MEMBERS

ADVISORY COMMISSION ON

INTERGOVERNMENTAL RELATIONS

Private Citizens

Mary Ellen Joyce, Arhw@n, Virginia

Richard P. Nathan, Albany, New York

William E Winter, Chuirmon, Jackson, Mississippi

Members of the U.S. Senate

Byron L. Dorga”, North Dakota

Bob Graham, Florida

vacancy

Members of the U.S. House of Representatives

James P. Moran, “lrgmma

Donald M. Payne, New Jersey

Stewn H. Sehiff, New Mexxa

Officers of the Executive Branch, U.S. Government

Csrol M. Browner, Admnistrator. US. Envronmental Protection Agency

Marcia L. Hale, Assistant to the President and Director of Intergovernmental Affairs

Richard W . Riley, U S Secretary of Education

Michael 0. Leavitt, Utah

Robert J. Miller, Nevada

Elected Countv Officials
FEDERAL MANDATE RELIEF

FOR STATE, LOCAL, AND TRIBAL

GOVERNMENTS

A COMMISSION REPORT

January 1995 A-129

T.lus statement responds to an April 1994 request

from the Clinton Administration to provide information

and guidance on the mandate relief legislation and r&ted conceprs being considered in the 103rd Congress. It

is based bn Ihe work of two Task Forces con&d by

the Commission durmg the Fall of 1994. These Task

Forces included fcdcrai legislative and executive stalf

members familiar with the issues. represenrativcs of ihe

affected state, local, and tribal governments, and other

knowledgeable experts The Task Force ~tatcments are

designed to bc helpful to the Congress as well as to the

Administration.

The Task Forces considered the issues surrounding

0 The deiinitian of mandates;

0 The principles and processes involved in srrking relief for state, local, and lrlba.1 govern-

“E”lS

0 Guidelines for evaluating existing mandates and

implementing mandate relief lemslation; and

‘The Commission commends the Congress and

the President liar developing and supponmg initistivcs

to provide relief from federal mandates for rlatc, local,

and tribal govcmmcnrs, and offers the fnllouing fmdings and recommendations to facilitate further lcgislative and c~rcutwe action 10 achieve this goal.
q The nation k state, lncnl, and tribal governments urgently need relief

from the burdens ofunfunded federal mandates. Over the past two

decades, in particular:

FINDINGS

0 The number and cost of federal mandates has

increased substantAly

0 The number of federal preemptions of state and

local authority has increased substantially.

0 Cunditions attached to federal grants have

incrcascd while the voluntary nature of state and

local patiicipatlon in these programs has

become more problematic.

These federal actions, taken togcthcr, halt.

0 Increased state and local government case;

0 Limited their abdit) to raise revenues; and

0 Too often. speciiied inefficient methods of compliance uith federal regulations.

The trend toward grcax use of unfunded federal mandates has shifted the costs of implcmrnting federal policies L o ihe stale. local, and t&al guvcmments.

q Federal mundutes provide many important benefits to the nution, but

they have become too burdensome and costly.

The campaign for mandate relief that began m 1993

does not challenge the objectives of constitutionally

justified and nationally necessary mandates. Instead.

this campaign focuses on the increasing shares of state.

local, and tribal budgets that are consumed by federal

action, and the loss of control by these governments

over their expenditures and compliance mechanama.
•I The proposed mandate relief bills would make significanl improvements in the Congressionnl fiscal notes process, but would not provide

complete relief from all federal actions that increase the costs of state,

local, and tribal governments.

The bills would:

0 hlQrove the quality and timehncss of cost cstimates:

0 Explore offsetting benefits and cost rrductions;

0 Provide for intergovernmental consultations in

the leg,slative and ,ulemeking processes,

0 Imtiate national debates in the legislative

process over relative priori&s v&n identifying

SOUIC~S of fundmg for new mandates; and

0 Introduce a stronger tense of accountability in

the Congress.

q Even after enactment and implementation of the pending mandate

refiefI~gis/afion, the federal government will be able to increase unreimbursed costs of state, local, and tribal governments.

‘1 he exclusions in the proposed bills and the

abilitv of the Congress to override protections against

enact& new mandates by a snnple majority would

allow enactment of new unfunded mandates and other

cost inducing legislation.
HECOMMENDATIONS

q The Congress and the President should enact mandate relief legislation

in earlv 1995 and implemenl it expedifiously in full consulfafion with the

state, local, and fribul governmenf.~.

•I Key provisions of federal mandate relief legislation should include:

0 The eonsen~~s definition of mandates COIItained in the draft legislation,

0 Use of cooperatively developed tinancial eatimates, intergovernmental consultations,

national debates on governmental priorities,

and Congressional roll call votes throughout

the legislative process to hold the Congress

accountdble for its mandate politics;

0 Use of sound financial estimates and intergovernmental consultations by federal agencies as they dcvslop regulations to implement

federal mandates, to minimize added burdens on

state, local, and tribal governments;

0 A review of existing federal mandates, with

recommendations L o the Congress and the Prcsident for reducing their burdens on state, local,

and tribal governments: and

0 Continual monitoring of the results achxved

through implcmentaiion of the mandate relief

legislation, with recommendations to the Congress and the President for improving the

rcs”Its.

Q Implemenfafion vf federal mandate relief legislation should be guided

by the following principles:

0 Federal government restraint in mandating,

using mandates only when constitutionally justified and clearly necessary;
0 Mutual trust and respect among the federal,

state, local, and tribal governments;

0 Active partnerships among the federal, state,

local, and tribal governments in developing and

debating mandate legislation, estimating the

costs and benefits of mandates. reviewing and

reforming existing mandates, developing

agency regulations to implement mandates, and

implementing compliance with mandates;

cl Federal avoidance of unilateral shifts of functional responsibilities to state, local, and tribal

governments without regard to the funding

implications,

0 Maximum flexibility to dlow ate, local, and

tribal governments the greatest possible choice

of means in complying with federal mandates in

their own circumstances; and

0 Federal technical zassistance in the mandate

compliance process to help empower the state,

local, and tribal governments to make more

effective and mope efficient use of good science

and good practices.

q The critical role of benefit and cost estimates in the mandate relief

process, and the difficulties in making sound estimates, should be recognized. The following realities should be incorporated into the process as

follows:

Cl Direct benefits and costs, and clearly idcntitiable cost savings to governments complying

with federal mandates. should be estimated

It is not feasible, at the present time, to net out

general benefits because of difficulties in capturing and allocating them among types of govermnents. However, every effort should be

made to identify benefits associated with federal

mandates.
0 The differential effects of benefits and costs

on different types of communities or on individual governments should be a part of

impact estimating, but such effects cannot now

be calculated. Improved information systems to

permit the calculation of them should be developed.

Cl To inform the Congress about the benefit and

cost implications of proposed legislation, a

progression of estimates should be made at:

(1) An early stage, before any committee action

and perhaps even before a committee bill

has been drafted;

(2) A middle stage, when a specific committee

bill has been developed and begins to move

toward markup; and

(3) A late stage, after full committee markup

and extending until the bill is passed.

Uncertainties in these estimates should be

brought to the attention of policymakers.

0 Developing benefit and cost estimates to

determine appropriate reimbursement

amounts cannot be done with great accuracy

during legislative consideration. Estimating

can and should be improved by developing new

tools and resources. Nevertheless, precise

amounts can be known only after agency rulemaking.

0 Consultations with state, local, and tribal

governments beginning at an early stage in

impact assessment are essential to improving

the quality of estimates.

0 Estimates of the benefits and costs of enacted

mandates do not exist, and calculating them

will require substantial resources and time. It

may be impossible to differentiate clearly the

specific benefits and costs attributable to federal, state, local, and tribal actions.

8
81 Congressionally debated provisions calling for the following four types

of studies in conjunction with federal mandate relief legislation are necessary and desirable for the effective achievement of mandate relief goals:

0

0

0

0

A review of existing statutory and administrative mandates, including recommendations

for reform;

Annual reports on federal court rulings that

impose mandates;

Regular reports monitoring and evaluating

implementation of the legislation, and recommending improvements; and

Baseline estimates of the costs of existing

mandates.

The Commission supports the authorization of these studies and reports,

and is eager to assist the Congress in preparing them.

FI..AL. STATEMENT

FEUERAL,MAIVZBATES TAM FORCEI

FEDERAA~MANDATERELIEF

FORSTATE,ICOCAC,AND TRIBAL GOKERAPEE~S:

DEFINIT~~~~~, PRIMXPLE~, PROCESSES, ANDEVALUATI~NS

In response to an April 1994 request

from the Clinton Administration, the Commission convened two task forces to provide guidance on the mandate relief initiatives being

considered in the Congress. Task Force I was

assigned the issues surrounding (1) the definition of mandates; (2) the principles and

processes involved in seeking relief for state,

local, and tribal governments; and (3) guidelines for evaluating the implementation of

mandate relief legislation. Task Force II was

assigned the issues surrounding the quantification of mandate costs and benefits.

Task Force I found that America is experiencing an era of fiscal constraint affecting

governments throughout the federal system. As

a result, the budgets of our federal, state, local,

and tribal governments must be viewed together as a single public budget bounded by voter

preferences and resource limits that make it

impossible and inappropriate to shift costs

from one government’s budget to another without new revenues and/or overall adjustments in

the priorities of the total public budget.

The federal government, therefore, must

exercise restraint in its enactment of unfunded

mandates on state, local, and tribal governments. The mandate relief bills proposed as of

mid-December 1994 take positive steps in this

direction.

The definition of mandates in the proposed bills includes (1) traditional unfunded

direct order mandates carrying criminal or civil

penalties; (2) cost-inducing conditions attached

to nine major federal entitlement programs that

provide $500 million or more annually for

state, local, and tribal governments; and (3)

caps, reductions, or elimination of federal

funding for these entitlement programs.

Explicitly excluded from the cost estimate and relief requirements of the proposed

bills are (1) civil rights laws; (2) individual

constitutional rights; (3) rules against waste,

fraud, and abuse in grant programs; (4)

requested emergency assistance or relief; (5)

national security and treaty matters; and (6)

emergency legislation.

The proposed bills would improve the

Congressional fiscal notes process by:

n Requiring better and more timely cost

estimates;

n Providing for a point of order against

applicable unestimated or unfunded mandates contained in proposed legislation;

n Requiring a roll call vote to be recorded

in any Congressional committee report

on a federal mandate covered by the mandate relief legislation; and

n Restraining unfunded mandating through

fewer enactments or adequate funding.

The threshold for cost estimates and a point of

order against proposed mandates is $50 million

in direct aggregate costs for state, local, and

tribal governments.

The mandate relief bills do, however,

exclude costly conditions in approximately 3 I

federal programs under which $500 million or

more is provided annually and the federal government’s .560+ smaller federal aid programs.

The proposed bills would not eliminate

federal mandates, including unfunded mandates, on state, local, and tribal governments.

Therefore, it is still necessary for the Congress

and the Executive Branch to adhere to principles of intergovernmental cooperation and

sound judgment when enacting or promulgating new mandates or revising statutes and

rules.

11
Consequently, mandates should be enacted only with full accountability through recorded roll call votes at all stages of Congressional

action, from committees to the floor, and with

full disclosure to taxpayers of the true costs and

benefits of implementation. The Congress and

citizens should be informed of budget costs,

social and economic costs and benefits, and

expected cost savings from mandate compliance.

Congressional and executive consideration should be given to the principle of ‘<no

money, no mandates,” even if the Congress

elects not to be bound by such a statutory rule

in every case. Pay-as-you-go rules also should

apply to federal intergovernmental mandates as

they do to other federal policies, and protections provided for state, local, and tribal government budgets should be as tough as those

provided for the federal budget.

Because effective governance in our federal democracy requires genuine power sharing, mutual cooperation, and real partnership

among the federal, state, local, and tribal governments, legislative enactments, promulgations of regulations, and implementation of

federal mandates require timely and meaningful consultation and collaboration with elected

officials, who should be exempted from the

Federal Advisory Committee Act.

Mandate legislation and administration

should:

(1) Specify clear goals;

(2) Ensure practical and workable implementation;

(3) Provide maximum freedom, discretion, and flexibility to meet performance objectives with creativity and

efficiency;

(4) Emphasize options over waivers that

must be granted by federal agencies;

and

(5) Avoid information overload on state,

local, and tribal officials.

