[Congressional Record Volume 141, Number 4 (Monday, January 9, 1995)]
[Senate]
[Pages S646-S653]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




STATEMENT OF THE CHAIRMAN ON THE REPORTING BY THE GOVERNMENTAL AFFAIRS 
         COMMITTEE OF S. 1--UNFUNDED MANDATE REFORM ACT OF 1995

  Mr. ROTH. Mr. President, this morning the Governmental Affairs 
Committee, by a vote of 9 to 4, reported S. 1, the Unfunded Mandate 
Reform Act of 1995. Because of the great importance of this legislation 
to the State and local governments of this country, the bill is 
expected to be taken up by the Senate this week. Therefore, no official 
report of the committee will be filed on this legislation. To do so 
would delay the start of the bill's consideration. When a report is to 
be filed, each Member is entitled to a minimum of 3 days to prepare 
additional views. After it is filed, printed, and made available, the 
bill must lay over for 2 days before it may be considered.
  Therefore, I am publishing instead a statement of the chairman on S. 
1, which contains the very information, such as a legislative history 
and a section-by-section analysis, that would have been included in the 
report to accompany the legislation, had one been filed. Much of this 
is similar to the official committee report that was filed on the bill 
last year, when the committee reported S. 993, the predecessor of S. 1.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

Statement of the Chairman, Senate Committee on Governmental Affairs, on 
               S. 1--Unfunded Mandate Reform Act of 1995


                               i. purpose

       The purpose of S. 1--the ``Unfunded Mandate Reform Act of 
     1995''--is to strengthen the partnership between Federal, 
     State, local and tribal governments by ensuring that the 
     impact of legislative and regulatory proposals on those 
     governments are given full consideration in Congress and the 
     Executive Branch before they are acted upon. S.1 accomplishes 
     this objective through the following major provisions: a 
     majority point of order in the Senate to lie against Federal 
     mandates without authorized funding to State, local and 
     tribal governments; a requirement that the Congressional 
     Budget Office (CBO) estimate the cost of Federal mandates to 
     State, local and tribal governments as well as to the private 
     sector; a requirement that Federal agencies establish a 
     process to allow State, local and tribal governments greater 
     input into the regulatory process; and, a requirement that 
     agencies analyze the costs and benefits to State, local, and 
     tribal governments of major regulations that include federal 
     mandates.


                             ii. background

       On October 27, 1993, State and local officials from all 
     over the Nation came to Washington and declared that day as 
     ``National Unfunded Mandates Day.'' These officials conveyed 
     a powerful message to Congress and the Clinton Administration 
     that unfunded Federal mandates imposed unreasonable fiscal 
     burdens on their budgets, limited their flexibility to 
     address more pressing local problems, forced local tax 
     increases and service cutbacks, and hampered their ability to 
     govern effectively.
       The Committee on Governmental Affairs heard that message, 
     and on November 3rd scheduled a Full Committee hearing on the 
     issue. Witnesses from all levels of State and local 
     government, from big cities on down to small townships, 
     testified at the hearing on how unfunded Federal mandates 
     adversely affected their ability to govern and set 
     priorities. Mayor Greg Lashutka of Columbus, Ohio summed up 
     the problems best when he said: ``Others have called it 
     [unfunded Federal mandates] spending without representation. 
     Across this country, mayors and city councils and county 
     commissioners have no vote on whether these mandated 
     spending programs are appropriate for our cities. Yet, we 
     are forced to cut other budget items or raise taxes or 
     utility bills to pay for them because we must balance our 
     budget at our level.''
       Mayor Ed Rendell of Philadelphia, Pennsylvania was more 
     emphatic: ``What is happening is we are getting killed. In 
     most instances, we can't raise taxes. Many townships are at 
     the virtual legal cap that their State government puts on 
     them, or in my case in Philadelphia I took over a city that 
     had a $500 million cumulative deficit that had raised four 
     basic taxes 19 times in the 11 years prior to my becoming 
     mayor. We have driven out 30 percent of our tax base in that 
     time. I can't raise taxes, not because I want to get 
     reelected or because it is politically feasible to say that, 
     but because that would destroy what is left of our base, and 
     our base isn't good enough.''
       Further, Mayor Rendell noted how Federal mandates forced 
     undesirable tradeoffs against tackling more needy local 
     problems: ``So when you pass a mandate down to us and we have 
     to pay for it, the police force goes down, the firefighting 
     force goes down. Recreation departments are in disrepair. Our 
     rec centers are in disrepair because our capital budget is 
     being sopped up by Federal mandates, by the need to pay for 
     Federal mandates.''
       Susan Ritter, County Auditor, Renville County, North 
     Dakota, and David Worhatch, Township Trustee, Hudson, Ohio 
     gave their perspective of how Federal mandates negatively 
     impact the smallest of governments with a description of some 
     specific examples. Ms. Ritter noted that the town of 
     Sherwood, with a population of 286, will have to spend one 
     half of its annual budget on testing its water supply. Mr. 
     Worhatch noted how well-intentioned Federal mandates can have 
     unintended consequences at a township-level that thwart the 
     original purpose of the mandate. He pointed to strict 
     regulations that could force the closure of a local landfill. 
     That closure could lead to greater midnight dumping--an 
     undesirable result.
       The Federal-State-local relationship is a complicated one. 
     It is a blurry line between where one level of government's 
     responsibility ends and another begins. Local officials decry 
     unfunded State mandates as much as they do unfunded Federal 
     ones. State officials then tell local officials that those 
     mandates aren't theirs, but rather that they come from the 
     Federal government and that States are just the conduit. 
     The Federal government officials sometimes accuse State 
     and local governments of falling down on their share of 
     responsibilities when using Federal aid to carry out a 
     Federal program. Likewise, State and local governments say 
     that the regulations that go with accepting that aid are 
     too onerous, and getting more so. They blame Federal 
     agencies for promulgating burdensome and inflexible 
     regulations. The agencies say that it is not their fault 
     and claim that they are only carrying out the will of 
     Congress in implementing statutes. Congress asserts that 
     agencies have the statutory authority to allow State and 
     local governments more leeway and flexibility in 
     regulation and that therefore the responsibility lies 
     there. What is lost in the debate is need for all levels 
     of government to work together in a constructive fashion 
     to provide the best possible delivery of services to the 
     American people in the most cost-effective fashion. Vice 
     President Gore's National Performance Review recognizes 
     this fundamental issue in its report--``Strengthening the 
     Partnership in Intergovernmental Service Delivery.'' The 
     report notes:
       ``Americans increasingly feel that public institutions and 
     programs aren't working. In fact, serious social and economic 
     problems seem to be getting worse. The percentage of low-
     birth-weight babies, the number of single teens having 
     babies, and arrest rapes for juveniles committing violent 
     crimes are rising; the percentage of children graduating from 
     high school is falling; welfare rolls and prison populations 
     are swelling; median incomes for families with children are 
     falling; more than half of children in female-headed 
     households are poor; and 37 million Americans have no basic 
     health care or not enough.''
       ``Why? At least part of the answer lies in an increasingly 
     hidebound and paralyzed intergovernmental process.''
       The report goes on to explain how the 140 Federal programs 
     designed to help families and children are administered by 10 
     departments and 2 independent agencies. Fifteen percent of 
     them are directly administered by the Federal government, 40 
     percent by States, and the remaining 40 percent by local, 
     private or public groups.
       Whether these programs, as well as many other Federal 
     programs, work or not hinges on the ability of Federal, State 
     and local to work together as partners in carrying the 
     [[Page S647]] program's responsibilities. When that 
     coordination breaks down, the whole program suffers and 
     program's objectives, be they improved environmental 
     protection, reduced crime, better education, etc., fall 
     short.
       State and local officials emphasized in the Committee's 
     hearings of November 3, 1993, April 28, 1994, and January 5, 
     1995, that over the last decade the Federal government has 
     not treated them as partners in the providing of effective 
     governmental services to the American people, but rather as 
     agents or extensions of the Federal bureaucracy. In their 
     view this lack of coordination and cooperation has not only 
     effected the provision of services as a local level but also 
     carriers with it the penalty of high costs, costs that they 
     then pass on to local citizens.

