AN INFORMATION REPORT

Federally Induced Costs

Affecting State

and Local Governments

U.S. Advisory Commission on

Intergovernmental Relations
U.S. Advisory Commission on

Intergovernmental Relations

800 K Street, NW

South Building

Suite 450

Washington, DC 20575

(202) 653-5640

FAX (202) 653-5429

ii U.S. Advisory Commission on Intergovernmental Relations
Executive Summary

In this report -Feder&y Induced C&s meeting St&e

and Local Governments-ACIR develops a new concept of

federally induced costs. The purpose of this concept is to

explore more completely the fiscal dimensions of federal

actions affecting state and local governments without the

pejorative connotations associated with the term “mandates.” Also explored are the ways in which the federal

government assists state and local governments, which

can be thought of as an offset to induced costs. This information can assist in considering the question of balance

between costs and aid.

The report (1) describes the issue, how it evolved over

recent years, and current congressional action; (2) examines the intergovernmental tensions associated with

federally induced costs; (3) examines the types of federal action that may increase state and local government costs; and

(4) examines nine ways in which the federal government assists state and local governments in getting the resources

they need to respond effectively to federal initiatives.

Federal mandates to state and local governments are

a built-in feature of American federalism. For decades,

the federal government’s use of mandates was relatively

limited. In recent years, however, the federal government’s use of mandates has grown rapidly. As the number

of mandates has grown, so have the costs to state and local

governments. In 1993, the term “unfunded federal mandates” became the rallying cry for one of the most contentious intergovernmental issues in recent times. This

commonly used term, however, has different meanings to

different participants in the debate. This report seeks to

help clarify the debate.

The Congress and the executive branch have begun to

focus greater attention on the problems associated with

federal mandates and possible strategies for relief. By

1994, 34 mandate relief bills had been introduced in the

Congress and the President had signed Executive Order

12875 prohibiting federal agencies from creating unfunded mandates not required by law.

Establishing and operating a workable reimbursement process will be difficult. State experience with mandate reimbursement programs for local governments

suggests that federal policymakers will need to address a

series of complex issues before reimbursement programs

can be effective. One of the principal objectives of this report is to develop a viable framework for investigating

such issues. Among the issues are the following:

1) There is no universally accepted definition of a

federal mandate and surprisingly little consensus

on the matter.

2 ) Some of the most costly federal financial impacts

on states and localities do not fit the standard definition of a federal mandate closely, if at all.

It is clear that many federal policy instruments can impose financial impacts on state and local governments.

They may include: traditional direct mandates; various

forms of grant-in-aid conditions; federal preemptions; tax

policy provisions; incidental and implied federal policy impacts; and federal exposure of state and local governments

to legal and financial liabilities.

From the federal government’s perspective, requiring

state and local governments to undertake activities, provide benefits, or enact laws can appear to be an effective

and efficient way to achieve desirable federal policy objectives. Few state and local governments disagree with those

objectives, but many question the implementation methods, financing, effectiveness, and implications for federalism. These concerns include, among others:

1) Excessive costs due to complex and rigidly specified implementation mechanisms, often not

based on sound, peer-reviewed scientific studies;

U.S. Advisory Commission on Intergovernmental Relations iii
Inadequate consideration of the costs imposed 

and the benefits to state and local jurisdictionsby 

growing numbers of judicial decisions, statutes, 

and regulations; 

Distortion of state and local government budgets 

and policy priorities; 

Erosion of state and local initiative and innovation; 

Inefficiencies due to the application of single, 

uniform (one size fits all) solutions to geographically diverse problems; 

Inadequate consideration of the varying state and 

local financial and personnel resources; 

Attenuated accountability to citizens, due to the 

separation of responsibilities for policy direction 

and public finance; and 

Existence of a double standard, whereby the federal government exempts itself from compliance, 

or complies only partially, with the regulations it 

imposes on state and local governments. 