The federal government and the state,

local, and tribal governments should provide

for sufficient staff to carry out mandate relief

legislation successfully. In addition, more realistic time frames should be established for

ACIR’s monitoring and evaluation responsibilities under the proposed legislation.

12
I.

II.

III.

IV.

V.

VI.

VII.

VIII. Guidelines for Reviewing Existing Federal Mandates

and Monitoring the Implementation

of Federal Mandate Relief Legislation ............................ .32

A. Reviewing Existing Mandates ................................. -32

B. Monitoring the Implementation of Mandate Relief Legislation ........ .32

Bibliography ...................................................... ..3 3

Participants: Federal Mandates Task Force I ............................ .34

CONTENTS

Objective ................................................... ..15

Definitions .................................................. ..15

Findings .................................................... ..16

A. The General Question of Mandates .............................. 18

B. The Proposed Mandate Relief Legislation ........................ .19

Principles to Guide the Design

and Consideration of Federal Mandates ........................... .23

A. Principles for Establishing National Policy ....................... .23

B. Principles for Strengthening the Intergovernmental Partnership ....... .23

C. Principles for Ensuring Workability ............................. .24

Principles to Govern Funding of Federal Mandates ................. .26

Guidelines for Implementing

Federal Mandate Relief Legislation .............................. .27

A. Process Guidelines .......................................... .27

B. Partnership Guidelines ....................................... .28

C. Efficiency Guidelines ........................................ .29

D. Effectiveness Guidelines ...................................... .29

E. Guidelines for Balancing Competing Values ...................... .30

Alternative Administrative and Fiscal Mechanisms

for Easing Compliance ......................................... .30

A. Statutory and Administrative Mechanisms ........................ .30

B. Fiscal Mechanisms .......................................... .3 1

1 3
14
FEDERALMANDATE RELIEF

FOR STATE, LOCAL, AND TRIBAL GOVERNMENTS

The purpose of this task force statement

is to provide useful and practical assistance to

the President and the Congress for improving,

evaluating, and implementing federal mandate

relief legislation, executive orders, and administrative regulations. This statement addresses

issues of definition, process, procedure, and

funding.

Federal assistance or a duty arising from

participation in a voluntary Federal program, except as stated in subparagraph

(B)), upon States, local governments, or

tribal governments, or (ii) would reduce

or eliminate the amount of authorization

of Federal financial assistance that will

be provided to States, local governments,

or tribal governments for the purpose of

complying with any such duty; or

This statement reflects the views of the

recommendations on how mandate relief

should work were informed by the likely

task force convened by ACIR. The task force’s ,

course of Congressional action as of midDecember 1994, but were not limited by that

information.

before Congress or in a proposed or final

Federal regulation that relates to a then

existing Federal program under which

(B) any provision in a bill or joint resolution

$500,000,000 or more is provided annually to States, local governments, and

tribal governments under entitlement

authority (as that term is defined in section 3(9) of the Congressional Budget

Act of 1974 (2 U.S.C. 622(9))), if

In recent years, definitions have played a

key and often confusing role in debates about

federal mandates and other forms of federal

regulation affecting state, local, and tribal governments. This confusion has produced widely

varying estimates of the numbers and fiscal

impacts of federal mandates and their effects

on intergovernmental relations.

The definition of “mandates” proposed in

the compromise bill worked out in the U.S.

Senate has begun to settle the definitional issue

-S.993, “The Federal Mandate Accountability

and Reform Act of 1994”; H.R. 5 128, “The

Federal Mandates Relief for State and Local

Government Act of 1994”; and Title X, “Job

Creation and Wage Enhancement Act,” of the

“Contract with America.” This definition reads

as follows:

(A) any provision in a bill or joint resolution

before Congress or in a proposed or final

Federal regulation that--(i) would impose

a duty that is enforceable by administrative, civil, or criminal penalty or by

injunction (other than a condition of

(i)(I) the bill or joint resolution or

regulation would increase the stringency of conditions of assistance to

States, local governments, or tribal

governments under the program, or

(II) would place caps upon, or otherwise decrease, the Federal Government’s responsibility to provide

funding to States, local governments, or tribal governments under

the program; and

(ii) the States, local governments, or

tribal governments that participate in

the Federal program lack authority

under that program to amend their

financial or programmatic responsibilities to continue providing

required services that are affected by

the bill or joint resolution or implementing regulation.

The mandates covered by (A) and (B) are

those in a bill that, singularly or collectively,

would impose annual direct costs of $50 mil15
lion or more (adjusted annually for inflation by

the Consumer Price Index) on state, local, and

tribal governments in the aggregate.

Explicitly excluded from cost-estimate

and relief requirements in the proposed bills

are: (1) civil rights laws; (2) individual constitutional rights; (3) rules against waste, fraud,

and abuse in grant programs; (4) emergency

assistance or relief requested by state, local, or

tribal governments; (5) national security and

treaty matters; and (6) emergency legislation.

The definition of mandates included in

the proposed legislation is more inclusive than

the historic understanding of mandates. Traditionally, mandates have been defined as direct

federal orders requiring compliance under pain

of civil or criminal penalties. The proposed

bills, however, also include as “mandates” conditions attached to nine federal aid entitlement

programs. Although some public officials refer

to conditions of federal aid as mandates, traditionally they have not been defined as mandates because governments are considered, as a

matter of law, to accept federal aid voluntarily

and are, therefore, free to refuse participation

in, or to withdraw from, federal aid programs.

Given the broader definition of mandates

included in the bills, the term “mandates” will

refer to direct orders as well as to the conditions of federal aid attached to the entitlement

creatures of their states; therefore, federal mandates applicable to local governments also

apply to the states insofar as states are legally

obligated to ensure local compliance. Recognized Indian tribes are domestic sovereign

nations subject to federal mandates but only to

limited state regulation in accordance with federal statutes and U.S. Supreme Court decisions

interpreting the Indian commerce clause,

treaties, and federal laws. Federal statutes and

treaty obligations pertaining to all or some recognized tribes may make certain applications

of mandate relief measures different for tribal

governments than for state and local govemments. This statement does not examine these

differences, but such differences in status will

require recognition, where necessary, in legislative and executive implementation of mandate relief legislation.

The following findings address issues

pertinent to (A) the general question of federal

mandates and (B) the proposed legislation

being considered by the Congress.

A. The General Question

programs, I of Federal Mandates

In the spirit of intergovernmental partnership, and in deference to the language of the

proposed bills and of Executive Orders 12875 ,

Financial Relationships

on “Enhancing the Intergovernmental Partner- / 1. The fiscal constraints now being experiship” and 12866 on “Regulatory Planning and enced by most governments demand that all

Review,” this statement refers equally to “state, /

federal, state, local, and tribal budgets be

local, and tribal governments.” All three types viewed together as a single public budget

of government are affected by federal man- bounded by voter preferences and resource

dates and want to be treated as partners in the limits. It is impossible and inappropriate to

mandate relief process. It is recognized, how- shift costs from one government’s budget to

ever, that state, local, and tribal governments another without overall adjustments in the

have different legal and other relationships to , revenues and priorities of the total public

the federal government. budget.

Constitutionally, the states are the constituent polities of the federal system. They 2 . , Unfunded mandates shift the costs of federshare the sovereign powers of governance with i al policy decisions to state, local, and tribal

the federal government and possess all sover- governments whose budgets are no less coneign powers not delegated to the federal gov- 1 strained than the federal budget. Unlike the

ernment under the United States Constitution. ’ Articles of Confederation, the U.S. ConstiConstitutionally, local governments are legal ) tution authorizes the Congress to levy and

16
collect its own taxes so that (1) it is not

dependent on voluntary state contributions

to carry out its policies and (2) it can be held

directly accountable by the voters for the

costs of its policies. The Constitution does

not contemplate the need for the federal

government to rely on independently levied

state, local, or tribal revenues to carry out its

policies. Instead, the Constitution ensures

that the federal and state governments each

have concurrent tax authority to finance

their own policies.

Power Relationships

3. Through the Constitution of the United

States, the people of the states delegated

certain limited powers, enumerated and

implied, to the federal government relevant

to the general interests of the nation. Federal statutes, administrative actions, and court

orders instituted in accordance with the constitutional delegation of powers are supreme

and, therefore, binding on state and local

governments and also on tribal governments

when they do not conflict with treaty obligations.

4. All powers not delegated to the federal government are reserved to the states or to the

people as explicitly stated in the Tenth

Amendment to the U.S. Constitution. The

Constitution recognizes the preexisting plenary powers of the original states and of the

tribes as nations, which predated the Articles of Confederation and the U.S. Constitution. The states generally derive their

powers directly and independently from

their citizens, not by delegations from the

federal government. Local governments

derive their powers from their states and citizens. The tribes derive their powers of selfgovernment from their original sovereign

status as recognized by the U.S. Constitution, treaties, federal statutes, and/or executive orders.

5. American federalism should be a partnership of shared governance and selflgovernance for the nation and its diverse

communities of people. Partnerships and

6 .

7 .

8 .

cooperation are necessary for effective and

efficient governance. Under many federal

mandates, state, local, and tribal governments are essential partners and often

co-regulators working with the federal government to achieve nationally mandated

goals. State, local, and tribal governments

also are regulated parties. There should be

active and meaningful intergovernmental

consultation and collaboration in enacting

and implementing federal mandates,

Federal mandates have produced many

social and economic benefits. Federal mandates covering such matters as the environment, civil rights, the rights of Americans

with disabilities, fair labor standards, voting

rights, access to health care, and surface

transportation clearly have benefited environmental protection, mobility, and the lives

of many people. Efforts to achieve mandate

relief and intergovernmental fiscal equity

should not weaken or undermine mandate

objectives essential for the well-being of the

nation.

Unfinded mandates, however, obscure Congressional accountability to citizens and

reduce efficiency by separating the authority to mandate from the responsibility to pay

or share the costs for implementation.

Accountability and efficiency in a federal

democracy require close links between the

authority of a government to make policy

and its responsibility to ask taxpayers to pay

for it. Accountability is obscured and efficiency is reduced when the pleasure of

spending tax dollars is divorced from the

pain of raising those dollars. Under such

conditions, the mandating government has

little incentive to engage in adequate benefit-cost analyses and to implement sound

and efficient policy.

In the spirit of trust and partnership, state,

local, and tribal governments should

endeavor to manage national initiatives in

an efficient and productive manner Partnership is a two-way street. Therefore, state,

local, and tribal governments have an obligation to address problems that give rise to

federal mandates, to work with the federal
government to resolve those uroblems. and 13. State, local, and tribal governments report

to assist in implementing mandate relief that federal mandates have become

increasingly burdensome, fiscully and

administratively, und are sometimes counterproductive to the effective and efficient

achievement of national goals. The actual

costs and benefits of the full range of federal mandates are unknown. The increased

number, complexity, and prescriptiveness

of federal mandates, however, necessarily

impose costs that must be paid out of state,

local, and tribal revenues, thus requiring

those governments to levy additional taxes

and charges or to displace their own spending priorities. Tribal governments and

many local governments, however, have

tax bases limited by law as well as by economic constraints. In addition, all these

governments must legally comply with federal mandates before they are free to satisfy

their citizens’ priorities.

legislation.

-

Recenf Sfrains in Relafionships

9. In recent decades, intergovernmental cooperation has been strained by significant

increases in federal mandating, especially

unfunded mandating. For example, one

count of conservatively defined statutory

mandates requiring state and local compliance showed the Congress enacting only

one statute in 193 1, one in 1940, none in

the 1950s nine in the 1960s 25 in the

197Os, and 27 in the 1980s. Mandating has

been a bipartisan activity, and has thus far

continued through the early 1990s.

10. Federal preemption of state, local, and

tribal government powers has increased

significantly as well. Of 439 explicit preemption statutes enacted from 1789 to 199 1

by the Congress, 233 (53 percent) were

enacted from 1970 through 1991. Some

preemptions reduce flexibility or revenueraising ability for complying with federal

mandates.

11. Cooperation also has been strained by

increased conditions of federal aid. Federal

aid conditions date back to the first land

grants to states, and most were limited and

integrally related to grant purposes. In

recent decades, conditions increased in

number and scope, including crossover

sanctions and crosscutting conditions not

directly and substantially related to the specific grant purposes.

