Ms. VELAZQUEZ. Thank you.
Administrator, every week that we hold hearings regarding
an issue related to small business growth, people raise the
regulatory environment and how this hinders small businesses.
My question to you is agencies have been reporting for over a
year now on retrospective reviews. And we want them to do their
work because it is going to show cost savings for small
businesses. What is the role that sequestration plays on that
effort?
Mr. SHELANSKI. Well, I think that is a very important
question. I can speak from OIRA's standpoint. I think the role
of sequestration in general is one that constrains the ability
of agencies to have as much person power as they would like to
have in their various functions, and to the extent one of those
functions is retrospective review, one might imagine that
sequestration is having a negative effect on their ability to
devote resources to that activity. But as for the specific
effects on any given agency, I cannot speak to that.
I can, however, speak to OIRA's role in encouraging and
working with the agencies and reviewing their retrospective
review plans. All of OMB, OIRA included, is really at sort of a
bare bones level of staffing at this point, and under
sequestration we are not in a position, never mind to add
staff, but not even to backfill vacancies that are occurring.
And with this extremely hardworking and dedicated staff that we
have, and I really wish to say that to a person they are
outstanding and they work extremely hard, we lose some of their
effort due to furlough days. And we are subject to furlough.
Just, for example, my staff has furlough day this coming
Monday. They have a furlough day the Monday afterwards. They
have had furlough days since sequestration. And that, of
course, is person power that we do not have to devote to this
effort.
Ms. VELAZQUEZ. Thank you.
It has been two years since agencies issued their final
plans and began implementing them. Are you satisfied that
agencies are taking this seriously?
Mr. SHELANSKI. Thank you very much for that question. I am
satisfied that they are taking it seriously, but I want to be
careful with the word ``satisfied.'' I am very encouraged by
the signs that I have seen. You know, the president's executive
order is only a couple of years old on retrospective review,
and I think that what I have seen is an increasing engagement
by the agencies in this process. So I am satisfied that it is
getting traction, but I want to see more.
Ms. VELAZQUEZ. Okay. So my final question is we have seen
executive orders before and they come and they go. Do you
believe that this time agencies are more committed than they
have been in the past? Are we breaking that culture?
Mr. SHELANSKI. Well, I think that is a very important
question. I do think that there is a culture of retrospective
review and of look back that is taking hold in the agencies.
Certainly, none of us want to see regulations that are getting
in the way of small business, that are deterring small
businesses, or that are imposing unjustified costs. We do not
want to see those persisting.
Ms. VELAZQUEZ. Okay. So my next question, what type of
oversight do you have in place to make sure that agencies will
be held accountable?
Mr. SHELANSKI. Well, what OIRA does as part of this process
is first of all, we make sure that the agencies are engaging in
the processes that are mandated under the president's executive
orders related to retrospective review, and we have provided
guidance on how to implement those executive orders. But we
also require the agencies to file their reports with OIRA. In
fact, in early July, all executive departments and agencies did
file their reports with OIRA showing a very serious engagement
with the retrospective review process. There are a large number
of initiatives that are listed on each agency's report. We are
in the process of reviewing them, and those will very shortly
be public on the agency's websites.
Ms. VELAZQUEZ. Will you be grading them?
Mr. SHELANSKI. You know, we do not grade them per se but we
provide them feedback and we try to improve their efforts.
Ms. VELAZQUEZ. Well, the public wants to know that they are
really doing the work that they are supposed to be doing.
Mr. SHELANSKI. Right. And really the proof of that is not
just the lists that they very openly will post on their
websites, but it is the real dollar savings that we have seen
in the past two years from these retrospective review efforts
which in terms of finalized rules that are retrospective and
that change preexisting regulations, we can already find $10
billion of savings to the American public, much of that savings
enjoyed by small businesses. But I can also say that looking
forward there are very important rules, such as one that the
Department of Transportation is going to release that is going
to reduce reporting obligations of truck drivers for vehicle
inspection reports and reduce daily burdens on truck drivers.
And perhaps I will talk more about that rule later. But that
will have $1.7 billion in savings, not to mention all of the
hassle and annoyance that truckers have to face until now in
filing those reports.
These are the kinds of efforts that we see on an ongoing
basis. And I think the way for the public to evaluate the
retrospective review efforts is to look at those savings and to
see the ongoing efforts to find them.
Ms. VELAZQUEZ. Thank you, Administrator. I yield back.
Chairman GRAVES. Mr. Hanna.
Mr. HANNA. You mentioned in your testimony the president's
Quick Pay initiative, which you know, this Committee has
supported. But the Department of Defense has, which is over 70
percent of subcontractors, about $51.8 billion has decided to
do away with that. And yet earlier in your conversation you
mentioned that they were committed to paying people more
quickly. Can you respond to that?
Mr. SHELANSKI. Thank you very much for the question, Mr.
Hanna. I would have to go back and look at what the current
status of the Department of Defense's implementation is. I am
not aware of that.
Mr. HANNA. One other thing I want to ask you. The idea of a
cost-benefit analysis is by definition subjective. What does it
mean to you? And what does it mean in your department? And is
it really money or is it subjective and more nuanced than that?
At what point do you decide a regulation is or is not worth
doing? What does that mean in real terms?
Mr. SHELANSKI. Well, I think what it means in real terms is
this. What cost-benefit analysis should do is, to the extent
possible, quantify the costs that a regulation will bring to
the American public, but also the benefits in dollar terms that
will be created. And in many cases, those benefits can be
quantified. For example, when we talk about the forthcoming
Department of Transportation DVIR rule, that is the
retrospective rule that is going to lift certain inspection
report requirements that truckers have to comply with every
day. We can actually count the amount of time it takes a
trucker to file that report every day, and you can quantify
what the value of that is by knowing what the average hourly
rate of a trucker is and how many truckers are out there on the
road.
Mr. HANNA. Who decides when a rule is more expensive than
the benefits derived?
Mr. SHELANSKI. To the extent benefits can be quantified, we
can look and see what the costs are and measure them against
the benefits. But to your point that there are often values
that go beyond things that are easily quantifiable, that is a
harder question. Certainly, there are values that are beyond
those that are quantifiable that do come into the evaluation of
a regulation, and those might be in some cases hard to put a
dollar value on. But I would note that those are also often
values that are dictated by the underlying statute.
Mr. HANNA. On another note getting back to Quick Pay and
the president's directive, do you have the ability to go to the
Department of Defense and ask them to follow the directive
rather than abandon it to over 70 percent of their contracts?