Many hard-to-grasp details are crucial to finding 

workable solutions to the mandate relief issue. Some of 

the questions fall into the following categories: 

1) What is a “mandate” and who is responsible for 

funding it? 

2) How should reimbursement amounts be calculated? 

3) Who should determine the amounts to be reim- bursed? 

4) Should the Congress take further action to help 

provide mandate relief in the executive rulemaking process? 

The Clinton Administration has taken steps to: 

1) Involve state, local, and tribal governments more 

deeply in the administrative rulemaking process; 

2) Avoid imposing new mandates not required by 

law; and 

3) Review regulations to ensure that they are need- ed and are no more burdensome than necessary. 

Potential solutions to three broad problems include: 

1) Informing the process. Three types of improved 

information have been suggested: (1) better cost 

estimates for proposed federal actions (including 

netting out related benefits), (2) cost-benefit accounting standards, and (3) an inventory of federally induced costs updated annually to track net 

aggregate impacts. 

2) Disciplining the system. There are several ways 

to introduce greater discipline into the legislative 

and rulemaking processes to limit or reverse unfunded federal requirements: (1) process improvements, (2) criteria for federal funding, (3) 

caps, (4) realignment of the federal system, and 

(5) moratoria. 

3) Funding federally induced costs. Beyond appro- priation of funds for grants or loans, there likely 

will be interest in: (1) shared revenues; (2) payments in lieu of taxes; (3) user fees; (4) mixed public and private funds; (5) in-kind contributions; (6) 

tax expenditures; (7) stretched-out schedules for 

compliance; and (8) waivers from the strict letter 

of requirements for hardship cases. 

iv U.S. Advisory Commission on Intergovernmental Relations 
Highlights 

1. Many types of actions by the federal government 

create costs that are being paid by state and local governments using their own funds. 

Some federal actions-such as enactment of new 

matching grant programs and increases in matching ratios, 

program scope, and other conditions of federal aid-are 

designed intentionally to stimulate increased state and local spending. Others increase state and local costs unintentionally. In addition to matching grants and grant 

conditions, the principal types of federal actions that induce state and local costs include: 

Direct orders that mandate state and local governments to perform an activity for which there is 

little or no federal funding; 

Federal regulations that allow state or local government enforcement if the state or local standards are 

equal to or higher than the federal standard; 

Prohibitions of state or local actions that could 

save state and local costs; 

Tax policies that make it more difficult or expensive for state and local governments to raise 

revenues, borrow funds, fund public-private partnerships, and privatize public functions; 

Court decisions or administrative regulations 

that impose an implied constitutional or statutory 

obligation for state and local governments to do 

or not to do something; 

Regulatory delays and nonenforcement; and 

Laws that expose state and local governments to 

liability lawsuits. 

2. The amount of federally induced costs paid by state 

and local governments are perceived to be substantial 

and growing. 

Among the largest and most rapidly growing of these 

costs perceived by state and local governments are those 

for compliance with health care and environmental regulations, the Americans with Disabilities Act, the Fair Labor 

Standards Act, and services to undocumented aliens. As 

the federal government endeavors to reduce its budget 

deficit, many state and local governments fear that there 

maybe strong temptations to reduce even further the federal financial contribution to meeting such goals. 

3. In some cases, federally induced costs are higher than 

necessary because of inflexible federal requirements. 

For example, rules requiring bilingual education rigidly emphasized instruction in a student’s native language, 

despite obstacles to implementing transitional bilingual 

education in many jurisdictions and an absence of scientific evidence to justify reliance on a single approach. 

Similarly, federal water pollution regulations require 

the use of “best available control technology,” even when 

the benefits of such costly technology may vary greatly 

from one locality to the next. In addition, localities are required by the Safe Drinking Water Act to invest in costly 

testing for a variety of pollutants, including those unlikely 

to appear in a particular local water supply. 

4. Federally induced costs are displacing state and local 

priorities for the use of their own funds. 

The prime example in state budgets has been the rapid increase of Medicaid costs, which has been spurred by a 

combination of federally mandated program expansions 

and rising health care costs. Much of this increased Medicaid spending has come at the expense of higher education. 

