[Federal Register Volume 60, Number 189 (Friday, September 29, 1995)]
[Notices]
[Pages 50651-50654]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-24261]



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OFFICE OF MANAGEMENT AND BUDGET


Guidelines and Instructions for Implementing Section 204, 
``State, Local, and Tribal Government Input,'' of Title II of Public 
Law 104-4

AGENCY: Office of Management and Budget.

ACTION: Memorandum for Heads of Departments and Agencies.

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SUMMARY: On March 22, 1995, the President signed into law the 
``Unfunded Mandates Reform Act of 1995'' (P.L. 104-4). This notice 
provides guidance to agencies on the Act.

FOR FURTHER INFORMATION CONTACT: Jeff Hill, 395-7340.
    Attached to this notice is the material for inclusion in the 
Federal Register.
    Dated: September 25, 1995.
John B. Arthur,
Assistant Director for Administration.

Memorandum for the Heads of Departments and Agencies

    FROM: Alice M. Rivlin, Director.
    SUBJECT: Guidelines and Instructions and Implementing Section 204, 
``State, Local, and Tribal Government Input,'' of Title II of P.L. 104-
4.

    On March 22, 1995, President Clinton signed into law the ``Unfunded 
Mandates Reform Act of 1995'' (P.L. 104-4) (the ``Act''). Section 
204(a) of the Act requires that--

    ``Each agency shall, to the extent permitted in law, develop an 
effective process to permit elected officers of State, local, and 
tribal governments (or their designated employees with authority to 
act on their behalf) to provide meaningful and timely input in the 
development of regulatory proposals containing significant Federal 
intergovernmental mandates.'' \1\

    \1\ The Act's consultation requirement builds on that set forth 
by President Clinton on October 26, 1993, in Executive Order No. 
12875. In order ``reduce the imposition of unfunded mandates upon 
State, local, and tribal governments,'' the Executive order requires 
agencies, when they seek to impose unfunded mandates upon State, 
local, or tribal governments through a regulation, to provide to the 
Director of the Office of Management and Budget ``a description of 
the extent of the agency's prior consultation with representatives 
of affected State, local, and tribal governments, the nature of 
their concerns, any written communications submitted to the agency 
by such units of government, and the agency's position supporting 
the need to issue the regulation containing the mandate'' (Sec. 
1(a)(2)).

    Section 204(b) of the Act provides an exemption from the Federal 
Advisory Committee Act (5 U.S.C. App.) for intergovernmental 
consultations involving intergovernmental responsibilities or 
administration.
    Section 204(c) requires the President to issue guidelines and 
instructions to Federal agencies ``for appropriate implementation'' of 
both of these provisions ``consistent with applicable laws and 
regulations.'' In accordance with the President's delegation of 
authority,\2\ OMB is today issuing those guidelines and 
instructions.\3\

    \2\ See 60 Fed. Reg. 45039 (August 29, 1995).
    \3\ Portions of these guidelines and instructions are based on 
OMB Memorandum M-94-10, entitled ``Guidance for Implementing E.O. 
12875, `Reduction of Unfunded Mandates,' '' issued by Director Leon 
E. Panetta on January 11, 1994. These guidelines and instructions 
are not intended, and should not be construed, to create any right 
or benefit, substantive or procedural, enforceable at law by a party 
against the United States, its agencies, its officers, or its 
employees. Neither are these guidelines and instructions intended, 
nor should they be construed, to limit the availability of any 
exclusion from the Federal Advisory Committee Act contained in that 
Act or any applicable regulations.
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I. The Process for Intergovernmental Consultation

    It is important that this intergovernmental consultation process 
not only achieves meaningful input, but also builds a better 
understanding among Federal, State, local, and tribal governments. As 
described in Part II, below, the process required by the Federal 
Advisory Committee Act is not to act as a hindrance to full and 
effective intergovernmental consultation.