What would you say if you found out what I am saying to you
today is true, which we believe that it is?
Mr. SHELANSKI. OIRA does not have jurisdiction to go and
enforce the law on executive departments. We review regulations
as they come in to us. Once the regulations are finalized and
they are out there on the books, we are not an enforcement
agency, so it would not be within our jurisdiction to go out
and call them into account.
Mr. HANNA. But let us say you looked at that, which you
will when you get back I hope, and you discovered that it was a
big expense to the small businesses that they are paying them
but not paying in a timely fashion. What would you do? Would
you just put it back in the drawer or would you call this
Committee?
Mr. SHELANSKI. Well, you know, it is not in our drawer.
What we would hope is that small businesses would be making
clear that the regulation is not working as they had hoped and
that the entities with the appropriate jurisdiction would
investigate what was happening. What we would do is if there
was a regulation that was submitted to us by the Department of
Defense that was changing their practices, we would review that
regulation under our normal processes.
Mr. HANNA. So 70 percent of these contracts by small
businesses that are out there that the Department of Defense
has decided not to follow the Quick Pay rules, really what you
are saying is that they can do that and there is no recourse?
Mr. SHELANSKI. Well, no, that is not what I am saying at
all, sir. Just to be----
Ms. VELAZQUEZ. Will the gentleman yield? I would suggest
that the small businesses, the contractors, reach out to the
Office of the IG. They have the jurisdiction to investigate
whether or not the agency is complying with the rules.
Mr. HANNA. Thank you. My time is expired.
Chairman GRAVES. Ms. Hahn.
Ms. HAHN. Thank you, Mr. Chairman, Ranking Member
Velazquez.
So we are 13 years into the 21st century and yet we are
only just beginning to develop the streamlined and modern
government that the American people expect and deserve from the
nation that invented the Internet. An important part of that is
judicious and thorough reviews of our regulations, ensuring
that our regulations have not grown outdated or duplicative and
making sure that we are cutting down on paperwork wherever we
can. Since last Congress, I have actually had some legislation
to make the Small Business Administration's pilot Small Loan
Advantage Program permanent. That pilot has streamlined
applications for small loans up to $350,000, cutting down their
paperwork to only two pages. And I think that is the sort of
thing that we should be doing across government. In particular,
I think we need to do more to shift more of our compliance and
regulatory infrastructure online and to improve our electronic
filing.
Last week, in this Committee, we had the head of the IRS
talk about how severe budget cuts have been endured by the IRS,
and that has meant that they have had to prioritize which tax
forms they have moved to e-filing, and that means that some
more exotic forms are getting pushed down the waiting line for
next year or the year after. And the commissioner noted that
the people and the small businesses that still have to paper
file these less common forms make a lot of noise about how
especially burdensome and complicated they are and how much
they would benefit from e-filing, but his budget limits him
from helping them now.
So I am going to ask you, what do you think Congress needs
to do to accelerate and support the shift towards e-filing and
technology-based reporting across government? And what do you
think are the greatest obstacles to moving towards e-filing and
technology-based reporting? And are some of the agencies
farther along or lagging behind than others in that respect?
Mr. SHELANSKI. Thank you very much for your questions,
Congresswoman Hahn, because you have raised an issue that I
think is very important to me as administrator and is very
important to OIRA and OMB, which is paperwork reduction but
also making the government more accessible and easier to use
for American citizens. E-filing, electronic access to
information are all part of that picture. To be sure, part of
OIRA, part of the acronym is information. And so a lot of what
we are concerned about is implementation of the Privacy Act,
paperwork reduction. All kinds of online initiatives, of
course, have to be balanced against concerns about privacy and
data security, and I think those are things that the agencies
are working together on very well. OMB is part of a broader
interagency process that looks at all of these kinds of issues
on an ongoing basis. And so consistent with the obligations of
ensuring privacy, data security, it is a major priority to make
this government simpler, more accessible.
In terms of the particular priorities that an agency might
have in moving towards electronic filing or electronic data
availability, I cannot speak to the particular agencies'
priorities. They have to set those consistent with their
statutes, with their policy mandates, and with their resources.
And so I think one of the things that I hope going forward is
that the agencies will have the resources to fully continue
their work on making government as user friendly and as
accessible as possible.
Ms. HAHN. Yeah, I appreciate that, but I think one of the
things I think we really, I mean, it is one thing to review
these regulations and see where we might do a better job, but
it is another thing if we are asking businesses to comply and
we are making it really difficult or burdensome of them to fill
out forms to show that they are in compliance. I mean, I just
really feel like that is another part of what I would like to
see you also include as part of your reviews.
Mr. SHELANSKI. Thank you. And I agree entirely. One of the
things that we do look at in all of our reviews is to see what
the paperwork burdens are and to see that the agencies have
done what is possible to reduce those burdens. And
particularly, pursuant to our particular concern for small
businesses, to see what can be done to reduce the cost of small
businesses that may not have the ability to hire somebody to be
a paperwork person. We are very concerned about the way that
this could actually become more costly for small businesses. So
we do review agencies' efforts to try to reduce those burdens.
Ms. HAHN. And make suggestions?
Mr. SHELANSKI. We make suggestions. We ask questions about
why things might not be done other ways, but sometimes there
are limits to the resources, to the technology, legal
questions. But I can assure you that the agencies and certainly
my office are very concerned with these issues.
Ms. HAHN. Thank you. I yield back the balance of my time.
Chairman GRAVES. Mr. Schweikert.
Mr. SCHWEIKERT. Thank you, Mr. Chairman.
Mr. Director, help me understand some of your process.
Agency is working on a reg set, rule set. What do you do
methodology in your office? What are your steps you go through
to review?
Mr. SHELANSKI. Well, at the point that the agency is
actually engaged in the rulemaking process, the rulemaking
process is at the agency, and so in most cases it is a notice
and comment rule process. It is there at the agency, not with
my office.
Mr. SCHWEIKERT. In your shop, what are your steps? What do
you do?
Mr. SHELANSKI. After the agency feels that it has its rule,
whether it is a proposed rule or a final rule or some kind of
advanced notice of a rule, when they feel they have that
document ready, they notify my office and say we would like to
transmit this or we are going to transmit this rule to you.
They then upload the rule in our system and it becomes public
at that point what the rule is and that it is with OIRA. And
this is following a public notice and comment period at the
agencies.
Mr. SCHWEIKERT. Okay. So at this point you are a bulletin
board. What do you do next?