12. Nonparticipation in voluntary federal aid

programs is not always fiscally or politically feasible. Although state, local, and tribal

governments can and do decline certain

federal aid programs, it is fiscally and/or

politically impossible to decline participation in programs such as Medicaid and surface transportation. Furthermore, many

conditions of aid are retroactive. Consequently, conditions attached to many federal aid programs are mandates for all

practical purposes.

When the economy of a state, local, or

tribal government experiences a downturn,

taxpayers must continue to fund federal

mandate compliance and look for reductions in their own programs and services.

At the same time, these governments are

called on by their citizens to tax, spend, and

borrow within various constitutional and/or

statutory balanced budget rules, tax and

expenditure limits, and debt ceilings not

applicable to the federal government. In

essence, there is no money left in many of

their budgets to finance more federal mandates.

While the costs of one mandate may be

small, the aggregate costs of all mandates

can be substantial. Federal requirements

also have differential fiscal impacts, especially on small, poor, or fiscally weak governments. In some cases, small or fiscally

stressed governments are unable to respond

to, or even know of, all requirements until

enforcement action is taken against them.

At times, the costs of complying with federal mandates that are intended to improve

a public service compel discontinuance or

service reduction.
Need for Mandate Relief

14. Although the Congress has enacted effective relief for some specific mandates, on

balance, federal mandate relief measures

taken over the past 15 years have been

largely ineffective. In a 1993 report, ACIR

reviewed federal regulatory relief in the

1980s and concluded that the efforts of the

Congress (fiscal notes), the Executive

Branch (Federalism Executive Order), and

the U.S. Supreme Court (federalism cases)

had not effectively curtailed the rising

numbers and costs of federal regulations or

helped ease compliance significantly.

15. In the final analysis, pay-as-you-go rules

need to be applied to ail federal mandates.

There is a need for more open and honest

budgeting based on publicly debated intergovernmental priorities for which elected

federal, state, local, and tribal officials can

be held accountable by citizens.

B. The Proposed Mandate Relief Legislation

Improvements

1. The proposed mandate relief bills reported

as of mid-December 1994 have the potential

to improve the fiscal notes process. These

bills would improve the quality and timeliness of cost estimates, explore offsetting

benefits and cost reductions, provide for

intergovernmental consultations, initiate

debates over relative priorities when identifying sources of funding for new mandates,

and introduce a sense of Congressional

accountability by requiring separate debates

and votes on points of order raised when

unfunded mandates are proposed in either

house of the Congress.

Applicability

3 .

4 .

5 .

n

n

n

Traditional unfunded direct-order

mandates carrying criminal or civil

penalties;

Cost-inducing conditions (including

certain crossover sanctions)

attached to nine major federal entitlement programs where state, local,

and tribal governments lack authority to alter their financial or programmatic duties to provide

required services; and

Caps, reductions, or elimination of

federal funding for nine entitlement

programs (see 5 below).

The mandate relief bills would apply only to

newly proposed or reauthorized mandates

having an annual direct-cost impact on

state, local, or tribal governments of $50

million or more and that are outside the six

exclusions listed above in Section II. These

exclusions leave substantial opportunities

for enacting legislation and promulgating

regulations that would increase state, local,

and tribal costs, and could create incentives

to insert mandates in bills that would bring

them under an exclusion.

Although the six exclusions in the mandate

relief bills are meritorious, unfunded mandates falling under the exclusions should

still receive benefit-cost estimates so that

citizens and federal, state, local, and tribal

officials are fully informed of their expected

costs and benefits. One key principle of the

proposed mandate relief legislation is full

disclosure of the costs and benefits of federal policies. A requirement for benefit-cost

analyses of mandates falling under the six

exclusions need not trigger a point of order.

The mandate relief bills would not apply to

conditions attached to most of the federal

governments approximately 600 grants-inaid.’ However, they would apply to the nine

2. The definition of mandates stipulated in the * According to the report of the Senate Committee on Governproposed bills includes three categories of

mental Affairs (100-330, p. 12): “Subsection (l)(A) [of Section

31 exempts legislation or regulation that authorizes or implefederal “mandates ” that have been of great- ments a voluntary discretionary aid program to State. local and

est concern:

tribal governments that has no requirements or conditions of particlpation specific to that program.”

1 9
large federal-aid entitlement programs having some of the greatest cost effects on

state, local, and tribal governments. The

nine programs are: Medicaid; Aid to Families with Dependent Children (AFDC);

Child Nutrition; Food Stamps; Social Services Block Grants; Vocational Rehabilitation State Grants; Foster Care, Adoption

Assistance, and Independent Living; Family

Support Welfare Services; and Child Support Enforcement. Although the legislative

history of the Senate bill (S. 993) enumerates these nine programs, it is not clear that

the proposed mandate relief bills, if enacted

into law, would still apply to the nine programs if they are amended to remove them

from the entitlement category or are capped

or moved into a block grant.

There are approximately 3 1 other federal

aid programs above the $500 million

threshold that would be excluded. Some of

these large exempted programs, especially

the federal aid highway program, carry

many conditional mandates, some of which

are costly and not substantially or directly

related to program purposes. In the absence

of federal legislation or Congressional selfrestraint requiring conditions of aid to be

directly and substantially germane to program purposes, large excluded federal aid

programs could become vehicles for circumventing requirements of federal mandate relief legislation.

It appears that the proposed mandate

relief bills would apply to crossover sanctions and other conditions attached to these

nine programs, when they meet the $50 million threshold within any one of the nine

programs and do not fall under one of the

proposed bills’ six exclusions.

It is not clear, however, whether the fiscal

impact of a condition that cuts across many

or all federal grants will be subject to an

unfunded mandate point of order outside of

the nine federal aid entitlement programs.

Crosscutting requirements-such as the

environmental impact statement requirement of the National Environmental Policy

Act of 1969-generally are enacted separately from grant legislation even though

many of their financial effects may play out

within grant programs. Thus, the cost estimates for crosscutting bills would combine

the effects on many programs and could

easily exceed $50 million in the aggregate.

But, it is not clear whether this aggregate

estimate would be used.

The bills ’ $50 million direct-cost impact

threshold (an average annual cost of $1 million per state) is more favorable to state,

local, and tribal governments than the current $200 million fiscal note threshold.

Some de minimis requirement is necessary

for the federal government to conduct its

ordinary business, although the broad, but

still restricted, range of mandates covered in

the bills might argue for a lower threshold,

perhaps $5 million annually. Under the current bills, however, if the total direct cost of

mandates exceeds $50 million in any year

of a five-year authorization, the entire

authorization will fall under the mandate

relief statute. Additionally, once the threshold is reached, the statute will apply to the

entire amount of the mandate, not just to the

amount in excess of the $50 million.

Nevertheless, the $50 million threshold

could encourage a proliferation of

mini-mandates having sizable cumulative

effects on state, local, and tribal governments. New mini-mandates could be fiscally problematic because the proposed bills

apply to future mandates; they do not provide retroactive relief or relief from current

state, local, and tribal mandate-compliance

costs.

The bills do not shield state, local, and tribal

governments from a number of other federal

actions that induce costs, such as:

n Prohibitions or preemptions of

state, local, or tribal alternatives that

could reduce state, local, or tribal

costs or create offsetting revenues;

n Tax policies that make it more difficult or expensive for state, local,

and tribal governments to raise revenues, borrow money, fund publicprivate partnerships, or privatize

public functions;

20
Court decisions or administrative

regulations that impose an implied

constitutional or statutory obligation for state, local, and tribal governments to do or not do something;

Regulatory delays and lax enforcement or nonenforcement of federal

laws that have spillover costs for

state, local, and tribal governments;

and

Laws that expose state, local, and

tribal governments to liability lawsuits.

Protections

8. The hills provide state, local, and tribal

governments with the new procedural protection of a majority point of order against

applicable unestimated or unfunded mandates contuined in proposed legislation.

This provision would strengthen the fiscal

notes process in the State and Local Government Cost Estimate Act of 1981, which

lacks a point-of-order rule. The principal

concern about the proposed majority point

of order is that it may be too weak. A point

of order may be waived by unanimous consent or by a majority of those voting, provided a quorum is present. Requiring a

majority vote of the members of the Senate

or House would offer more protection for

state, local, and tribal governments. Even

further, a supermajority vote to waive a

point of order would ensure that any

unfunded mandate enacted by the Congress

reflected a broad consensus on the national

interest. However, a supermajority point of

order could also produce more gridlock in

the Congress.

9 . The proposed bills require a roll call vote to

be recorded in any committee report on a

federal mandate covered by the mandute

relief legislation, but recorded roll call

votes are not required to be taken on all federal mandates und at all stages of their legislative consideration. The current

provision is an important step toward

greater openness and accountability in the

enactment of federal mandates. However,

the proposed bills do not provide for recorded roll call votes throughout the process of

mandate enactment (including conference

reports and amendments offered on the

House and Senate floors), nor do they

require recorded roll call votes on all mandates or preemptions. These voting provisions could be added to the proposed bills

for informational and accountability purposes without altering the scope of the bills’

current provisions for mandate relief.

10. The mandate relief bills do not extend to

the Congressional appropriations process,

and the procedural mechanisms to protect

.state, local, and tribal government budgets

are not as tough as those the Congress has

enacted to protect the federal budget. Ideally, mandate relief legislation would include

the Congressional appropriations process;

however, this may be politically impossible

to achieve at the present time.

1 1 Proposed federal agency backstop provisions could overcome this limitation by signaling appropriators that they will have to

fund a mandate if they expect federal agencies to enforce it. Such potential provisions

as Section 10502 of Title X of the proposed

“Job Creation and Wage Enhancement Act”

would require federal executive agencies to

enforce a mandate that would be subject to

the proposed bills’ point-of-order rule

“only to the extent that the head of the

agency determines that State and local governments [tribal governments are not mentioned in Section 105021 to which the

Federal mandate would apply have been

provided Federal resources equivalent to

the intergovernmental direct costs of the

Federal mandate.” Such a provision, however, may be an unconstitutional delegation

of legislative powers to the Executive

Branch.

Another backstop technique that could be

considered to account for lack of follow

through in the Congressional appropriations process to fund new mandates is the

one used in Massachusetts to determine

which state mandates on local governments

21
are unfunded by the state. This technique merits. This oversight should be remedied

uses a mandates commission that makes a

finding on funding after the appropriations

in final mandate relief legislation.

process has come to an end. 15. The preemption provisions in the bills

12. The “‘federal mandate budget cost control”

appear to apply only to mandates. If a preemption is not defined as a mandate, it will

provision of Title XI of the proposed “Job not be covered by the proposed mandate

Creation and Wage Enhancement Act” relief statutes. It would be preferable, therewould incrementally lower the aggregate fore, to include rules for roll call votes and

costs of state and local government compliante with all federal mandates and require

points of order for all proposed preemptions and to incorporate it in mandate relief

a three-fifths vote to waive a point of order

against any bill or resolution, or amendmerit, that would exceed a given years

mandate budget authority. During the first

six years following enactment, this provision could significantly reduce aggregate

state and local compliance costs; however,

the provision does not define “all federal

mandates.” If the term “mandates” is

intended to conform to the definition given

in Section 1002 (1) quoted in Section II of

this statement, then the cost reductions produced by this provision will be limited. In

addition, this proposed provision does not

include tribal governments.

This provision also would amend the

Regulatory Flexibility Act to require each

agency that prepares a regulatory flexibility

analysis for a proposed rule that establishes

or implements a new mandate to submit to

the Congress and to CBO and OMB a cost

estimate and benefit-cost analysis of any

new federal mandate that would have an

aggregate direct cost to state and local governments of at least $10 million for any fiscal year.

legislation. ACIR’s 1992 recommendations

on explicit statements of intention and

scope for all preemptions are that:

(1) the Congress not preempt state and

local authority without clearly

expressing its intent to do so; (2) the

Congress limit its use of the preemption power to protecting basic political

and civil rights, managing national

defense and foreign relations, ensuring the free flow of interstate commerce, preventing state and local

actions that would harm other states or

their citizens, and protecting the fiscal

and programmatic integrity of federal

aid programs into which state and

local governments freely enter; [and]

(3) the Executive Branch not preempt

by administrative rulemaking unless

the Congress has expressly authorized

such action and established clear

guidelines for doing so, and unless the

administrative agency taking such

action clearly expresses its intent to

preempt. . . .