A. What Agencies Are Covered?

    The process for intergovernmental consultation called for by 
Section 204(a) applies to all Federal agencies (as 

[[Page 50652]]
defined in 5 U.S.C. 551(1)), with the exception of independent 
regulatory agencies.

B. When Should Intergovernmental Consultations Take Place?

    Intergovernmental consultation should take place as early in the 
regulatory process as possible. Except where the need for immediate 
agency action precludes prior consultation, consultation should occur 
before publication of the notice of proposed rulemaking or other 
regulatory action proposing a significant Federal intergovernmental 
mandate. Consultation should continue after publication of the 
regulatory action initiating the proposal. Except in exceptional 
circumstances where the need for immediate action precludes prior 
consultation, consultation must occur prior to the formal promulgation 
in final form of the regulatory action.

C. With Whom Should Agencies Consult?

    The statute directs agencies to develop an effective process to 
ensure that ``elected officers of State, local, and tribal governments 
(or their designated employees with authority to act on their behalf)'' 
who wish to provide meaningful and timely input are able to do so.
    Each agency needs to develop an intergovernmental consultation 
process for that agency. To do so, the agency should first develop a 
proposal for that process, and consult with State, local, and tribal 
governments (as appropriate) concerning this proposed process, as soon 
as possible.
    One approach an agency may wish to adopt is to designate a person 
or an office through which intergovernmental consultation should be 
coordinated. Another approach is for an agency to instruct those 
responsible for developing a rule to seek out the views of elected 
officers of their designated employees. An agency may also wish to 
develop other effective means of generating meaningful input or expand 
those that it already has. An agency will be able to obtain the fullest 
range of meaningful input from State local, and tribal governments by 
undertaking the following kinds of consultation.
(1) Heads of Government
    Agencies should seek to consult with the highest levels of the 
pertinent government units, e.g., the Office of the Governor, Mayor, or 
Tribal Leader (or their designated employees with authority to act on 
their behalf). These officials are the ones elected to represent the 
people and are the ones that the public holds directly accountable for 
the actions of those government units.
(2) Both Program and Financial Officials
    Many regulatory agencies have functional counterparts in State, 
local, and tribal governments, e.g., those government officials who 
implement or enforce regulatory responsibilities required in whole or 
part by the Federal agency. These local officials tend to be those most 
familiar with the Federal agency's regulatory program, and should be 
consulted as a source of important information concerning the likely 
effects of, or effective alternatives to, Federal regulatory proposals.
    In addition, agencies should consult with those State, local, and 
tribal officials most directly responsible for ensuring the funding of 
compliance with the Federal mandate, e.g., the applicable treasury, 
budget, tax-collection, or other financial officials. These officials 
are institutionally responsible for balancing the competing claims for 
scarce State, local, or tribal resources.
(3) Washington Representatives
    It is also important that Federal agencies consult with Washington 
representatives, where available, of associations representing elected 
officials. These Washington representatives often know which local 
elected officials are the most knowledgeable about, interested in, or 
responsible for, implementing specific issues, regulations or programs, 
and can ensure that a broad range of government officials learn of and 
provide valuable insight concerning a proposed intergovernmental 
mandate.
(4) Small Governments
    Agencies should make special efforts to consult with officials of 
small governments, and to develop a plan for such consultation under 
section 203 of Title II of the Act. Agencies may wish to consider 
several mechanisms for reaching small governments, including special 
task forces, periodic mailings through small government associations, 
or communication through rural development councils.

D. How Much Consultation Should There Be?

    The scope of intergovernmental consultation should be based on 
common sense and be commensurate with the significance of the action 
being taken. The more costly, the more potentially disruptive, the more 
broadly applicable, the more controversial the proposed Federal 
intergovernmental mandate--the more consultation there should be. An 
agency should decide the extent of its consultation on a case-by-case 
basis; a one-size-fits-all prescription is neither appropriate nor 
desirable.