Mr. SHELANSKI. We then take the rule--and we are much more
than a bulletin board. I have got----
Mr. SCHWEIKERT. What do you do next?
Mr. SHELANSKI. It will go to the relevant branch, and an
analyst will sit down with the rule and start working through.
What is this rule designed to accomplish? What other rules
might be doing what this rule is doing? What other agencies
might have an interest?
Mr. SCHWEIKERT. Okay. At that point, so you have a
researcher and an analyst----
Mr. SHELANSKI. Yes.
Mr. SCHWEIKERT.--going over the rule. What tools is that
researcher to go over and say a version of this rule already is
in the reg sets here? This is duplicative. So when they are
doing their--I am trying to understand the mechanics of how do
you actually do your analysis and find either things that are
wonderful or things that are ultimately bad acts?
Mr. SHELANSKI. So there are several components of the
analysis. One would be the question of is this a rule that
relates to other rules that might already exist or rules that
other agencies are either promulgating or have promulgated. And
that is where we convene the interagency process to make sure
that this is not duplicative or conflicting.
Mr. SCHWEIKERT. Okay. So at that moment you are telling me
the analyst is not doing the research themselves but they are
bringing together representatives who cover other agencies to
provide the input?
Mr. SHELANSKI. If there is something in the rule that might
implicate the activities of another agency, the most efficient
course of action is to say to those other agencies--because
they know much more what they are up to and they will know much
better what rules they are enforcing--how does this rule
interact with what you do?
Mr. SCHWEIKERT. So your analyst does not first do a search,
a public document search on that subject area, that specialty
area or common regulatory literature and first builds the box
around it?
Mr. SHELANSKI. No. The rule comes to the analyst with
explanations of why the rule is being promulgated, what other
rules are out there, and the analyst is researching this.
Mr. SCHWEIKERT. Okay. You are saying two different things,
and maybe I am not understanding, so work with me here.
The analyst is given this information from the agency;
right?
Mr. SHELANSKI. The analyst is given a draft rule.
Mr. SCHWEIKERT. Okay. And is the analyst actually doing the
research or is the analyst reading someone else's research?
Mr. SHELANSKI. The analyst is doing both. It is not an
either/or. The analyst will be doing research. The analyst will
be reviewing the cost analysis and the benefit analysis. And
the analyst will be looking primarily for two things. And the
two things that the analyst will be looking at primarily are
why is this rule being done? And what other rules might be
implicated? The analyst can do the analyst's own research, but
also draw on other research that is submitted, comments that
are submitted, the preamble to the rule. They are both there.
Mr. SCHWEIKERT. Okay. Well, one of the things I wanted to
get to and we are only down to about 40-some seconds now, okay,
so analysts now have done the research or read someone else's
and finds out parts of the rules are duplicative. Do you have
the authority area to reach out and say, hey, this rule is more
modern? We need to find a way to eliminate the previous? Or
what happens in those sorts of cases?
Mr. SHELANSKI. Well, the question that is asked there is
why are there benefits to this rule given what is already out
there? And this is where the very rigorous analysis comes into
play.
Mr. SCHWEIKERT. Okay. Now, in our last 10 seconds, how
often does that happen and how often is the rule basically, the
path of it, ended because of that type of analysis?
Mr. SHELANSKI. The back and forth, the finding of
questions, hard questions, happens on a daily basis at OIRA.
Mr. SCHWEIKERT. How often does a rule not move forward
because of this analysis?
Mr. SHELANSKI. Well, it would depend what you mean by ``not
move forward.'' If what you mean----
Mr. SCHWEIKERT. It means it does because it is duplicative
or some other research you created.
Mr. SHELANSKI. What happens is there is a back and forth
between OIRA and the agency. And rules can change. They can be
pulled back, like the fiduciary rule, and be repromulgated. The
rule can be changed in response to comments and the review
process.
Mr. SCHWEIKERT. Forgive me. I am way over time.
Thank you for your patience, Mr. Chairman.
Chairman GRAVES. I am trying to figure out--we are going to
have a long series of votes. I know we have got several members
that are left to ask questions. Does anybody have anything that
they need pressing asked? If so, speak now.
Mr. BARBER. I will try to be brief, Mr. Chairman. I just
wanted to have an opportunity since I probably cannot come back
when we reconvene, thank you for your testimony and thank you,
Mr. Chairman, and ranking member for convening this hearing.
As a small business owner, I know from our experience--my
wife and I's experience 22 years as small business owners--that
we just have to make every effort to get direct input from
small business owners and feedback of what is working and what
is not working. That is why I meet regularly with small
businesses. It is the only way I can do this job effectively.
Part of the retrospective review process that federal agencies
are already implementing on an ongoing basis to review
regulations requires that they solicit input from the public,
from the general public, and I believe the most crucial
component of any regulatory review process is that kind of
direct feedback.
But it seems to me that each agency is pretty much
interpreting the standards as they see fit and differently.
While some are going to communities in a very open way and
talking to people who are really interested in the issues,
others print their review process on their website in such fine
print you have to take a magnifying glass to read it. It seems
to me that so many agencies are closed to public input and
closed to members of the public who have an interest in their
regulations.
Can you tell the Committee what guidance your office is
providing to federal agencies regarding public input and what
it should look like and how we can better ensure that we do not
just have a process that is in name only but a real process
that gets input from the public?
Mr. SHELANSKI. Thank you, Mr. Barber. You have raised the
critical issue of transparency and the openness of the
regulatory process to the public. And I agree, and OIRA agrees,
that it is absolutely critical that rulemaking be as open and
accessible as possible to all members of the public. And that
would mean especially for the reasons that you provided the
small business community.
As a general matter, the rulemakings that come to us have
been through a very open notice and comment period. Now, it may
well be the case that different agencies have different levels
of resources or different institutionalized practices for reach
out specifically for small businesses and therefore can get
more input. I think it is of vital importance for small
businesses to encourage such efforts to get their associations
or to get their coalitions to focus on the agency actions. I
applaud the actions of this Committee to apprise small
businesses of specific regulatory actions that are pending that
small businesses might want to pay attention to. I could not
agree with you more that making sure that the process is open
and accessible is paramount. And the guidance that we at OIRA
give to agencies is precisely that.
Mr. BARBER. Can you say what more you think you can do in
your new position to really make sure that they get it? That it
is not just some kind of a process that really does not mean
anything, you know, in name only that kind of generally follows
the law but really does not get at the heart of what the public
wants to say?