Other Issues 16. Effective implementation of the proposed

. .

13. The proposed mandate relief bills apply to

federal Executive Branch departments and

agencies, but not to independent regulatory

agencies. Many independent regulatory

agencies, such as the Federal Communications Commission and the Securities and

Exchange Commission, promulgate rules

that have significant fiscal impacts on state,

local, and tribal governments.

14. The proposed bills define state, local, and

small governments, but not tribal governmandate relief legislation will require,

among other things, additional funding for

the Congressional Budget Ofice, adequate

and perhaps additional trained staff in

executive agencies, and active cooperatton

from state, local, and tribal governments in

preparing cost estimates. Effective implementation of the proposed bills will require

objective and thorough benefit-cost analyses, accurate estimates of mandate compliance costs, and Congressional agreement

on how to treat range estimates that may be

issued by CBO.

22
The proposed bills would not eliminate

federal mandates, including unfunded mandates, on state, local, and tribal governments.

Therefore, it is still necessary for the Congress

and the Executive Branch to adhere to principles of intergovernmental cooperation and

sound judgment when enacting or promulgating new mandates or revising statutes and

rules. The following sixteen principles are

grouped into three broad categories: principles

for establishing national policy, principles for

strengthening the intergovernmental partnership, and principles for ensuring mandate

workability.

A. Principles for Establishing

National Policy

1. Establish Federal Accountability. Mandates

should be enacted with full accountability

through recorded roll call votes at all stages

of Congressional action and with full disclosure of the true costs and benefits of

implementation. The Congress and citizens

should be informed of budget costs, social

and economic costs and benefits, as well as

. . 1 1. P

5 .

B. Principles for Strengthening

the Intergovernmental Partnership cost savings expecrea to accrue from mandate compliance. The goal should be to

combine intergovernmental fiscal fairness I.

with sound national policy.

2. Promote Debate on National Priorities.

Proposed mandates should trigger broad

debate about national priorities not only

within the Congress but also across the

country. Federal officials should recognize

that not every national priority requires federal legislation and that not every federal

priority is a national priority.

Create Mutual Trust. State, local, and tribal

governments can be trusted to act for the

public good, meet public needs, and

respond to citizen preferences. The principal responsibility of the federal government

is not to regulate its governmental partners

in response to special interests, but to create

the genera1 economic, fiscal, and regulatory

conditions needed nationwide for citizens to

exercise their proper self-governing powers.

2 .

3. Recognize Constitutional Limits. Federal

actions must recognize such important federal constitutional requirements as the

republican guarantee clause (Article IV,

Section 4); the Tenth and Eleventh AmendEnhance the Intergovernmental Partnership.

State, local, and tribal governments are not

administrative arms of the federal government. The states are coequal constitutional

governments elected by and accountable to

their citizens. Local governments derive

men&.; the limited, delegated federal powers

enumerated in the U.S. Constitution (e.g.,

Article 1, Section 8); and the federal and

state constitutional obligations to be

accountable to the people for policy decisions and expenditures of public funds.

Exercise Federal Restraint. Mandates

should be limited to compelling, constitutionally valid national interests involving

such matters as (a) clearly negative interstate spillovers, (b) treaty obligations, (c)

uniform policy imperatives unattainable by

interstate action, (d) redistributive policy

necessities, and (e) clear state, local, or tribal failure to protect basic rights.

Achieve National Goals. Mandate relief

efforts should not undercut important and

long-established national goals that clearly

serve the public well-being. However, all

persons and governments have a right to be

treated fairly and equitably in the regulatory

process. Protecting this right requires careful balancing between uniform protection of

fundamental rights; deference to state, local,

and tribal democratic processes; public participation and accountability in the regulatory process; freedom from unreasonably

costly regulatory burdens; and intergovernmental fiscal fairness.

23
their powers from their states and citizens, removing onerous administrative condinot from the federal government or the U.S. tions-should be used more fully in creatConstitution. Tribal governments represent ing additional federal block grants. This

the original sovereign nations of American action would:

Indians and Alaskan Natives. State, local,

and tribal governments, therefore, should be w

free to do what is appropriate pursuant to n

their constitutional or governmental authority. n

Streamline the grant system;

Reduce its burdens;

Because it is often better to educate than to

legislate or regulate, mandates should be

enacted or promulgated only as a last resort.

Consideration also should be given to funding demonstration programs designed to

explore likely outcomes before enacting

mandates.

3. Educate Rather than Mandate. Excessive

mandating is counterproductive and undermines the legitimacy of the federal role.

Federal offtcials who perceive a policy need

should first seek alternatives to mandates.

Cut the large number of overlapping

and conflicting programs and

requirements; and

Reduce the number of federal mandates.

This option should be a first-order consideration in designing new federal programs.

n

7. Emphasize Goal Attainment. Mandates

enacted by the Congress and promulgated

by executive agencies should set forth

appropriate, attainable, and measurable performance standards rather than detailed

implementation rules, specifications, and

other procedural prescriptions.

4. Look to the Laboratories of Democracy.

When considering mandates, federal ofticials and members of Congress should

examine the costs and benefits of existing

state, local, and tribal policies in the same

field to:

n Determine whether a federal mandate would be more effective, economical, and efficient than multiple

standards; and

n Learn from state, local, and tribal

experiences in order to adopt the

most workable federal standard.

5. Enhance Flexibility and Options. Mandate

legislation and administration should provide maximum freedom, discretion, and

flexibility to meet performance objectives

so as to make the most of management creativity and efficiency. Options for choices

should be emphasized over waivers that

must be granted by federal agencies.

6. Create More Block Grants. The power of

block grants to devolve greater freedom to

recipients-both by enlarging the scope of

expenditure choices and reducing and/or

C. Principles for Ensuring Workability

1. Stimulate Power Sharing and Consultation.

Effective governance in the American federal democracy requires genuine power

sharing, mutual cooperation, and real partnership among governments. At a minimum, enactments and promulgations of

federal mandates require timely consultation with the relevant elected officials of

state, local, and tribal governments and,

when appropriate, relevant representatives

of implementation agencies and the private

sector. To ensure timely and adequate consultation, meetings between federal officials

and elected state, local, and tribal officials

should be exempted from the Federal Advisory Committee Act.

2. Nurture Co-Regulation. Many federal mandates apply not only to governments but

also to the private sector. Frequently, the

mandates are enforced, in the first instance,

by the state, local, and tribal governments.

This co-regulator relationship also sometimes joins federal and state agencies in reg24
mating local and tribal governments, Thus,

this relationship needs to be nurtured to

achieve success.

3. Provide Personal Contact. Regardless of

whether a mandate is funded or unfunded,

federal officials need sufficient resources to

make helpful personal contacts with state,

local, and tribal offtcials. This federal role is

increasingly important because, in many

states and most local and tribal governments,

n Limited or no budgets for travel and

telecommunications restrain public

officials’ ability to acquire necessary training and assistance; and

n Citizens have come to expect more

insistently that their public servants

stay home and focus on their

responsibilities.

4. Ensure Workability. When mandates intended to yield positive benefits are deemed

necessary, legislation and regulations

should be practical and achievable. Toward

this end, they should:

n

n

n

n

n

Have clear and unambiguous objectives, priorities, and requirements;

Provide options for compliance and,

thereby, lessen the necessity for

waivers;

Avoid displacing or reducing the

delivery of existing government services or rights protections;

Allow the most efficient, economical, and scientifically sound methods of allocating resources and

achieving mandated goals;

Emphasize long-term continuity

and stability in goals and rules to

avoid frequent midstream changes

that add more costs than benefits

and require constant adjustment to

changing Congressional and executive moods;

n

n

n

n

n

n

Provide at least six-months’

advance notification before enforcement of final rules or rule changes;

Recognize differences in state,

local, and tribal institutional structures, resources, conditions, and

service responsibilities;

Ensure that state, local, and tribal

governments are not penalized for

good-faith innovative efforts;

Emphasize cooperation over confrontation, incentives over penalties, and assistance over punitive

sanctions;

Include provisions for technical

assistance and adequate information

technology for all jurisdictions, but

especially for those lacking the

technical know-how and administrative capacity to comply with

complex mandates without assistance;

Avoid information overload by recognizing that many local and tribal

elected officials are part-time public

servants with little or no staff support (thousands of pages of mandate

regulations may be no more accessible and manageable to them on-line

than on paper);

Emphasize simple, nonlegalistic

language in federal legislation and

regulations;

Include provisions for periodic

review or sunsetting of legislative

and executive regulatory requirements; and

Designate a federal agency to assist

state, local, and tribal governments

in complying with each crosscutting

regulation.
The proposed mandate relief bills provide

political leverage for funding federally induced

costs, but they do not require the Congress to

fund part or all of such costs. Furthermore,

even though broad areas of policymaking are

excluded from the bills’ cost-estimate and

relief requirements, the Congress retains full

authority to fund or not fund any mandates

fully or partially.

Therefore, the Congress and executive

agencies still need to be guided by principles of

intergovernmental fiscal equity. These principles include the following:

1. No Money, No Mandates. Congressional

and executive consideration should be given

to the principle of “no money, no mandates,” even if the Congress elects not to be

bound by such a statutory rule in every case.

This concept was driving the legislative

momentum for reform in 1994. The federal

agency backstop provision, proposed in

December, would give effect to the principle that the Congress should not enact mandates without providing funding to cover

compliance costs.

2. Federal Funding. Congressional and executive policymaking also should be guided by

the principle that any policy important

enough to require a national mandate is

important enough for the federal government to provide full or partial implementation funding. Pay-as-you-go rules should

apply to federal intergovernmental mandates as they do to other federal policies.

3. Net Benefits. No mandate should be enacted

unless its costs and benefits are known and

limited, and unless the costs are balanced

with benefits at every step of implementation by federal departments and agencies.

4. Federal Revenue Commitment. When federal officials enact or promulgate mandates

that have intended benefits, they also should

share the obligation of raising revenues

from citizens to pay for the mandate benefits. This principle is critical for public

accountability and policy efficiency in our

federal democracy. In providing assistance,

consideration also should be given to targeting more assistance to state, local, and tribal

governments having weak fiscal capacities.

5. Federal Funding for Administrative Costs

of Grants. Full federal funding should be

made available for all reasonable and appropriate administrative costs in federal aid

programs as an incentive for the federal

government to keep those requirements

simple and efficient. OMB Circulars A-87

and A-102 make administrative costs eligible for cost sharing under most federal grant

programs, but the federal share frequently is

less than 100 percent.

6. Federal Funding of Grant Conditions. The

costs of meeting all the conditions (including crossover sanctions) attached to a federal grant program should be eligible for

funding within the program, to the extent

that they are not funded by some other federal means. The greater the level of federal

micromanagement of mandate requirements-such as strict deadlines, inflexible

uniform standards of compliance, and

repeated intervention-the greater the federal fiscal obligation to assist state, local,

and tribal compliance.

7. Federal Compensation for Spillover Costs.

Members of Congress and executive agencies should be fully cognizant of the

impacts of all federal actions that induce

costs for state, local, and tribal governments, and should weigh carefully the positive and negative impacts of various policy

choices and priorities against the intended

benefits. The greater the intended or unintended spillover costs of federal policies,

the greater the federal fiscal obligation to

compensate costs that exceed state, local,

and tribal benefits.

8. Consideration of Indirect Effects. Considerations of mandate costs should include not

only direct budgetary costs but also indirect

effects as well as social and economic costs

and offsetting benefits and savings. Such

26
considerations should be made only after

meaningful consultation with elected state,

local, and tribal offkials and their designated representatives.

9. Consideration of Variable Impacts. The

variable impacts of the costs and benefits of

federal mandates on other governments in

different regions should be given close

scrutiny. The greater the financial and technical burdens on individual governments

because of their size or particular circumstances, the greater the federal obligation to

help fund or otherwise ease compliance.