     A. The cost of Federal mandates to State and local governments

       There has been substantial debate on the actual costs of 
     Federal mandates as well as on their indirect costs and 
     benefits. Suffice it to say that almost all participants in 
     the debate would conclude that there is not complete data on 
     the aggregate cost of Federal mandates to State and local 
     governments. So there is a need to develop a baseline of what 
     the aggregate cost of Federal mandates is to State and local 
     budgets.
       Notwithstanding the difficulty in preparing reliable cost 
     estimates, the Committee believes that a strengthened and 
     more thorough analytical process applied to legislation and 
     regulation that impacts State, local and tribal governments 
     is not only worthwhile, but achievable. There have been good 
     faith efforts made in the past to measure the cost impacts of 
     Federal intergovernmental mandates.
       The Advisory Commission on Intergovernmental Relations' 
     (ACIR) 1993 report ``Federal Regulation of State and Local 
     Governments: The Mixed Record of the 1980s'' examined the 
     procedures by which Congress measures the impact of 
     legislation on State and local governments. Since 1981, the 
     Congressional Budget Office (CBO) has been preparing cost 
     estimates on major legislation reported by Committee that is 
     expected to have an annual cost to State and local 
     governments in excess of $200 million. According to CBO, on 
     average roughly 10 to 20 reported bills per year exceed to 
     $200 million threshold. These figures translate to between 2 
     and 4 percent of the total number of bills reported out of 
     Committee. CBO estimates that about 11 percent of all bills 
     reported out of Committee each year have some cost impact on 
     State and local governments. A breakout on a year-by-year 
     basis between 1983 and 1988 is shown below.

                       TABLE 5-5.--STATE AND LOCAL COST ESTIMATES PREPARED BY CBO, 1983-88                      
----------------------------------------------------------------------------------------------------------------
     Estimates prepared         1983      1984      1985      1986      1987      1988       Total      Average 
----------------------------------------------------------------------------------------------------------------
For bill approved by                                                                                            
 committee..................       483       554       367       465       393       559       2,821         470
Other.......................        90        87       166       125       138       127         733         122
                             -----------------------------------------------------------------------------------
      Total.................       573       641       533       590       531       686       3,554         592
                             ===================================================================================
Estimates with no state/                                                                                        
 local cost.................       496       584       488       543       448       598       3,157         526
Percent.....................        87        91        92        92        84        87          89          89
Estimates with some cost....        77        57        45        47        83        73         382          64
Percent.....................        13         9         8         8        16        11          11          11
Estimates with impact above                                                                                     
 $200 million...............        24         6        14         8        22        15          89          15
Percent of total............         4         1         3         1         4         2           3           3
Percent of bills with some                                                                                      
 cost.......................        31        11        31        17        26        21          23         23 
----------------------------------------------------------------------------------------------------------------
Source.--Congressional Budget Office Bill Estimates Tracking System, in Theresa A. Gullo, ``Estimating the      
  Impact of Federal Legislation on State and Local Governments,'' in Michael Fix and Daphne A. Kenyon, eds.,    
  ``Coping with Mandates: What Are the Alternatives?'' (Washington, DC: Urban Institute Press, 1990), p. 43.    

       The Committee also asked CBO to provide it with more recent 
     cost estimates and to examine the number of bills that cross 
     a $100 million annual threshold. In 1991, CBO scored 5 bills 
     to cost State and local governments in excess of $100 million 
     apiece. Another 8 bills had significant costs to State and 
     local governments, but fell under the $100 million threshold. 
     Further, CBO determined that for another 6 pieces of 
     legislation for which they were unable to come up with 
     specific estimates--5 bills would probably fall under the 
     $100 million mark, one would probably exceed that total.
       In testimony before the Committee on April 28, 1994, Dr. 
     Robert Reischauer, Director of CBO, noted that preparing 
     thorough and reliable State and local cost estimates is not 
     easy. He presented the following reasons for the difficulty 
     CBO sometimes has in preparing the estimates: Preparing the 
     estimates requires the use of many different methodologies; 
     the estimating process does not always yield firm estimates. 
     Further, completing the estimates does take time--time that 
     may not be readily available in the normal legislative 
     process; and, legislative language may lack the detail 
     necessary to estimate the costs.
       Dr. Reischauer further stated that these constraints apply 
     even more so to the preparation of cost estimates on private 
     sector mandates. The Committee does believe that part of 
     CBO's difficulty in performing these estimates lies in CBO 
     not having adequate resources to conduct the estimates. 
     Therefore, S. 1 authorizes an increase in funding for CBO of 
     $4.5 million for each of Fiscal Years 1996 through 2002. 
     CBO's budget currently stands at just over $23 million.
       Federal environmental mandates head the list of areas that 
     State and local officials have claimed to be most burdensome. 
     A closer look at two of the studies done on the cost to State 
     and local governments of compliance with environmental 
     statutes does indicate these costs appear to be rising. A 
     1990 EPA study (prepared in conjunction with the 
     Environmental Law Institute) ``Environmental Investments: The 
     Cost of a Clean Environment,'' estimates that total costs of 
     environmental mandates (from all levels of government) to 
     State and local governments will rise (in constant 1986 
     dollars) from $22.2 billion in 1987 to $37.1 billion by the 
     year 2000--a real increase of 67 percent. According to the 
     Vice President's National Performance Review report on the 
     EPA, this figure when adjusted for inflation reaches close to 
     $44 billion on an annual basis by the year 2000. EPA 
     estimates that costs to local government will increase the 
     most (70 percent) while the impact on State governments is 
     less (48 percent), but still significant. Over the 13 year 
     span, the average real increase in costs to State and local 
     governments translates to 5.2 percent on an annual basis. A 
     table is included as follows:

 TABLE I-2.--TOTAL ANNUALIZED COSTS OF ENVIRONMENTAL MANDATES BY FUNDING
                           SOURCES, 1972-2000                           
                      [In millions of 1986 dollars]                     
------------------------------------------------------------------------
    Funding source        1972      1980      1987      1995      2000  
------------------------------------------------------------------------
Environmental                                                           
 Protection Agency....      $978    $4,574    $6,578    $9,161   $10,409
Other Federal Agencies        87     1,932     2,649     7,970    11,670
State Government......     1,542     2,230     3,025     3,911     4,476
Local Government......     7,673    12,857    19,162    27,913    32,577
Private...............    16,201    36,376    53,696    76,101    88,772
                       -------------------------------------------------
      Total...........    26,481    57,969    85,290   125,056   147,904
------------------------------------------------------------------------
Source.--U.S. Environmental Protection Agency, ``Environmental          
  Investments: The Cost of a Clean Environment'' (Washington, DC: U.S.  
  Environmental Protection Agency, 1990) selected data from pp. 8-49    
  through 8-51. These estimates use a mid-range discount rate of 7      
  percent and include funding to meet EPA's air, water, land, chemicals,
  and multi-media regulations.                                          

       The City of Columbus, Ohio also noted a trend in rising 
     costs for city compliance with Federal environmental mandates 
     in its study: ``Environmental Legislation: The Increasing 
     Costs of Regulatory Compliance to the City of Columbus.'' The 
     City examined its cost of compliance with 13 Federal 
     environmental and health statutes and concluded that its cost 
     of compliance with those statutes would rise from $62.1 
     million in 1991 to $107.4 million in 1995 (in 1991 constant 
     dollars), a 73 percent increase. The City estimates that its 
     share of the total city budget going to pay for these 
     mandates will increase from 10.6 percent to 18.3 percent over 
     that timeframe. These calculations were based on 
     an unchanging total city budget between 1991 and 1995; 
     assuming a 3 percent annual real growth rate in the budget 
     reveals a lesser increase from 10.6 percent to 16.1 
     percent.
       In addition to environmental requirements, State and local 
     officials cite other Federal requirements as burdensome and 
     costly: compliance with the Americans with Disabilities Act 
     and the Motor Voter Registration Act; complying with the 
     administrative requirements that go with implementing many 
     Federal programs; meeting Federal criminal justice and 
     educational program requirements. While all these programs 
     clearly carry with them costs to State and local governments, 
     they can have benefits both to society as a whole--a fact 
     that State and local officials concede. It is the aggregate 
     impact of all Federal mandates that has spurred the calls for 
     mandate reform and relief. However, to truly reach a better 
     understanding of the Federal mandates debate, it is necessary 
     to look at the Federal funding picture.