Mr. SHELANSKI. Well, I think what we can do since our
experience is that most agencies really do follow the notice
and comment period, or notice and comment process, indeed,
their regulations are quite vulnerable if they do not follow
that process, and I think they understand that. So it is very
much in their interest to ensure that the requirements of the
Administrative Procedure Act are followed. What we can do is to
encourage and to ask what small business input was received?
What efforts were made to respond to that? How did that factor
into your analysis ? These are the kinds of questions that we
at OIRA can ask and will ask, and I believe that those can help
to focus attention on precisely the issues you raise.
Mr. BARBER. Well, I encourage you to be even more vigilant.
And I thank you, Mr. Chairman. I yield back.
Chairman GRAVES. I would ask that any other members that
have questions to please submit them, and I would hope that Mr.
Shelanski, you would answer them in a very timely manner and
get back to us on that since we do have a series of votes and
we will not keep you through that series of votes.
Mr. SHELANSKI. Thank you, Chairman Graves. And I would be
pleased to respond in a timely manner.
Chairman GRAVES. Well, I want to thank you for testifying
today. You know, reducing unnecessary regulations or regulatory
burdens, I guess, is critically important to small businesses
when they are trying to compete and trying to create jobs in a
competitively global economy. And these retrospective reviews
can yield results but only if it is taken seriously, and I hope
you use your office and your position to ensure that the
agencies are taking it seriously and trying to do just that.
And I hope you will update us, too, periodically, if you would,
on the progress of this and how it is obviously affecting small
businesses.
With that, again, I want to thank you for coming in.
Mr. SHELANSKI. Thank you, Chairman Graves. This is just to
end on the note by ensuring you that small businesses are very
much at the heart of this administration's concern with growing
the economy, creating jobs, and it is very much a focus of my
office.
Chairman GRAVES. Well, with that I would ask unanimous
consent that all members have five legislative days to submit
statements and supportive materials for the record. Without
objection that is so ordered. And with that the hearing is
adjourned. Thank you.
[Whereupon, at 1:56 p.m., the Committee was adjourned.]
A P P E N D I X
[EMBARGOED UNTIL 1:00 PM, JULY 24]
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
www.whitehouse.gov/omb
TESTIMONY OF HOWARD SHELANSKI
ADMINISTRATOR FOR THE OFFICE OF INFORMATION AND REGULATORY AFFAIRS
OFFICE OF MANAGEMENT AND BUDGET
BEFORE THE HOUSE SMALL BUSINESS COMMITTEE
UNITED STATES HOUSE OF REPRESENTATIVES
July 24, 2013
Mr. Chairman, Ranking Member Velazquez, and Members of the
Committee, thank you for the opportunity to appear before you
today. I was recently confirmed as the Administrator of the
Office of Information and Regulatory Affairs (OIRA) at the
Office of Management and Budget (OMB), and am honored to be
serving in this role. I look forward to speaking with you today
about the topic of retrospective regulatory review and its
benefits for small business.
Retrospective review is critical to ensuring that our
regulatory system is modern, streamlined, and does not impose
unnecessary burdens on the American public. Even regulations
that were well crafted when first promulgated can become
unnecessary over time as conditions change. Retrospective
review of regulations helps to ensure that those regulations
are continuing to promote the safety, health, welfare, and
well-being of Americans without imposing unnecessary costs.
Recognizing the importance of this effort, in January 2011,
the President issued Executive Order 13563, ``Improving
Regulation and Regulatory Review.'' Among other things, that
Executive Order asks executive departments and agencies to
review existing Federal regulations to streamline, modify, or
repeal regulations and reduce unnecessary burdens and costs. As
a result of that Executive Order, executive departments and
agencies produced more than two dozen plans, with over 500
regulatory reform initiatives. Just a small fraction of the
rules already finalized will produce billions of dollars of
savings in the near term.
Since issuing Executive Order 13563, the President has
taken several other important actions relevant to retrospective
review. In July 2011, the President issued Executive Order
13579, ``Regulation and Independent Regulatory Agencies,''
which asked the independent regulatory agencies to follow the
principles of Executive Order 13563 and to develop their own
retrospective review plans. Almost twenty independent agencies
issued plans for public comment, and many have implemented
substantial initiatives. For example, in May 2013, the Federal
Communications Commission announced that it was lifting over
120 outdated or unnecessary regulatory requirements on phone
companies.
In order to further institutionalize retrospective review,
President Obama issued Executive Order 13610, ``Identifying and
Reducing Regulatory Burdens'' in May 2012. To promote priority-
setting, the Executive Order directs agencies to emphasize
reforms that produce significant, quantifiable savings. To
promote accountability, the Executive order requires agencies
to provide the public with regular reports on their past
efforts and their future plans. These reports are available on
agency websites.
The Administration's retrospective review efforts are
already producing significant results. For example:
The Department of Health and Human Services
(HHS) finalized rules to remove unnecessary regulatory
and reporting requirements on hospitals and other
healthcare providers, saving more than $5 billion over
the next five years.
The Department of Labor (DOL) finalized a
rule to simplify and to improve hazard warnings for
workers, producing net benefits of more than $2.5
billion over the next five years while increasing
safety.
HHS finalized a rule to allow greater
flexibility for providers that rely on telemedicine
services, making services more readily available in
remote rural areas and saving providers millions of
dollars in the process.
DOL finalized a rule that will remove
approximately 1.9 million annual hours of redundant
reporting burdens on employers and save more than $200
million in costs over five years.
The Environmental Protection Agency
finalized a rule to eliminate the obligation for many
states to require air pollution vapor recovery systems
at local gas stations, since modern vehicles already
have effective air pollution control technologies. The
anticipated five-year savings are over $400 million, a
number that takes into account the costs associated
with the removal of vapor recovery equipment and the
use of less expensive conventional equipment on the
gasoline dispensers, as well as reductions in record-
keeping requirements and other operating costs.
The Department of Transportation (DOT)
finalized a rule to eliminate or extend most compliance
dates on traffic control requirements (which would,
among other things, require states and localities to
change street name signs), saving millions of dollars
in the process.
Our retrospective review efforts have focused especially on
benefiting small businesses. Some examples include:
The DOT retrospective review plan alone
identifies over two dozen initiatives to save money for
small businesses and local governments. For example,
one of DOT's initiatives would codify regulations to
prevent duplicative requirements for air carrier drug
and alcohol testing programs, which would be
particularly helpful for small carriers.
The Department of Defense issued a new rule
to accelerate payments on contracts to as many as
60,000 small businesses, improving their cash flow.