In local budgets, displaced expenditures have been reported to include personnel (such as police, fire fighters, 

and teachers), public works projects, and services (such as 

cutting library hours and closing library branches). These 

displacements make it difficult for state and local elected officials to deliver on their campaign pledges, thereby damaging their political accountability in the federal system. 

U.S. Advisory Commission on intergovernmental Relations v 
5. Many estimates of federally induced costs are neither 

reliable nor particularly helpful in the process of enacting legislation or making administrative rules. 

The reasons that estimates of federally induced costs 

are deficient include the following: 

They are prepared quickly without the use of generally accepted methods that can be audited. 

They do not reflect secondary effects (such as 

federal displacement of state and local priorities). 

They are not recalculated to reflect changes 

made in the bill or the proposed rule. 

They are made too late in the process to help 

identify and authorize less costly means of achieving federal objectives. 

They are seldom considered by the Congress in 

relation to the benefits they create (to assist in 

calculating the net effect). 

They rarely show how federally induced costs affect 

different types of state and local governments. 

In addition, many federally induced costs are not estimated at all because they are considered to be nonquantifiable or too difficult to estimate. 

Especially in the legislative process, cost estimates often are not available to the committee members and staff 

when they are developing proposals, considering alternatives, and crafting the final policy. The cost estimates that 

are made often come after the political and policy decisions have been made. 

Estimates of compliance costs for meeting environmental protection requirements, now being made by local 

governments, show that the same requirement frequently 

has dramatically different cost implications for different 

localities. Given the differences in fiscal capacity, fiscal effort, and expenditure demands from place to place, these 

differences in federal cost impacts may range from easily 

manageable to impossible in individual local budgets. The 

same may be true of the states, although they generally 

have greater leeway in arranging their finances. 

6. No reliable estimate of the total current magnitude of 

federally induced costs is available. 

Most estimates are for single programs or regulations, 

made at the time they are proposed. Seldom is any attempt 

made to prepare current estimates for large groups of programs. The main exception is certain groups of environmental protection programs. 

The time periods of existing estimates differ, so they 

cannot be added together to measure the cumulative ef- fect of federally induced costs. Some are annualized; others are for an arbitrary number of years; still others project 

the full costs of compliance regardless of timing. 

Some current estimates of federally induced costs 

have begun to emerge from local governments, and to be 

aggregated by the U.S. Conference of Mayors and the National Association of Counties. No federal agency has 

been given responsibility for maintaining a running total 

of the aggregate annual amount of federally induced costs 

that must be paid. 

7. Precedents for reimbursing federally induced costs, 

at least in part, and mechanisms for doing so are well 

established in the federal government. 

In earlier decades, the federal government generally 

shared the costs of its new intergovernmental initiatives 

with state and local governments-through grants and 

other means. In recent years, however, the federal government has moved away from cost-sharing. Federal reimbursements have been made in the form of: 

Payments for services and benefits provided by 

state and local governments; 

Payment for administrative or enforcement costs 

incurred by state and local governments on behalf 

of the federal government; 

Authorization for state and local governments to 

assess user fees to cover costs of a federally required program; 

Payments in lieu of state and local taxes; 

Grants, loans, loan guarantees, and tax expenditures to assist in funding joint programmatic objectives; 

Payments from federal trust funds supported by 

dedicated taxes that are collected for the purpose 

of meeting federally induced costs; 

Sharing of fines and penalties collected by the 

federal government; and 

“In-kind” provision of free training, data, technical assistance, and equipment. 

There are no agreed-on criteria for deciding which intergovernmental initiatives should be reimbursed, 

the extent of reimbursement, and how reimbursement should be made. 

Federal programs and regulations typically are devcloped in isolation. Whether a program includes federal 

funding, and how much, frequently depends on when it 

was enacted, how tight its appropriationbill is, and how effective its lobbyists are. 

