[House Report 108-490]
[From the U.S. Government Publishing Office]




108th Congress                                            Rept. 108-490
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

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

 
           PAPERWORK AND REGULATORY IMPROVEMENTS ACT OF 2004

                                _______
                                

                  May 14, 2004.--Ordered to be printed

                                _______
                                

  Mr. Tom Davis of Virginia, from the Committee on Government Reform, 
                        submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 2432]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Government Reform, to whom was referred the 
bill (H.R. 2432) to amend the Paperwork Reduction Act and 
titles 5 and 31, United States Code, to reform Federal 
paperwork and regulatory processes, having considered the same, 
report favorably thereon with an amendment and recommend that 
the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Committee Statement and Views....................................     4
Section-by-Section...............................................    14
Explanation of Amendments........................................    17
Committee Consideration..........................................    17
Rollcall Votes...................................................    18
Correspondence...................................................    23
Application of Law to the Legislative Branch.....................    34
Statement of Oversight Findings and Recommendations of the 
  Committee......................................................    34
Statement of General Performance Goals and Objectives............    34
Constitutional Authority Statement...............................    34
Unfunded Mandate Statement.......................................    34
Committee Estimate...............................................    34
Budget Authority and Congressional Budget Office Cost Estimate...    34
Federal Advisory Committee Act...................................    37
Changes in Existing Law Made by the Bill as Reported.............    37
Minority Views...................................................    42

                               Amendment

  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Paperwork and Regulatory Improvements 
Act of 2004''.

SEC. 2. FINDINGS.

  Congress finds the following:
          (1) In 1980, in the Paperwork Reduction Act, Congress 
        established the Office of Information and Regulatory Affairs 
        (OIRA) in the Office of Management and Budget. OIRA's principal 
        responsibility is to reduce the paperwork burden on the public 
        that results from the collection of information by or for the 
        Federal Government. In 2002, OIRA estimated that the paperwork 
        burden imposed on the public was 7.7 billion hours, at a cost 
        of $230 billion. The Internal Revenue Service accounted for 83 
        percent of the paperwork burden.
          (2) In 1995, Congress amended the Paperwork Reduction Act and 
        established annual governmentwide paperwork reduction goals of 
        10 percent for each of fiscal years 1996 and 1997, and 5 
        percent for each of fiscal years 1998 through 2001, but the 
        paperwork burden increased, rather than decreased, in each of 
        those fiscal years and fiscal year 2002. Both the Office of 
        Management and Budget and the Internal Revenue Service need to 
        devote additional attention to paperwork reduction.
          (3) In 2002, the House Report accompanying the Treasury and 
        General Government Appropriations Act, 2003 (House Report 107-
        575) stated, ``The Office of Management and Budget has reported 
        that paperwork burdens on Americans have increased in each of 
        the last six years. Since the Internal Revenue Service imposes 
        over 80 percent of these paperwork burdens, the Committee 
        believes that OMB should work to identify and review proposed 
        and existing IRS paperwork.''
          (4) One key to success in paperwork reduction is the Office 
        of Management and Budget's systematic review of every new and 
        revised agency paperwork proposal. Recent statutory exemptions 
        from that office's review responsibility, especially those 
        without any stated justification, should be removed.
          (5) In 2000, researchers Mark Crain of George Mason 
        University and Thomas Hopkins of the Rochester Institute of 
        Technology, in their October 2001 publication titled ``The 
        Impact of Regulatory Costs on Small Firms'', estimated that 
        Americans spend $843 billion annually to comply with Federal 
        regulations. Congress has a responsibility to review major 
        rules (as defined by section 804 of title 5, United States 
        Code) proposed by agencies, especially regulatory alternatives 
        and the costs and benefits associated with each of them. In 
        2000, in the Truth in Regulating Act, Congress established new 
        responsibility within the General Accounting Office to assist 
        Congress with this responsibility.
          (6) In 1996, because of the increasing costs and incompletely 
        estimated benefits of Federal rules and paperwork, Congress 
        required the Office of Management and Budget for the first time 
        to submit an annual report to Congress on the total costs and 
        benefits to the public of Federal rules and paperwork 
        requirements, including an assessment of the effects of Federal 
        rules on the private sector and State and local governments. In 
        1998, Congress changed the annual report's due date to coincide 
        with the due date of the President's budget, so that Congress 
        and the public could be given an opportunity to simultaneously 
        review both the on-budget and off-budget costs associated with 
        the regulatory and paperwork requirements of each Federal 
        agency. In 2000, Congress made this a permanent annual 
        reporting requirement.
          (7) The Office of Management and Budget requires agencies to 
        submit annual budget and paperwork burden estimates in order to 
        prepare certain required reports for Congress, but it does not 
        require agencies to submit estimates on costs and benefits of 
        agency rules and paperwork. The Office of Management and Budget 
        needs to require agencies to submit such estimates on costs and 
        benefits to help prepare the annual accounting statement and 
        associated report required under section 624 of the Treasury 
        and General Government Appropriations Act, 2001.

SEC. 3. REDUCTION OF TAX PAPERWORK.

  Section 3504 of title 44, United States Code, is amended by adding at 
the end the following new subsection:
  ``(i) In carrying out subsection (c)(3), the Director shall (in 
consultation with the Internal Revenue Service and the Office of Tax 
Policy of the Department of the Treasury and the Office of Advocacy of 
the Small Business Administration) conduct a review of the collections 
of information conducted by the Internal Revenue Service to identify 
actions that the Internal Revenue Service can take to reduce the 
information collection burden imposed on small business concerns, 
consistent with section 3520(c)(1) of this chapter. The Director shall 
include the results of the review in the annual report that the 
Director submits under section 3514 of this chapter for fiscal year 
2006.''.

SEC. 4. REPEAL OF EXEMPTIONS FROM PAPERWORK REDUCTION ACT, ETC.

  (a) Repeals.--The following provisions of the Farm Security and Rural 
Investment Act of 2002 (Public Law 107-171) are repealed:
          (1) Subparagraphs (A) and (C) of section 1601(c)(2).
          (2) Section 1601(c)(3).
          (3) Section 2702(b)(1)(A).
          (4) Section 2702(b)(2)(A).
          (5) Section 2702(c).
          (6) Subparagraphs (A) and (C) of section 6103(b)(2).
          (7) Section 6103(b)(3).
          (8) Subparagraphs (A) and (C) of section 10105(d)(2).
          (9) Section 10105(d)(3).
  (b) Effective Date.--The repeals of the provisions listed in 
subsection (a) shall take effect 180 days after the date of the 
enactment of this Act.

SEC. 5. AMENDMENT OF TRUTH IN REGULATING ACT TO MAKE PERMANENT PILOT 
                    PROJECT FOR REPORT ON RULES.

  The purpose of this section is to make permanent the authority to 
request the performance of regulatory analysis to enhance Congressional 
responsibility for regulatory decisions developed under the laws 
enacted by Congress. The Truth in Regulating Act of 2000 (Public Law 
106-312; 5 U.S.C. 801 note) is amended--
          (1) in the heading for section 4, by striking ``PILOT PROJECT 
        FOR'',
          (2) by striking section 5 and redesignating section 6 as 
        section 5; and
          (3) in section 5 (as redesignated by paragraph (2))--
                  (A) in the heading, by striking ``and duration of 
                pilot project'';
                  (B) in subsection (a), by striking ``(a) Effective 
                Date.--''; and
                  (C) by striking subsections (b) and (c).

SEC. 6. IMPROVED REGULATORY ACCOUNTING.

  (a) Requirement for Agencies To Submit Information on Regulations and 
Paperwork to OMB.--Section 624 of the Treasury and General Government 
Appropriations Act, 2001 (as enacted into law by Public Law 106-554; 
114 Stat. 2763A-161), is amended
          (1) by redesignating subsections (b), (c), and (d) as 
        subsection (c), (d), and (e), respectively, and
          (2) by inserting after subsection (a) the following new 
        subsection:
  ``(b) Agency Submissions to OMB.--To carry out subsection (a), the 
Director of the Office of Management and Budget shall require each 
agency annually to submit to the Office of Management and Budget an 
estimate of the total annual costs and benefits of Federal rules and 
paperwork, to the extent feasible--
          ``(1) for the agency in the aggregate; and
          ``(2) for each agency program.''.
  (b) Integration of OMB Accounting Statement and Report Into 
President's Budget.--Section 624 of the Treasury and General Government 
Appropriations Act, 2001 (as enacted into law by Public Law 106-554; 
114 Stat. 2763A-161) is further amended in subsection (a), by striking 
``with the budget'' and inserting ``as part of the budget''.
  (c) Regulatory Budgeting.--(1) Chapter 11 of title 31, United States 
Code, is amended by adding at the end the following new section:

``Sec. 1120. Regulatory budgeting

  ``(a) The Director of the Office of Management and Budget, after 
consultation with the head of each agency, shall designate not less 
than three agencies (or offices within an agency) to participate in a 
study on regulatory budgeting for fiscal years 2006 and 2007. The 
designated agencies shall include three regulatory agencies or offices 
from among the following: the Department of Labor, the Department of 
Transportation, the Department of Health and Human Services, and the 
Environmental Protection Agency.
  ``(b) The study shall address the preparation of regulatory budgets. 
Such budgets shall include the presentation of the varying estimated 
levels of benefits that would be associated with the different 
estimated levels of costs with respect to the regulatory alternatives 
under consideration by the agency (or office within the agency).
  ``(c) The Director of the Office of Management and Budget shall 
include, in the accounting statement and associated report submitted to 
Congress for calendar year 2006 under section 624 of the Treasury and 
General Government Appropriations Act, 2001 (as enacted into law by 
Public Law 106-554; 114 Stat. 2763A-161), a presentation of the 
different levels of estimated regulatory benefits and costs with 
respect to the regulatory alternatives under consideration for one or 
more of the major regulatory programs of each of the agencies 
designated under subsection (a).
  ``(d) In the accounting statement and associated report submitted to 
Congress for calendar year 2009 under section 624 of the Treasury and 
General Government Appropriations Act, 2001 (as so enacted), the 
Director of the Office of Management and Budget shall include a report 
on the study on regulatory budgeting. The report shall--
          ``(1) assess the feasibility and advisability of including a 
        regulatory budget as part of the annual budget submitted under 
        section 1105;
          ``(2) describe any difficulties encountered by the Office of 
        Management and Budget and the participating agencies in 
        conducting the study; and
        ``(3) recommend, to the extent the President considers 
        necessary or expedient, proposed legislation regarding 
        regulatory budgets.''.
  (2) The table of sections at the beginning of such chapter is amended 
by adding at the end the following new item:

``1120. Regulatory budgeting.''.

                     Committee Statement and Views


                                PURPOSE

    The purposes of the ``Paperwork and Regulatory Improvements 
Act'' are to increase the probability of results in paperwork 
reduction, assist Congress in its review of agency regulatory 
proposals, and improve public and Congressional understanding 
of the true costs and benefits of regulations (``regulatory 
accounting'').