             B. Federal aid to State and local governments

       It is readily apparent that Federal discretionary aid to 
     State and local governments both to implement Federal 
     policies and directives as well as to comply with them saw a 
     sharp drop in the 1980s before rising again in the early 
     1990s--although in real terms Federal aid is still 
     significantly below its earlier levels.
       An examination of Census Bureau data on sources of State 
     and local government revenue shows a decreasing Federal role 
     in funding to State and local governments. In 1979, the 
     Federal government's contribution to State and local 
     government revenues reached 18.6 percent. By 1989, the 
     Federal share of the State and local revenue pie had steadily 
     shrank to 13.2 percent before edging [[Page S648]] up to 14.3 
     percent in 1991--the latest year that data is available (see 
     accompanying chart).

  The Federal Government's contribution to State and local government 
                        revenues\1\ (1970-1991)

                          Percent of State and local government revenue
Year:
  1970.............................................................14.6
  1971.............................................................15.8
  1972.............................................................16.4
  1973.............................................................18.0
  1974.............................................................17.6
  1975.............................................................17.8
  1976.............................................................18.3
  1977.............................................................18.5
  1978.............................................................18.7
  1979.............................................................18.6
  1980.............................................................18.4
  1981.............................................................17.8
  1982.............................................................15.9
  1983.............................................................15.2
  1984.............................................................14.9
  1985.............................................................14.7
  1986.............................................................14.4
  1987.............................................................13.6
  1988.............................................................13.3
  1989.............................................................13.2
  1990.............................................................13.3
  1991.............................................................14.3

\1\U.S. Census Bureau--Government Finances Series, 1970-1991. Chart 
tabulated by Staff of Senate Committee on Governmental Affairs.

       A closer look at patterns in Federal discretionary grants-
     in-aid programs during the 1980s confirms the finding that 
     the Federal government lessened its financial support of 
     State and local governments. According to the Federal Funds 
     Information Service (FFIS), between 1981 and 1990 Federal 
     discretionary funding to State and local governments rose 
     from $47.5 billion to $51.6 billion, a nominal increase of 
     8.6. percent. However, this figure when adjusted for 
     inflation (using the GDP Price Deflator) tells a much 
     different story: Federal aid dropped 28 percent over the 
     decade--a 3.1 percent real decline on an annual average 
     basis.
       A number of significant Federal aid programs to State and 
     local governments experienced sharp cuts and, in some cases, 
     outright elimination during the decade. In 1986, the 
     Administration and Congress agreed to terminate the general 
     revenue sharing program--a program that provided 
     approximately $4.5 billion annually to local governments and 
     allowed them broad discretion on how to spend the funds. 
     Since its inception in 1972, general revenue sharing had 
     provided approximately $83 billion to State and local 
     governments. Funding for Urban Development Action Grants, 
     another significant program, was also terminated within 
     this timeframe.
       Between 1981 and 1990, funding for numerous Federal-State-
     local government grant programs was substantially trimmed, 
     among them: Economic Development Assistance (47.5 percent--
     decrease is in nominal dollars), Community Development Block 
     Grants (21.1 percent), Mass Transit (30.2 percent), Refugee 
     Assistance (38.4 percent), and Low-Income Home Energy 
     Assistance (17.6 percent). These cuts were partially offset 
     by increases in funding in other areas--primarily in housing 
     and health and human services programs.
       The early 1990s saw a resurgence in funding for Federal-
     State-local discretionary aid programs. Funding rose from 
     $51.6 billion in 1990 to $67.4 billion in 1993, a nominal 
     increase of 30.6 percent and an inflation-adjusted average 
     annual gain of 5.6 percent. This growth was driven primarily 
     by expansions in funding for Head Start, Highway Funding, and 
     Compensatory Education. Still, even with this recent growth, 
     between 1980 and 1993 discretionary funding declined 18.2 
     percent in real dollars--an average annual real decrease of 
     1.4 percent.
       In simple terms, over the last decade or so, State and 
     local governments have gotten less of the Federal carrot and 
     more of the Federal stick. The Committee has responded to 
     State and local officials' calls for change, and has reported 
     out bipartisan mandate reform legislation.


                        III. LEGISLATIVE HISTORY

       In the 103rd Congress, eight bills were introduced and 
     referred to the Committee that addressed, at least in part, 
     the subject of Federal mandates on State and local 
     governments. Bill sponsors included: S. 480--Levin; S. 563--
     Moseley-Braun; S. 648--Gregg; S. 993--Kempthorne; S. 1188--
     Coverdell; S. 1592--Dorgan; S. 1604--Glenn; and, S. 1606--
     Sasser. Several major concepts were contained in most of the 
     bills, among them: analysis of the costs of legislation and 
     regulation on State and local governments; a prohibition or 
     restriction on new Federal mandates without funding; and, 
     points of order enforcement. Senator Kempthorne's 
     legislation, the original S. 993--the ``Community Regulatory 
     Relief Act of 1993''--had the strongest support, with more 
     than 50 cosponsors. After two hearings and extensive meetings 
     and discussions with State and local government 
     organizations, the Administration, Senators and their 
     staff, and the public interest community, the Committee 
     crafted a legislative proposal that drew from many of the 
     provisions of the eight bills, as well as incorporating 
     several new provisions.
       On June 16, the Committee marked up and reported out S. 993 
     with an amendment and an amendment to the title. Chairman 
     Glenn offered a substitute bill to the original Kempthorne 
     Bill, titled the ``Federal Mandate Accountability and Reform 
     Act of 1994'', which passed by unanimous voice vote. Several 
     other amendments offered by members of the Committee were 
     also adopted, including an amendment by Senator Dorgan to 
     include the private sector under the CBO and Committee 
     mandate cost analysis requirements of Title I of S. 993, and 
     a Glenn amendment to allow CBO to waive the private sector 
     cost analysis if CBO cannot make a ``reasonable estimate'' of 
     the bill's cost.
       S. 993 as amended and reported by the Committee was 
     considered by the Senate on October 6, 1994, without a time 
     agreement. After some debate and the introduction of several 
     additional amendments to the bill, the Senate proceeded to 
     other items without taking any votes. The Senate adjourned 
     without further consideration of S. 993.
       In the 104th Congress, Senator Kempthorne introduced S. 1--
     the ``Unfunded Mandate Reform Act of 1995''--on January 4, 
     1995, and the bill was concurrently referred both to the 
     Governmental Affairs Committee. On January 5, the 
     Governmental Affairs Committee held a joint hearing on the 
     bill with the Budget Committee. On January 9, the 
     Governmental Affairs Committee voted to report the bill, S. 
     1, by a vote of 9-4 after adopting an amendment by Senator 
     Glenn and two by Senator Levin. Voting ``aye'' were Senators 
     Roth, Stevens, Cohen, Thompson, Cochran, Grassley, Smith, 
     Glenn, and Nunn (with Senators McCain and Dorgan voting 
     ``aye'' by proxy). Voting ``nay'' were Senators Levin, Pryor, 
     Lieberman, and Akaka.


                    IV. SECTION-BY-SECTION ANALYSIS

       S. 1 sets up a legislative and regulatory framework that is 
     based on three relatively simple concepts:
       To better understand the impact of Federal mandates on 
     State, local and tribal governments, and on the private 
     sector, before policymakers act in either the Congress or the 
     Executive Branch.
       To ensure that the needs and views of State and 
     local governments are given full consideration before the 
     Congress or the Executive Branch imposes new Federal 
     mandates without funding.
       To establish a point of order in the Congress against 
     unfunded federal mandates on State, local and tribal 
     governments.
       A more detailed description of the most important 
     provisions in the bill follows below.