9. Potential mechanisms for relieving federally induced 

costs include: 

1) A more effective fiscal notes process; 

2) Firm criteria for determining federal responsibil- ity for reimbursing induced costs; 

rn 

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rn 

rn 

rn 

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8. 

vi U.S. Advisory Commission on Intergovernmental Relations 
3) A regulatory budget process that would cap the to- tal annual costs imposed and their rate of growth; 

4) A federal review commission with authority to 

study and recommend, for an up or down 

vote, a complete package of reforms designed 

to rebalance federal, state, and local responsibilities and resources; 

5) A moratorium on new unfunded mandates; and 

6) A clear roll-call vote to authorize congressional 

consideration of any new “unfunded mandate.” 

Each of these mechanisms has been introduced for 

consideration in the Congress, along with proposals to 

legislatively strengthen the agency rulemaking process 

along similar lines. 

U.S. Advisory Commission on Intergovernmental Relations vii 
viii U.S. Advisory Commission on Intergovernmental Relations 
Preface 

The issue of unfunded federal mandates is at the top of 

the intergovernmental agenda today. It has coalesced the 

national associations of state and local governments llke no 

othcr issue in recent times, and it has caught the serious attention of the Congress and the Administration. For the 

Commission, this topic, which hasbeen under study for many 

years, also has become a top priority this year. 

According to the National Conference of State Legislatures, 34 mandate-relief bills have been introduced in the 

103rd Congress. Hearings have been held in both Houses, 

and compromise bills are working their way through the legislative process. Outstanding leadership has come from the 

Senate Governmental Affairs Committee and othersincluding many of this Commission’s members. 

Nevertheless, unfunded federal mandates remain a 

controversial issue. State and local governments, facing 

taxpayer revolts, believe they need additional federal 

funding to implement the growing number of federal 

mandates. The federal government believes that it can 

find no new money for these purposes under the hardbudget caps agreed to by the President and the Congress to 

reduce the deficit. Interest groups supporting individual 

mandates fear that progress toward improving America’s 

civil rights, environmental, health, safety, and other vital 

conditions may be lost on the shoals of fiscal deficiency. 

Lobbying is fierce, and compromise is difficult. 

The Commission authorized publication of this report 

to assist all the parties in this debate in their attempts to 

find a workable solution. There are no recommendations 

in this report because of the diverse views represented 

within the Commission. The Commission agreed, however, about the importance of this issue and the need to provide additional objective information. 

Inevitably, the mandates issue leads to discussion of the 

relative constitutional roles of the federal, state, and local 

governments, as well as the practical means by which all of 

these governments can work together. For the most part, 

federal mandates cannot be effective apart from an effective 

intergovernmental partnership. Yet, the process by which 

federal mandates are created sets a tone of “them against 

us’’ that weakens the intergovernmental partnership. We 

will continue to work on mandate-related issues in the spirit 

of finding ways to strengthen intergovernmental cooperation 

and reduce intergovernmental tensions. 

This report stops short of solutions. It does not speak 

much about sorting out federal, state, and local roles. It 

does not deal with the related issue of state mandates. 

These subjects have been treated in other ACIR reports 

that include policy recommendations of potential interest 

to the readers of this report. 

The Commission has not taken positions on the mandate-relief bills now before the Congress. It should be 

noted, however, that the compromise bill taking shape in 

the Congress appears to address many of the issues identified in ACIR research as needing attention, and appears 

to be gathering the support of most of the intergovernmental partners. I am pleased that this progress is occurring now. It is urgently needed. 

The Commission authorized the publication of this 

report at its meeting on June 17, 1994. 

William F. Winter 

Chairman 

U.S. Advisory Commission on Intergovernmental Relations ix 
x U.S. Advisory Commission on Intergovernmental Relations 
Acknowledgments 

The final report was prepared by Timothy J. Conlan of 

George Mason University, under the direction of Bruce 

D. McDowell, ACIR Director of Government Policy Research. Joseph F. Zimmerman of the State University of 

New York at Albany did the research presented in Chapters 3 and 4. John Kincaid, former ACIR Executive Director, and Sharon Lawrence, a former Senior Analyst, 

contributed to the report. 