The proposed mandate relief bills (as of

mid-December 1994) call for:

(1) CBO estimates of the fiscal impacts of proposed mandates;

(2) Congressional committee statements on

whether mandates should be partly or

entirely funded by the federal government;

(3) Committee identification of existing and

new sources of federal financial aid;

(4) Committee descriptions of other quantifiable and qualitative costs and benefits of

proposed mandates; and

(5) Committee statements on whether mandates are intended to preempt state, local, or

tribal law.

The bills also call for:

( I) Better executive agency consultation with

elected state, local, and tribal officials on

proposed regulatory mandates;

(2) Cost-benefit assessments (quantitative and

qualitative) by agencies of regulations

expected to induce annual, aggregate state,

local, and tribal costs of $100 million or

more;

(3) Estimates, where feasible, of the costs of

mandates in future time periods and of any

disproportionate budgetary effects of mandates on particular regions, or state, local

and tribal governments, or rural or other

types of communities;

(4) Greater agency technical assistance for

compliance to local governments with less

than 50,000 residents; and

(5) Pilot programs for helping small

governments explore more flexible, alternative methods of mandate compliance.

A. Process Guidelines

Effective implementation of these rules

and processes will require:

1 .

2 .

3 .

4 .

Parliamentary Procedures. Establishment

of general parliamentary procedures in the

House and Senate to provide protections for

state, local, and tribal budgets comparable

to those available for the federal budget,

including recorded and published roll call

votes at all stages of consideration of bills

containing proposed mandates.

Statements of Intent. Clear statements of

mandate intentions, including scale and estimated costs and benefits, so as to trigger

national debate on federal priorities and

require the Congress to announce clearly

whether and why it is willing to mandate

more spending by other governments.

Consultation. Well institutionalized and

open processes for timely and thorough federal consultation with elected state, local,

and tribal officials and with their citizens, as

well as coordination with the fiscal officers

of these governments;

Consideration of Costs and Benefits. Rules

and procedures in Congressional committees and federal agencies to ensure accurate

identification and full consideration of mandate costs and benefits.

5 . Treatment of Cost Estimates. Agreement by both houses of the Congress on

27
the treatment of range or point estimates of

mandate costs issued by CBO.

6. Staff Capacity. Adequate and well trained

committee and agency staff to make the

required statutory and regulatory determinations, especially the intergovernmental benefit-cost assessments of proposed mandates;

7. Authorizution and Appropriation Links.

Adequate consultation among relevant

authorization and appropriation committees

to prevent gridlock and conflict over

sources and mechanisms of funding mandates, and to link short-term mechanisms

and appropriations to long-term mandate

goals and standards that must be achieved

over many years;

8. Coordination. Continual coordination

among Congressional committees, CBO,

and federal agencies; and

9. House Rules. Resolution of parliamentary

procedures in the U.S. House with respect

to the role of the House Rules Committee in

the legislative process affecting mandates.

10. Oversight. Adequate Congressional and

Presidential oversight to ensure compliance

with statutory requirements.

B. Partnership Guidelines

The following guidelines, which are

intended to foster a stronger intergovernmental

partnership, should be applied whenever mandates are enacted, reauthorized, or promulgated:

1. Demonstrated Need. Mandating should be

limited to demonstrated needs and widely

recognized national purposes in accordance with the principles outlined above

in Section IV. Federal officials should

clearly document significant market failures or problems of national scope that

state, local, or tribal governments are

unable or unwilling to solve effectively,

either independently or through voluntary

intergovernmental cooperation. Mechanisms other than mandates should be

2 .

3 .

4 .

5 .

6 .

explored before concluding that a mandate

is necessary.

Clearly Defined Problem. Mandates should

focus on clearly defined problems identified

through thorough research, investigation,

and hearings by relevant Congressional

committees and executive agencies in close

consultation with state, local, and tribal

governments.

Leust Burdensome Mechanisms. If there is a

demonstrated need, the Congress and federal agencies should consider a full range of

options and select the least burdensome

mechanism able to achieve the objective,

with state, local, and tribal actions taken in

their own situations. The Congress should

not enact rigid, inflexible mandate prescriptions that direct the rulemaking process.

Federal agencies should not regulate more

prescriptively than the plainly stated

requirements of the law.

Consultation. As an integral part of considering options, the Congress and federal

agencies should actively consult with elected state, local, and tribal officials to elicit

their perspectives on feasible procedures

and requirements and to build a foundation

for effective intergovernmental cooperation.

Consultation should be early, open, and

long enough to generate well considered

and documented responses.

Aggregate Burdens and Benefits. To foster

the most effective implementation, the Congress and federal agencies should consult

and regularly update a systematic inventory

of all regulatory demands and associated

costs and benefits for state, local, and tribal

governments. Aggregate requirements as

well as existing responsibilities and services

should be taken into account when considering additional mandates.

Compliance Assistance. An effective intergovernmental partnership requires that federal officials support development and

adequate funding of applied demonstration

and compliance assistance programs, and

promote education, training, technical assis28
tance, and information sharing among all

the partners involved in mandate implementation.

C. Efficiency Guidelines

4. Economic Analysis. Regulatory options

should be subjected to careful economic

analysis in order to ensure that direct and

indirect costs, as well as benefits, are fully

considered when selecting the most efftcient

alternative for compliance.

The net benefits of necessary federal

mandates should be optimized by employing

resources as efficiently as possible. To do so,

the Congress and federal agencies should consider the following:

D. Effectiveness Guidelines

To help ensure more effective mandate

implementation, the Congress and federal

agencies should consider the following:

1. Good Science. When appropriate, federal

mandates should be based on, or revised in

,

’

response to, the generally accepted findings

of well established, peer-reviewed science.

If scientific knowledge is inadequate, Congressional committees and executive agencies should support research to remedy

deficiencies before issuing permanent standards or requirements, unless emergency

circumstances clearly require immediate

action that is likely to be effective.

2. Risk Analysis/Prioritization. Committees

and agencies should make full use of risk

analysis to help evaluate various threats to

public health and safety as well as exposures to financial liabilities, and should

allow the affected state, local, and tribal

governments to schedule their most serious

problems for priority attention.

Cooperative Rulemaking. The Congress and

federal agencies should engage in early,

active, and full consultation with state,

local, and tribal governments, independent

technical and professional organizations,

and other appropriate entities that will be

involved in or responsible for mandate

implementation. One promising method is

to make greater use of negotiated rulemaking, which brings together implementing

agencies and affected parties to negotiate

the text of a proposed rule. This process

often generates more practical rules, greater

commitment and acceptance, a wider range

of technical options, and less subsequent litigation and delay. To facilitate state, local,

and tribal participation, the sites of negotiated rulemaking should not be limited to

Washington, DC.

2 .

3. Regulatory Alternatives. Once problems are

prioritized, federal officials should allow

affected state, local, and tribal officials to

consider a full range of regulatory alternatives and use the most cost-effective ones

available to address their compliance needs.

The Congress and federal agencies should

especially consider innovative and potentially more cost-effective options, such as

greater use of market incentives, tiered Stan- 3

dards for jurisdictions of different sizes, and

expanded use of properly designed performance standards (with quantifiable measures of outcomes) in place of rigid

technical requirements. The search for alternatives should be made in consultation with

affected state, local, and tribal governments.

Final Rule Compliance. Federal officials

should not require tribal compliance with

mandates prior to the issuance of final rules.

At least six months should be allowed after

the issuance of final rules for state, local,

and tribal governments to make the necessary changes in laws, budgets, and administrative processes. This period should be

lengthened, as necessary, to accommodate

state legislative calendars.

Performance-Based Compliance. The Congress and federal agencies should provide

maximum flexibility to state, local, and tribal partners by using performance-based

goals to allow for variations in the severity

of problems addressed by a mandate and the

wide differences in jurisdictional capabilities, and to allow innovation and experi29
mentation with alternative compliance 5. Publicize Performance. To the extent possistrategies. ble, make the results of performance mea4. Prioritization of Responsibilities. The Consurements publicly available by region,

gress and federal agencies should recognize

state, and/or local or tribal jurisdiction. The

and be responsive to the full range of state,

purposes of publicizing this information are

local, and tribal responsibilities so that the

to educate the public and hold government

accountable.

goals of each particular federal mandate can

be prioritized, and feasible standards and

procedures can be devised by committees

and agencies in consultation with state, ~

local, and tribal governments.

E. Guidelines for Balancing Competing

Values Variations in problems demand variations

in their solutions. The Congress and federal

To help balance the often competing val- agencies, therefore, should be alert to alternaues of fairness, equity, efficiency, and account- tives to command-and-control policies and

ability, the Congress and federal agencies micromanaged implementation. Confining fedshould: era1 policies to least necessary levels of federal

intrusion will require consideration and selec1. Minimize Uniformity. Restrict uniform tive, situation-sensitive use of available adminrequirements and standards to the minimum istrative and fiscal mechanisms during the

level necessary to ensure the protection of compliance Process.

basic individual and constitutional rights

and the achievement of mandate objectives. A. Statutory and Administrative

Mechanisms

2. Equity and Ability to Pay. Ensure that mandate responsibilities are fairly distributed in The choices of mechanisms to help faciliterms of region, jurisdiction, and ability to

pay. Consider the differences in ability of

state, local, and tribal governments, taxpayers, and various classes of citizens to pay for

federal mandates as well as differences

among jurisdictions in the gravity of problems intended to be solved by a mandate.

3. Plain Language. Write legislation and regulations in plain, nonlegalistic language that

can be readily understood by effected parties, and make regulations easily available

to the affected parties.

4. Measure Performance. Monitor the performance of rules and regulations on a systematic basis in cooperation with state, local,

and tribal governments in order to promote

public accountability, evaluate accomplishments, ensure effective implementation,

assess evolving needs and priorities, and

encourage continuous improvement.

tate efficient, effective, and economical state,

local, and tribal compliance with federal policies should be made by or in cooperation with

state, local, and tribal governments. The mechanisms that should be considered include, but

may not be limited to:

1. Preauthorized options for performancebased compliance rather than waivers

applied for after implementation.

2. Emphasis on preventing the conditions that

generate mandates as a primary strategy to

reduce needs for later or deeper federal

intervention.

3. Minimal use of interim rules and arbitrary

deadlines.

4. Sunsetting of interim guidance documents

developed without full intergovernmental

consultation to accelerate issuance of final

regulations based on full consultation.

30
5 .

6 .

7 .

8 .

9.

Cooperative implementation, including

demonstration and evaluation partnerships.

Flexibility to define, prioritize, and reach

mandated objectives through self-determined state, local, and tribal action.

Performance-based and market-based compliance strategies.

Opt-out provisions for state, local, and tribal

governments under specified conditions.

Streamlined compliance processes for state,

local, and tribal governments.

0. Information about good practices and efft- (

cient and effective technologies.

11. Negotiated rulemaking and administrative

dispute resolution.

12. Decisionmaking that accounts for the multifaceted and interrelated dimensions and

long-term implications of public policies.

3. Ongoing consultation and information

sharing, including personal contact, with

state, local, and tribal officials.

B. Fiscal Mechanisms

A variety of federal fiscal mechanisms is

available to help alleviate the costs of federal ~

policies, including:

1. Grants, loans, loan guarantees, and tax

expenditures to help fund compliance.

2. Targeted aid for state, local, and tribal governments to help equalize their fiscal capacities or cope with severe financial and/or

mandate compliance problems.

3. Payments for services and benefits provided

to the federal government by state, local,

and tribal governments.

4. Payment for administrative or enforcement

costs incurred by state, local, and tribal governments pursuant to federal mandates.

5. Low-cost loan programs begun with federal

start-up funds.

6. Hold-harmless rules.

7. Non-preemption of state, local, and tribal

authority to assess user fees to cover costs.

8. Tax and regulatory rules to make it easier

for state, local, and tribal governments to

issue bonds and use the proceeds,

9. Payments in lieu of taxes.

10. Payments from federal trust funds supported by dedicated taxes collected for the purpose of meeting federal mandates.

11, Sharing of fines and penalties collected by

the federal government.

12. In-kind provision of free training, data,

technical assistance, and equipment.

13. Public-private partnerships.

14. Requirements, where appropriate, for creators of problems to pay costs (e.g., the

“polluter pays” principle).

15. Adherence to a regulatory budget for state,

local, and tribal costs induced by federal

mandates and other actions.