                         Section 1. Short Title

       This section identifies the short title as the ``Unfunded 
     Mandate Reform Act of 1995.''

                          Section 2. Purposes

       This section establishes the purposes of the Act.

                         Section 3. Definitions

       This section breaks the definition of Federal mandates into 
     two components: Federal intergovernmental mandates and 
     Federal private sector mandates.
       The section amends the Congressional Budget and Impoundment 
     Control Act of 1974, by adding several new definitions. It 
     stipulates that a ``Federal intergovernmental mandate'' means 
     any legislation, or a provision therein, or regulation that 
     imposes a legally binding duty on State, local or tribal 
     governments. This would include legislation or regulation 
     that seeks to eliminate or reduce the authorization of 
     appropriations of Federal financial assistance to State, 
     local and tribal governments should they not comply with that 
     legislation's or regulation's duties. The subsection also 
     provides that legislation or regulation would be considered a 
     Federal intergovernmental mandate if it sought to reduce or 
     eliminate an existing authorization of appropriations for the 
     purposes of complying with some previously imposed duty. The 
     Committee believes that if the Federal Government imposes 
     legally binding duties on State, local or tribal governments, 
     and provides financial assistance to them to carry out or 
     comply with those duties, then S. 1's provisions should apply 
     if the Federal government subsequently reduces the 
     authorization of that aid, while continuing to keep the 
     existing duties in place. Exempted from the provisions of 
     this subsection is legislation or regulation that authorizes 
     or implements a voluntary discretionary aid program to 
     State, local and tribal governments that has requirements 
     or conditions of participation specific to that program.
       Included, as part of the definition of Federal 
     intergovernmental mandates, are Federal entitlement programs 
     that provide $500 million or more annually to State, local or 
     tribal governments. This would currently include nine large 
     Federal entitlement programs, seven of which are either 
     exempt from sequestration or subject to a special rule under 
     the Budget Act. The nine are: Medicaid; AFDC; Child 
     Nutrition; Food Stamps; Social Security Block Grants; 
     Vocational Rehabilitation State Grants; Foster Care, Adoption 
     Assistance, and Independent Living; Family Support Welfare 
     Services; and, Child Support Enforcement. Any legislation or 
     regulation would be considered a Federal intergovernmental 
     mandate if it: (a) increases the stringency of State, local 
     or tribal government participation in any one of these nine 
     programs, or (b) caps or decreases the Federal government's 
     responsibility to provide funds to State, local or tribal 
     governments to implement the program, including a shifting of 
     costs from the Federal government to those governments. The 
     legislation or regulation would not be considered a Federal 
     intergovernmental [[Page S649]] mandate if it allows those 
     governments the flexibility to amend their specific 
     programmatic or financial responsibilities within the program 
     while still remaining eligible to participate in that 
     program. In addition to the nine previously-mentioned 
     programs, also included are any new Federal-State-local 
     entitlement programs (above the $500 million threshold) that 
     may be created after the enactment of this Act. The Committee 
     has included this provision in the legislation because of its 
     concern over past and possible future shifting of the costs 
     of entitlement programs by the Federal government onto State 
     governments.
       ``Federal private sector mandate'' is defined to include 
     any legislation, or a provision therein, that imposes a 
     legally binding duty on the private sector.
       ``Direct costs'' is defined to mean aggregate estimated 
     amounts that State, local and tribal governments, and the 
     private sector will have to spend in order to comply with a 
     Federal mandate. Direct costs of Federal mandates are net 
     costs; estimated savings will be subtracted from total costs. 
     Further, direct costs do not include costs that State, local 
     and tribal governments and the private sector currently incur 
     or will incur to implement the requirements of existing 
     Federal law or regulation. In addition, the direct costs of a 
     Federal mandate must not include costs being borne by those 
     governments and the private sector as the result of 
     carrying out a State or local government mandate. Finally, 
     the Committee intends that direct costs be calculated on 
     the assumption that State, local and tribal governments 
     and the private sector are in compliance with relevant 
     codes and standards of practice established by recognized 
     professional organizations or trade associations.
       ``Private sector'' is defined to cover all persons or 
     entities in the United States except for State, local or 
     tribal governments. It includes individuals, partnerships, 
     associations, corporations, and educational and nonprofit 
     institutions.
       Independent regulatory agencies are excluded from the 
     definition of a Federal ``agency''. The definition of ``small 
     government'' is made consistent with existing Federal law 
     which classifies a government as small if its population is 
     less than 50,000. ``Tribal government'' is defined according 
     to existing law.

                         Section 4. Exclusions

       The Committee believes that several types of unfunded 
     mandates should be properly excluded from the requirements of 
     this Act. These include Federal legislation or regulation 
     that: enforces constitutional rights of individuals; 
     establishes or enforces statutory rights to prohibit 
     discrimination on the basis of race, religion, gender, 
     national origin, or handicapped or disability status; 
     requires compliance with Federal auditing and accounting 
     procedures; provides emergency relief assistance or is 
     designated as emergency legislation; and, is necessary for 
     national security or ratification or implementation of 
     international treaties.
       A number of these exemptions are standard in many pieces of 
     legislation in order to recognize the domain of the President 
     in foreign affairs and as Commander-in-Chief as well as to 
     ensure that Congress' and the Executive Branch's hands are 
     not tied with procedural requirements in times of national 
     emergencies. Further, the Committee thinks that Federal 
     auditing, accounting and other similar requirements designed 
     to protect Federal funds from potential waste, fraud, and 
     abuse should be exempt from the Act.
       The Committee recognizes the special circumstances and 
     history surrounding the enactment and enforcement of Federal 
     civil rights laws. During the middle part of the 20th 
     century, the arguments of those who opposed the national, 
     uniform extension of basic equal rights, protection, and 
     opportunity to all individuals were based on a States 
     rights philosophy. With the passage of the Civil Rights 
     Acts of 1957 and 1964 and the Voting Rights Act of 1965, 
     Congress rejected that argument out of hand as designed to 
     thwart equal opportunity and to protect discriminatory, 
     unjust and unfair practices in the treatment of 
     individuals in certain parts of the country. The Committee 
     therefore exempts Federal civil rights laws from the 
     requirements of this Act.

                      Section 5. Agency Assistance

       Under this section, the Committee intends for Federal 
     agencies to provide information, technical assistance, and 
     other assistance to the Congressional Budget Office (CBO) as 
     CBO might need and reasonably request that might be helpful 
     in preparing the legislation cost estimates as required by 
     Title I. Through the implementation of various Presidential 
     Executive Orders over the last decade, agencies have 
     developed a wealth of expertise and data on the cost of 
     legislation and regulation on State, local and tribal 
     government and the private sector. CBO should be able to tap 
     into that expertise in a useful and timely manner. Other 
     Congressional support agencies may also have developed 
     information on cost estimates and the estimating process 
     which might be helpful to CBO in performing its duties. CBO 
     should not attempt to duplicate analytical work already being 
     done by the other support agencies, but rather use as needed 
     that information.