ACIR would like to thank the following individuals 

for their comments and suggestions on the report: 

Enid Beaumont, Academy for State and Local Government; Terri BuIIo, Congressional Budget Office; Richard Geltman, Mields, Reisler & Cottone; Paul Guthrie, 

U.S. Environmental Protection Agency; Stacy Jordan, 

U.S. Department of Housing and Urban Development; 

James L. Martin, National Governors’ Association; Justin 

McCarthy, State of Illinois; 

Adele McClaine, Virginia Advisory Commission on Intergovernmental Relations; Karen D. Morgan, Maryland 

Joint Committee on Fiscal Relations; Max B. SawicLy, 

Economic Policy Institute; Catherine L. Spain, Government Finance Officers Association; John Szabo, Nuclear 

Regulatory Commission; William Wig@, US. Office of 

Management and Budget; and Christine Wnuk, National 

Conference of State Legislatures. 

At ACIR, Seth Benjamin and Joan Casey edited the 

report, and Cheryl A. Fortineau provided secretarial support. 

William E. Davis I11 

Executive Director 

U.S. Advisory Commission on intergovernmental Relations xi 
xii U.S. Advisory Commission on Intergovernmental Relations 
Con tents 

Chaprer I-The Mandate Relief Issue Comes of Age ...................................................... Current Interest in Mandate Relief .......................................................... 

Growing Number and Impact of “Mandates” .............................................. The Federal Response ................................................................. 1 

1 

1 

1 

Difficulties in Reimbursing Mandates .................................................... 2 

The Scope of Federal Financial Impacts .................................................. 3 

The Approach of This Report ............................................................... 3 

Intergovernmental Tensions Associated with Federally Induced Costs ............................ 3 

Evolution of the Mandate Issue ............................................................. 4 

ACIR Examinesthe Issue .............................................................. 4 

Congress Considers Federally Induced Costs .............................................. 5 

Overview of Mandate-Relief Bills .................................................... 5 

Questions Raised .................................................................. 5 

What is a “Mandate” and Who is Responsible for Funding It? ....................... 5 

How Should Reimbursement Amounts be Calculated? ............................. 7 

Who Should Determine the Amounts to be Reimbursed? ........................... 7 

Should the Congress Thke Further Action to Reform the Executive Rulemaking Process 

to Help Provide Mandate Relief? ............................................. 7 

Potential Elements of the “Mandate-Relief” Solution .......................................... 7 

Informing the Process .................................................................. 7 

Disciplining the System ................................................................. 8 

Funding Federally Induced Costs ........................................................ Conclusion ............................................................................... 10 

9 

Chapter 2-Intergovernmental Tensions Associated with Federally Induced Costs ............................ 12 

Costs Imposed ............................................................................ 12 

ACIR Analysis of the Estimates ......................................................... 12 

Issues in Evaluating Mandates’ Fiscal Effects ............................................. 13 

Combined Impacts are Poorly Assessed 14 

Distortion of State and Local Priorities ................................................... 15 

Erosion of Initiative .................................................................... 16 

Unnecessary Costs ..................................................................... 16 

Inattention to State and Local Resource Limitations ....................................... 16 

Distortion of Accountability ............................................................. 17 

Double Standard 17 

18 

.................................................. 

...................................................................... Conclusion ............................................................................... 

U.S. Advisory Commission on Intergovernmental Relations xiii 
Chapter3-Federally Induced Costs .................................................................... 19 

19 

19 

Statutory Grant-in-Aid Conditions ....................................................... 20 

Crosscutting Requirements ............................................................. 22 

Statutory Preemption .................................................................. 22 

Implied Mandates. Preemptions. and Grant Conditions .................................... 24 

Regulatory Delays and Nonenforcement .................................................. 26 

Statutory Liability Exposures ............................................................ 26 

Determining Costs ........................................................................ 26 

Identifying the Types of Expenses Incurred ............................................... 26 

Estimating the Magnitude of Costs ...................................................... 27 

Conclusion ............................................................................... 30 

Practices that Impose Federally Induced Costs ................................................ Statutory Direct Order Mandates ........................................................ 