                                SUMMARY

    In brief, the Paperwork and Regulatory Improvements Act is 
intended to do the following:
    A. Require that the Office of Management and Budget (OMB), 
after consultation with three identified Federal agencies, 
submit a report to Congress on actions that the Internal 
Revenue Service (IRS) can take to reduce paperwork burden 
imposed on small business. Currently, tax paperwork burden 
accounts for over 80 percent of all federally-imposed paperwork 
burden on the public.
    Section 3 adds a new subsection to Sec. 3504 of the 
Paperwork Reduction Act to require OMB to include the results 
of its review in its annual report to Congress for Fiscal Year 
(FY) 2006.
    B. Remove statutory exemptions in the Farm Security and 
Rural Investment Act of 2002 (Pub. Law 107-171) from various 
paperwork review and regulatory due process requirements. 
Neither the law nor its legislative history includes a 
justification for these exemptions to standard good government 
protections for the public.
    Section 4 repeals exemptions from: (a) the Paperwork 
Reduction Act (44 U.S.C. Chapter 35), including the requirement 
for OMB review and approval of each proposed and continuing 
paperwork imposition on the public to ensure practical utility; 
(b) the Administrative Procedure Act (5 U.S.C. Sec. 553), 
including the requirement for affected parties to have notice 
and an opportunity to comment on all agency regulatory 
proposals; and, (c) the Congressional Review Act (5 U.S.C. 
Sec. 808), including a requirement for Congressional review 
before agency final rules can become effective.
    C. Make permanent the authorization for the General 
Accounting Office (GAO) to respond to requests from Congress 
for an independent evaluation of selective economically 
significant rules proposed or issued by Federal agencies.
    Section 5 amends the Truth in Regulating Act (Pub. Law 106-
312) to make permanent the authority to request the performance 
of regulatory analysis in order to enhance Congressional 
responsibility for regulatory decisions developed under the 
laws enacted by Congress. This amendment removes the 
authorization for a 3-year pilot project.
    D. Require OMB to improve its annual regulatory accounting 
statement and associated report, which are required by law to 
be submitted in final form with the President's Budget. Under 
current law, OMB is annually required to submit the total 
annual costs and benefits for all Federal rules and paperwork 
in the aggregate, by agency, by agency program, and by major 
rule, and to include an associated report on the impacts of 
Federal rules and paperwork on certain groups.
    Section 6(a) requires Federal agencies to submit annual 
estimates of the costs and benefits associated with the Federal 
rules and paperwork for each of their agency programs.
    Section 6(b) requires integration into the President's 
Budget of OMB's regulatory accounting statement and associated 
report. Integration will allow Congress and the public to be 
able to review simultaneously both the on-budget and off-budget 
costs associated with each Federal agency imposing regulatory 
or paperwork burdens on the public.
    Section 6(c) requires OMB to designate at least three 
agencies (or offices within an agency) to participate in a 
study of regulatory budgeting for FYs 2006 and 2007, and then 
report the results to Congress. This study, in which agencies 
are to identify regulatory alternatives and prioritize possible 
regulatory actions, will determine whether agencies can better 
manage regulatory burdens on the public.

                          NEED FOR LEGISLATION

    Since 1995, Congress has changed the direction of the 
Federal Government from the endless burden of more taxes and 
spending to a new discipline based on accountability. America's 
freedom and innovation have produced a quality and productivity 
revolution and an American economy that is the unparalleled 
envy of the world. American business has brought incredible 
improvements to our health care, education, and overall quality 
of life. Through the new emphasis on flexibility and 
innovation, State and local governments have worked to create 
safer, cleaner, and better places to live. Congress recognizes 
the impact of Federal paperwork and Federal regulatory programs 
on our economy and innovation. In addition to the burdens 
arising from taxes, the Federal Government imposes tremendous 
costs and restrictions on innovation by the private sector and 
State and local governments through ever increasing Federal 
regulations. Here, too, we must strive for quality, efficiency, 
and accountability.
    Nevertheless, the burden of Federal regulations on the 
American public has continued to grow. An October 2001 report, 
entitled ``The Impact of Regulatory Costs on Small Firms,'' by 
Drs. W. Mark Crain and Thomas D. Hopkins, commissioned by the 
Small Business Administration's (SBA) Office of Advocacy, 
estimated that, in 2000, Americans spent $843 billion to comply 
with Federal regulations. These off-budget costs to Americans 
are on top of the costs reflected in the President's fiscal 
Budget. SBA's report concluded, ``Had every household received 
a bill for an equal share, each would have owed $8,164.'' The 
report also found that, in the business sector, those hit 
hardest by Federal regulations are small businesses. It stated, 
``Firms employing fewer than 20 employees face an annual 
regulatory burden of $6,975 per employee, a burden nearly 60 
percent above that facing a firm employing over 500 
employees.'' Regulations add to business costs and decrease 
capital available for investment and job creation.
    In September 2002, Dr. Crain co-authored a study entitled 
``Compliance Costs of Federal Workplace Regulations: Survey 
Results for U.S. Manufacturers.'' This paper revealed that, in 
2000, manufacturers spent an average of $2.2 million per firm 
(or $1,700 per employee) to comply with Federal workplace 
regulations. Also, in September 2002, Dr. Joseph M. Johnson 
published a study entitled ``A Review and Synthesis of the 
Costs of Workplace Regulation.'' This paper compiled available 
estimates of the costs of various workplace regulations, 
totaling at least $91 billion annually.

Paperwork reduction

    OMB estimates the Federal paperwork burden on the public at 
over 8 billion hours. In its June 1993 final first-year task 
force report for the Small Business Paperwork Relief Act, OMB 
estimated that the price tag for all paperwork imposed on the 
public is $320 billion a year.
    To reduce paperwork imposed on the public, in 1942, 
Congress established a centralized review function for proposed 
paperwork. The 1942 Federal Reports Act required the Bureau of 
the Budget (which became OMB) to review and approve each agency 
paperwork proposal. In 1980, the Paperwork Reduction Act 
replaced the Federal Reports Act and established the Office of 
Information and Regulatory Affairs (OIRA) in OMB, whose 
principal responsibility is paperwork reduction. The Paperwork 
Reduction Act was intended principally to ``minimize the 
paperwork burden for individuals, small businesses, educational 
and nonprofit institutions, Federal contractors, State, local 
and tribal governments, and persons resulting from the 
collection of information by or for the Federal Government.''
    In 1995, Congress reauthorized the Paperwork Reduction Act 
and set government-wide paperwork burden reduction goals for 
FYs 1996 to 2001. After annual increases in paperwork, instead 
of decreases, in 1998, Congress, in a provision in the 1999 
Treasury-Postal Appropriations Act, required OMB to issue a 
report identifying specific expected paperwork reduction 
accomplishments in FYs 1999 and 2000. OMB's 1999 report 
identified only a limited number of specific expected 
reductions. For example, IRS identified no specific expected 
reductions in tax paperwork in FY 2000.
    As a consequence, in 2000, Congress, in Section 518 of the 
2001 Treasury-Postal Appropriations Act, required OMB to issue 
a report evaluating paperwork imposed by agency regulations 
(``regulatory paperwork''), including each major rule imposing 
over 10 million hours of burden, and identifying specific 
expected reductions in regulatory paperwork in FYs 2001 and 
2002. OMB's August 2001 report did not fully respond to the 
statutory requirements. In fact, OMB limited its evaluation to 
only two major rules--both from the Department of Labor (DOL)--
issued since March 1996. This limitation was invented by OMB 
because the statute did not include a March 1996 starting date 
for covered major rules. Moreover, the Subcommittee identified 
an additional 15 non-IRS and 40 IRS covered major rules, which 
each impose more than 10 million hours of burden. These rules 
were issued by seven non-IRS agencies.
    After OMB's April 2002 Information Collection Budget (ICB) 
for FY 2002 revealed another year of increases, instead of 
decreases, in paperwork and did not identify sufficient 
accomplishments and initiatives to reduce IRS paperwork, the 
Appropriations Committee, in July 2002, included a directive to 
OMB in House Report 107-575, which accompanied its 2003 
Treasury-Postal Appropriations bill, to focus more of OMB staff 
attention on reducing IRS paperwork.
    Annually, since 1999, proximate to the Federal tax return 
filing deadlines, the Government Reform Regulatory Affairs 
Subcommittee has held a hearing to assess progress in paperwork 
reduction. Under the Chairmanship of Mr. Ose, the Government 
Reform Subcommittee on Energy Policy, Natural Resources and 
Regulatory Affairs held four hearings on paperwork reduction 
on: (a) April 24, 2001, (b) April 11, 2002, (c) April 11, 2003, 
and (d) April 20, 2004. In addition, from April 2001 to April 
2004, the Subcommittee sent 15 oversight letters to OMB on 
paperwork reduction.
    In 1983, after issuance of President Reagan's 1981 
Executive Order 12291, which initiated OMB review of agency 
regulatory proposals, OMB signed a Memorandum of Agreement with 
the Treasury Department relating to its regulatory reviews. 
Nothing therein or subsequently limited OMB's statutory 
responsibility for review and approval of each IRS paperwork 
requirement.
    In March 2004, at OMB's annual House Appropriations 
Subcommittee hearing, Subcommittee Members emphasized to OMB 
Director Josh Bolten that mere reduction in the rate of growth 
of regulatory burden is insufficient. They asserted that OMB 
must instead do more to examine and reduce the base of existing 
regulatory and paperwork burden.
    In its April 2003 and April 2004 hearings and post-hearing 
questions, the Government Reform Subcommittee, chaired by Mr. 
Ose, explored a means for substantial paperwork reduction: 
IRS's authority to add thresholds administratively (below which 
reporting is not required) or change the level of thresholds, 
i.e., independent of a change in statute or regulation. For 
example, IRS administratively made a threshold change for the 
Form 1040 Schedule B because the statute provided the IRS 
Commissioner with discretion to set an appropriate threshold. 
In a May 2, 2003 post-hearing answer, IRS stated that the 
Office of Taxpayer Burden Reduction ``is reviewing the 
regulations and all administrative provisions to identify such 
thresholds, elections, tolerances, etc. that could be adjusted, 
without requiring legislation, to reduce unnecessary taxpayer 
burden.'' During the April 2004 hearing, IRS discussed its not-
yet-completed analysis and stated that completion was ``several 
years'' away.
    In the April 2004 hearing of the Government Reform 
Subcommittee, Chairman Ose also broached another avenue for 
substantial paperwork reduction: the IRS's ability to institute 
changes in periodicity within the Commissioner's administrative 
discretion, i.e., again, independent of a change in statute or 
regulation. For example, the IRS is exploring a proposal that 
would allow certain taxpayers to file a Form 941 annually 
instead of quarterly.
    As evident by its actions, paperwork reduction is of great 
concern to Congress, especially for tax and regulatory 
paperwork. Nonetheless, in the Subcommittee's April 2004 
hearing, GAO reported that the paperwork burden on the public 
has increased, not decreased, in each of the last eight years. 
GAO differentiated between substantive program changes in 
paperwork (such as those arising from a change from quarterly 
to annual reporting) and adjustments (such as those stemming 
from re-estimates of the time necessary to complete a form). 
The public experiences no relief whatsoever from adjustments.

Congressional responsibility for agency rules

    In 2000, Congress enacted the Truth in Regulating Act (Pub. 
Law 106-312). This statute authorized GAO to perform regulatory 
analyses for Congress. Under the statute, at the request of 
Congress, GAO was required to prepare an independent evaluation 
of selective economically significant rules proposed or issued 
by Federal agencies. GAO never hired staff for this function 
since the law only authorized a 3-year pilot project. Instead, 
GAO intended, after the 3-year pilot project received funding 
(which never occurred), to use contractors, instead of full-
time expert agency staff, to prepare its independent 
evaluations. To ensure full-time agency expertise within GAO, a 
change from a pilot approach to permanency is needed.
    Fulfillment of GAO's regulatory analysis function would 
enhance Congressional responsibility for regulatory decisions 
developed under the laws Congress enacts. A full understanding 
of the impact of regulations is necessary for Congress to 
fulfill its Constitutional role as a co-equal branch of 
government. Just as Congress needs a Congressional Budget 
Office (CBO) to check and balance the Executive Branch in the 
budget process, it also needs analytic capability to check and 
balance the Executive Branch in the regulatory process. The 
choice of GAO was logical because it already has some 
regulatory review responsibilities under the Congressional 
Review Act.
    Article I, Section 1 of the U.S. Constitution vests all 
legislative powers in the U.S. Congress. While Congress may not 
delegate its legislative functions, it routinely authorizes 
Executive Branch agencies to issue rules that implement laws 
passed by Congress. Congress has become increasingly concerned 
about its responsibility to oversee agency rulemaking, 
especially because of the escalating costs and impacts of 
Federal rules.
    With GAO's analytic help, Congress would be better equipped 
to review final agency rules under the Congressional Review 
Act. More importantly, Congress needs its own, in-house, 
regulatory analysis capability to provide timely comment on 
proposed rules, while there is still an opportunity to 
influence the cost, scope, and content of the final agency 
action. The regulatory analysis function would: (a) take into 
account Congressional intent; (b) examine other, less costly 
regulatory and nonregulatory alternative approaches besides 
those in an agency proposal; and (c) identify additional, non-
agency sources of data on benefits, costs, and impacts of an 
agency's proposal. GAO's analysis would include an evaluation 
of the potential benefits and costs of the rule, alternative 
approaches in the rulemaking record, and the various impact 
analyses.
    Current law does not require GAO to conduct any new 
Regulatory Impact Analyses, cost-benefit analyses, or other 
impact analyses. However, GAO's independent evaluation could 
lead the agencies to prepare any missing cost-benefit, small 
business impact, federalism impact, or any other missing 
analysis.
    In recent years, various statutes (such as the Unfunded 
Mandates Reform Act of 1995 and the Small Business Regulatory 
Enforcement Fairness Act of 1996) and executive orders (such as 
President Reagan's 1981 Executive Order 12291, ``Federal 
Regulation,'' and President Clinton's 1993 Executive Order 
12866, ``Regulatory Planning and Review'') have mandated that 
Executive Branch agencies conduct extensive regulatory 
analyses, especially for economically significant rules having 
a $100 million-or-more effect on the economy or a significant 
impact on small businesses. Congress, however, does not have 
the analytical capability to evaluate these analyses 
independently, fairly, and rigorously. Thus, a permanent office 
in GAO with expert staff devoted to regulatory analysis is 
needed.
    The best government is a government accountable to the 
people. For America to have an accountable regulatory system, 
the people's elected representatives must participate in, and 
take responsibility for, the rules promulgated under the laws 
Congress passes.