             Title I--Legislative Accountability and Reform

       Section 101. Legislative mandate accountability and reform

       This section amends title IV of the Congressional Budget 
     and Impoundment Control Act of 1974 by creating a new section 
     408 on Legislative Mandate Accountability and Reform. 
     Subsection (a) establishes procedures and requirements for 
     Committee reports accompanying legislation that imposes a 
     Federal mandate. It requires a committee, when it orders 
     reported legislation containing Federal mandates, to promptly 
     provide the reported bill to CBO so that it can be scored. 
     The Committee is concerned that the CBO scoring process not 
     unnecessarily impede or slow the legislative process. With 
     this view in mind, the Committee would urge the relevant 
     authorizing committees to work closely with CBO during the 
     committee process to ensure that legislation containing 
     federal mandates, as well as possible related amendments to 
     be offered in markup, be scored in a timely fashion.
       The committee report shall include: an identification and 
     description of Federal mandates in the bill, including an 
     estimate of their expected direct costs to State, local and 
     tribal governments and the private sector, and a qualitative 
     assessment of the costs and benefits of the Federal mandates, 
     including their anticipated costs and benefits to human 
     health and safety and protection of the natural environment. 
     If a mandate affects both the public and the private sectors, 
     and it is intended that the Federal Government pay the public 
     sector costs, the report should also state what effect, if 
     any, this would have on any competitive balance between 
     government and privately owned business.
       Some Federal mandates will affect both the public and 
     private sectors in similar, and in some cases nearly 
     identical, ways. For example, the costs of compliance with 
     minimum wage laws or environmental standards for landfill 
     operations or municipal waste incinceration are incurred by 
     both sectors. There has been some concern expressed that 
     subsidization of the public sector in these cases could 
     create a competitive advantage for activities owned by State, 
     local or tribal governments in those areas where they compete 
     with the private sector. In any instance where this might be 
     the case, Congress should be aware of that impact and the 
     effect on the continuing ability of private enterprises to 
     remain viable, and carefully consider whether the granting of 
     a competitive advantage to the public sector is fair and 
     appropriate.
       For Federal intergovernmental mandates, Committee reports 
     must also contain a statement of the amount, if any, of 
     increased authorization of Federal financial assistance to 
     fund the costs of the intergovernmental mandates.
       This section also requires the authorizing Committee to 
     state in the report whether it intends the Federal 
     intergovernmental mandate to be funded or not. There may be 
     occasions when a Committee decides that it is entirely 
     appropriate that State, local or tribal governments should 
     bear the cost of a mandate without receiving Federal aid. If 
     so, the Committee report should state this and give an 
     explanation for it. Likewise, the Committee report must state 
     the extent to which the reported legislation preempts State, 
     local or tribal law, and, if so, explain the reasons why. To 
     the maximum extent possible, this intention to preempt should 
     also be clear in the statutory language.
       Also set out in this section are procedures to ensure that 
     the Committee publishes the CBO cost estimate, either in the 
     Committee report or in the Congressional Record prior to 
     floor consideration of the legislation.

                         Duties of the Director

       New section 408(b) of the Congressional Budget and 
     Impoundment Control Act requires that the Director of CBO 
     analyze and prepare a statement on all bills reported by 
     committees of the Senate or House of Representatives other 
     than appropriations committees. This subsection stipulates, 
     first, that the Director of CBO must estimate whether all 
     direct costs of Federal intergovernmental mandates in the 
     bill will equal or exceed a threshold of $50,000,000 
     annually. If the Director estimates that the direct costs 
     will be below this threshold, the Director must state this 
     fact in his statement on the bill, and must briefly explain 
     the estimate. (Although this provision requires only a 
     determination by CBO that the threshold will not be equalled 
     or exceeded, if, in cases below the threshold, the Director 
     actually estimates the amount of direct costs, the Committee 
     expects that he will include that estimate in his explanatory 
     statement.) If the Director estimates that the direct costs 
     will equal or exceed the threshold, the Director must so 
     state and provide an explanation, and must also prepare the 
     required estimates.
       In estimating whether the threshold will be equalled or 
     exceeded, the director must consider direct costs in the year 
     when the Federal intergovernmental mandate will first be 
     effective, plus each of the succeeding four fiscal years. In 
     some cases, the new duties or conditions that constitute the 
     mandate will not become effective against State, local and 
     tribal governments when the statute becomes effective, but 
     will become effective when the implementing regulations 
     become effective. In such cases, the Director must consider 
     direct costs in the first fiscal year when the regulations 
     are to become effective, and each of the next four fiscal 
     years.
       The $50,000,000 threshold in this legislation for Federal 
     intergovernmental mandates is [[Page S650]] significantly 
     lower than the threshold of $200,000,000 in the State and 
     Local Cost Estimate Act of 1981 (2 U.S.C. 403(c)). The 
     threshold in the 1981 Act also included a test of whether the 
     proposed legislation is likely to have an exceptional fiscal 
     consequence for a geographic region or a level of government. 
     The Committee believes that, in the context of this present 
     legislation, applying a threshold for specific geographic 
     regions or levels of government would be too subjective or 
     too complex. However, the significantly lowered threshold 
     of S. 1 should provide an extra margin of protection for 
     particular geographic regions or levels of government 
     affected by Federal intergovernmental mandates.
       If the Director determines that the direct costs of the 
     Federal intergovernmental mandates will equal or exceed the 
     threshold, he must make the required additional estimates and 
     place them in the statement. These additional estimates may 
     be summarized as follows:
       An estimate of the total amount of direct costs of the 
     Federal intergovernmental mandates. This is an aggregate 
     amount, broken out on an annual basis over the 5-year period.
       An estimate of any increase in the bill in authorization of 
     appropriations for Federal financial assistance programs 
     usable by the State, local, and tribal governments for 
     activities subject to the Federal intergovernmental mandates.
       The amount of increase in authorization of appropriations 
     would be calculated, as the sum of the increased budget 
     authority of any Federal grant assistance, plus the increased 
     subsidy amount of any loan guarantees or direct loans.
       The Director of CBO must also estimate first whether all 
     direct costs of Federal private sector mandates in the bill 
     will equal or exceed a threshold of $200,000,000 annually. In 
     making this estimate, the Director must consider direct costs 
     in the year when the Federal private sector mandate will 
     first be effective, plus each of the succeeding four fiscal 
     years. In some cases, the new duties or conditions that 
     constitute the mandate will not become effective for the 
     private sector when the statute becomes effective, but will 
     become effective when the implementing regulations become 
     effective. In such cases, the Director must consider direct 
     costs in the first fiscal year when the regulations become 
     effective, and each of the next four fiscal years. If the 
     Director estimates that the direct costs will equal or exceed 
     the threshold, the Director must so state and provide an 
     explanation, and must also prepare the required estimates. 
     These additional estimates may be summarized as follows:
       An estimate of the total amount of direct costs of the 
     Federal private sector mandates. This is an aggregate amount, 
     broke out annually over the 5-year period.
       An estimate of any increase in the bill in authorization of 
     appropriations for Federal financial assistance programs 
     usable by the private sector for activities subject to the 
     Federal private sector mandates.
       If the Director determines that it is not feasible for him 
     to make a reasonable estimate that would be required with 
     respect to Federal private sector mandates, the Director 
     shall not make the estimate, but shall report in the 
     statement that the reasonable estimate cannot be reasonably 
     made. No corresponding section applies for Federal 
     intergovernmental mandates.
       If the Director estimates that the direct costs of a 
     Federal mandate will be below the specified threshold, the 
     Director must state this fact in his statement on the bill, 
     and must briefly explain the estimate. (Although this 
     provision requires only a determination from CBO of whether 
     the threshold will or will not be exceeded, if, in cases 
     below the threshold, the Director actually estimates the 
     amount of direct costs, the Committee expects that he will 
     include this estimate in his explanatory statement.)

                      Point of order in the Senate

       This section provides that a point of order lies against 
     any bill or joint resolution reported by a committee that 
     contains a Federal mandate, but does not contain a CBO 
     estimate of the mandate's direct costs. A point of order 
     would also lie against any bill, joint resolution, amendment, 
     motion, or conference report that increased the costs of a 
     Federal intergovernmental mandate by an amount that caused 
     the $50,000,000 threshold to be exceeded, unless that same 
     amount were fully funded to State, local and tribal 
     governments.
       Such action would have to specify that the funding of the 
     mandate's full costs would be by way of; (1) an increase in 
     entitlement spending with a resulting increase in the Federal 
     budget deficit, (2) an increase in direct spending paid for 
     by an increase in tax receipts, or (3) an increase in the 
     authorization of appropriations.
       If the third alternative is used (authorization of 
     appropriations), the specific appropriation bill that is 
     expected to provide funding must be identified. The mandate 
     legislation must also designate a responsible Federal agency 
     that shall either: implement an appropriately less costly 
     mandate if less than full funding is ultimately appropriated 
     (pursuant to criteria and procedures also provided in the 
     mandate legislation), or declare such mandate to be 
     ineffective. In other words, the authorizing committee should 
     expect that unless it expressly plans otherwise, its 
     mandate will be voided if the appropriations committee at 
     any point in the future under-funds the mandate. 
     Therefore, if a ``less money, less mandate'' alternative 
     is both feasible and desired, it is incumbent upon the 
     authorizing committee to specify how the agency shall 
     implement that alternative.
       Appropriations bills are not subject to a point of order 
     under this section. If such a bill did seek to impose a 
     federal mandate, it would likely be subject to the point of 
     order that lies against legislating on an appropriations 
     bill.
       The Committee expects that during those instances when the 
     Parliamentarian must rule on a point of order under this 
     section, there may be occasions when there is a need for 
     consultation regarding the applicability of this Act. This 
     section provides that on all such questions that are not 
     within the purview of either the House or Senate Budget 
     Committee, it is the Senate Governmental Affairs Committee or 
     House Government Reform and Oversight Committee that shall 
     make the final determination. For example, on the question of 
     whether a particular mandate is properly excluded from 
     coverage of the Act as bill which enforces constitutional 
     rights of individuals, the Governmental Affairs Committee 
     would be the appropriate committee to consult. On a question 
     regarding the particular cost of such a mandate, the Budget 
     Committee would be the appropriate committee.