Statutory ?ax Policies .................................................................. 24 

Chapter 4-Federal Reimbursement Needs and Experiences .............................................. 33 

Examining the Need for Reimbursement ..................................................... Arguments for Federal Reimbursement .................................................. 

The Need for Reimbursement Criteria ....................................................... 

33 

33 

Arguments against Reimbursement ...................................................... 34 

34 

Types of Reimbursement ............................................................... 34 

Direct Reimbursement Mechanisms .................................................. 35 

Indirect Reimbursement Mechanisms ................................................ 36 

37 

37 

Accompanying Conditions .............................................................. 37 

Reimbursement Limited to Certain Governments ......................................... 38 

Reimbursement Prorated ............................................................... 38 

38 

Conclusion ............................................................................... 38 

41 

45 

Weaknesses of Existing Reimbursement Approaches ........................................... Authorizatiori but No (or Reduced) Appropriation ......................................... 

Cost, Difficulty, and Uncertainty of Applying for Reimbursement ........................... 

Appendix A-Mandate Effects on Individual Governments ................................................ Appendix B-Excerpts of Recommendations From ACIR Reports on the Unfunded Federal Mandates Issue .... 

Figures and Tables 

Figure 1 

Table 1-I 

Table 2-1 

Table 2-2 

Table 2-3 

Table 2-4 

Table 2-5 

Table 3-1 

Table 3-2 

Table 3-3 

Table 3-4 

Table 4-1 

Table 1 

Table 2 

Table 3 

Table 4 

Table 5 

Table 6 

Table 7 

The Growth of Regulatory Federalism: Enactments per Decade. 1931-1990 ....................... Major Statutes Regulating State and Local Governments Enacted between 1931-1980 ............. City and County Estimates of Total Annual Costs to Comply with Certain Unfunded 

Federal Mandates. Fiscal Year 1993 ...................................................... Annualized State and Local Costs to Comply with Environmental Mandates. 1972-2000 ........... Official Cost Estimates from Selected Fiscal Notes and Regulatory Analyses ..................... Average Annual Revenues of Small General Local Governments. 1986-1987 ..................... Potential Increase in Annual User Charges from Environmental Regulations ..................... Instruments and Types of Federally Induced Costs ............................................. Crossover Sanctions in Federal Highway Programs ............................................ Operating Costs and State Assistance for Foreign-Born K-12 Students. Dade County Public Schools 

1987-88 to 1989-90 ..................................................................... Estimated Unreimbursed Costs of Foreign-Born Students K.12. Dade County Public Schools. 

1987-88 to 1989-90 ..................................................................... Funding for Administrative Costs in “Intergovernmental Partnership Programs ................... State of Tennessee Federal Mandate Costs ................................................... State of Ohio Federal Mandate Costs ........................................................ City of Columbus. Ohio. Federal and State Environmental Mandate Costs ....................... Columbus Mandate Costs by Source of Payments and by Household Costs ....................... Lewiston. Maine Cost of Federal Mandates 

City of Chicago. Illinois. Unfunded Federal Mandates ......................................... Anchorage. Alaska. Costs of Federal Environmental Mandates ................................. 

.................................................. 

1 

8 

13 

14 

15 

17 

17 

21 

22 

26 

26 

38 

41 

42 

42 

42 

43 

44 

44 

xiv U.S. Advisory Commission on Intergovernmental Relations 
The Mandate Relief Issue 

Comes of Age 

Current Interest in Mandate Relief 

Federal mandates to state and local governments are 

a built-in feature of American federalism. The federal 

government has a number of responsibilities, enumerated 

in the Constitution, over which it has definitive authority. 