Regulatory accounting

    Because of Congressional concern about the increasing costs 
and incomplete estimates of benefits of Federal rules and 
paperwork, in 1996,\1\ Congress required OMB to submit its 
first regulatory accounting report by September 30, 1997. In 
1997, Congress continued this requirement. In 1998, Congress 
changed the report's due date to coincide with the President's 
Budget so that Congress and the public could review 
simultaneously both the on-budget and off-budget costs 
associated with each Federal agency and each Federal agency 
program imposing regulatory or paperwork burdens on the public. 
Finally, in 2000, Congress made this a permanent annual 
reporting requirement. The law requires OMB to estimate the 
total annual costs and benefits for all Federal rules and 
paperwork in the aggregate, by agency, by agency program, and 
by major rule, and to include an associated report on the 
impacts of Federal rules and paperwork on certain groups, such 
as small business. These laws were enacted to vindicate the 
principle that the public has the right to know the costs and 
benefits of Federal rules and paperwork and the right to open 
and accountable government.
---------------------------------------------------------------------------
    \1\ The requirements for OMB's regulatory accounting reports were 
enacted as: Sec. 645 of the Treasury, Postal Services and General 
Government Appropriations Act for 1997 (P.L. 104-208); Sec. 625 of the 
Treasury and General Government Appropriations Act for 1998 (P.L. 105-
61); Sec. 638 of the 1999 Omnibus Consolidated and Emergency 
Supplemental Appropriations Act (P.L. 105-277); Sec. 628 of the 
Treasury and General Government Appropriations Act for 2000 (P.L. 106-
58); and Sec. 624 of the Treasury and General Government Appropriations 
Act for 2001 (P.L. 106-554).
---------------------------------------------------------------------------
    Access to data on Federal rules and paperwork by agency and 
by agency program is necessary to enable the public to know the 
aggregate costs and benefits associated with each agency and 
each major regulatory program. For example, the public should 
know what the aggregate costs and benefits are of the 
requirements imposed by the U.S. Department of Agriculture 
(USDA) and the Labor Department's Occupational Health and 
Safety Administration (OSHA). The public should know whether 
there is an alternative approach for USDA or OSHA to accomplish 
their intended objectives more effectively, with less burden on 
and cost to the public.
    Under the Chairmanship of Mr. Ose, the Government Reform 
Subcommittee on Energy Policy, Natural Resources and Regulatory 
Affairs held three hearings on regulatory accounting on: (a) 
March 12, 2002, entitled ``Regulatory Accounting: Costs and 
Benefits of Federal Regulation''; (b) March 11, 2003, entitled 
``How to Improve Regulatory Accounting: Costs, Benefits, and 
Impacts of Federal Regulations''; and, (c) February 25, 2004, 
entitled ``How to Improve Regulatory Accounting: Costs, 
Benefits, and Impacts of Federal Regulations--Part II.''
    The 2002 hearing was intended to be a hearing about the 
fifth report due February 4th; however, OMB did not publish its 
draft report until after the hearing (i.e., on March 18th). The 
2003 hearing considered OMB's draft sixth report that was 
published on February 3rd, the same day as release of the 
President's FY 2004 Budget. It was not, however, part of the 
various Budget documents; instead, it was published in the 
Federal Register on the same day as release of the Budget. This 
approach was not useful to Congress since it precluded a timely 
side-by-side comparison for analytic purposes of the on-budget 
and off-budget costs associated with each major regulatory 
agency (e.g., DOL) and each of its regulatory programs (e.g., 
DOL's OSHA). For the 2004 hearing, OMB missed the statutory 
deadline for simultaneous reporting with the February 2nd 
release of the FY 2005 Budget. As a consequence, in their Views 
and Estimates on the FY 2005 Budget for the Budget Committees, 
Congressional Subcommittees were unable to analyze the full 
impact of the President's Budget for the major regulatory 
agencies and their programs.
    To date, OMB has issued six final and a seventh draft 
regulatory accounting reports--in September 1997, January 1999 
(dated 1998), June 2000, December 2001, December 2002, 
September 2003, and February 2004. Each of the seven did not 
meet some or all of the content requirements under the statute. 
For example, none of the seven was presented as an accounting 
statement and some of the seven did not include the required 
associated report on impacts, e.g., on small business.
    OMB has, however, made progressive improvements, such as 
adding agency level detail for eight agencies in March 2002, 
and adding agency program level detail for seven major 
regulatory programs in February 2003. For the President's 
fiscal Budget and OMB's ICB, OMB requires agencies to submit 
annual budgetary and paperwork estimates, respectively, for 
each agency bureau and program. In contrast, however, with 
regard to Federal regulations, OMB imposes no parallel 
requirement upon agencies to submit annual cost-benefit 
estimates for each agency bureau and regulatory program. 
Therefore, in March 2002, Subcommittee Chairman Ose wrote to 
OMB recommending that OMB issue annual OMB Bulletins to the 
agencies for regulatory accounting information. To date, OMB 
has not done so.
    Currently, the huge off-budget expenditures (these are 
stealth taxes) to comply with Federal regulations receive much 
less scrutiny than proposed on-budget expenditures and the 
Federal deficit. Regulatory accounting is a useful way to 
improve the cost-effectiveness of government. Both Presidents 
Reagan and Clinton issued executive orders requiring cost-
benefit analyses so that policymakers could see the strengths 
and weaknesses of alternative approaches and could make choices 
to ensure that benefits to the public are maximized. These 
requirements ensure that the Government is doing everything it 
can to minimize the burden of Federal regulations on the 
American public.
    On April 22, 2004, Subcommittee Chairman Ose submitted a 9-
page comment letter to OMB on its February 13th draft seventh 
regulatory accounting report, the final version of which was 
required by law to be submitted with the President's fiscal 
Budget on February 2nd. This letter, which is provided herein, 
comprehensively describes possible improvements to OMB's 
regulatory accounting reports and makes the case for the 
regulatory accounting provisions in H.R. 2432.
    Subcommittee Chairman Ose's letter addressed: (a) statutory 
requirements; (b) historical progress in six specific areas, 
and (c) miscellaneous issues, including the need for OMB to 
include cost and benefit estimates for non-major rules and 
major rules still in effect but issued before agencies were 
required to prepare cost-benefit analyses. The six areas 
discussed in the historical progress section were: (1) the 
required annual associated report on impacts, (2) required 
agency-level detail, (3) required program-level detail, (4) the 
need for agency input for OMB's annual regulatory accounting 
statement, (5) the purpose of OMB's including its report as 
part of the President's fiscal Budget, and (6) the need for 
enforcing standardized estimation procedures for all agency 
cost-benefit analyses.
    H.R. 2432 was introduced to address matters revealed by the 
Subcommittee's hearings and oversight. Section 6 of this bill 
includes requirements to improve regulatory accounting, such 
as: (a) requiring agencies to submit information for OMB's 
annual regulatory accounting statements; (b) requiring the 
annual regulatory accounting statement and associated report to 
be submitted ``as part of'' (versus ``with'') the President's 
Budget; and (c) requiring OMB to conduct a multi-agency study 
of regulatory budgeting.

H.R. 2432

    On July 22, 2003, the Government Reform Committee held a 
hearing on H.R. 2432. Witnesses included: Dr. John D. Graham, 
OMB's OIRA Administrator; Thomas M. Sullivan, SBA's Chief 
Counsel for Advocacy; Fred L. Smith, Jr., President and Founder 
of the Competitive Enterprise Institute; Dr. Wendy Lee Gramm, 
Director of the Regulatory Studies Program at the Mercatus 
Center of George Mason University and former OIRA 
Administrator; and organizational witnesses for the National 
Association of Manufacturers (NAM) and the National Small 
Business Association (NSBA) (Serial No. 108-68).
    Dr. Gramm expressed support for Section 4. She stated, 
``there should not be exemptions from the Paperwork Reduction 
Act and the time-tested Administrative Procedures Act. There is 
flexibility enough in the acts themselves. I do not understand 
why one would want to take protections away from farmers. These 
exemptions set a bad precedent and should be repealed'' (pp. 
73-4). Dr. Graham and Mr. Sullivan agreed (see pp. 29, 36 & 57-
8). The NAM witness stated, ``Unless a compelling case can be 
made, the NAM opposes exemptions to the Paperwork Reduction Act 
in the OIRA review of agency regulations, notwithstanding the 
fact that nearly every agency thinks that its activities should 
be exempt'' (p. 84).
    Dr. Gramm expressed support for Section 5. She stated, ``I 
testified in favor of a Congressional Office of Regulatory 
Analysis and have been very disappointed that it has not yet 
been funded. It is high time for Congress to put its money 
where its mouth is. Fund it and make it permanent'' (p. 74). 
The NAM witness stated, ``The NAM was a fervent supporter of 
the Truth in Regulating Act prior to its passage in the 106th 
Congress. The NAM continues to believe that giving the General 
Accounting Office the ability to review major rules upon 
request will allow Congress to have more and better information 
in reviewing the implementation of legislation'' (p. 84). Mr. 
Sullivan and the NSBA witness also expressed support for 
Section 5 (see pp. 36 & 97-98).
    Dr. Gramm expressed support for Section 6(a), stating, ``I 
believe that all agencies should make those reports'' (p. 122). 
Mr. Smith agreed. Mr. Sullivan elaborated stating, ``Advocacy 
recommends that the bill also require agency submissions to OMB 
(and OMB's corresponding accounting statements) to identify and 
analyze regulatory impacts on small entities'' (p. 37).
    Dr. Gramm and Mr. Smith expressed support for Section 6(b). 
He stated, ``I think that's a very good idea'' (p. 130) and 
``Consolidating the presentation of tax, spending, and 
regulatory cost information would help clarify the big picture 
for Congress and the public * * * OMB should begin as soon as 
possible to integrate the presentation of regulatory cost 
information with its annual presentation of tax and expenditure 
information'' (p. 71). She added, ``I believe [regulatory 
accounting information] should be provided with the fiscal 
budget documents for the reasons I stated earlier, but with 
another one: I think it would get the attention of the OMB 
Director and the higher-ups in the executive branch and get 
them to pay more attention to this issue'' (p. 130).
    With respect to Section 6(c), Dr. Gramm stated, ``I 
strongly support section 6 and believe that section [6(c)], 
which establishes pilot projects for regulatory budgeting, is 
perhaps the most important provision of the whole bill. It 
would begin to do what I have long advocated: bring the off-
budget cost of government on budget, expose the hidden costs of 
regulations that Americans are paying each year, and hold 
agencies and Congress, where appropriate, accountable for the 
taxes they impose on citizens and businesses'' (p. 74). Dr. 
Graham expressed support, stating,

        The biggest one is that regulators currently have a big 
        incentive to watch their own budget that they have been 
        appropriated, but there's no limit on how much they can 
        ask the private sector or State and local governments 
        to spend because that doesn't count as part of their 
        budget. So what a regulatory budget immediately does 
        is, it asks them to consider that we're only able to do 
        a certain number of these regulations because we have a 
        private sector and State and local government limit on 
        our regulation, so let's pick the most cost-effective 
        ones. That's a huge advantage (p. 57).