        Section 102. Enforcement in the House of Representatives

       This section specifies the procedures to be followed in the 
     House of Representatives in enforcing the provisions of this 
     Act.

           Section 103. Assistance to committees and studies

       This section requires the Director of CBO to consult with 
     and assist committees of the Senate and the House of 
     Representatives, at their request, in analyzing proposed 
     legislation that may have a significant budgetary impact on 
     State, local or tribal governments or a significant financial 
     impact on the private sector. It provides for the assistance 
     that committees will need for CBO to fulfill their 
     obligations under the provisions of S. 1.
       This section also states that CBO should set up a process 
     to allow meaningful input from those knowledgeable, affected, 
     and concerned about the Federal mandates in question. One 
     possible way to establish this process is through the 
     formation of advisory panels made up to relevant outside 
     experts. The Committee leaves it to the discretion of the 
     Director as to when and where it is appropriate to form an 
     advisory panel; however, the Committee does encourage the 
     Director to form these panels where feasible and helpful 
     in performing the requisite studies. The membership of the 
     panels should represent a fair balance of interests and 
     constituencies, as well as include those expert in the 
     areas of economic and budgetary analysis, but the 
     Committee believes that when the Director convenes an 
     advisory panel, he should appoint State, local or tribal 
     officials (including their designated representatives) to 
     the panels.
       This section encourages authorizing committees to take a 
     prospective look at the impact of Federal intergovernmental 
     and private sector mandates before considering new 
     legislation. It stipulates that committees should request 
     that CBO undertake studies in the early part of each Congress 
     of the potential budgetary and financial impact of Federal 
     mandates in major legislation expected to be considered in 
     that Congress.

              Section 104. Authorization of appropriations

       This paragraph authorizes appropriations for CBO of 
     $4,500,000 per year for FY 1996 through 2002. The Committee 
     recognizes that additional resources and personnel are needed 
     for CBO to fully perform its duties under this Act along with 
     continuing to carry out its current responsibilities. The 
     Committee understands that the current policy and practice at 
     CBO is to rely on in-house personnel to conduct studies and 
     cost estimates, rather than contracting these duties to 
     outside entities. The Committee supports this policy and 
     urges the Appropriations Committee, in funding this 
     authorization, to increase CBO's authority to hire additional 
     personnel in order to fulfill its new duties under this Act.

               Section 105. Exercise of rulemaking powers

       This section provides that the terms of title I are enacted 
     as an exercise of the rulemaking power of the Senate and the 
     House of Representatives, and that either house may change 
     such rules at any time.

  Section 106. Repeal of the State and Local Cost Estimate Act of 1981

       This paragraph rescinds the provisions of the State and 
     Local Cost Estimate Act of 1981.

                      Section 107. Effective date

       Title I will take effect on January 1, 1996 and apply only 
     to legislation introduced on or after that date. This is to 
     give CBO the time to develop the proper methodologies and 
     analytical techniques in order to develop a more thorough 
     cost estimating process, as well as to give Congress 
     opportunity to provide adequate resources to CBO in the 
     annual appropriations process.


             Title II--Regulatory Accountability and Reform

                    Section 201. Regulatory process

       Under this section, agencies must assess the effects of 
     their regulations on State, local and tribal governments, and 
     the private sector, including resources available to 
     [[Page S651]] carry out Federal intergovernmental mandates 
     contained in those regulations. In keeping with both 
     statutory and regulatory objectives, agencies shall seek ways 
     to minimize regulatory burdens that significantly effect 
     State, local and tribal governments.
       Subsection (b) requires agencies to develop an effective 
     process to permit elected officials of those governments (or 
     their designated representatives) to provide meaningful and 
     timely input into the development of regulatory proposals 
     that contain significant Federal intergovernmental mandates. 
     This provision mirrors Section 1(b) of President Clinton's 
     Executive Order 12875--``Enhancing the Intergovernmental 
     Partnership''--which seeks to establish a closer partnership 
     between Federal agencies and elected and other State, local 
     and tribal officials in the regulatory process. The Committee 
     expects agencies to fully and faithfully implement this 
     section as well as the other provisions in the E.O. On 
     January 11, 1994, OMB Director Leon Panetta and OIRA 
     Administrator Sally Katzen issued guidance on the 
     implementation of the E.O. Concerning Section 1 of the E.O., 
     that guidance states, ``intergovernmental consultation should 
     take place as early as possible, and preferably before 
     publication of the notice of proposed rulemaking or other 
     regulatory action proposing the mandate. Consultations may 
     continue after publication of the regulatory action 
     initiating the proposal, but in any event they must occur 
     `prior to the formal promulgation' in final form of the 
     regulatory action `containing the proposed mandate.''' Early 
     and extensive intergovernmental consultation can help promote 
     the development of more cost-effective Federal regulation as 
     well as help all the participants in the process reach a 
     better understanding of the proper needs and responsibilities 
     of each level of government in implementing or complying with 
     a Federal requirement.
       OMB's guidance also outlines with whom agencies 
     should consult in State, local and tribal government. The 
     Committee feels strongly that agencies should follow the 
     OMB guidance concerning consultation with elected 
     officials, including their representatives, from all 
     levels of smaller governments because these officials are 
     responsible for balancing the competing claims on the 
     government's revenue base from many program 
     responsibilities. The OMB guidance further discusses how 
     Federal agencies should also confer with the designated 
     representatives of elected officials as well as with 
     program and financial officials from State, local and 
     tribal governments. program officials clearly are able to 
     offer information and guidance to their Federal 
     counterparts on the likely effectiveness of any Federal 
     regulatory proposal, while financial officials can offer 
     important perspectives on their government's ability to 
     pay for the mandate. In consulting with financial 
     officials, Federal agencies should look to the applicable 
     treasury, budget, tax-collection, or other financial 
     officers in State, local and tribal governments.
       Subsection (b) also states that the intergovernmental 
     consultations should be consistent with the requirements 
     established in existing Federal law governing the regulatory 
     process. In particular, the Committee believes that agencies 
     must ensure that the consultation process not subvert or 
     violate in any way the public disclosure and sunshine 
     provisions of existing law and Executive Order, including the 
     Administrative Procedure Act.
       Subsection (c)(1) has agencies establishing plans to 
     inform, advice, involve and consult with small governments 
     before implementing regulations that might significantly or 
     uniquely affect those governments. The Committee believes 
     that Federal agencies should undertake a special effort to 
     ensure that officials from small governments have an 
     opportunity for significant input into the regulatory 
     process. According to the Census Bureau, small governments 
     (population below 50,000) make up 97 percent of all general 
     purpose governments in the United States. A full 67 percent 
     of all general purpose governments serve fewer than 2,500 
     people. Yet despite their prevalence, small governments have 
     a relatively small presence in the Nation's Capital where 
     Federal regulatory policies and decisions are made. It is the 
     Committee's sense that Federal agencies have not always been 
     aware of, or have adequately considered, small governments' 
     capabilities in implementing certain regulatory requirements. 
     This has resulted in the promulgation of regulations in 
     certain cases that have not only over-burdened small 
     governments to the point of widespread non-compliance, but in 
     so doing fails to achieve those regulations' goals 
     and objectives. The Committee believes that one way to 
     achieve the twin goals of more cost-effective regulation 
     and greater rates of compliance on significant regulations 
     that impact small governments is for agencies to establish 
     plans for outreach to small governments. Such plans might 
     incorporate activities such as greater technical 
     assistance to small governments; regional planning 
     activities, conferences, and workshops; and establishment 
     of small government advisory committees, or appointment of 
     small government representatives on existing advisory 
     committees. One good approach is embodied in the 
     recommendations of the National Performance Review Report 
     for the Environmental Protection Agency. The NPR EPA 
     Report recommends that the agency convene a series of town 
     meetings across the United States to discuss more flexible 
     ways to achieve environmental protection.