Other governmental responsibilities are “reserved to the 

states or to the people,” as expressed in the Tenth Amendment to the Constitution. 

For decades, the federal government’s use of mandates was relatively limited. The relationship with state 

and local governments typically revolved around federal-aid 

programs that provided substantial federal funding for implementing federal requirements. In recent years, however, 

the federal government’s use of mandates has grown rapidly. 

By 1993, the term “unfunded federal mandates” had become 

the rallying cry for one of the most contentious intergovernmental issues. This commonly used term, however, has different meanings to different participants in the debate. This 

report seeks to help clanfy the debate. 

This chapter examines the growing interest in federal 

mandate relief, the factors driving this trend, and the evolutionary steps that have brought the issue into the congressional arena and shaped the current debate. 

Crowing Number 

and Impact of “Mandates” 

Even defined conservatively, the number of federal 

intergovernmental regulations has increased dramatically 

since 1960 (see Figure l).l Using a more inclusive definition, the National Conference of State Legislatures has 

identified 185 federal “mandates” that are in effecL2 

As the number of mandates has grown, so have the 

costs to state and local governments. Medicaid and environmental protection programs have been particularly 

costly. At the same time, many state and local governments 

have been facing taxpayer revolts and revenue-depleting reverses in their economies. As a result of these forces, many 

state and local government officials have made mandate relief their top intergovernmental reform priority. 

The Federal Response 

The Congress and the Executive Branch have begun 

to focus greater attention on the prdblems associated with 

federal mandates and possible strategies for relief. In one 

of his first intergovernmental initiatives, President Bill 

Figure I 

The Growth of Regulatory Federalism: 

Enactments per Decade, 1931 -1 990 

30 

25 

20 

15 

10 

5 

0 

~ ~~ 

Crosscutting Regulations 

0 Partial Preemptions 

Crossover Sanctions 

Direct Orders 

19314 1941-50 1951-60 1961-70 1971-80 1981-90 

Note-Includes new programs and major amendments. 

Sources: ACIR, Fedeml Regulation of State and Local Gov- ernments (1993), Table 4-1, and Regulatory Federalkm (19841 Appendix Table 1. 

U.S. Advisory Commission on Intergovernmental Relations 1 
Clinton issued Executive Order 12866 (September 30, 

1993), which requires federal agencies to consult more actively and fully with their state and local counterparts before promulgating intergovernmental regulations and 

mandates. This order was followed by Executive Order 

12875 (October 26, 1993), which seeks to limit unfunded 

mandates arising from agency rule promulgation. 

Many state and local government officials would like 

to go further, and they have made the reimbursement of 

federally mandated expenditures a top priority for legislative action in the Congress. In response to their concerns, 

34 mandate relief bills had been introduced in the 103rd 

Congress by June 1994, including 10 that would require 

federal reimbursement or waiver of some or all of the 

costs of federally mandated activities.) 

Difficulties in Reimbursing Mandates 

Establishing and operating a workable reimbursement process will be difficult. Studies of state mandate reimbursement programs for local governments have found 

that most of them provide relatively little funding relief 

and some are completely ineffe~tive.~The states’ experience suggests that federal policymakers will need to address a series of complex issues before reimbursement 

programs can be designed. 

One of the principal objectives of this report is to develop a viable framework for investigating such issues. For 

example, precision is needed to determine which types of 

regulatory requirements and which costs will qualify for 

federal reimbursement. More will need to be learned 

about the federal programs that provide full or partial cost 

reimbursement to state and local governments, how such 

programs differ, and their advantages and disadvantages. 

Other questions pertain to the benefits of federal 

mandates and the relationship between benefits and costs. 

Although compliance with mandates may require additional expenditures, state and local governments also may 

derive increased revenues, or economic, social, or environmental benefits and/or reduced costs because of the 

amelioration of previously costly conditions. Thus, netting 

out of costs and benefits is an important consideration. 