    Mr. Smith stated, ``I think pilots are a good idea. We're 
going to learn a lot from this, hopefully'' (p. 131). Mr. 
Sullivan and the NSBA witness also expressed support for a 
study of regulatory budgeting (see pp. 57 & 131). NAM's witness 
stated, ``The NAM supports the pilot program for regulatory 
budgeting. The pilot program will help determine whether the 
regulatory budgeting program for the Federal Government as a 
whole makes sense. The NAM agrees with the agencies included in 
the text of H.R. 2432 for the pilot project, since the 
Department of Labor, the Department of Transportation, and the 
Environmental Protection Agency are the three top sources of 
rulemaking'' (p. 84) and ``Both Congress and the Administration 
should try to direct regulatory dollars where they supply the 
most benefit and at the least cost'' (p. 94).
    Dr. Gramm concluded her oral testimony by stating, ``I 
strongly support H.R. 2432 because it takes important steps in 
bringing accountability and transparency to the regulatory 
process. My testimony makes clear that I support all sections 
of H.R. 2432 because it begins to make the treatment of 
regulatory programs similar to other programs of government'' 
(p. 73). Mr. Sullivan also indicated the support of his office, 
stating, ``We support the bill and believe that it would 
improve agency accountability in ways that would benefit small 
business'' (p. 33). Lastly, Mr. Smith stated, ``CEI strongly 
supports the `Paperwork and Regulatory Improvements Act of 
2003.' Although the bill is by no means a cure for the defects 
of the regulatory process, it is a positive step in the right 
direction'' (p. 63).
    The Committee has received many letters of support for H.R. 
2432, including from the Chamber of Commerce of the United 
States, National Association of Manufacturers, National Small 
Business Association, Small Business Survival Committee, Air 
Conditioning Contractors of America, American Farm Bureau 
Federation, American Road and Transportation Builders 
Association, Associated Builders and Contractors, Inc., The 
Associated General Contractors of America, Consumer Specialty 
Products Association, IPC Association Connecting Electronics 
Industries, National Grocers Association, National Paint and 
Coatings Association, National Pest Management Association, 
Inc., National Roofing Contractors Association, National Stone, 
Sand and Gravel Association, Printing Industries of America, 
Inc., Rubber Manufacturers Association, Society of Glass and 
Ceramic Decorators, and Synthetic Organic Chemical 
Manufacturers Association.
    As just one example, the Small Business Survival Committee 
stated: ``Another important step under H.R. 2432 would be the 
integration of regulatory accounting reports by agency within 
the federal budget. This would give members of Congress and the 
public a more accurate picture of what the total costs of 
government actually are.''
    The American Farm Bureau Federation stated: ``We strongly 
support comprehensive annual regulatory budgeting and believe 
that these provisions are a positive and necessary first step 
toward achieving that goal.''
    The bill will not impose an undue burden on OMB. In fact, 
CBO estimates that H.R. 2432 would increase OMB's reporting 
costs by $2 million a year. Much of the needed information is 
already available. Since President Reagan's 1981 historic 
executive order, Federal agencies have been required to perform 
cost-benefit analyses of major rules, which constitute the bulk 
of Federal regulatory costs and benefits. Also, OMB can avail 
itself of many other existing sources of information, including 
private regulatory accounting studies and government studies.
    The ``Paperwork and Regulatory Improvements Act'' is a 
basic step toward achieving a smarter partnership in regulatory 
programs. It is an important tool for understanding the 
magnitudes and impacts of Federal regulatory programs. The Act 
will empower all Americans by providing them with new 
information and opportunities to help them participate more 
fully and improve our government. Additional useful information 
and public input will help regulators make better, more 
accountable decisions and promote greater confidence in the 
quality of Federal policy and regulatory decisions. Better 
decisions and improved regulatory programs will enhance 
innovation, improve the quality of the environment, secure our 
economic future, and foster a better quality of life for every 
American.

                           Section-by-Section


Section 1. Short title

    The short title of the bill is the ``Paper Work and 
Regulatory Improvements Act.''

Section 2. Findings

    Section 2 includes historical information about 
Congressional direction regarding paperwork reduction--as 
expressed in the Paperwork Reduction Act, two appropriations 
acts, and a House Appropriations Report--and inadequate 
paperwork reduction results in the last eight years. This 
Section also includes historical information about the 
statutory requirement for an annual regulatory accounting 
report, including the impact of Federal rules and paperwork, 
and the need for improvements in these reports.
    Section 2 reports that, in 1980, Congress established OIRA 
in OMB. OIRA's principal responsibility is to reduce the 
paperwork burden on the public that results from the collection 
of information by or for the Federal government. In 1996, 
because of the increasing cost and incompletely estimated 
benefits of Federal rules and paperwork, Congress required OMB 
to submit an annual report to Congress on the total costs and 
benefits to the public of Federal rules and paperwork 
requirements, including an assessment of the effects of Federal 
rules on the private sector and State and local governments. In 
1998, Congress changed the annual report's due date to coincide 
with the due date of the President's budget and, in 2000, made 
this a permanent annual reporting requirement.

Section 3. Reduction of tax paperwork

    Section 3 requires that OMB, after consultation with the 
IRS and two other Federal agency offices, submit a report to 
Congress on actions the IRS can take to reduce paperwork burden 
imposed on small business.
    In 1995, 1998, 2000, and 2002, Congress enacted legislation 
and issued a House Report with the objective of decreasing 
paperwork burden. Nonetheless, paperwork has increased in each 
of the last eight years. Currently, tax paperwork burden 
accounts for over 80 percent of all federally-imposed paperwork 
burden on the public. Nonetheless, OMB continues to devote less 
than 1 full-time equivalent staff to IRS paperwork reduction.
    Section 3 adds a new subsection to Sec. 3504 of the 
Paperwork Reduction Act that requires OMB, after consultation 
with IRS, Office of Tax Policy of the Department of the 
Treasury, and SBA's Office of Advocacy, to conduct a review of 
the collections of information conducted by the IRS to identify 
actions that the IRS can take to reduce the information 
collection burdens imposed on small business concerns. OMB 
shall include the results of its review in the annual report 
for FY 2006 that OMB submits to Congress under section 
Sec. 3514 of the Paperwork Reduction Act.

Section 4. Repeal of exemptions from Paperwork Reduction Act, etc.

    Section 4 removes statutory exemptions in the Farm Security 
and Rural Investment Act of 2002 (Pub. Law 107-171) from 
various paperwork review and regulatory due process 
requirements. Neither the law nor its legislative history 
includes a justification for these exemptions to standard good 
government protections for the public.
    Section 4 repeals exemptions from: (a) the Paperwork 
Reduction Act (44 U.S.C. Chapter 35), including the requirement 
for OMB review and approval of each proposed and continuing 
paperwork imposition on the public to ensure practical utility; 
(b) the Administrative Procedure Act (5 U.S.C. Sec. 553), 
including the requirement for affected parties to have notice 
and an opportunity to comment on all agency regulatory 
proposals; and, (c) the Congressional Review Act (5 U.S.C. 
Sec. 808), including a requirement for Congressional review 
before agency final rules can become effective. This repeal is 
effective 180 days after enactment.
    The current exemptions to be repealed are in the following 
sections of the Farm Security and Rural Investment Act: Title 
I, Commodity Programs, Subtitle F, Administration, Sec. 1601, 
Administration generally; Title II, Conservation, Subtitle H, 
Funding and Administration, Sec. 2702, Regulations; Title VI, 
Rural Development, Subtitle B, Rural Electrification Act of 
1936, Sec. 6103, Enhancement of access to broadband service in 
rural areas; and, Title X, Miscellaneous, Subtitle B, Disaster 
Assistance, Sec. 10105, Market loss assistance for apple 
producers.
    OMB's implementing rules for the Paperwork Reduction Act 
include ``Emergency processing'' provisions (5 C.F.R. 
Sec. 1320.13). These rules are available in various situations, 
such as when the collection of information is ``essential to 
the mission of the agency'' or when ``public harm is reasonably 
likely to result if normal clearance procedures are followed.'' 
In addition, the Administrative Procedure Act authorizes an 
agency to issue an interim final rule (instead of a proposed 
rule) upon an agency finding of ``good cause'' (5 U.S.C. 
Sec. 553(b)(3)(B)). Lastly, the Congressional Review Act 
provides that a rule may take effect without Congressional 
review under certain circumstances (5 U.S.C. Sec. 801(c)). With 
these identified provisions already in place, funds intended 
for immediate distribution under the Farm Security and Rural 
Investment Act or future farm legislation can be promptly 
distributed without need for specific statutory exemptions from 
these good government laws.

Section 5. Amendment of Truth in Regulating Act to make permanent pilot 
        project for report on rules

    Section 5 makes permanent the authorization for GAO to 
respond to requests from Congress for an independent evaluation 
of selective economically significant rules proposed or issued 
by Federal agencies.
    Section 5 amends the Truth in Regulating Act (Pub. Law 106-
312) to make permanent the authority to request the performance 
of regulatory analysis in order to enhance Congressional 
responsibility for regulatory decisions developed under the 
laws enacted by Congress. This law was enacted to: increase the 
transparency of important agency rules; promote effective 
Congressional oversight to ensure that agency rules fulfill 
statutory requirements in an efficient, effective, and fair 
manner; and, increase the accountability of Congress and the 
agencies to the people they serve. This amendment removes the 
authorization for a 3-year pilot project.
    GAO never hired staff for this function since the law only 
authorized a 3-year pilot project. Instead, GAO intended, after 
the 3-year pilot project received funding (which never 
occurred), to use contractors instead of full-time expert 
agency staff to prepare its independent evaluations. To ensure 
full-time agency expertise within GAO, a change from a pilot 
approach to permanency is needed.
    To assume oversight responsibility for Federal regulations, 
Congress needs to be armed with an independent evaluation. With 
this analytic help, Congress will be better equipped to review 
final agency rules under the Congressional Review Act. More 
importantly, Congress will be better equipped to submit timely 
and knowledgeable comments on proposed rules during the public 
comment period.