E. What Should Be the Content of Consultation?

    Agencies should seek views of State, local, and tribal governments 
regarding costs, benefits, risks, and alternative and flexible methods 
of compliance regarding their regulatory proposals. Agencies should 
also seek views on potential duplication with existing laws or 
regulations at other levels of government, and on ways to harmonize 
their rules with State, local and tribal policies and programs.
    To assist with these consultations, agencies should first estimate 
the direct costs to be incurred by the State, local, or tribal 
governments in complying with the mandate and then inform the affected 
governmental units of these cost estimates. Estimates should cover both 
up-front and recurring costs, for a reasonable number of years after 
the rule is to be put into effect. To the extent practicable, agencies 
should make reasonable efforts to disaggregate these cost estimates as 
they affect the various levels of government, or otherwise provide the 
criteria by which those affected can disaggregate the cost estimates in 
order to determine the potential costs to themselves. Where 
quantitative estimates are not feasible, agencies should work with 
other levels of government to discern and discuss qualitative costs.
    Agencies should also consult on and estimate the benefits expected 
from the mandate for States, localities, tribes, and their residents 
and businesses. Estimates should cover both up-front and recurring 
benefits for a reasonable number of years after the rule is to be put 
into effect. To the extent practicable, agencies should make reasonable 
efforts to disaggregate these benefit estimates as they affect the 
various levels of government, or otherwise provide the criteria by 
which those affected can disaggregate the benefit estimates in order to 
determine the potential benefits to themselves. Where quantitative 
estimates are not feasible, agencies should work with other levels of 
government to discern and discuss qualitative benefits.
    Agencies should also, during the consultative process, seek views 
on the expected method of compliance. Governmental units may have 
suggestions as to how to achieve the Federal regulatory objective in a 
way that is more effective, efficient flexible, 

[[Page 50653]]
and consistent with State, local, and tribal governmental regulatory 
and other functions.

F. How Should Agencies Integrate These Intergovernmental Consultations 
into the Rulemaking Process?

    It is important for agencies to integrate these consultation 
activities into the ongoing rulemaking process. The cost and benefit 
estimates, any additional viable suggestions received during the pre-
notice consultations, and the agency plan to carry out 
intergovernmental consultation should be included in the preamble to 
the notice of proposed rulemaking. Publication of consultation plan in 
the Federal Register will assure that those governmental units that are 
not contacted directly will have access to the same cost and benefit 
estimates as those who were contacted directly, and have the 
opportunity to make their concerns known. Similarly, and consistent 
with E.O. 12875, any preamble transmitted to the Federal Register on or 
after October 2, 1995, should include, as of the particular stage of 
the ruleamking, the extent of the agency's prior consultations with 
representatives of affected State, local, and tribal governments, the 
nature of their concerns, any written communications submitted to the 
agency by such units of government, and the agency's position 
supporting the need to issue the regulation containing the mandate.

G. What Compliance Reports Should Agencies Submit to OMB?

    Under Section 208 of the Act, OMB is required to submit a report to 
Congress on agency compliance with the requirements of Title II of the 
Act, which includes the intergovernmental consultation requirement, on 
or before March 22, 1996, and annually thereafter. Accordingly, 
agencies should provide the Administrator of the Office of Information 
and Regulatory Affairs, by January 15, 1996, and annually on that date 
thereafter, a written report of each agency's compliance with Title II 
of the Act. The report should include a description of the process 
established by the agency to ensure meaningful input, as well as a 
description of agency consultations with State, local, and tribal 
governments for each proposed and final rule ``containing significant 
Federal intergovernmental mandates.'' As part of the report to be 
submitted by January 15, 1996, agencies should also describe the plans 
they have developed to consult with small governments, under Section 
203 of Title II of the Act.