  Section 202. Statements to accompany significant regulatory actions

       This section states that before a Federal agency 
     promulgates any final rule or notice of proposed rulemaking 
     that includes any intergovernmental mandate that is estimated 
     to result in an annual aggregate expenditure of $100,000,000 
     or more by State, local or tribal governments, and the 
     private sector, the agency must complete a written statement 
     containing the following:
       Estimates of the anticipated costs to State, local and 
     tribal governments, and the private sector, of compliance 
     with the mandate, including the availability of Federal funds 
     to pay for those costs;
       Future costs of Federal intergovernmental mandate not 
     estimated above, including estimates of any disproportionate 
     budgetary effects on any particular regions of the United 
     States or on particular States, local governments, tribal 
     governments, urban or rural or other types of communities;
       A qualitative, and if possible, a quantitative assessment 
     of costs and benefits anticipated from any Federal 
     intergovernmental mandate, including enhancement of public 
     health and safety and protection of the natural environment;
       An estimate of the effect on the national economy of the 
     mandate's impact on private sector costs;
       A description and summary of input, comments, and concerns 
     received from State, local and tribal government elected 
     officials; and,
       A summary of the agency's evaluation of those comments and 
     concerns, and the agency's position supporting the need to 
     issue the regulation containing the Federal intergovernmental 
     mandates.
       Subsection (b) requires agencies to summarizes their 
     written statements and include that summary in the 
     promulgation of the notice of proposed rulemaking and in the 
     final rule. Subsection (c) states that preparation of the 
     written statements may be done in conjunction with other 
     analyses. This subsection ensures that agency actions be 
     compatible with the regulatory planning and coordination 
     provisions of the President's scheme for regulatory review as 
     governed by Executive Order 12866--Regulatory Planning and 
     Review.
       The Committee believes that proper agency assessment of the 
     impact of major regulations on State, local and tribal 
     governments can lead to better and more cost-effective 
     Federal regulation as well as reduce unreasonable burdens on 
     smaller governments. The spirit and intent of this section is 
     meant to be entirely consistent with the relevant portions of 
     E.O. 12866. As part of its principles, the E.O. states, 
     ``each agency shall assess the effects of Federal regulations 
     on State, local, and tribal governments, including 
     specifically the availability of resources to carry out those 
     mandates, and seek to minimize those burdens that uniquely or 
     significantly affect such governmental entities, consistent 
     with achieving regulatory objectives. In addition, as 
     appropriate, agencies shall seek to harmonize Federal 
     regulatory actions with related State, local, and tribal 
     regulatory and other governmental functions.'' The Committee 
     strongly endorses these principles and supports their full 
     implementation.

       Section 203. Assistance to the Congressional Budget Office

       This section requires the Director of the Office of 
     Management and Budget to collect the written statements 
     prepared by agencies under Section 202 and submit them on a 
     timely basis to CBO. The reason for this section is that CBO 
     may find useful agency assessments and analyses in performing 
     the required cost estimates on legislation. As OMB already 
     collects these assessments and related information from all 
     agencies under Executive Order authority, it makes good sense 
     that OMB also supply that information to CBO as a matter of 
     routine.

       Section 204. Pilot program on small government flexibility

       This section requires OMB, in consultation with 
     Federal agencies, to establish at least two pilot programs 
     to test innovative and more flexible regulatory approaches 
     that reduce reporting and compliance burdens on small 
     governments while continuing to meet overall statutory 
     goals and objectives.
       The Committee believes that Federal agencies should 
     experiment with some new and innovative approaches on 
     regulations that affect small governments. Such a pilot 
     program would embody some of the recommendations of the Vice 
     President's National Performance Review. For example, the NPR 
     report for the Environmental Protection Agency recommends 
     that the agency establish a pilot project to assist a 
     community in assessing its environmental and community health 
     risks and how to direct resources to priority problems. The 
     Committee's wish is that similar sorts of initiatives be 
     tried by at least one other agency.


                       title iii--baseline study

           Section 301. Baseline study of costs and benefits

       This section establishes a Commission on Unfunded Federal 
     Mandates.

   Section 302. Report on unfunded Federal mandates by the Commission

       This section provides that the Commission shall review the 
     role and impact of unfunded Federal mandates in 
     intergovernmental relations, and make recommendations to the 
     President and Congress on how State and [[Page S652]] local 
     governments can participate in meeting national objectives 
     without the burden of such mandates. It shall also make 
     recommendations on how to allow more flexibility in complying 
     with mandates, reconcile conflicting mandates, terminate 
     obsolete ones, and simply reporting and other requirements. 
     The Commission shall first develop criteria for evaluating 
     unfunded mandates, and then shall publish a preliminary 
     report on its activities under this title within 9 months of 
     the enactment of this Act. A final report shall be submitted 
     within 3 months of the preliminary report.

                        Section 303. Membership

       This section provides that the Commission shall be composed 
     of 9 members--3 appointed by the Speaker of the House of 
     Representatives (in consultation with the minority leader), 3 
     by the majority leader of the Senate (in consultation with 
     the minority leader), and 3 by the President. No Member or 
     employee of Congress may be a member of the Commission.

 Section 304. Director and staff of commission; experts and consultants

       This section provides for the appointment of the staff and 
     Director of the Commission, without regard to certain Civil 
     Service rules. It also grants the Commission the authority to 
     hire on a temporary basis the services of experts and 
     consultants for purposes of carrying out this title, as well 
     as the right to receive detailees from Federal agencies on a 
     reimbursable basis, if approved by the agency head.

                   Section 305. Powers of commission

       This section provides the Commission with the authority to 
     hold hearings, obtain official data, use the U.S. mails, 
     acquire administrative support services from the General 
     Services Administration, and contract for property and 
     services.

                        Section 306. Termination

       The Commission shall terminate 90 days after submitting its 
     final report.

              Section 307. Authorization of appropriations

       This section authorizes the appropriation to Commission of 
     $1 million.

                        Section 308. Definition

       This section defines the term ``unfunded federal mandate'', 
     as used in title III.


                       title iv--judicial review

                      Section 401. Judicial review

       This section provides that nothing under the Act shall be 
     subject to judicial review, that no provisions of the Act 
     shall be enforceable in an administrative or judicial action, 
     and that no ruling or determination under the Act shall be 
     considered by any court in determining the intent of Congress 
     or for any other purpose.