Section 6. Improved regulatory accounting

    Section 6 requires OMB to improve its annual regulatory 
accounting statement and associated report, which are required 
by law to be submitted in final form with the President's 
Budget. In 1996, Congress required OMB to submit its first 
regulatory accounting report. In 1998 and 2000, Congress 
enacted additional legislation to make OMB's regulatory 
accounting reports more useful. OMB is annually required to 
submit the total annual costs and benefits for all Federal 
rules and paperwork in the aggregate, by agency, by agency 
program, and by major rule, and to include an associated report 
on the impacts of Federal rules and paperwork on certain 
groups.
    OMB's seventh draft and six final regulatory accounting 
reports have not met some of the statutorily-required content 
requirements. Part of the reason is that OMB has not requested 
agency estimates for each agency bureau and program. OMB does 
this annually with respect to its ICB (paperwork budget) and 
for the President's Budget (fiscal budget). Section 6(a) 
extends this practice of requiring agency input for OMB's 
annual regulatory accounting statements.
    Section 6(a) requires Federal agencies annually to submit 
estimates of the costs and benefits associated with the Federal 
rules and paperwork for each of their agency programs. As OMB 
does for its Information Collection Budget and the fiscal 
Budget, OMB shall require each agency to submit annual 
estimates. This section includes a ``to the extent feasible'' 
qualifier to ensure no further burden on or cost to the 
agencies, i.e., for their submissions to include all available 
data.
    Section 6(b) requires integration into the President's 
Budget of OMB's regulatory accounting statement and associated 
report. Current law requires submission ``with the budget.'' 
Section 6(c) requires submission ``as part of the budget.'' 
Currently, the economic impacts of Federal regulation receive 
much less scrutiny than programs in the fiscal Budget. 
Integration will allow Congress and the public to be able to 
review simultaneously both the on-budget and off-budget costs 
associated with each Federal agency imposing regulatory or 
paperwork burdens on the public.
    Section 6(c) requires OMB to designate at least three 
agencies (or offices within an agency)--from among the 
following four major regulatory agencies: the Department of 
Labor, the Department of Transportation, the Department of 
Health and Human Services, and the Environmental Protection 
Agency--to participate in a study of regulatory budgeting for 
fiscal years 2006 and 2007, and then report the results to 
Congress.
    This study, in which agencies are to identify regulatory 
alternatives and prioritize possible regulatory actions, will 
determine whether agencies can better manage regulatory burdens 
on the public. The study will set forth the preparation of 
regulatory budgets, including the presentation of varying 
estimated levels of benefits associated with different 
estimated levels of costs with respect to the regulatory 
alternatives under consideration.

                       Explanation of Amendments

    The provisions of the substitute are explained in this 
report.

                        Committee Consideration

    The bipartisan ``Paperwork and Regulatory Improvements 
Act'' (H.R. 2432) was introduced on June 11, 2003 by Rep. Doug 
Ose, Chairman, Government Reform Subcommittee on Energy Policy, 
Natural Resources and Regulatory Affairs, and Rep. Tom Davis, 
Chairman, Committee on Government Reform. There were 5 other 
original co-sponsors, including 3 Democrats and 2 Republicans.
    After introduction, the bill was referred to the Committee 
on Government Reform. On July 22, 2003, the Committee on 
Government Reform held a hearing on H.R. 2432. On May 12, 2004, 
the Government Reform Committee considered the bill in open 
session. The Committee ordered the bill favorably reported, as 
amended, to the full House by voice vote.



                             Correspondence

                                                    April 22, 2004.
By facsimile

Hon. Joshua B. Bolten,
Director, Office of Management and Budget,
Washington, DC.
    Dear Director Bolten: I am writing to state my views on the 
Office of Management and Budget's (OMB's) February 13, 2004 
draft seventh regulatory accounting report, the final version 
of which was required by law to be submitted with the 
President's fiscal Budget on February 2nd. OMB published a 
Notice of availability and request for comments on February 
20th (34 FR 7987).
    As the Government Reform Subcommittee Chairman responsible 
for oversight over OMB's regulatory functions, this is my 
seventh letter to OMB on its draft and final regulatory 
accounting reports. Also, on February 25th, my Subcommittee 
held a hearing, entitled ``How to Improve Regulatory 
Accounting: Costs, Benefits, and Impacts of Federal 
Regulation--Part II,'' on OMB's draft seventh report. I regret 
to report to you that OMB's draft not only again fails to 
respond to many of the concerns raised in my previous comment 
letters but also again fails to meet some of the specific 
statutory requirements.

                       I. STATUTORY REQUIREMENTS

    The law requires OMB to annually submit with the 
President's fiscal Budget: (a) a regulatory accounting 
statement, (b) an associated report on impacts of Federal rules 
and paperwork, and (c) recommendations for regulatory reform. 
OMB's draft report includes partial regulatory accounting 
information, an inadequate associated report on impacts, and no 
specific reform recommendations. I remain concerned about the 
noncompliance or incomplete compliance with the specific 
statutory mandates.
    For the accounting statement, the law requires OMB to 
estimate the total annual costs and benefits of all Federal 
rules and paperwork (1) in the aggregate, (2) by agency, (3) by 
agency program, and (4) by major rule. OMB's 2004 draft report 
was still not presented as an accounting statement and it 
includes information on only nine agencies (p. 5) and only six 
agency regulatory programs (p. 7). Moreover, OMB's draft 
includes only aggregate data on major rules issued in a rolling 
10-year period instead of for all Federal rules and paperwork, 
as required by law. Furthermore, it excludes many categories of 
rules from its aggregation, e.g., all ``transfer'' rules that 
implement Federal budgetary programs. This omission is 
problematic for many reasons, among which is the fact that many 
of these rules impose huge costs on State and local 
governments. Nothing in the statute authorizes OMB to exclude 
any category of rules.
    In her written statement for the Subcommittee's February 
25th hearing, the Director of the Regulatory Studies Program at 
the Mercatus Center, in a section captioned ``The estimates 
cover a small fraction of federal regulation,'' stated, ``The 
benefits and costs for fiscal year 2003 are based on agency 
estimates for only six regulations, or one-tenth of one percent 
of the final rules published in the Federal Register during the 
year'' (p. 2).
    In fact, non-OMB estimates of the aggregate costs of all 
Federal rules and paperwork far exceed OMB's estimates. OMB's 
draft seventh report estimates that annual costs of the major 
rules issued in its rolling 10-period range from $34 billion to 
$39 billion. In contrast, in Fall 2001, the Small Business 
Administration (SBA) estimated that, in 2000, Americans spent 
$843 billion to comply with Federal regulations.
    In my March 27, 2002 comment letter on OMB's draft fifth 
report, I stated,

          To assist OMB in preparing estimates by agency and by 
        agency program, I recommend that OMB issue annual OMB 
        Bulletins to the agencies like it does for paperwork 
        reduction. In fact, agency proposed estimates of 
        aggregate and new paperwork burden help OMB prepare a 
        government-wide Information Collection Budget to manage 
        paperwork burden on the public. OMB's regulatory 
        accounting Bulletins should require each agency to 
        submit estimates of its aggregate and new regulatory 
        burden for the agency as a whole and for each of the 
        agency's major regulatory programs.

    In my January 3, 2003 comment letter on OMB's final fifth--
and incomplete--report, I stated, ``I now request that OMB 
promptly issue such a Bulletin.'' To date, OMB has not done so. 
Bi-partisan legislation (H.R. 2432, Paperwork and Regulatory 
Improvements Act), which I introduced on April 3rd, would 
require OMB to do so in the future. To improve upon its 
incomplete draft regulatory accounting report, OMB should 
promptly ask each agency for any available information for the 
agency as a whole or for one or more of its agency regulatory 
programs.

                        II. HISTORICAL PROGRESS

    I am enclosing a chart that summarizes comments submitted 
to OMB by the Subcommittee from 1997 to present, i.e., not only 
from me but also from my predecessor. The chart includes six 
areas relating to OMB's regulatory accounting reports and OMB's 
progress in addressing each of these areas: (1) the 
statutorily-required annual associated report on impacts of 
Federal rules and paperwork; (2) the statutorily-required 
annual estimates of the total annual costs and benefits of all 
Federal rules and paperwork by agency; (3) the statutorily-
required annual estimates of the total annual costs and 
benefits of all Federal rules and paperwork by agency program; 
(4) my request for OMB to issue an OMB Bulletin to the agencies 
calling for all available cost-benefit data to be submitted to 
OMB; (5) my recommendation for OMB's annual report to be 
submitted ``as part of'' the Budget instead of ``with'' the 
Budget; and (6) and the need for standardized agency estimation 
so that OMB is aggregating comparable numbers (i.e., apples and 
apples instead of apples and oranges).

A. Associated Report on Impacts

    The first column includes comments on the required 
associated report on impacts of Federal rules and paperwork in 
certain sectors, e.g., on small business and State and local 
government. You will note that OMB's fourth and sixth reports 
did not include the required associated report and OMB's other 
reports inadequately addressed the impacts of Federal rules and 
paperwork, especially on small business (e.g., its draft 
seventh report includes only 2 pages on impacts on small 
business).
    On October 24, 2003, Small Business Subcommittee Chairman 
Edward Schrock submitted comments on resources that OMB could 
use to include a full impacts report on small business in its 
future regulatory accounting reports. He stated, ``By law, 
every regulation that is certified to have a significant impact 
on a substantial number of small entities is required to 
develop a Regulatory Flexibility Analysis. Within each of the 
initial and final versions of this agency analysis is a 
statement of the potential impact of the rule on small 
business.'' Unfortunately, OMB did not follow Chairman 
Schrock's recommendation, i.e., it did not incorporate 
estimates from available agency Regulatory Flexibility Analyses 
(RFAs). In his written statement for the Subcommittee's 
February 25, 2004 hearing, SBA's Chief Counsel for Advocacy 
stated, ``From the Office of Advocacy's perspective, the Draft 
OMB Report would also benefit from small business impact 
analyses that should be prepared for rules reviewed by OIRA'' 
(p. 4).
    In my March 4th post-hearing questions, I asked whether OMB 
had reviewed the agencies' RFAs. In its March 26th answer, OMB 
stated that OMB ``has not aggregated information on these rules 
in the 2004 draft report. OMB is open to discussing this type 
of review with the SBA Office of Advocacy'' (p. 6). OMB also 
pointed to a report issued by SBA. SBA's report does not 
override a statutory requirement for OMB to submit an annual 
associated report on impacts. In fact, this mandatory element 
is extremely important to the regulated community and deserves 
a more concerted effort by OMB, including OMB's systematically 
seeking input from the agencies and outside groups.

B. Agency Detail

    The second column contains comments on the required agency 
level detail. You will note that OMB's fifth report was its 
first to include any agency detail but it did so for only eight 
agencies. Its draft seventh report includes only partial data 
for eight departments (Agriculture, Education, Energy, Health 
and Human Services (HHS), Homeland Security, Housing and Urban 
Development, Labor, and Transportation) and one independent 
agency (Environmental Protection Agency (EPA)). In fact, data 
are missing for several key regulatory agencies, such as for 
three key independent regulatory commissions: the Federal 
Communications Commission, the Federal Trade Commission, and 
the Securities and Exchange Commission. I encourage OMB to 
expand its database for its seventh final report and its future 
reports.

C. Program Detail

    The third column contains comments on the statutorily-
required annual estimates of the total annual costs and 
benefits by agency program. You will note that OMB's sixth 
report was its first to include any program-level detail but it 
did so for only seven agency programs. OMB's draft seventh 
report includes only partial data for six agency programs: one 
in the Energy Department, one in HHS, the Occupational Safety 
and Health Administration (OSHA) in the Labor Department, one 
in the Transportation Department, and two in EPA.
    For the last two Budgets, OMB used a Program Assessment 
Rating Tool (PART) to review 40 percent of all agency programs. 
Many agency programs were categorized as ``regulatory based'' 
programs. For example, in the Labor Department, besides OSHA, 
OMB categorized five other programs as regulatory based: Davis-
Bacon Wage Determination Program, Employee Benefits Security 
Administration (EBSA), Mine Safety and Health Administration 
(MSHA), Office of Federal Contract Compliance Programs (OFCCP), 
and Pension and Welfare Benefits Administration (PWBA). OMB's 
draft report does not include program-level detail for any of 
these five regulatory programs. I encourage OMB to expand its 
database for its seventh final report and its future reports.

D. Agency Input

    The fourth column arises out of my recommendation that OMB 
issue an annual Bulletin requesting input from the agencies so 
that OMB will eventually be able to provide complete agency 
detail and program detail. In my March 18, 2003 comment letter 
on OMB's draft sixth report, I stated, ``I recognize that, in 
the first few years, agency submissions will be incomplete; 
nonetheless, this discipline will result in more complete and 
better data in time.''
    I also stated, ``Witnesses at my Subcommittee's March 11, 
2003 hearing, entitled `How to Improve Regulatory Accounting: 
Costs, Benefits and Impacts of Federal Regulations,' expressed 
support for a pilot test of regulatory budgeting. More complete 
and better agency data are essential to pursue such an 
approach.'' My bi-partisan legislation (H.R. 2432) includes 
pilot tests of regulatory budgeting. OMB's witness at our March 
11, 2003 and February 25, 2004 hearings expressed support for 
such pilot tests. At the latter, he stated, ``You know that I 
am very optimistic and enthusiastic about the concept of a 
regulatory budget. You know that I am enthusiastic about the 
idea of trying to move forward for a pilot project, to try to 
actually demonstrate and study the potential promise of this 
type of activity'' (transcript, pp. 23-4).