H.R. 5128 (Sets. 502 and 503) would

require ACIR to (1) review existing unfunded

mandates and recommend ways to reduce their

burdens on state and local governments; and

(2) monitor and evaluate implementation of the

mandate relief legislation.

In performing these tasks, ACIR should

measure progress against the principles outlined in this statement and recommend

improvements where procedures fall short of

the principles. In turn, ACTR should adhere to

these principles by engaging in adequate and

3 1
timely consultation with federal, state, local,

and tribal officials on its monitoring activities,

reports, and recommendations.

A. Reviewing Existing Mandates

Under the Section 502 requirement to

review existing unfunded federal mandates,

ACIR would have to issue a preliminary report

within nine months of enactment of the bill and

a final report three months later. To accomplish

this large task, ACIR should:

1. Consult with the national associations of

state, local, and tribal governments to help

identify those unfunded mandates most in

need of reform and to agree on preliminary

criteria for making recommendations in

accordance with the principles of this statement.

2. Publish the preliminary criteria to solicit

broad public comment.

3. Review the Code of Federal Regulations

and the Federal Register to identify further

mandates and complexities among mandates.

4. Work with each state ACIR and with representatives of other states to identify federal

mandates most in need of reform attention

and to refine criteria for making recommendations from the perspective of each state

and its local governments, and with tribal

governments.

5. Convene regional groups of federal, state,

local, and tribal officials to develop preliminary reform recommendations and to refine

criteria for making recommendations from

the perspective of each region.

6. Convene a national working group to finalize the criteria for making recommendations

and to develop a preliminary report of recommendations.

7. Publish a notice of availability of the preliminary report in the Federal Register and

hold regional public hearings on the preliminary report as required by the proposed

statute.

8. Prepare a final report of recommendations

for consideration by members of the Commission and transmittal to the Congress and

the President.

These tasks are wide ranging, complex,

and time consuming. They cannot reasonably

be accomplished within one year of enactment

of the proposed legislation. The deadline for

completion of this task should be extended at

least to two years.

B. Monitoring the Implementation

of Mandate Relief Legislation

Given the limited funding available for

ACIR’s Section 503 responsibility to monitor

implementation of the mandate relief legislation and issue biennial reports, ACIR should

form both general and policy-specific advisory

groups of federal, state, local, and tribal officials to assist in monitoring and to give primary

attention to the following priorities:

1. Improvements arising from the mandate

relief statute, such as levels of post-relief

mandating, funding, flexibility, and other

matters pertinent to the principles and

processes outlined in this statement;

2. The efficacy of the procedural protections

afforded state, local, and tribal budgets

under the statute;

3. The aggregate cumulative costs and benefits

of federal mandates;

4. The relationships between estimated mandate costs and actual implementation costs;

and

5. Recommendations for further improvement.

32
BIBLIOGRAPHY

FEDERAL MANDATES TASK FORCE I

Advisory Commission on Intergovernmental Rela- Kelly, Janet M. “Anti-Mandates Strategies: Reimtions. Federul Regulation of State and Local Gov- bursement Requirements in the States.” Washingernments: The Mixed Record of the 1980s. ton, DC: National League of Cities, September

Washington, DC, 1993. 1994.

Federal Statutory Preemption of State

and Local Authority. Washington, DC, 1992.

Library of Congress. Congressional Research Service. Environmental Protection and the Unfunded

Mandates Debate. Washington, DC, September 22,

Federally Induced Costs Affecting State 1994.

and Local Governments. Washington, DC, 1994.

~ High Performance Public Works: A New

Federal Infrastructure Investment Strategy for

America. Washington, DC, 1993.

Congressional Budget Office. “Environmental Federalism: Allocating Responsibilities for Environmental Protection.” Working Paper. Washington,

DC, September 1988.

‘Contract with America,” Legislative Digest. September 27, 1994.

Executive Order 12612, “Federalism.” October 30,

1987.

National Council on Public Works Improvement.

Fragile Foundations: A Report on America’s Public

Works. Washington, DC, 1988.

Panetta, Leon. “Guidance for Implementing E.O.

12866.” Memorandum for Heads of Executive

Departments and Agencies, and Independent Regulatory Agencies. October 12, 1994.

. “Guidance on Implementing E.O. 12875,

Reduction of Unfunded Mandates.” Memorandum

for Heads of Executive Departments and Agencies,

and Independent Regulatory Agencies. January 11,

1994.

Executive Order 12866, “Regulatory Planning and

Review.” September 30, 1993

Pompili, Michael J. “Environmental Mandates: The

Impact on Local Government.” Columbus, Ohio:

Department of Health, 1993.

Executive Order 12875, “Enhancing the Intergovernmental Partnership.” October 26, 1993.

U. S. House of Representatives. Amendment to

H.R. 5128. Offered by Rep. Henry A. Waxman,

Groups United to Oppose “Unfunded Mandates”

Legislation. Letter to U.S. Senators dated April 15,

1994.

Hatch Constitutional Amendment on Unfunded

Mandates. November 1994.

October 4, 1994.

. H.R. 5 128: An Amendment in the Nature

of a Substitute, “Federal Mandate Accountability

and Reform Act of 1994.”

U.S. Senate. S. 993: “Federal Mandate Account-

“Job Creation and Wage Enhancement Act, Title ability and Reform Act of 1994.”

X.” September 23, 1994.

-. Committee on Governmental Affairs,

Katzen, Sally. “Guidance for Implementing E.O. “Summary of the Federal Mandate Accountability

12866.” Memorandum for Heads of Executive and Reform Act of 1994.”

Departments and Agencies, and Independent Regulatory Agencies. Washington, DC, Office of Man-

“Why We Need Mandates, and How We Should

agement and Budget, October 12, 1994.

Pay for Them,” The Bond Buyer, November 2,

1994.

“Guidance for Implementing E.O. 12875,

Section 1, Reduction of Unfunded Mandates.”

Memorandum for Heads of Executive Departments

and Agencies, and Independent Regulatory Agencies. Washington, DC, Office of Management and

Budget, January 11, 1994.

Wilson, Jerome. Letter to the Task Force dated

October 25. 1994.

Zimmerman, Joseph F. “State Mandate Relief: A

Quick Look,” Intergovernmental Perspective

(Spring 1994).

33
PARTICIPANTS

FEDERAL MANDATES TASK FORCE I

Tim Aiken

Office of U.S. Representative James P. Moran

Ron Allen

Chairman, Jamestown S’Klallam Tribe

Chris Barclay

Administrative Regulation Review

Commission

New York State Senate

Ab Basu

Council of State Governments

Jeremy Bates

Offrce of U.S. Senator Byron DorganEnid Beaumont

Executive Director

Academy for State and Local Government

William Binfonti

U.S. Department of Housing and Urban

Development

Ralph Bowers

City Manager

City of Jasper, FL

Jim Campbell

Executive Director

Virginia Association of Counties

Dan Chenok

U.S. Office of Management and Budget

Timothy Conlan

Professor of Government and Politics

George Mason University

Anthony Crowell

International City/County Management

Association

James Crowley

State and Local Legal Center

Scott DeFife

National Conference of State Legislatures

W.H. Fawcett

Legislative Director

Office of U.S. Senator Dirk Kempthorne

Paul Guthrie

State/Local Relations

U.S. Environmental Protection Agency

34

leffrey Hart

qew York State Senate

Washington, DC Office

Robert Hartman

Congressional Budget Office

Larry Jones

National Association of Counties

Steve Jones

Office of U.S. Representative Gary Condit

Stacey Jordan

U.S. Department of Housing and Urban

Development

Elizabeth Kellar

International City/County Management

Association

Charles Kent

Office of the Administrator

U.S. Environmental Protection Agency

Jack Koury

Administrative Regulation Review

Commission

New York State Senate

Mary Margaret Larmouth

National League of Cities

James L. Martin

National Governors Association

Jane Wallace McNeil

National Performance Review

Will Meyer

Senior Fiscal Analyst

Colorado Legislative Council

Michael Monteith

Assistant City Manager

City of Hampton, VA

Sebastian O’Kelly

Senate Committee on Governmental Affairs

Erik Olson

Natural Resources Defense Council

Peter Peyser

Peyser and Associates
Chip Phinney

Senate Committee on Labor and Human

Resources

Paul Posner

Director of Budget Issues

U.S. General Accounting Office

David Rebuck

National Association of Attorneys General

John Ross

Director, Division of Economic Development

and Public Finance

U.S. Department of Housing and Urban Development

Ken Rynne

U.S. Senate Democratic Policy Committee

Andrew Schneider

Office of U.S. Representative Henry Waxman

Kristine Simmons

House Committee on Government Operations

Gary Smith

Offtce of U.S. Senator Dirk Kempthorne

Frank Sturzl

Executive Director

Texas Municipal League

Robert Sunshine

Congressional Budget Office

Ralph Tabor

National Association of Counties

Barry Van Lare

National Governors Association

David Walker

Professor of Political Science

University of Connecticut

Jerome Wilson

Rogers and Wells

Joseph Zimmerman

Professor of Political Science

State University of New York at Albany

Consultants

ACIR Staff

John Behrens

William E. Davis III

Philip M. Dearborn

Charles Grifftths

Bruce D. McDowell

Laura Pennycuff

Sandra Pine1

Hidetoshi Terasaki

Frank Blechman

John Kincaid

Jasbinder Singh

3j
36
STATEMENT

FEDERAI;M+WDATESTASKFORCEII

FEDERAL RK~NDATEREAIEF

FORSTATE,LOCXL,AND TRIBAL GOYERN~WEWTS:

This purpose of this Task Force was to

explore the technical issues associated with

estimating the costs of federal mandates

imposed on state, local, and tribal governments, and to recommend practical and acceptable methods for making such estimates.

The Task Force findings are discussed in

detail in Section IV, and some of the key findings are summarized below. These findings

apply only to the estimation of state and local

government costs. The Task Force did not analyze the feasibility or methods of estimating

private sector costs.

Mandate cost estimating should begin

early in the legislative process and not be limited to a single estimate when legislation is

reported out of committee.

Diverse and flexible approaches will be

necessary, depending on the uses for which the

cost estimates are made. Uncertainties associated with estimates should be clearly identified. Estimates with detail below the total

national cost, while desirable, will not generally be feasible at this time.

The general standard for measurement

should be direct costs net of any quantifiable

savings to state and local governments. It is not

feasible to net out general benefits that are not

specific to individual governments.

At the time a bill is being considered by

Congress, it is impossible to develop cost estimates that are of sufftcient quality to provide

an accurate basis for authorizing or appropriating funds for reimbursement of mandate costs.

Cost estimates can be improved by increased

consultation with state, local, and tribal governments, federal agencies, and other interested

organizations, It is important that these consultations begin early in the process.

Better, more detailed, and more timely

estimates than those feasible at the legislative

stage are desired by state and local governments, Such improvements will require the

development of both better information systems and estimating models.

It will be difficult, if not impossible, to

calculate the actual costs of enacted federal

mandates separately from costs attributable to

state or local actions.

37
CONTENTS

I. Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...39

II. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...39

III. TheTaskForce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...39

Iv. Findings ....................................................

..4 0

l.CostEstimates................................................4 0

2. Defining Net Costs ...........................................

.40

3. Time Period Covered By Estimates ..............................

.40

4. Changes in Estimating Schedule and Process ....................... .41

5. Consultations with State and Local Governments ................... .42

6. Reimbursement-Quality Estimates ............................... .42

7. End Point Estimates .......................................... .42

8. Post-Legislative Cost Analyses .................................. .43

9. Future Improvements .........................................

.43

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...44

Participants: Federal Mandates Task Force II . . . . . . . . . . . . . . . . . . . . . . . . . . . .47

38
ESTIMATING THE COSTS OF FEDERAL MANDATES

The U.S. Office of Management and

Budget asked the Advisory Commission on

Intergovernmental Relations (ACIR) for guidance on a variety of mandate issues, including

ways to estimate the costs. ACIR convened

two Task Forces to address related mandate

issues. The conclusions of this report on the

issues associated with estimating the costs of

federal mandates are expected to provide practical and useful guidance to the President and

the Congress in the development and implementation of mandate relief legislation.