The Small Business Administration is
adopting a single electronic application to reduce the
paperwork required of certain lenders, which will in
turn benefit small business borrowers who seek
relatively small amounts of capital to grow and
succeed.
DOT has proposed a rule that would harmonize hazardous
material standards with international requirements and update,
clarify, correct, or provide relief from certain regulatory
requirements for the transportation of radioactive materials.
DOT expects the rule to result in cost savings for small
businesses by easing the regulatory compliance costs for
shippers and carriers engaged in international commerce,
including trans-border shipments within North America. This
past winter, agencies focused their retrospective review
updates on paperwork burden reduction. Many of the initiatives
stemming from this effort will save substantial money for small
businesses. For example, the Internal Revenue Service announced
a simplified method for claiming the home office deduction,
which will save taxpayers (particularly those with home-based
small businesses) over 1.6 million hours and $7 million in out-
of-pocket costs per year. Similarly, DOT is working on a
proposed rule that would rescind the requirement that
commercial motor vehicle drivers submit (and motor carriers
retain) driver-vehicle inspection reports when the driver has
neither found nor been made aware of any vehicle defects or
deficiencies. This rulemaking would save tens of millions of
hours in paperwork burden per year, for approximately $1.5
billion in annual paperwork time savings.
In July 2013, agencies submitted to OIRA their latest
updates of their retrospective review plans, pursuant to
Executive Orders 13563 and 13610. Although OIRA is still
reviewing the plans and the full updates are not yet public. I
am happy to report that many of the initiatives highlighted in
the updated plans benefit small businesses. For example, the
Department of Housing and Urban Development is drafting a final
rule that would create alternative, more streamlined financial
statement reporting requirements for small supervised lenders
and mortgagees. The rule would also eliminate duplicative
reporting requirements for lenders who already report to other
Federal agencies. In addition, the Federal Aviation
Administration is proposing a rule to update, simplify, and
streamline rules of practice and procedure for filing and
adjudicating complaints against federally-assisted airports.
Small businesses would particularly benefit from this rule,
which would decrease the time spent on processing complaints by
allowing parties to file electronically.
Retrospective review is crucial to ensuring that we have a
well-functioning regulatory system, and moving forward I will
look for further ways to institutionalize retrospective review
of regulations and ensure that it continues to produce
significant cost-savings for small businesses and for the
American people.
Thank you for your time. I would be happy to answer any
questions.
Chairman Sam Graves:
1. How much is it costing agencies to conduct retrospective
reviews?
I would refer you to the agencies, which are best suited to
answer this question.
2. How are agencies doing their existing work while
conducting retrospective reviews?
Agencies prioritize their regulatory work based on their
respective agency goals and priorities, as well as guidance
provided by the President's Executive Orders. Executive Order
13610 states that ``agencies shall give priority [in doing
retrospective review], consistent with law, to those
initiatives that will produce significant quantifiable monetary
savings or significant quantifiable reductions in paperwork
burdens while protecting public health, welfare, safety, and
our environment.'' It further states that ``agencies shall give
consideration to the cumulative effects of their own
regulations, including cumulative burdens.''
3. How are agencies documenting their outreach to outside
or regulated entities in doing these reviews?
Executive Order 13610 states that ``agencies shall invite,
on a regular basis, public suggestions about regulations in
need of retrospective review and about appropriate
modifications to such regulations.'' Agencies use a variety of
approaches for soliciting and documenting outreach, ranging
from Federal Register notices to public meetings to websites
focusing on retrospective review.
4. Some agencies are reviewing guidance documents as part
of their retrospective review process. Should that be a
requirement for all agencies under the terms of Executive Order
13,563?
OIRA has encouraged agencies to consider not just
rulemakings, but paperwork burden reduction initiatives as well
as guidance documents.
5. In your testimony you noted that agencies are required
to provide the public with regular reports on their
retrospective review efforts and that those reports are
available on agency websites. However, not all the agencies
have posted all their reports on their websites and some of the
agencies' reports provide very little detail. Furthermore, on
the White House website, only the preliminary and final
retrospective review plans and January and May 2012 progress
reports are available.
a. Have all executive agencies submitted the five
required progress reports to your office so far? If
not, please provide the names of the agencies that have
not provided all the required reports.
b. What will the Office of Information and Regulatory
Affairs (OIRA) do to ensure that agencies make their
reports available on their websites within three weeks
of submission of the draft reports to OIRA, as directed
by Executive Order 13,610, and provide complete and
detailed information on their activities to the public?
Executive Order 13610 requires agencies to make final
reports available to the public within a reasonable period (not
to exceed three weeks from the date of submission of draft
reports to OIRA). All executive agencies are required to submit
progress reports and post them on their respective Open Gov
(www.agencyname.gov/open) websites. Agencies posted the most
recent reports on their Open Gov websites on July 29, 2013,
three weeks after submitting them to OIRA. All executive
agencies have submitted the five required progress reports to
date.
6. Some agencies appear to have done little more than
incorporate their regular, planned rulemaking activities into
their retrospective review reports. Agencies also are making
changes to new rules that have not yet been implemented and
claiming that the changes are part of retrospective review.
Other agencies are claiming that certain actions will reduce
burdens significantly, but the regulated entities have
indicated that the burden reduction estimates are significantly
overstated or fail to account for significant burden increases
associated with the same regulatory action. All of this
indicates that agencies are not taking the retrospective review
effort seriously and are not making genuine efforts to review
existing regulations.
a. Is OIRA scrutinizing agency progress reports and
asking agencies to remove items from the report that
are not truly retrospective review activities?
b. Is your office scrutinizing agencies' burden
reduction estimates to ensure that they are accurate?
c. If OIRA finds that an agency's burden reduction
estimates are inaccurate, what actions does OIRA take?
d. What will OIRA do to ensure that agencies are
actually reviewing existing significant regulations?
Agencies understand that they are expected to devote
significant resources to examine whether existing rules should
be modified or streamlined in order to remove unjustified
regulatory and paperwork burdens. OIRA works with agencies to
stress the importance of appropriately prioritizing and
thinking comprehensively about retrospective review.
OIRA reviews agency submissions of information collection
requests covered under the Paperwork Reduction Act, including
submissions that are submitted as part of a retrospective
review rulemaking. Consistent with the Paperwork Reduction Act,
agencies are required to provide a justification and
itemization of all estimates in their information collection
requests. Agencies also issue a 60-day Federal Register notice
as well as a 30-day Federal Register notice to seek comment on
the agency estimates. OIRA reviews the evidence provided by the
agency as well as any public feedback received during the
public comment periods to ensure that any information
collections meet applicable standards.