E. Budget Submission

    The fifth column contains comments on the statutorily-
required submission ``with'' the President's fiscal Budget. You 
will note that OMB's draft sixth report was the first to be 
submitted on time. Unfortunately, it was published in the 
Federal Register instead of with the Budget documents. As a 
consequence, it was harder for Congress to simultaneously 
review both the on-budget and off-budget costs associated with 
each Federal agency and each Federal agency program imposing 
regulatory or paperwork burdens on the public. Even though 
OMB's September 2003 final sixth report stated, ``OMB's 
objective is to publish the draft 2004 report as part of the 
President's FY 2005 budget submission to Congress, which will 
be released in February 2004'' (p. 4), OMB did not do so. 
Instead, OMB submitted its draft report to Congress 11 days 
late and published it for public comment 18 days late. This 
late submission prevented Congressional Subcommittees from 
preparing fully informed recommendations for this year's Budget 
Resolution.
    On March 4, 2004, I sent OMB post-hearing questions after 
the Subcommittee's February 25th hearing. At the outset, I 
noted that, ``Current law (codified as 31 U.S.C. 1105 Note for 
`Budget contents and submission to Congress,' USCA pp. 219-237) 
requires that the Office of Management and Budget (OMB) submit 
its annual regulatory accounting statement and associated 
report on impacts `with' the President's Budget.'' I then 
discussed my bi-partisan bill (H.R. 2432) that would require 
submission ``as part of'' (vs. ``with'') the President's Budget 
and stated, ``This provision provides OMB with considerable 
flexibility regarding in which of the various Budget documents 
it will present this information.'' In its March 26th post-
hearing answer, OMB stated, ``We are concerned about this 
proposed change to current law for several reasons. First, this 
would impose a mandate on the President with respect to what 
information the President must include in his Budget submission 
to Congress'' (p. 2). In fact, as indicated in my question, 
there are already nearly 20 pages of detailed specifications in 
law and, unlike some of the existing detailed specifications, 
my bill provides considerable flexibility to OMB.
    OMB further argued, ``Second, under existing law, the draft 
cost-benefit report that OMB issues in February, with the 
Budget, is subject to public comment, interagency review, and 
peer review'' (p. 2). The problem is that OMB's regulatory 
accounting reports have been issued off-cycle. OMB's draft 
report should be issued several months earlier so that its 
final report can be submitted with the Budget, as the law 
requires.
    Lastly, OMB argued that its report covers only ``a series 
of years.'' In fact, the law does not authorize OMB to limit 
its report to only a series of years. As stated earlier in this 
letter, OMB's draft only includes aggregate data for a rolling 
10-year period instead of for all Federal rules and paperwork, 
as required by law.
    The Chamber of Commerce witness at the Subcommittee's 
February 25th hearing stated his support for including the 
regulatory accounting report as part of the Budget. He stated, 
``We would like to see it as part of a submittal, because what 
the agencies are going to do as part of their budget is 
certainly going to have an impact on regulation'' (transcript, 
pp. 75-6). The Mercatus Center witness elaborated by saying, 
``I would agree, and I think the analogy to the Government 
Performance and Results Act is helpful there. We have seen that 
in recent years that [it] has been part of the budget; not 
alongside the budget, but part of the budget, and I think it is 
helping improve accountability and performance'' (transcript, 
p. 76). In her written testimony, in a section captioned ``The 
annual reports could be integrated more fully into the fiscal 
budget process,'' she stated, ``integrating OMB's Regulatory 
Accounting Report will allow policymakers and appropriators to 
allocate our nation's resources more efficiently and 
effectively to achieve greater benefits from our regulatory 
programs'' (pp. 1-2).

F. Standardized Estimation

    The last column contains comments about the absence of any 
mandatory systematic and standardized procedure agencies must 
use to collect and report data to OMB on the impacts of all 
existing, revised, and new regulations. The Subcommittee 
repeatedly commented,
    With respect to the absence of standard procedures for 
collecting and reporting data by the agencies, implementing 
such procedures are critical to the credibility of future 
government-wide analyses. Accordingly, we expect OMB to require 
all executive branch agencies to follow uniform systematic 
standardized procedures for collecting and reporting data to 
OMB and to request that the independent regulatory agencies do 
the same. At a minimum, there must be a standardized procedure 
for collecting and reporting data on the costs and benefits for 
all existing rules.
    I am pleased that OMB issued a new OMB Circular A-4, 
Regulatory Analysis, as part of its sixth final report. In my 
first comment letter on regulatory accounting, I stated, 
``During OMB's review of individual agency regulatory 
proposals, the Subcommittee recommends that OMB return to the 
agencies any regulatory proposal that does not present costs 
and benefits estimates that fully conform with OMB's 
standards'' (5/4/01). Our February 25, 2004 witnesses agreed. 
SBA's Chief Counsel for Advocacy stated, ``My office recommends 
that OMB issue return letters on a rule-by-rule basis to 
enforce agency compliance'' (transcript, p. 10). The Mercatus 
Center witness stated, ``OMB should be able to hold agencies 
accountable for these new guidelines. And, if they do not 
comport, they should return regulations to agencies'' 
(transcript, p. 55). In addition, OMB's witness stated, ``we 
intend to use all the available authorities we have to make 
sure that agencies comply with Circular A-4'' (transcript, p. 
35).
    I am heartened by OMB's March 26th post-hearing answer that 
stated, ``It is the Administration's policy that all regulatory 
impact analyses for economically significant proposed rules 
must comply with Circular A-4 after January 1, 2004, and that 
all regulatory impact analyses for economically significant 
final rules must comply with Circular A-4 after January 1, 
2005. A regulatory impact analysis that is not-compliant with 
Circular A-4 will be a basis for returning rules to agencies'' 
(emphases added, p. 5).
    My March 4, 2004 post-hearing question asked not only 
whether OMB will return for revision all agency cost-benefit 
analyses that are non-compliant with Circular A-4 but also 
whether OMB will adjust agency cost-benefit estimates in OMB's 
future annual regulatory accounting reports to ensure more 
consistent and reliable aggregate information. OMB's post-
hearing answer for the latter is not reassuring. OMB stated,

          OMB expects that these new disclosure requirements 
        and the new guidelines in general will lead to 
        estimates that are more comparable across agencies. We 
        are aware of this issue, however, and will continue to 
        monitor the comparability of estimates across agencies 
        and the effect of the new Circular on comparability. As 
        the Subcommittee points out, a goal of our Circular is 
        to encourage the standardization of the way that 
        benefits and costs of rules are measured and reported'' 
        (emphases added, pp. 5-6).

OMB needs to do more than monitor and encourage; it needs to 
adjust all inconsistent agency estimates.

                          III. OTHER COMMENTS

    In OMB's response to other public comments in its September 
2003 sixth final report, OMB stated, ``Two commenters (307, 
327) recommended that the report should include estimates of 
the benefits and costs of regulations issued prior to 1992. OMB 
does not believe that the estimates of the costs and benefits 
of regulations issued over ten years ago are very reliable or 
very useful for informing current policy decisions'' (p. 17). I 
agree with these commenters. The Subcommittee has repeatedly 
asked OMB to include all regulations. In my first comment 
letter on regulatory accounting, I stated,

          The Subcommittee believes that OMB's accounting 
        statement and associated report should include all 
        regulations, including those issued prior to 1990. 
        Since there was no executive order in place mandating 
        such analysis prior to 1981, the Subcommittee 
        recognizes the difficulty of estimating these data. 
        Nonetheless, they are essential to appreciate the full 
        impact of Federal regulatory and paperwork requirement 
        on the public (5/4/01).

    In my March 4, 2004 post-hearing questions, I quoted the 
following from OMB's draft report, ``Based on information 
contained in this and previous reports, the total costs and 
benefits of all Federal rules now in effect (major and non-
major, including those adopted more than 10 year ago) could 
easily be a factor of ten or more larger than the sum of the 
costs and benefits reported'' herein (emphasis added, p. 6). 
Then, I asked OMB, ``What steps, if any, has OMB taken to 
include available data for the still active major rules issued 
from 1981 (under President Reagan's E.O.) to 1993 (February 17, 
1981 to September 30, 1993), and estimates for the still active 
major rules issued before 1981?'' In its March 26th reply, OMB 
stated that, for the 2005 Report, OMB ``has assembled a time 
series of new Federal regulatory costs for the past 17 years, 
from 1987-2003'' (p. 8). This is encouraging. Data for a 17-
year period is clearly more desirable than data for only a 
rolling 10-year period.
    OMB's sixth final report also stated, ``One commenter (327) 
believed that the report should include benefit and cost 
estimates for non-major rules. OMB believes that major 
(economically significant) rules account for the vast majority 
of the total costs of Federal regulation, even though most 
Federal rules are not considered major'' (p. 17). I agree with 
the commenter and request that OMB, in its future reports, use 
statistical procedures to include estimates for these benefits 
and costs. In his written statement for the Subcommittee's 
February 25, 2004 hearing, the Chamber of Commerce witness 
stated,

          * * * some methodological approach should be 
        established that can enable OMB to more reliably gauge 
        the impact of all federal rules that are in effect, not 
        just those major rules promulgated over the previous 
        ten years or some other arbitrarily established 
        timeframe that fails to capture the full cost and 
        benefit impacts of regulations on the public (p. 6).

    As stated earlier, non-OMB estimates of the aggregate costs 
of all Federal rules and paperwork far exceed OMB's estimates. 
OMB's draft seventh report estimates that annual costs of the 
major rules issued in its rolling 10-period range from $34 
billion to $39 billion, which pales in comparison to SBA's 
estimate that, in 2000, Americans spent $843 billion to comply 
with Federal regulations, including both major and non-major 
rules. The cumulative impact of all rules in the aggregate, by 
agency, and by agency program is critical for informed 
Congressional and public debate.
    Thank you for your attention to my concerns.
            Sincerely,
                                          Doug Ose,
                   Chairman, Subcommittee on Energy Policy,
                          Natural Resources and Regulatory Affairs.
    Enclosure.
    
    
              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of reported bills to the 
legislative branch where the bill relates to the terms and 
conditions of employment or access to public services and 
accommodations. This bill increases the probability of results 
in paperwork reduction, assists Congress in its review of 
agency regulatory proposals, and improves regulatory 
accounting. To the extent that this bill reduces paperwork 
burdens this benefit would apply equally to employees of the 
legislative branch.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(2) of rule XIII and clause 
(2)(b)(1) of rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the descriptive portions of 
this report.

         Statement of General Performance Goals and Objectives

    Because this bill does not authorize funding, a statement 
of general performance goals pursuant to clause 3(c)(4) of rule 
XIII of the Rules of the House of Representatives is not 
required.

                   Constitutional Authority Statement

    Under clause 3(d)(1) of rule XIII of the Rules of the House 
of Representatives, the Committee must include a statement 
citing the specific powers granted to Congress to enact the law 
proposed by H.R. 2432. Article I, Section 8, Clause 18 of the 
Constitution of the United States grants the Congress the power 
to enact this law.

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandate Reform Act, P.L. 104-4) requires a statement whether 
the provisions of the reported include unfunded mandates. In 
compliance with this requirement the Committee has received a 
letter from the Congressional Budget Office included herein.

                           Committee Estimate

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 2432. However, clause 3(d)(3)(B) of that rule provides 
that this requirement does not apply when the Committee has 
included in its report a timely submitted cost estimate of the 
bill prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act.