II. The Exemption From the Federal Advisory Committee Act

    In order to facilitate the consultation process, section 204(b) of 
the Act provides an exemption from the Federal Advisory Committee Act 
(``FACA'') (5 U.S.C. App.) ``for the exchange of official views 
regarding the implementation of public laws requiring shared 
intergovernmental responsibilities or administration.''\4\ This 
exemption applies to all Federal agencies subject to FACA, and is not 
limited to the intergovernmental consultations required by Section 
204(a) but instead applies to the entire range of intergovernmental 
responsibilities or administration. In accordance with the legislative 
intent, the exemption should be read broadly to facilitate 
intergovernmental communications on responsibilities or administration.

    \4\ House Conference Report 104-76 (March 13, 1995), p. 40.
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    This exemption applies to meetings between Federal officials and 
employees and State, local, or tribal governments, acting through their 
elected officers, officials, employees, and Washington representatives, 
at which ``views, information, or advice'' are exchanged concerning the 
implementation of intergovernmental responsibilities or administration, 
including those that arise explicitly or implicitly under statute, 
regulation, or Executive order.\5\

    \5\ Specifically, this exemption from FACA applies where--
    ``(1) meetings are held exclusively between Federal officials 
and elected officers of State, local, and tribal governments (or 
their designated employees with authority to act on their behalf), 
acting in their official capacities; and
    ``(2) such meetings are solely for the purposes of exchanging 
information, or advice relating to the management or implementation 
of Federal programs established pursuant to public law that 
explicitly or inherently share intergovernmental responsibilities or 
administration.''
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    The scope of meetings covered by the exemption should be construed 
broadly to include any meetings called for any purpose relating to 
intergovernmental responsibilities or administration. Such meetings 
include, but are not limited to, meetings called for the purpose of 
seeking consensus; exchanging views, information, advice, and/or 
recommendations; or facilitating any other interaction relating to 
intergovernmental responsibilities or administration.
    The guidance given above should help determine when a meeting 
qualifies under Section 204(b) of the Act for an exemption from the 
FACA. We also note that meetings that do not meet these guidelines for 
an exemption may nonetheless not be subject to the FACA in the first 
instance. Accordingly, to determine whether there is even a need for an 
exemption from the FACA, agencies should also consult the FACA itself, 
as well as the General Service Administration's regulations at 41 CFR 
Subpart 101-6.10, and the court decisions construing the FACA.
 * * * * *
    It is important that agencies make their best efforts to implement 
these guidelines and instructions. As the Conference Report stated, 
``an important part of efforts to improve the Federal regulatory 
process entails improved communications with State, local, and tribal 
governments. Accordingly, this legislation will require Federal 
agencies to establish effective mechanisms for soliciting and 
integrating the input of such interests into the Federal decision-
making process.''\6\

    \6\ House Conference Report 104-76 (March 13, 1995), p. 40.
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    If agencies have any questions concerning these guidelines and 
instructions, they should contact the Administrator of the Office of 
Information and Regulatory Affairs, or her staff. OMB will provide 
additional guidance as experience and need dictate.

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-36272; File No. SR-OCC-95-01]


Self-Regulatory Organizations; the Options Clearing Corporation; 
Notice of Withdrawal of a Proposed Rule Change

September 22, 1995.
    On January 23, 1995, The Options Clearing Corporation (``OCC'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ a proposed rule change clarifying OCC's Rules regarding 
the unavailability of current index values. Notice of the proposed rule 
was published in the Federal Register on March 17, 1995.\2\ On 
September 19, 1995, OCC filed a request that the proposed rule change 
be withdrawn.\3\

    \1\ 15 U.S.C. 78s(b)(1) (1988).
    \2\ Securities Exchange Act Release No. 35472 (March 10, 1995), 
60 FR 14475 [File No. SR-OCC-95-01].
    \3\ Letter from James C. Yong, First Vice President and General 
Counsel, OCC, to Jerry Carpenter, Assistant Director, Division of 
Market Regulation, Commission, (September 15, 1995).

[[Page 50654]]

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    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\4\

    \4\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-24261 Filed 9-28-95; 8:45 am]
BILLING CODE 8010-01-M