7. A December 2012 Governmental Accountability Office
report found that agencies did not publish a notice of proposed
rulemaking for about 35 percent of major rules and about 44
percent of non-major rules published between 2003 through 2010.
Agencies frequently cited the ``good cause'' exception and
other statutory exceptions as reasons to bypass notice and
comment rulemaking. This is particularly problematic for small
businesses because the Regulatory Flexibility Act (RFA) is
triggered by notice and comment rulemaking. What will you do to
ensure that exceptions are not inappropriately used to avoid
analytical requirements like the RFA and public input to the
rulemaking process?
I believe firmly in the value of a rulemaking agency
obtaining public comment during its development of a rule,
because public comment can improve agency's decision-making
process. Public comments can provide new information, different
perspectives, and ideas for alternative solutions. However, as
Congress recognized when it enacted the ``good cause''
exception in 1946, as a part of the original Administrative
Procedure Act (APA), there are situations in which it would be
``impracticable, unnecessary, or contrary to the public
interest'' for a rulemaking agency to seek public comment
before acting. In such a situation, an agency is required to
include an explanation for its use of the good cause exemption
in the preamble of the rule issued. That explanation is
included in any such rule that may be reviewed by OIRA under EO
12866. In addition, in cases where agencies use interim final
rules under the ``good cause'' exception, the public is
afforded an opportunity to assess the agency's use of interim
final procedures once the rule is published. With regard to how
the use of the ``good cause'' exception impacts agency
compliance with the Regulatory Flexibility Act, I defer to the
Small Business Administration's Office of Advocacy, which
oversees the implementation of that statute.
8. Agencies are avoiding the notice and comment rulemaking
process and imposing new burdens through guidance, memos and
other documents.
a. At your June 12, 2013 confirmation hearing before
the Senate Homeland Security and Government Affairs
Committee, you said, ``It is my view that substance
rather than labels should dictate OIRA's review.''
Could you elaborate on this statement? Will you direct
agencies to utilize the notice and comment rulemaking
process instead of issuing guidance, memos and other
documents when those issuances impose significant
burdens?
b. Are you concerned about agencies inappropriately
avoiding notice and comment rulemakings and thereby the
responsibility to give full consideration of impacts on
small businesses, among other protections?
c. There are concerns about the effort of the
Interagency Working Group (IWG), of which the Office of
Management and Budget is a participant, on the Social
Cost of Carbon (SCC). The expressed purpose of the IWG
effort is ``to incorporate the social benefit of
reducing CO2 emissions into cost-benefit analyses of
regulatory actions that impact global emissions.''
I. Is OIRA concerned t hat the calculated
SCC, which is now as much as $129 per ton of
CO2, may be used to justify the benefits of new
rules that impact small entities, yet the SCC
was established without a formal rulemaking,
review under the Data Quality Act, the RFA and
review or approval by Congress? If so, have
those concerns been expressed in any formal
way?
In your June 18, 2013 testimony before the House
Committee on Oversight and Government Reform
Subcommittee on Energy Policy, Health Care and
Entitlements you stated that the current SCC estimates
will be used in future rulemakings. You went on to
state that the public will have an opportunity to
comment on the SCC when it is used in a rulemaking.
Instead of forcing the public, including small
businesses with limited resources, to go through the
inefficient and duplicative process of commenting on
the SCC in multiple rules, why wasn't the updated SCC
published as a separate, stand-alone document in the
Federal Register for notice and public comment?
My statement was intended to express that the label on the
policy document is not the key factor determining whether
Executive Orders 12866 or 13563 apply. Executive Order 12866
defines a ``rule'' as ``an agency statement of general
applicability and future effect, which the agency intends to
have the force and effect of law, that is designed to
implement, interpret, or prescribe law or policy or to describe
the procedure or practice requirements of an agency.'' There
are instances when guidance and other non-binding statements
are useful to members of the public, because they provide
information about the agency's priorities or other
discretionary aspects of their mission. Therefore, OIRA does
not direct agencies to avoid these types of documents entirely.
However, we firmly support the lines established by both the
Administrative Procedure Act, which governs the legal process
for promulgating rules, and Executive Orders 12866 and 13563,
which govern regulatory planning and review.
As to your question about the Social Cost of Carbon, in
2009, an interagency working group developed recommendations
for agencies to use in estimating benefits from carbon
emissions reductions in agency rule making. These estimates
were based on the leading peer-reviewed academic models (DICE,
FUND, and PAGE) developed by researchers at Yale University,
Cambridge University, the University of Sussex and the
University of Michigan. These estimates were used by several
agencies in subsequent rules, with multiple opportunities
provided for public comment. At the time the 2010
recommendations were issued, the interagency group also
committed to periodically update the estimates to reflect
improvements in the underlying models over time. Commenters on
the initial use of these values also stressed the importance of
keeping them up-to-date. Since the original estimates were
developed, all three models have undergone significant
revisions which have been incorporated into their subsequent
use in the peer-reviewed literature. In early 2013, the
interagency group decided that it was appropriate to issue a
technical update to the estimates to reflect these changes to
the models. No changes were made to any of the assumptions used
to derive the estimates from the models, such as the
appropriate discount rates. The interagency group recommended
that agencies use a range of values, representing different
assumptions about discount rates and other factors. The values
also vary based on the year in which the emissions reductions
occur. For emissions reductions in 2015, the group recommended
that agencies use a range from $12 to $109 per ton, with a
central tendency estimate of $38 per ton. The purpose of the
recommendations is to improve the quality and consistency of
agency regulatory analyses. The recommendations are not rules.
Rather, they help ensure that future rulemaking affecting
carbon emissions is based on the best available scientific,
economic, and technical information.
As noted above, the revised estimates reflected technical
updates to the earlier estimates, based on changes to the
underlying models on which they were based that have been
incorporated into their subsequent use in the peer-reviewed
literature. The 2010 estimates were updated, as commenters
suggested and also as the IWG had committed to do on a periodic
basis when the recommendations were first issued. We expect and
welcome comments on the SCC values in the context of proposed
rules that are out for comment now and future proposed rules.
9. The RFA requires agencies to assess the impacts of
proposed and final regulations on small businesses and consider
alternatives that lessen burdens. Unfortunately, agencies still
do not fully comply with the law. President Obama recognized
this by issuing a January 18, 2011 memorandum on the Act. What
will you do to ensure that agencies comply with the RFA?