     Budget Authority and Congressional Budget Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause (3)(c)(3) of rule XIII of the Rules 
of the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the Committee has received 
the following cost estimate for H.R. 2432 from the Director of 
Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, May 14, 2004.
Hon. Tom Davis,
Chairman, Committee on Government Reform,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed estimate for H.R. 2432, the Paperwork and 
Regulatory Improvements Act of 2004.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                         Elizabeth Robinson
                               (For Douglas Holtz-Eakin, Director).
    Enclosure.

H.R. 2432--Paperwork and Regulatory Improvements Act of 2004

    Summary: H.R. 2432 would amend the Truth In Regulating Act 
and other provisions of current law concerned with the cost of 
government regulations and the burden of federal reporting 
requirements. H.R. 2432 would grant the General Accounting 
Office (GAO) permanent authority to evaluate economically 
significant agency rules. The bill also would direct the Office 
of Management and Budget (OMB) to expand its regulatory 
accounting process, require OMB to review the burden of 
information collection requirements imposed by the Internal 
Revenue Service (IRS) on small business, and repeal the 
exemption granted in the Farm Security and Rural Investment Act 
of 2002 from certain regulatory review requirements for 
specific Department of Agriculture programs.
    CBO estimates that implementing H.R. 2432 would cost about 
$10 million a year, assuming the appropriation of the necessary 
amounts. Enacting the bill would not affect direct spending or 
revenues. H.R. 2432 contains no intergovernmental private-
sector mandates as defined in the Unfunded Mandates Reform Act 
(UMRA) and would not affect the budgets of state, local, or 
tribal governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 2432 is shown in the following table. 
The costs of this legislation fall within budget function 800 
(general government).

----------------------------------------------------------------------------------------------------------------
                                                                       By fiscal year, in million of dollars--
                                                                    --------------------------------------------
                                                                       2005     2006     2007     2008     2009
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

GAO Analysis of Major Rules:
    Estimated Authorization Level..................................        8        8        8        8        8
    Estimated Outlays..............................................        7        8        8        8        8
Regulatory Accounting Reporting and Studies:
    Estimated Authorization Level..................................        2        2        2        2        2
    Estimated Outlays..............................................        2        2        2        2        2
Total Proposed Changes:
    Estimated Authorization Level..................................       10       10       10       10       10
    Estimated Outlays..............................................        9       10       10       10       10
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: For this estimate, CBO assumes that H.R. 
2432 will be enacted near the end of fiscal year 2004, that the 
necessary amounts will be provided each year, and that spending 
will follow historical patterns for similar activities.

General Accounting Office analysis of major rules

    H.R. 2432 would grant permanent authority to continue a 
pilot project that required GAO to independently evaluate and 
report on certain regulatory rules issued by federal agencies. 
The authority for this pilot project expired on January 15, 
2004.
    The rules subject to review by GAO would include those that 
could have an annual effect on the U.S. economy of at least 
$100 million or those that could adversely affect the economy, 
environment, public health and safety, or state, local, or 
tribal governments. Each GAO analysis would include an 
evaluation of the potential costs and benefits of implementing 
a particular rule, alternative approaches for achieving the 
goal of the rule at a lower cost, and an evaluation of the 
regulatory impact analysis or other assessment performed by the 
agency issuing the rule. Based on information from GAO, CBO 
estimates that those activities would cost about $8 million 
annually, subject to the availability of appropriated funds.

Regulatory accounting

    Under current law, OMB is required to submit with the 
President's budget an accounting statement that includes an 
estimate of the total annual costs and benefits of all federal 
rules and reporting requirements. Additionally, OMB must report 
on the impact of federal rules and reporting requirements on 
state, local, and tribal governments and small business.
    H.R. 2432 would require OMB to designate three regulatory 
agencies or offices for a pilot project to prepare a regulatory 
budget for fiscal years 2006 and 2007. The regulatory budget 
would present varying estimated levels of benefits that would 
be associated with different estimated levels of costs for 
alternative agency regulations. A full study on the value of a 
regulatory budget and issues involved in its preparation would 
be submitted to the Congress in 2009. In addition, the 
legislation would require agencies, to the extent feasible, to 
submit to OMB the total annual costs and benefits of federal 
rules and reporting requirements. This material would be 
presented as part of the President's budget submission to the 
Congress. CBO estimates that those additional reporting 
requirements and the study would cost federal agencies about $2 
million annually beginning in fiscal year 2005.

Other provisions

    H.R. 2432 would require a study by OMB, in consultation 
with the IRS, to reduce the information collection burden 
imposed on small businesses by the IRS. The legislation also 
would repeal the exemption from the Paperwork Reduction Act and 
other regulatory review requirements for certain specific 
Department of Agriculture programs. CBO estimates that those 
provisions would cost less than $500,000 to implement.
    Intergovernmental and private-sector impact: H.R. 2432 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Estimate prepared by: Federal Costs: Matthew Pickford; 
Impact on State, Local, and Tribal Governments: Sarah Puro; and 
Impact on the Private Sector: Paige Piper/Bach.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                     Federal Advisory Committee Act

    The Committee finds that the legislation does not establish 
or authorize the establishment of an advisory committee within 
the definition of 5 U.S.C. App., Section 5(b).

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

              SECTION 3504 OF TITLE 44, UNITED STATES CODE


Sec. 3504. Authority and functions of Director

  (a) * * *

           *       *       *       *       *       *       *

  (i) In carrying out subsection (c)(3), the Director shall (in 
consultation with the Internal Revenue Service and the Office 
of Tax Policy of the Department of the Treasury and the Office 
of Advocacy of the Small Business Administration) conduct a 
review of the collections of information conducted by the 
Internal Revenue Service to identify actions that the Internal 
Revenue Service can take to reduce the information collection 
burden imposed on small business concerns, consistent with 
section 3520(c)(1) of this chapter. The Director shall include 
the results of the review in the annual report that the 
Director submits under section 3514 of this chapter for fiscal 
year 2006.
                              ----------                              


FARM SECURITY AND RURAL INVESTMENT ACT OF 2002

           *       *       *       *       *       *       *



TITLE I--COMMODITY PROGRAMS

           *       *       *       *       *       *       *


                       Subtitle F--Administration

SEC. 1601. ADMINISTRATION GENERALLY.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Regulations.--
          (1) * * *
          (2) Procedure.--The promulgation of the regulations 
        and administration of this title shall be made without 
        regard to--
                  [(A) chapter 35 of title 44, United States 
                Code (commonly know as the ``Paperwork 
                Reduction Act'');]

           *       *       *       *       *       *       *

                  [(C) the notice and comment provisions of 
                section 553 of title 5, United States Code.
          [(3) Congressional review of agency rulemaking.--In 
        carrying out this subsection, the Secretary shall use 
        the authority provided under section 808 of title 5, 
        United States Code.]

           *       *       *       *       *       *       *


TITLE II--CONSERVATION

           *       *       *       *       *       *       *


Subtitle H--Funding and Administration

           *       *       *       *       *       *       *


SEC. 2702. REGULATIONS.

  (a) * * *
  (b) Applicable Authority.--The promulgation of regulations 
under subsection (a) and administration of this title--
          (1) shall--
                  [(A) be carried out without regard to chapter 
                35 of title 44, United States Code (commonly 
                known as the Paperwork Reduction Act); and]

           *       *       *       *       *       *       *

          (2) may--
                  [(A) be promulgated with an opportunity for 
                notice and comment; or]
    [(c) Congressional Review of Agency Rulemaking.--In 
carrying out this section, the Secretary shall use the 
authority provided under section 808(2) of title 5, United 
States Code.]

           *       *       *       *       *       *       *


TITLE VI--RURAL DEVELOPMENT

           *       *       *       *       *       *       *


Subtitle B--Rural Electrification Act of 1936

           *       *       *       *       *       *       *


SEC. 6103. ENHANCEMENT OF ACCESS TO BROADBAND SERVICE IN RURAL AREAS.

    (a) * * *
    (b) Regulations.--
          (1) * * *
          (2) Procedure.--The promulgation of the regulations 
        shall be made without regard to--
                  [(A) the notice and comment provisions of 
                section 553 of title 5, United States Code;]

           *       *       *       *       *       *       *

                  [(C) chapter 35 of title 44, United States 
                Code (commonly known as the ``Paperwork 
                Reduction Act'').
          [(3) Congressional review of agency rulemaking.--In 
        carrying out this subsection, the Secretary shall use 
        the authority provided under section 808 of title 5, 
        United States Code.]

TITLE X--MISCELLANEOUS

           *       *       *       *       *       *       *


Subtitle B--Disaster Assistance

           *       *       *       *       *       *       *


SEC. 10105. MARKET LOSS ASSISTANCE FOR APPLE PRODUCERS.

    (a) * * *

           *       *       *       *       *       *       *

    (d) Regulations.--
          (1) * * *
          (2) Procedure.--The promulgation of the regulations 
        and administration of this section shall be made 
        without regard to--
                  [(A) the notice and comment provisions of 
                section 553 of title 5, United States Code;]

           *       *       *       *       *       *       *

                  [(C) chapter 35 of title 44, United States 
                Code (commonly known as the ``Paperwork 
                Reduction Act'').
          [(3) Congressional review of agency rulemaking.--In 
        carrying out this subsection; the Secretary shall use 
        the authority provided under section 808 of title 5, 
        United States Code.]

           *       *       *       *       *       *       *

                              ----------                              


                    TRUTH IN REGULATING ACT OF 2000


SEC. 4. [PILOT PROJECT FOR] REPORT ON RULES.

    (a) * * *

           *       *       *       *       *       *       *


[SEC. 5. AUTHORIZATION OF APPROPRIATIONS.

    [There are authorized to be appropriated to the General 
Accounting Office to carry out this Act $5,200,000 for each of 
fiscal years 2000 through 2002.]

SEC. [6]. 5. EFFECTIVE DATE [AND DURATION OF PILOT PROJECT].

    [(a) Effective Date.--]This Act and the amendments made by 
this Act shall take effect 90 days after the date of enactment 
of this Act.
    [(b) Duration of Pilot Project.--The pilot project under 
this Act shall continue for a period of 3 years, if in each 
fiscal year, or portion thereof included in that period, a 
specific annual appropriation not less than $5,200,000 or the 
pro-rated equivalent thereof shall have been made for the pilot 
project.
    [(c) Report.--Before the conclusion of the 3-year period, 
the Comptroller General shall submit to Congress a report 
reviewing the effectiveness of the pilot project and 
recommending whether or not Congress should permanently 
authorize the pilot project.]

           *       *       *       *       *       *       *

                              ----------                              


SECTION 624 OF THE TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS ACT, 
                                  2001

    Sec. 624. (a) In General.--For calendar year 2002 and each 
year thereafter, the Director of the Office of Management and 
Budget shall prepare and submit to Congress, [with the budget] 
as part of the budget submitted under section 1105 of title 31, 
United States Code, an accounting statement and associated 
report containing--
          (1) * * *

           *       *       *       *       *       *       *

    (b) Agency Submissions to OMB.--To carry out subsection 
(a), the Director of the Office of Management and Budget shall 
require each agency annually to submit to the Office of 
Management and Budget an estimate of the total annual costs and 
benefits of Federal rules and paperwork, to the extent 
feasible--
          (1) for the agency in the aggregate; and
          (2) for each agency program.
    [(b)] (c) Notice.--The Director of the Office of Management 
and Budget shall provide public notice and an opportunity to 
comment on the statement and report under subsection (a) before 
the statement and report are submitted to Congress.
    [(c)] (d) Guidelines.--To implement this section, the 
Director of the Office of Management and Budget shall issue 
guidelines to agencies to standardize--
          (1) * * *

           *       *       *       *       *       *       *

    [(d)] (e) Peer Review.--The Director of the Office of 
Management and Budget shall provide for independent and 
external peer review of the guidelines and each accounting 
statement and associated report under this section. Such peer 
review shall not be subject to the Federal Advisory Committee 
Act (5 U.S.C. App.).
                              ----------                              


TITLE 31, UNITED STATES CODE

           *       *       *       *       *       *       *



SUBTITLE II--THE BUDGET PROCESS

           *       *       *       *       *       *       *


   CHAPTER 11--THE BUDGET AND FISCAL, BUDGET, AND PROGRAM INFORMATION

Sec.
1101. Definitions.
     * * * * * * *
1120. Regulatory budgeting.