In recent years, discussions about

unfunded federal mandates have assumed that

it is possible to estimate with some degree of

accuracy the costs imposed on state, local, and

tribal governments. Mandate relief legislation

considered in 1994 (S. 993 and H.R. 5128) and

legislation proposed in the Republican “Contract with America” for enactment in 1995

include requirements for estimating costs and

benefits. Although only bills with costs

exceeding a threshold amount may be subject

to provisions of legislation, it will be necessary

to make a detailed review of many more proposed mandate bills in order to determine

whether their costs reach the threshold.

The Congressional Budget Office (CBO)

is required to estimate the costs for each bill

“reported by any committee of the House of

Representatives or the Senate (except by the

Committee on Appropriations of each House)”

that imposes costs on state and local governments totaling at least $200 million per year or

that is likely to have exceptional fiscal consequences for a geographic region or a particular

level of government. Over the most recent ten

years, CBO reports, an average of 13 bills per

year have exceeded the $200 million threshold

and an average of 74 bills per year have had

some costs for state and local governments.

Proposed mandate relief measures are

expected to apply to mandates with annual

state and local costs of $50 million or more,

although some proposals suggest the threshold

for relief may be less than $50 million. Therefore, enactment of this mandate relief legislation may substantially increase the number of

bills that require a formal estimate. Because of

the procedural requirements proposed for bills

exceeding the threshold, the accuracy of the

estimates will be much more important.

The Task Force reviewed previous estimates prepared by CBO to see how the process

could be improved, but it did not consider its

role to be to evaluate any particular estimate.

With the expectation that limited

resources will be available to make cost estimates, it is clear that new approaches must be

developed. Additional longer term efforts

should be undertaken to create a system that

will generate fast, reliable, and detailed estimates. Meanwhile, the Task Force has

addressed some of the most pressing issues

involved in cost estimating, and suggested

appropriate procedures that can be followed in

the short term.

ACIR’s goal was to bring together

knowledgeable people representing a variety of

interests. Information about estimating mandate costs was collected by ACIR and provided

to the Task Force. A description of each item

provided is included in this report.

Two Task Force meetings were held in

the Fall of 1994, attended by representatives of

the Congressional Budget Office (CBO), federal executive agencies, state and local governments, and environmental and other interested

organizations. The participants were asked to

confine their discussion to the technical issues

related to cost estimating.

39
The Task Force participants approached

the development of this report in a very positive and constructive way that recognized the

importance of the issues being discussed. No

votes were taken, but there appeared to be

agreement on most points. In the instances

where there was clear disagreement, the differences are noted in the report.

Principal attention was directed to the

feasibility of cost estimates during the legislative consideration of mandates, but some

observations about estimating post-legislative

costs also are included in the report. It is apparent that the quality and detail of cost estimates

should depend on their use.

Estimates used to measure the costs of

reimbursement by the federal government will

have different requirements than those for public policy discussions or comparisons of relative costs of alternative proposals. Similarly,

the costs and time required to prepare these

estimates will be significantly different

depending on their use. More resources will be

necessary to produce estimates for reimbursements. (See below, however, regarding the

Task Force’s conclusion that reimbursementquality estimates are not possible at this time).

No conclusions were reached by the Task

Force about estimating nongovernmental mandate costs, although some participants

expressed concern that using resources to make

such estimates could detract from the quality of

government cost estimates.

1. Cost Estimates

The costs of mandate legislation will

depend on the programmatic options and flexibility provided for implementation. No single

cost estimating model will be satisfactory to all

interests, and diverse approaches may be necessary. Cost estimates should assume the use of

all reasonable program options and should consider any flexibility allowed in implementation. The estimates should clearly identify

uncertainties and warn users about them. In

general, only direct costs should be estimated.

Indirect costs are difficult to estimate with

accuracy and consistency.

State and local officials would like cost

estimates to show differential effects on different types of communities, and on individual

governments. Such detailed estimates are not

provided by CBO. These estimates would be

costly and time consuming for CBO to prepare

because the necessary information is not readily available. Until improved information systems become available, detailed estimates will

not usually be feasible during the legislative

process.

2. Defining Net Costs

It is necessary to distinguish between

savings and benefits. Identified savings should

be subtracted from mandate cost estimates, but

it is not feasible to net out benefits. Savings are

defined as quantifiable amounts that state or

local government accounting could recognize

as attributable to the mandate, such as federal

grants, reduced staffing, lower material costs,

or similar amounts. Benefits relate to the general reason for the mandate and are less easily

quantified. Benefits are often the key subject of

political debate.

One participant disagreed and felt that it

is unfair to compare unquantified benefits

against quantified costs. If costs are to be measured, then benefits should be measured. Other

participants pointed out that costs are specific

to individual state or local governments, while

benefits may be general and not related to individual governments.

3. Time Period Covered by Estimates

The CBO estimates are based on a fiveyear time horizon due to their focus on the federal budget. Mandates may require

governments to spend for capital costs, operating costs, or a combination of both. When

extensive capital spending is required, the full

capital costs and subsequent operating costs, if

any, may not be reflected within a five-year

period. In other instances, there may be large

start-up costs, followed by reduced recurring

costs. Therefore, the cost horizon should be

flexible, but should be as long as necessary to
reflect the full cost implications of the mandate. Capital, start-up, and recurring operating

costs should be estimated separately. For purposes of making a single estimate to determine

whether a bill exceeds the threshold requirements, capita1 costs can be shown as annualized costs over a reasonable amortization

period, if they are likely to be financed through

bonds.

4. Changes in Estimating Schedule and

Process

It is assumed that the purpose of these

estimates will be to inform the Congress about

the cost implications of proposed legislation

throughout the legislative process, and not just

to trigger mandate control threshold laws, if

enacted. It also is important to provide a

process through which state and local governments and other interested parties can submit

information relative to cost estimates early in

the Congressional deliberations.

While the Task Force believes that as

much information as possible about costs is

desirable during legislative consideration, it

recognized that both time and resources available to CBO are limited. Thus, it is necessary

to provide different types of estimates at different stages of the legislative process. Legislation follows various routes to final passage and

types of estimates should not be tied to specific

legislative events. Instead, general legislative

stages at which cost estimates will occur were

suggested as follows:

n An early stage before any committee

action, or perhaps before a committee bill

has been drafted.

n A middle stage when specific legislation

has been developed and begins to move,

usually at the subcommittee markup

point.

n A late stage, after full committee markup

and extending until the bill is passed.

Cost estimates at each of these stages

would build on information developed in a

prior stage, and the reliability of the estimates

would improve as it became more likely that

the bill would be considered on the floor and

adopted. The estimates at each stage would be

characterized as follows:

Early Stage: Any mandate cost estimates

at this stage will result from consultations

by CBO with committee chairs, federal

agencies, and state and local officials and

associations representing them about

which mandate legislation is likely to be

seriously considered. The contemplated

legislation would be identified at this

stage as likely to have costs for state and

local governments. These costs might be

identified as expected to be minor or

major, but should generally not be

expressed as a quantified estimate. For

those bills with costs expected to be

major, CBO should ask knowledgeable

parties, including federal agencies and

state and local governments, to submit

information.

MiddIe Stage: Cost estimates at this stage

should still be considered preliminary. In

preparing estimates, information submitted by state and local governments, federal agencies, and other sources should be

considered by CBO. However, any gaps

in available information and sources of

uncertainty should be identified. There

should be flexibility in the analysis and

presentation of resulting estimates. Estimates will generally consist of a range at

this stage.

Some Task Force participants felt that

only point estimates consisting of one specific

amount should be made at this stage and

throughout the process. Proponents of point

estimates argued that by providing ranges,

opponents and proponents of the legislation

would use the extremes of the range to support

their positions. Supporters of ranges believe

that there are too many uncertainties in the estimates to permit their reduction to a single number.

w Late Stage: A single estimate of gross

national costs of mandate legislation

under consideration should be made at

this stage. The Congress will demand a

4 1
point estimate prior to final passage of

legislation. Users of the estimate should

be cautioned that it contains uncertainties, a description of which should

accompany the estimate. In most cases,

CBO should have developed sufficient

information by this stage to enable it to

adjust estimates fairly quickly to amendments. In some cases, it may be possible

to provide more detailed estimates based

on type or size of government, or on geographic or other divisions. In most

instances, however, such estimates cannot be made with sufficient reliability to

be useful.

5. Consultations with State and Local

Governments

State and local government officials

believe that they can make a positive contribution to CBO’s cost estimating procedures. It

would be desirable for CBO to consult state

and local governments in a more extensive and

systematized way, which should improve the

accuracy of the estimates but will not immediately increase the level of estimate detail.

Participants discussed whether state and

local officials should be asked to provide only

factual data, or should do cost analyses. There

was no general agreement, but most participants felt it is impractical to do more than collect basic anecdotal information for use by

CBO in its analyses, but that additional study

should be given to ways to improve the

process.

3. Because the actual costs to be reimbursed

will be determined by the actions of individual governments employing sometimes

alternative methods of compliance, only a

careful sampling of affected governments

can provide reliable costs. Such a sampling

is not feasible given the time and resource

constraints at the legislative stage.

Some states have had success in implementing electronic data systems to provide ,

information and analysis for estimating the

costs of state mandates. State and local officials could similarly be expected to participate

in a national system for gathering cost information, provided they were assured the results

would be used by the Congress. However,

those supplying the information would have to

be trained and use clearly defined methods,

forms, questions, and assumptions.

, . End Point Estimates

stantial commitment of time and resources

because:

n A very large number of local governments may be affected by mandates; and

n Many local governments, especially

smaller ones, are not aware of the details

about mandate legislation being considered.

6. Reimbursement-Quality Estimates

During legislative consideration of a

mandate, it will be impossible to develop cost

estimates that are of sufficient quality to provide an accurate basis for authorizing or appropriating funds for the partial or total

reimbursement of the mandated costs. This

conclusion was reached for the following reasons:

1. The final form of legislation cannot usually

be predicted because it is subject to amendments until final votes are taken.

2. Even if the form can be assured prior to final

passage, there will be uncertainty about the

way the regulations will implement the law.

Such systems might be feasible at the

national level, but it would require several

years to develop them and would require a subIf reimbursement-quality estimates could

not be made prior to final legislative approval,

the Congress would face a practical problem of

determining the amounts to authorize and

appropriate for full or partial federal reimbursement. Using an “end point” estimate, the

final adopted legislation would incorporate a

cost estimate as a maximum cost target to be

used during implementation. If the implementation cost estimates could not be brought within the legislative ceiling, then the Congress

42
would have to be notified and given an opportunity to amend the legislation.

The implementing agency would be

required to design its regulations so that the

expected actual costs incurred by state and

local governments would not exceed the maximum amounts estimated in the legislation.

Concerns were expressed about the ability of

the implementing agency to design regulations

so that actual costs would not exceed the legislative estimates.

The Task Force did not agree on the feasibility of using end point estimates, nor did it

endorse the concept. Nevertheless, there was

agreement that the idea should receive further

study.

8. Post-Legislative Cost Analyses

In addition to potential costs of new legislation, there are concerns about the costs of

mandates that are in effect. Therefore, the feasibility of calculating the actual costs of enacted mandates was considered. Knowledge of the

actual costs could enable federal agencies and

the Congress to assess the direct and indirect

capital and operating cost effects on state and

local government finances. By establishing

such baseline information, the effects of

changes in federal laws on those costs could

then be evaluated.

Such calculations would be expensive

and time consuming, even if done only periodically. There also would be a problem in separating the effects from state, local, and tribal

local actions and those from federal actions.

While it would be possible to calculate the

effects of all regulations on costs, it would be

difftcult or impossible to attribute costs specifically to state, local, tribal, or federal government actions.

Any calculations of actual costs of implemented mandates should not be compared to

earlier cost estimates prepared during the legislative process. The time elapsed between legislative estimates and actual cost calculations

would make such comparisons meaningless.

9. Future Improvements

Better, more detailed, and more timely

estimates should be possible in the future with

additional study. Several suggestions were

made:

1. Assess the feasibility and cost of developing

a Census Bureau on-line electronic data system that CBO could access for data about

state and local government characteristics;

2. Study the feasibility of constructing estimating models in areas of frequent mandate

activity, such as the environment; and

3. Consider information systems, using electronic responses from state and local govemments or their organizations.

43
BIBLIOGRAPHY

FEDERAL MANDATES TASK FORCE II

There has been a variety of reports, testimony, and analyses related to the issues of costing federal mandates. A sampling of these documents was

assembled to provide all of the Task Force participants with a common beginning point for discussing

these issues.