As you mentioned, on January 18, 2011, President Obama
issued a Presidential Memorandum entitled ``Regulatory
Flexibility, Small Business, and Job Creation.'' The memorandum
reminds Federal agencies of their responsibilities under the
Regulatory Flexibility Act and directs executive departments
and agencies to ``give serious consideration to whether and how
it is appropriate, consistent with law and regulatory
objectives, to reduce regulatory burdens on small businesses,
through increased flexibility.'' The memorandum goes on to
highlight specific forms of flexibility that agencies should
consider, including extended compliance dates that take into
account the resources available to small entities, performance
standards rather than design standards, simplification of
reporting and compliance requirements (as, for example, through
streamlined forms and electronic filing options), different
requirements for large and small firms, and partial or total
exemptions.
During OIRA review of proposed and final rules pursuant to
Executive Orders 12866 and 13563, OIRA works with agencies to
ensure that they fully comply with the requirements of the RFA,
and that they consider, and adopt where appropriate, the
flexibilities highlighted in the Presidential Memorandum. For
rules issued by the Environmental Protection Agency,
Occupational Health and Safety Administration, and Consumer
Financial Protection Bureau, OIRA also participates with the
Small Business Administration's (SBA) Office of Advocacy and
these rule writing agencies in Small Business Advocacy Review
Panels to solicit input and advice from affected small entity
representatives and provide recommendations to the rule writing
agency on alternatives for minimizing the burden of the rule on
small entities. OIRA also ensures that the SBA Office of
Advocacy is a full participant in the interagency review of all
rules that may have a significant impact on a substantial
number of small entities.
10. Section 602 of the RFA requires agencies to publish
regulatory flexibility agendas in the Federal Register each
April and October. The agendas provide small businesses notice
of regulatory actions agencies plan to take. The Spring 2012
regulatory agendas were never published. The Fall 2012 and
Spring 2013 regulatory agendas were published very late. Will
you commit to ensuring that the Obama Administration complies
with the law and publishes the agendas on time?
I will continue to work to publish the regulatory
flexibility agendas consistent with applicable law.
Rep. Chris Collins:
1. The FDA's menu-labeling proposal would require, for
example, pizza-delivery restaurants to label in-store menu
boards with calorie information forcing small businesses to
spend thousands of dollars for menu boards. In fact, your
agency estimated that the menu-labeling regulation would be the
third-most-onerous regulation proposed, requiring more than
14.5 million hours of compliance. If this single regulation
exceeds 14 million hours, what will be the expected compliance
impact of Obamacare, which even by conservative estimates has
10,000 pages of regulations?
When judging the merits of any regulation or piece of
legislation, it is important to look at net benefits (benefits
minus costs), not just costs. While OIRA does not typically
report on the aggregate costs of regulations associated with
particular pieces of legislation, we do issue a report to
Congress on the costs and benefits of each individual
regulation reviewed by our office. The most recent on these
reports was issued in April 2013 and is available on the OIRA
website. (http://www.whitehouse.gov/sites/default/files/omb/
inforeg/2013--cb/
draft--2013--cost--benefit--
report.pdf).
Rep. Richard Hanna:
1. In your testimony, you discussed the President's Quick
Pay Initiative, which we've been very supportive of as a
Committee. However, I'm concerned that despite all the fanfare
with which Quick Pay was announced, some might have missed the
Department of Defense's (DoD) February announcement (see
attachment) that it was going to stop participating in the part
of Quick Pay that helps small subcontractors be paid faster.
Since over 70 percent of federal contract are awarded by DoD,
that is a pretty important omission. In fact, in FY 2010, DoD
had subcontracts of more than $51.8 billion with small
businesses. What is being done by OIRA and OMB to encourage DoD
to follow the President's direction on Quick Pay?
OMB remains firmly committed to improving cash flow for
small businesses and increasing small business participation in
all levels of federal contracting--i.e., for prime contractors
and subcontractors. On July 11, 2013, OMB extended its 2012
policy pursuant to which agencies temporarily accelerate
payment to all prime contractors--with a goal of paying them
within 15 days of receipt of proper invoices--in order to allow
prime contractors to provide prompt payments to small business
contractors (see http://www.whitehouse.gov/sites/default/files/
omb/memoranda/2013/m-13-15.pdf). Unfortunately, due to the
negative impacts of sequestration on DOD's fiscal situation,
the Department was forced to temporarily suspend the QuickPay
policy for small business subcontractors. OMB has directed the
Federal Acquisition Regulatory Council to solicit public input
on alternative strategies that might be used over the longer
term to help maintain effective cash flow and prompt payment to
small business subcontractors, such as considering a prime
contractor's commitment to paying small business subcontractors
in a prompt manner as part of a contract award determination.
Rep. Tim Huelskamp:
1. According to the May 2013 Technical Support Document,
``Technical Update of the Social Cost of Carbon for Regulatory
Impact Analysis,'' the Office of Management and Budget (OMB)
participated in the Interagency Working Group (IWG) on the
Social Cost of Carbon (SCC).
a. Did a staff member of OIRA serve as an OMB
participant in the IWG? If yes, who was the
participant? Please provide a name and title. If not,
who represented OMB in the IWG? Please provide a name,
title and office.
b. Please provide a complete list of the names and
titles of all federal agency participants in the IWG.
c. When the SCC is used in any rulemaking or other
guidance documents that OIRA reviews, does OIRA
evaluate it in accordance with the Data Quality Act?
d. Please provide any and all documentation including
emails, correspondence, memoranda or meeting notes
describing OIRA's review(s) of the SCC.
OIRA staff participated in the IWG, along with the Council
on Economic Advisers, the Council on Environmental Quality, the
Department of Agriculture, the Department of Commerce, the
Department of Energy, the Department of Transportation, the
Environmental Protection Agency, the National Economic Council,
the Domestic Policy Council Office of Energy and Climate
Change, the Office of Management and Budget, the Office of
Science and Technology Policy, and the Department of Treasury.
The Technical Support Document explaining the work of the IWG
and the technical basis for the revised estimates is available
at http://www.whitehouse.gov/sites/default/files/omb/inforeg/
social--cost--of--carbon--
for--ria--2013--update.pdf.