           *       *       *       *       *       *       *


Sec. 1120. Regulatory budgeting

    (a) The Director of the Office of Management and Budget, 
after consultation with the head of each agency, shall 
designate not less than three agencies (or offices within an 
agency) to participate in a study on regulatory budgeting for 
fiscal years 2006 and 2007. The designated agencies shall 
include three regulatory agencies or offices from among the 
following: the Department of Labor, the Department of 
Transportation, the Department of Health and Human Services, 
and the Environmental Protection Agency.
    (b) The study shall address the preparation of regulatory 
budgets. Such budgets shall include the presentation of the 
varying estimated levels of benefits that would be associated 
with the different estimated levels of costs with respect to 
the regulatory alternatives under consideration by the agency 
(or office within the agency).
    (c) The Director of the Office of Management and Budget 
shall include, in the accounting statement and associated 
report submitted to Congress for calendar year 2006 under 
section 624 of the Treasury and General Government 
Appropriations Act, 2001 (as enacted into law by Public Law 
106-554; 114 Stat. 2763A-161), a presentation of the different 
levels of estimated regulatory benefits and costs with respect 
to the regulatory alternatives under consideration for one or 
more of the major regulatory programs of each of the agencies 
designated under subsection (a).
    (d) In the accounting statement and associated report 
submitted to Congress for calendar year 2009 under section 624 
of the Treasury and General Government Appropriations Act, 2001 
(as so enacted), the Director of the Office of Management and 
Budget shall include a report on the study on regulatory 
budgeting. The report shall--
          (1) assess the feasibility and advisability of 
        including a regulatory budget as part of the annual 
        budget submitted under section 1105;
          (2) describe any difficulties encountered by the 
        Office of Management and Budget and the participating 
        agencies in conducting the study; and
          (3) recommend, to the extent the President considers 
        necessary or expedient, proposed legislation regarding 
        regulatory budgets.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    H.R. 2432 is portrayed by its sponsors as an attempt to 
improve federal regulations and reduce red-tape and paperwork. 
Unfortunately, the substance of this bill and the timing of its 
consideration make clear it is more public relations than 
public policy. This bill was rushed through the Committee 
without a Subcommittee markup. It will be featured as part of a 
partisan effort, entitled the ``Hire Our Workers'' plan, which 
highlights measures claimed to increase jobs and revive the 
economy. H.R. 2432 would weaken, rather than improve, the 
process of developing federal regulations, and it does nothing 
to stem the sharp rise in paperwork burden that has occurred 
since President Bush took office. This bill also fails to 
address real current problems in federal regulation, such as 
the pressure on agencies to misuse or ignore science for 
political ends. As such, H.R. 2432 will have no positive effect 
on employment or the economy.
    During full Committee markup, we proposed amendments to 
H.R. 2432 to better align the bill with its intended purposes. 
An amendment by Representative Henry A. Waxman would have 
established an independent commission on politicization of 
science in the regulatory process. An amendment by 
Representative John F. Tierney would have enhanced transparency 
in the rule-making process by requiring comments and other 
communications from the White House Office of Management and 
Budget (OMB) to be made public. Both of these measures would 
have significantly enhanced the federal regulatory process and 
the quality of the regulations issued. Democratic members 
offered other amendments that would have corrected or 
ameliorated some of the flaws in the bill discussed below. This 
included an amendment by Representative Dennis Kucinich that 
would have changed the provision in the bill permanently 
requiring the General Accounting Office (GAO) to respond to 
requests from Congress to evaluate economically significant 
agency rules to a three-year pilot project. All of the 
Democratic members' amendments were rejected.

                           REGULATORY BUDGETS

    Section 6(c) of H.R. 2432 requires targeted agencies to 
participate in a study on regulatory budgeting. This 
requirement is ambiguous and the concept is misguided. H.R. 
2432 does not define ``regulatory budget'' and it is unclear 
what agencies participating in the ``study'' would be required 
to do. As described by Subcommittee Chairman Ose and witnesses 
in prior hearings, a regulatory budget is actually a 
``regulatory cap,'' which limits the total costs that an 
agency's combined regulations can impose on the public. This is 
a deeply flawed concept, which should not be pursued.
    A budget ensures that spending does not exceed income. 
However, in the context of regulations to enhance public 
welfare there is no equivalent to income, so any numeric cap 
set on regulatory costs is inherently arbitrary. A regulatory 
budget also by definition does not take benefits into account. 
The cap on regulations would be based solely on the costs of 
the regulations, not on their net benefits. Once an agency 
reached its cost cap, it would not be allowed to issue further 
regulations, even if the benefits of each regulation far 
exceeded the costs. Moreover, the cost estimates for 
regulations that would be used for a regulatory budget are 
inherently inaccurate and generally biased upward. The cost 
estimates are based on prospective projections of regulatory 
costs, with no validation after the regulation has been 
implemented.
    We believe resources should be directed toward increasing 
the transparency and integrity of the regulatory process rather 
than studying how to limit public protections.

                 AGENCY COST BENEFIT SUBMISSIONS TO OMB

    Section 6(a) of H.R. 2432 requires each agency annually to 
submit to OMB ``the total annual costs and benefits of Federal 
rules and paperwork, to the extent feasible'' for the entire 
agency and each agency program. This requirement significantly 
expands the universe of rules for which agencies must submit 
cost and benefits estimates to OMB. Currently, agencies must 
submit such estimates to OMB only for ``significant regulatory 
actions,'' which are generally those that impose annual costs 
of $100 million or more. Agencies should not be required to 
conduct any additional analysis beyond what is currently 
required. Majority staff has informed us that this provision is 
not intended to require the agencies to conduct any additional 
analyses beyond what they would already prepare.
    In addition, because cost-benefit estimates have so many 
uncertainties, limitations, and flaws, expanding the use of 
these estimates will not add value or improve the quality of 
decision-making in the regulatory process. It also would do 
nothing to further the fundamental goals of our system of laws 
and regulations, such as protecting public health and the 
environment.

    SUBMISSION OF REGULATORY ACCOUNTING REPORT AS PART OF THE BUDGET

    Section 6(b) of H.R. 2432 requires OMB to submit its annual 
regulatory accounting report as part of the President's budget. 
OMB's regulatory accounting report is not a budget document and 
therefore it does not make sense to require this document to be 
included in the President's budget. Moreover, OMB has expressed 
concerns this could conflict with the requirement to submit the 
report to public comment, interagnecy reviews, and peer 
reviews.
    OMB's Office of Information and Regulatory Affairs (OIRA) 
Administrator John Graham expressed OMB's opposition to this 
provision in a March 26, 2004, letter to Subcommittee Chairman 
Doug Ose. Dr. Graham stated:

          [U]nder existing law, the draft cost-benefit report 
        that OMB issues in February, with the Budget, is 
        subject to public comment, interagency review, and peer 
        review. Then, in response to comment and reviews OMB 
        receives, OMB revises the report and issues the final 
        version of the report later in the year. If the cost-
        benefit report were made ``a part of '' the President's 
        Budget, we have concerns about how the public comment 
        and review procedures would work and how they could be 
        incorporated into the development of the President's 
        Budget.

    OMB's regulatory accounting report must continue to be 
subject to public review and comment. Majority staff has 
informed minority staff that this provision is not intended to 
preclude OMB from providing an opportunity for public review 
and comment on a draft report. The majority staff believes that 
this section requires the draft regulatory accounting report be 
used at a time well before the issuance of the President's 
Budget ensuring that the report would subject to public 
comment, interagency review, and peer review.

     REQUIREMENT ON GAO TO RE-EVALUATE AGENCY COST BENEFIT ANALYSES

    Section 5 of H.R. 2432 unwisely makes permanent the pilot 
program created in the Truth in Regulating Act (TIRA) of 2000. 
TIRA established a three-year pilot program in which GAO, if 
asked by a chairman or ranking minority member, would report on 
economically significant proposed and final rules within a 
mandated timeframe. That law states that the pilot would only 
go forward if GAO received TIRA-earmarked appropriations and 
that the pilot would be reviewed for effectiveness to determine 
permanency. To this date, Congress has failed to provide GAO 
with funding for TIRA.
    GAO currently does not have the resources to comply with 
section five, and more troubling, cannot accept all of its 
current congressional requests. In fact, GAO is in the process 
of revising its congressional protocols and is considering 
prohibiting individual member requests and taking on work only 
from committees. As it is, member requests are at the bottom of 
the priority chain. GAO should be taking on member requests and 
members are not requesting TIRA reviews. GAO Comptroller 
General Walker, in a letter sent yesterday, states, ``if 
Congress wants TIRA to continue, we believe it should do so as 
a pilot project rather than as permanent authority.'' We agree; 
TIRA should not be made permanent until we see if it is 
worthwhile.

                                FINDINGS

    H.R. 2432 cites in its findings an estimate for the 
paperwork burden for fiscal year 2001, as calculated by OIRA in 
2002. Rep. Waxman offered an amendment to supplement this 
information by including OIRA's paperwork burden estimate for 
fiscal year 2002, and GAO's estimate for fiscal year 2003. 
These estimates reveal that the paperwork burden increase for 
fiscal year 2002 was a record 570 million hours. They also show 
that the annual paperwork burden for fiscal year 2003 rose by 
another 72 million hours, excluding adjustments to paperwork 
burden estimates. Overall, since fiscal year 2000, OIRA's 
figures show that the paperwork burden has increased by 70 
million hours.
    As the bill is intended to address the paperwork burdens in 
place today, it is appropriate that the findings refer to the 
most recent estimates. To the extent that the Committee is 
concerned about ongoing increases in paperwork burden, 
information on recent trends is critical context.
    The findings in H.R. 2432 also cite to an estimate of the 
total costs incurred annually in the United States to comply 
with federal regulations. However, this estimate, and the study 
that produced it, has been strongly critiqued. For example, in 
testimony before the Committee last July, Dr. John Graham, 
Administrator of OIRA, made the following statement regarding 
this estimate:

          The estimate * * * is based on a previous estimate by 
        Hopkins done in 1995, which itself was based on summary 
        estimates done in 1991 and earlier, as far back as the 
        1970s. The underlying studies were mainly done by 
        academics using a variety of techniques, some peer 
        reviewed and some not. Most importantly, they were 
        based on data collected ten, twenty, and even thirty 
        years ago. Much has changed in those years and those 
        estimates may no longer be sufficiently accurate or 
        appropriate for an official accounting statement. 
        Moreover, the cost estimates used in these aggregate 
        estimates combine diverse types of regulations, 
        including financial, communications, and environmental, 
        some of which impose real costs and others that cause 
        mainly transfers of income from one group to another. 
        Information by agency and by program is spotty and 
        benefit information is nonexistent. These estimates 
        might not pass OMB's information quality guidelines. In 
        particular, many of the studies they relied upon for 
        these aggregate estimates are not sufficiently 
        transparent about the data and methods to facilitate 
        the reproducibility of the information by qualified 
        third parties.

    We do not believe that a figure so discredited should be 
cited in legislation or used as the basis for Congress' 
decision making.

                                   Henry A. Waxman.
                                   Tom Lantos.
                                   Major R. Owens.
                                   Edolphus Towns.
                                   Paul E. Kanjorski.
                                   Bernie Sanders.
                                   Carolyn B. Maloney.
                                   Elijah E. Cummings.
                                   Dennis J. Kucinich.
                                   Danny K. Davis.
                                   John F. Tierney.
                                   Wm. Lacy Clay.
                                   Diane E. Watson.
                                   Stephen F. Lynch.
                                   Chris Van Hollen.
                                   Linda T. Sanchez.
                                   Eleanor Holmes Norton.

                                
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