                     v. regulatory impact statement

       Paragraph 11(b) of Rule XXVI of the Standing Rules of the 
     Senate requires Committee reports to evaluate the 
     legislation's regulatory, paperwork, and privacy impact on 
     individuals, businesses, and consumers.
       S. 1 addresses Federal government process, not output. 
     It will directly affect and change both the legislative 
     and regulatory process. It will not have a direct 
     regulatory impact on individuals, consumers, and 
     businesses as these groups are not covered by the bill's 
     requirements.
       However, the implementation of S. 1 will likely have an 
     indirect regulatory impact on these groups since a primary 
     focus of the bill is to ensure that Congress assess the cost 
     impact of new legislation on the private sector before 
     acting. In so much as information on private sector costs of 
     any particular bill or resolution may influence its outcome 
     during the Congressional debate, it is possible that this 
     bill may ease the regulatory impact on the private sector--
     both on individual pieces of legislation as well as overall. 
     However, it is impossible at this time to determine with any 
     specificity what that level of regulatory relief may be.
       S. 1 does address the Federal regulatory process in three 
     ways: (1) It requires agencies to estimate the costs to 
     State, local and tribal governments of complying with major 
     regulations that include Federal intergovernmental mandates; 
     (2) It compels agencies to set up a process to permit State, 
     local and tribal officials to provide input into the 
     development of significant regulatory proposals; and (3) It 
     requires agencies to establish plans for outreach to small 
     governments.
       However, with the exception of the third provision, the 
     bill will not impose new requirements for agencies to 
     implement in the regulatory process that are not already 
     required under Executive Orders 12866 and 12875. The bill 
     merely codifies the major provisions of the E.O.s that 
     pertain to smaller governments.
       The legislation will have no impact on the privacy of 
     individuals. Nor will it add additional paperwork burdens to 
     businesses, consumers and individuals. To the extent that CBO 
     and Federal agencies will need to collect more data and 
     information from State, local and tribal governments and the 
     private sector, as they conduct their requisite legislative 
     and regulatory cost estimates, it is possible that those 
     entities will face additional paperwork. However, although 
     smaller governments are certainly encouraged to comply with 
     agency and CBO requests for information, they are not bound 
     to.


                         VI. CBO COST ESTIMATE

                                                    U.S. Congress,


                                  Congressional Budget Office,

                                  Washington, DC, January 9, 1995.
     Hon. William V. Roth,
     Chairman, Committee on Governmental Affairs, U.S. Senate, 
         Washington, DC.
       Dear Mr. Chairman: The Congressional Budget Office has 
     prepared the enclosed cost estimate for S. 1, the Unfunded 
     Mandate Reform Act of 1995.
       Enactment of S. 1 would not affect direct spending on 
     receipts. Therefore, pay-as-you-go procedures would not apply 
     to the bill.
       If you wish further details on this estimate, we will be 
     pleased to provide them.
           Sincerely,
                                             Robert D. Reischauer.
       Enclosure.

       Congressional Budget Office Cost Estimate--January 9, 1995

       1. Bill number: S. 1.
       2. Bill title: Unfunded Mandate Reform Act of 1995.
       3. Bill status: As ordered reported by the Senate Committee 
     on Governmental Affairs on January 9, 1995.
       4. Bill purpose: S. 1 would require authorizing committees 
     in the House and Senate to include in their reports on 
     legislation a description and an estimate of the cost of any 
     federal mandates in that legislation, along with an 
     assessment of their anticipated benefits. Mandates are 
     defined to include provisions that impose duties on states, 
     localities, or Indian tribes (``intergovernmental mandates'') 
     or on the private sector (``private sector mandates''). 
     Mandates also would include provisions that reduce or 
     eliminate any authorization of appropriations to assist 
     state, local, and tribal governments or the private sector in 
     complying with federal requirements, unless the requirements 
     are correspondingly reduced. In addition, intergovernmental 
     mandates would include changes in the conditions governing 
     certain types of entitlement programs (for example, 
     Medicaid). Conditions of federal assistance and duties 
     arising from participation in most voluntary federal programs 
     would not be considered mandates.
       Committee reports would have to provide information on the 
     amount of federal financial assistance that would be 
     available to carry out any intergovernmental mandates in the 
     legislation. In addition, committees would have to note 
     whether the legislation preempts any state or local laws. The 
     requirements of the bill would not apply to provisions that 
     enforce the constitutional rights of individuals, that are 
     necessary for national security, or that meet certain other 
     conditions.
       The Congressional Budget Office (CBO) would be required to 
     provide committees with estimates of the direct cost of 
     mandates in reported legislation other than appropriation 
     bills. Specific estimates would be required for 
     intergovernmental mandates costing $50 million or more and, 
     if feasible, for private sector mandates costing $200 million 
     or more in a particular year. (CBO currently prepares 
     estimates of costs to states and localities of reported 
     bills, but does not project costs imposed on Indian tribes or 
     the private sector.) In addition, CBO would probably be asked 
     to assist the Budget Committees by preparing estimates for 
     amendments and at later stages of a bill's consideration. 
     Also, at times other than when a bill is reported, when 
     requested by Congressional committees, CBO would analyze 
     proposed legislation likely to have a significant 
     budgetary or financial impact on state, local, or tribal 
     governments or on the private sector, and would prepare 
     studies on proposed mandates. S. 1 would authorize the 
     appropriations of $4.5 million to CBO for each of the 
     fiscal years 1996-2002 to carry out the new requirements. 
     These requirements would take effect on January 1, 1996, 
     and would be permanent.
       S. 1 would amend Senate rules to establish a point of order 
     against any bill or joint resolution reported by an 
     authorizing committee that lacks the necessary CBO statement 
     or that results in direct costs (as defined in the bill) of 
     $50 million or more in a year to state, local, and tribal 
     governments. The legislation would be in order if it provided 
     funding to cover the direct costs incurred by such 
     governments, or if it included an authorization of 
     appropriations and identified the minimum amount that must be 
     appropriated in order for the mandate to be effective, the 
     specific bill that would provide the appropriation, and a 
     federal agency responsible for implementing the mandate.
       Finally, S. 1 would require executive branch agencies to 
     take actions to ensure that state, local, and tribal concerns 
     are fully considered in the process of promulgating 
     regulations. These actions would include the preparation of 
     estimates of the anticipated costs of regulations to state, 
     localities, and Indian tribes, along with an assessment of 
     the anticipated benefits. In addition, the bill would 
     authorize the appropriation of $1 million, to be spent over 
     fiscal years 1995 and 1996, for a temporary Commission on 
     Unfunded Federal Mandates, which would recommend ways to 
     reconcile, terminate, suspend, consolidate, or simplify 
     federal mandates.
       5. Estimated cost to the Federal Government:

------------------------------------------------------------------------
                                 1995   1996   1997   1998   1999   2000
------------------------------------------------------------------------
Congressional Budget Office:                                            
  Authorization of                                                      
   Appropriations.............  .....    4.5    4.5    4.5    4.5    4.5
  Estimated Outlays...........  .....    4.0    4.4    4.4    4.4    4.4
Commission on Unfunded Federal                                          
 Mandates:                                                              
  Authorization of                                                      
   Appropriations.............    1.0  .....  .....  .....  .....  .....
                                                                        
                                                                        
  [[Page S653]]Estimated                                                
   Outlays....................    0.4    0.6  .....  .....  .....  .....
Bill Total:                                                             
  Authorization of                                                      
   Appropriations.............    1.0    5.5    4.5    4.5    4.5    4.5
  Estimated Outlays...........    0.4    4.6    4.4    4.4    4.4    4.4
------------------------------------------------------------------------

       The costs of this bill fall within budget function 800.
       Basis of estimate: CBO assumes that the specific amounts 
     authorized will be appropriated and that spending will occur 
     at historical rates.
       We estimate that executive branch agencies would incur no 
     significant additional costs in carrying out their 
     responsibilities associated with the promulgation of 
     regulations because most of these tasks are already required 
     by Executive Orders 12875 and 12866.
       6. Comparison with spending under current law: S. 1 would 
     authorize additional appropriations of $4.5 million a year 
     for the Congressional Budget Office beginning in 1996. CBO's 
     1995 appropriation is $23.2 million. If funding for current 
     activities were to remain unchanged in 1996, and if the full 
     additional amount authorized were appropriated, CBO's 1996 
     appropriation would total $27.7 million, an increase of 19 
     percent.
       Because S. 1 would create the Commission on Unfunded 
     Federal Mandates, there is no funding under current law for 
     the commission.
       7. Pay-as-you-go considerations: None.
       8. Estimated cost to State and local governments: None.
       9. Estimate comparison: None.
       10. Previous CBO estimate: None.
       11. Estimate prepared by: James Hearn.
       12. Estimate approved by: Paul Van de Water, Assistant 
     Director for Budget Analysis.

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