Pursuant to the Data Quality Act (section 515(a) of the
Treasury and General Government Appropriations Act for Fiscal
Year 2001 (Public Law 106-554; H.R. 5658), OMB published
Government-wide Information Quality Guidelines (September 2001
(66 FR 49718), and February 2002 (67 FR 8452)). Those
guidelines, in turn, set the template for each agency's own
Information Quality Guidelines. It is the agency's
responsibility to ensure that they have conducted pre-
dissemination review. The more important the information, the
higher the quality standards to which the information should be
held. During the process of reviewing any regulation or
guidance document under applicable Executive Orders, OIRA
engages agencies in discussions to ensure that they have met
their obligations under their Information Quality Guidelines.
That discussion focuses on whether the quality, utility,
objectivity, and integrity of the information upon which policy
decisions and supporting regulatory analysis are based is
commensurate with its use.
2. Is the Clean Water Protection Guidance currently under
12866 review by OIRA a review of the definition of navigable
waters by the EPA? If so, will OIRA take into consideration
decreased agricultural production if farmers are no longer able
to treat their fields because of this guidance? Specifically,
would OIRA take into account lower yields and higher food
prices? With regards to this or any other guidance under review
by OIRA, are impacted entities required under the
Administrative Procedures Act to treat guidance as having the
force and effect of law before OIRA completes its review?
Please provide any and all documentation including emails,
correspondence, memoranda or meeting notes regarding this
review.
The proposed Clean Water Protection Guidance would provide
guidance to field staff at EPA and the US Army Corps of
Engineers on making case-by-case determinations regarding
whether specific water bodies are ``navigable waters'' and thus
subject to Clean Water Act requirements. By definition,
guidance does not have the force and effect of law, whether
issued in final or draft form and regardless of review by OIRA
or any other entity. The draft final guidance currently under
review includes an analysis of its potential economic impacts
and OIRA is carefully considering these impacts in reviewing
the draft guidance.
3. OIRA is currently reviewing the following proposed
rule--Standards of Performance for Greenhouse Gas Emissions
from New Stationary Sources: Electric Utility Generation Units.
According to the proposed rule as published in the Federal
Register, EPA notes that it will have no cost before 2030
essentially because no new plants would be built that could
comply with the rule before 2030. Under this rationale, the
federal government could pass a series of rules that stop the
expansion of every sector of the economy and say that it has no
cost.
a. Explain how a 17-year delay in the ability of the
economy to comply with this proposed rule would comport
with President Obama's directive to ``protect public
health, welfare, safety and our environment while
promoting economic growth, innovation, competitiveness,
and job creation'' in Executive Order 13563.
b. Explain how EPA may use a ``transitional''
designation on generation units that have already
acquired a preconstruction permit and begin
construction within 12 months. Will the 12 months begin
from submission by EPA in 2013 or the original notice
in 2012 (in which case the 12 months would be passed)?
What standards would ``transitional'' facilities fall
under? Does any action by another agency or court toll
the 12-month time period to begin construction?
c. Did OIRA or EPA estimate the cost of constructing
new generation units with new technology after 2030
with the understanding that the technology could come
online sooner? Why or why not?
d. Does OIRA or EPA take into consideration higher
costs to the economy of higher energy prices resulting
from reduced supply when no new generation units are
constructed for the next 17 years? Why or why not?
e. Does OIRA or EPA take into consideration higher
costs to the economy that may result from rolling
brownouts or blackouts that might occur from a reduced
supply when no new generation units are constructed for
the next 17 years? Why or why not?
f. Does OIRA or EPA take into consideration higher
costs to the economy that may result from fewer jobs
being created in the construction or ongoing energy
production industries when no new generation units are
constructed for the next 17 years? Why or why not?
g. Please provide any and all documentation including
emails, correspondence, memoranda or meeting notes
regarding this review.
Information regarding EPA's analysis of the costs and
benefits of its June 2012 proposed rule can be found in the
publicly available rulemaking docket at http://
www.regulations.gov/#!documentDetail;D=EPA-HQ-OAR-2011-0660-
0001.
The Clean Air Act requires that documents associated with
OMB review be disclosed to the public when a rule is published.
Those documents associated with the review of the original
proposal are available in the EPA rulemaking docket at http://
www.epa.gov/dockets/ and when EPA publishes the re-proposal,
the documents associated with OMB review of the re-proposal
will be available here as well. In addition, information
provided to OMB during public meetings is available on our
website at http://www.whitehouse.gov.gov/omb/
oira--meetings/. /.
Rep. Donald Payne:
1. I understand that retrospective regulatory reviews are
not new and are certainly needed, particularly to address
outdated mandates that become burdens. However, the length of
the review process for new rules from the OIRA can be
burdensome as well. Just as regulatory reviews are important,
many new rules offered by agencies address new dangers and
important updates in areas such as food safety, minimum wage
and worker safety- all areas that have a real time impact on
the life of Americans. Just before you were confirmed, 70 of
the more than 120 rules submitted to OIRA had been under review
longer than 90 days. What are you doing to address this
burdensome delay?
It is one of my top priorities to make sure OIRA reviews
regulations in a timely fashion. Notably, since earlier this
year, OIRA has cut in half the number of rules that were under
review for more than 200 days, and continues to make steady
progress on bringing that number down. That said, more work is
necessary. I will continue to work with staff on completing the
review of rules that have been at OIRA for a substantial length
of time, while ensuring that reviews continue to be thoughtful
and careful.
2. A December 2012 GAO report found that agencies, though
not required, often requested comments on major final rules
issued without a Notice of Proposed Rule Making, but they did
not always respond to the comments received. However, when
agencies responded to public comments they often made changes
to improve the rules. Many of these rules have an impact of a
billion dollars a year or more. Further, courts have recognized
that the opportunity to comment is meaningless unless the
agency responds to significant points raised by the public. How
are you working with agencies to ensure that the public is
truly engaged in the rule making process?
Please see my answer to Question 7 from Chairman Graves. As
a general matter, OIRA encourages agencies to issue final rules
that demonstrate the agency's consideration of the comments
received during the comment period, and Executive Order 13563
emphasizes the importance of adopting regulations ``through a
process that involves public participation.''
3. Several retrospective reviews and subsequent proposals
focus on relieving paper burdens and transitioning to or
strengthening the use of technology. How have the proposals to
increase the use of technology taken into account small
businesses owners who may not be tech-savvy?
Consistent with the Paperwork Reduction Act, agencies issue
a 60-day Federal Register Notice as well as a 30-day Federal
Register Notice seeking comment on all information collection
requests (ICRs). OIRA will review these ICRs to ensure
practical utility and to make sure proposals to increase the
use of technology take into account small business owners who
may not be tech-savvy.
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