Adler, Robert W. Testimony for the Natural

Resources Defense Council, before the U.S. Senate,

Committee on Governmental Affairs. April 28,

1994.

The Natural Resources Defense Council

opposed the proposed legislation to regulate the use

of federal mandates. Instead, the Council concluded

that “before this issue can be addressed wisely we

need a more serious evaluation of the federal-statelocal partnership, based on more objective and carefully analyzed information.” In regard to estimating

mandate costs, Mr. Adler concluded:

It may be extremely difftcult for any state or

city to identify what it would have spent on a

given program absent a federal requirement.

Moreover, because absent minimum federal

requirements different states or cities usually

address issues in far different ways, the bills

could cause perverse results. Under some scenarios, only states and cities with the best programs would be covered by federal law, while

the worst cities and states would be exempt.

Or, in order to include the worst states or

cities in a program, Congress would unfairly

have to provide them with higher increments

of funding than states and cities that have

raised taxes or other revenues to comply.

Advisory Commission on Intergovernmental Relations. Estimating the Financiul Effects of Federal

Mandates on Stute and Local Governments. Working Paper. Washington, DC, March 23, 1994.

This report reviews mandate cost estimation

in three national studies (U.S. Conference of Mayors, National Association of Counties, and U.S.

EPA), three state studies (Ohio, Tennessee, and Virginia), and four city reports (Columbus, Ohio;

Chicago, Illinois; Lewiston, Maine; and Anchorage,

Alaska). The studies raised questions about methodology and interpretation of results, including issues

relevant to the Task Force, such as:

When both state and federal laws or regulations

require similar actions, which government

should be considered responsible for the unfunded local mandate?

Should local costs passed through to users in the

form of fees and charges be differentiated from

costs payable from general taxes?

Should mandate costs incorporated in budget

bases or rate schedules be differentiated from

future costs that will add to spending or rates?

Should the effects of mandates be shown as a

percentage of budgets, own-source revenues,

costs per household, or on some other basis to

make them more meaningful?

How should future mandate costs that are known

but unscheduled and unfinanced be shown to

illustrate effects on annual budgets?

Congressional Budget Office. “Cost Estimate for

H.R. 2, the National Voter Registration Act of

1993,” as ordered by the Committee on House

Administration. Washington, DC, January 27, 1993.

This estimate compares the cost to states of

complying with the bill’s provisions to the cost of

practices under existing law. This report describes

problems in collecting information about registration practices in 18,000 election jurisdictions and in

making assumptions about how implementation of

the law would affect state and local costs.

Congressional Budget Office. Preliminary Analysis

of Unfunded Federal Mandates and the Cost of the

Safe Drinking Water Act. Washington, DC, 1994.

This report highlights some important

methodological issues in measuring the costs of the

Safe Drinking Water Act. The important conclusions

of the report are summarized as follows:

Mandates generally involve worthwhile goals

that most communities share. As a result,

communities would probably incur some

costs to achieve those goals without mandates. Once mandates are in place, however,

those costs are difficult to estimate, , . ,

A second measurement issue is how to properly account for federal funds. Calculating the

unfunded cost of a federal mandate obviously

requires deducting any federal funds that are

provided from the cost of complying with the

regulation. . In addition to federal funds

that are directly linked to a particular mandate, the federal government provides other

general subsidies. . . .

A third measurement issue is the appropriate

treatment of capital expenses.

44
Measuring the costs of federal legislation and

mandates is difftcult, even after the laws and

regulations have taken effect. Measuring

costs is even more difficult when mandates

are in the form of a legislative proposal. . . . In

addition to uncertainty about the final form

that the mandate will take, measurements of

costs are hindered by the fact that none of the

sources of information discussed above are

typically available: engineering analyses are

usually developed only as the specific regulations are formed, and little, if any, information 1

on the costs that municipalities would actually experience for compliance is available

from census data or case studies.

“Job Creation and Wage Enhancement Act, Title X,

Federal Mandate Accountability and Reform.” September 23, 1994.

This act is one of the ten proposed in the

Republican “Contract with America.” Title X contains a variety of references to mandate costs.

Library of Congress. Congressional Research Service. Environmental Protection and the Unfunded

Mandates Debate. Washington, DC, September 22,

1994.

Chapter 3 of this report reviews the costs of

unfunded environmental mandates in the cost estimation studies of the National Association of Counties, U.S. Conference of Mayors, and the

Environmental Working Group, as well as EPA data

and other specialized cost data. CRS found that:

There is substantial variation of methods and

results among the studies, which make verification and comparisons of estimates difficult.

The debate and reviewed cost studies do not

distinguish between costs paid generally by

Federal, State, and local taxpayers and the

costs specifically paid by users or consumers,

Data collection was irregular across the

board, due to lack of time or resources to collect and report information accurately or completely, particularly concerning the needs of

small communities.

The more localities that are affected by a regulation. the more difficult it may be to depict

costs on a national scale accurately.

Many of the estimates reviewed do not really

distinguish between federally induced State

and local costs, or demonstrate what requirements are unfunded and how much so.

Policy Planning and Evaluation. Municipal Sector

Study, Impacts of Environmental Regulations on

Municipalities. Prepared for the U.S. Environmental Protection Agency. Washington, DC, September

1988.

This report attempted to estimate for local

governments the costs of the cumulative effects of

all EPA requirements. It discusses some of the problems of trying to estimate costs of regulations that

have not been issued, and the difficulties caused by

the diversity in size, organizational arrangements,

and physical characteristics of local governments.

Policy Planning and Evaluation. Municipaf Sector

Study, Impacts of Environmental Regulations on

New Jersey’s Municipalities. Prepared for the New

Jersey Department of Environmental Protection.

Washington, DC, April 1990.

The State of New Jersey commissioned this

study to quantify the cumulative cost of all environmental regulations for the state and for cities and

towns. The study addressed two broad questions:

(1) What are the impacts of the regulations on

household payments (whether paid through taxes or

user fees) in different sizes of communities? and

“Can environmental services continue to be

financed in the same way as they are now?”

Reischauer, Robert D. Testimony for the Congressional Budget Offtce, before the U.S. Senate, Committee on Governmental Affairs. April 28, 1994.

Dr. Reischauer testified on the problems of

estimating mandate costs. He concluded with the

following points, which generally parallel the key

issues facing the Task Force.

In the situations in which it matters the most,

the aggregate cost to states and localities of a

particular federal mandate-whether existing

or prospective-is frequently very hard to

determine with great specificity. Costs may

vary greatly from locality to locality. They

often depend on future decisions of federal,

state, or local government agencies, which are

difficult to predict. The estimates also depend

largely on information from state and local

officials, who usually have a strong interest in

having the costs appear as high as possible.

And even for existing costs, there is often no

clear and consistent basis for identifying how

much of a locality’s spending is the result of a

specific federal mandate rather than a cost

that it would have incurred in any event.

U.S. General Accounting Office. Legislative Mundates, State Experiences Off& Insights for Federal

Action. Washington, DC, September 1988.

35
In Chapter 2 of this report, GAO reviews federal and state cost estimation processes and discusses problems encountered in making such estimates.

The constraints listed include (1) limited time, (2)

inability to use standardized cost estimation

approaches because of the diversity of program

areas covered, and (3) the lack of meaningful data

sources on which to draw for state and local estimates.

U.S. Senate. Committee on Environment and Public

Works. “Analysis of the Unfunded Mandates Surveys Conducted by the U.S. Conference of Mayors

and the National Association of Counties.” Staff

Report. June 14, 1994.

The staff reported numerous flaws in the survey results used to support the cost estimates of the

cities and counties. They concluded that “it is essential that any estimate of the costs of federal programs be accurate and verifiable. Congress must not

act on the basis of unreliable information.” Among

the staff’s findings were the following:

The survey results and cost data provided by

the cities and counties cannot be verified by

supporting documents.

The survey did not assess the cost of unfunded mandates, but reported the total costs of

federal programs without offsetting grant dollars and other federal and state sources of

state and local revenues.

The method of extrapolating survey results to

the entire nation does not adjust for significant confounding factors, such as the differences in the amount of pollution in different

regions of the country.

The cost estimates contained in the survey

include substantial amounts of dollars that

would have been expended even in the

absence of federal programs.

The survey listed unfunded mandates for

cities and counties that had incurred no

expenses for the activity reported.

U.S. Senate. Committee on Governmental Affairs.

“Summary of the Federal Mandate Accountability

Act of 1994.”

Senate Bill 993 was reported out of committee and appeared to have enough votes for passage,

but it was not considered on the floor. It contained

language defining mandates and direct costs that

was apparently agreed to by state and local representatives, and directs the Congressional Budget

Office to prepare cost estimates beyond those currently done. The important definition for Task Force

purposes is as follows:

Subsection (4) defines direct costs to mean

aggregate estimated amounts that State, local,

and tribal governments and the private sector

will have to spend in order to comply with a

Federal mandate. Direct costs of Federal mandates are net costs; estimated savings will be

subtracted from total costs, Further, direct

costs do not include costs that State, local,

and tribal governments and the private sector

currently incur or will incur to implement the

requirements of existing Federal law or regulation. In addition, the direct costs of a Federal mandate must not include costs being borne

by State, local, or tribal governments and the

private sector as the result of carrying out a

State or local government mandate. . . .

U.S. Senate. Committee on the Judiciary. “Memorandum on Constitutional Amendment on Unfunded

Mandates.” Prepared by Edward Whelan, November 1994.

This memorandum discusses a resolution to

be offered by Sen. Orrin Hatch on an unfunded

mandates constitutional amendment. The memorandum discusses potential arguments against the

amendment and responses to those arguments.

36
PARTICIPANTS

FEDERAL MANDATES TASK FORCE II

Robert Adler

College of Law

University of Utah

Jennifer Bing

Apogee Research

Greg Brown

National Association of State Budget Officers

James Dinneen

Solid Waste Management Department

Montgomery County, OH

Fran Dubrowski

Natural Resources Defense Council

Meg Duncan

U.S. Senate Budget Committee

Mary Kay Falconer

Florida ACIR

Jerry Fastrup

U.S. General Accounting Offrce

Terri Gullo

Congressional Budget Office

Vera Hannigan

U.S. Environmental Protection Agency

John Hazen

New Jersey Department of Environmental

Protection

Tamar Henkin

Apogee Research

Marcia Howard

American Federation of State, County and

Municipal Employees

Stacey Jordan

U.S. Department of Housing and Urban

Development

Jerry Keffer

Governments Division

U.S. Bureau of the Census

Janet Kelly

Clemson University

Charles Kent

Office of the Administrator

U.S. Environmental Protection Agency

Virginia Kibler

Office of Water

U.S. Environmental Protection Agency

Mark Kilgallon

Cook County, IL

Mary Margaret Larmouth

National League of Cities

Iris Lav

Center on Budget & Policy Priorities

Randall Lutter

U.S. Office of Management and Budget

Robert Maynard

Vorys, Sater, Seymour & Pease

Christopher McKenzie

Executive Director

League of Kansas Municipalities

Jane Wallace McNeil

National Performance Review

C.G. Nuckols

Congressional Budget Office

Sebastian O’Kelly

Senate Committee on Government Affairs

Carey Pilato

Office of U.S. Representative Bill Goodling

Marvin Phaup

Congressional Budget Office

Albert Pritchett

Chief Administrative Officer

Cook County, IL

John Ross

Director, Division of Economic Development

& Public Finance

U.S. Department of Housing and Urban

Development

Ken Rynne

U.S. Senate Democratic Policy Committee

47
Kristine Simmons

House Committee on Government Operations

Rafael Stein

OfTice of Water

U.S. Environmental Protection Agency

Robert Sunshine

Congressional Budget Office

Ralph Tabor

National Association of Counties

Eric Tucker

Finance Director

City of Detroit, Ml

Roberta Wilson

Department of Water

City of Denver, CO

Consultants

Frank Blechman

Jasbinder Singh

ACIR Staff

John Behrens

Philip M. Dearborn

Jill Gibbons

Bruce D. McDowell

Laura Pennycuff

Sandra Pine1

Hidetoshi Terasaki

48