Determining benefits is no less difficult than determining 

costs, however, especially when indirect costs and benefits 

are included. Without such data, mandates often are enacted on the basis of presumed benefits because they appear, on their face, to be good policy. 

Many obstacles to mandate reimbursement are conceptual in nature. For example, definitions of “mandates” 

often are unworkable or inappropriate. According to common usage, mandates encompass any federal statutory, 

regulatory, or judicial instruction that (1) directs state or 

local governments to undertake a specific action or to perform an existing function in a particular way, (2) imposes 

additional financial burdens on states and localities, or (3) 

reduces state and local revenue source^.^ 

Three problems interfere with utilizing this definition 

as a basis for financial reimbursement: (1) the nonfiscal dimension of mandates, (2) problems of definition, and (3) 

impacts beyond mandates. 

The Nonfiscal Dimension. Many of the problems associafed 

with mandates are not primarily fiscal in nature. For example, objections to provisions establishing a uniform speed 

limit on the nation’s highways, and to many other rules, 

have little to do with the cost of implementation. These 

mandates, however, raise important issues of legitimacy, 

accountability, and political representation, such as: 

Is there a clear and convincing need for national 

uniformity in this area? 

Should such decisionsbe made unilaterally by national policymakers-whether in the Congress, 

the Executive Branch, or the courts? 

m 

If state or local governments are charged with implementing a rule, what happens if their constituents object and come to believe that the 

governments are unresponsive because they are 

unable to alter a mandated activity? 

What impact does such citizen dissatisfaction have 

on the concept of democratic accountability? 

“Political costs” such as these would remain even if the financial costs of mandate implementation were minimal or 

fully reimbursed by the Congress. 

From the federal government’s perspective, however: 

m 

Issues such as cross boundary costs and impacts 

(e.g., air emissions, wastewater flows, groundwater contamination) create a need for minimum 

national standards. 

National standards also can be viewed as less expensive for industry than compliance with many 

individual, distinct state standards. 

8 States compete. Absence of a minimum national 

standard can lead to destructive competition, cspecially if (1) there are no mechanisms for charging 

prices equal to marginal costs or for marginal pricing, or (2) marginal costs are less than average costs. 

m Disconnects between accountability and decisionmaking can occur at all levels. State and local 

governments are more subject to pressure by 

large economic development entities and may be 

pressured into less than optimal pricing and investment decisions because of monopoly/oligopoly powers in the local marketplace. 

Every federal regulation is created for a purpose. 

To the extent that each regulation incorporates a 

2 U.S. Advisory Commission on Intergovernmental Relations 
legitimate national interest (such as national security, health, or interstate commerce), there is a 

counterweight to state and local interests. 

Problems of Definition. There is no universally accepted definition of a federal mandate and surprisingly little consensus 

on the rnattez For example, in its 1984 report Regulatov 

Federalism: Policy, Process, Impact, and Reform, ACIR highlighted four forms of intergovernmental regulation that 

were relatively new at the time: direct order mandates, partial preemptions, crossover sanctions, and crosscutting 

requirements. The report did not include grant-in-aid conditions, judicial mandates, complete federal preemptions of 

state and local activities, or federal statutes that affect state 

and local revenue-raising capabilities. 

Consequently, attempts to estimate the total number 

of federal mandates-and thus define the universe of programs that might be subject to reimbursement-vary 

greatly. One recent estimate of statutory mandates totalled 36, another counted 185.6 A recent inventory of federal preemption laws, which overlaps partially with the 

other two studies, counted 439 explicit federal preemption 

statutes7 None of these tallies included federal judicial 

mandates. Moreover, all of them were based on counts of 

legislative statutes-some of which entail hundreds of 

pages of specific administrative rules and procedures affecting state and local governments. 

Financial Impacts beyond Mandates. Some of the most 

costly federal financial impacts on states and localities do not fit 

the mndard definition of a federal mandate closely, ifat all. For 

example, the federal government spends millions of dollars 

annually on so-called “impact aid” grants to local school systems to help offset costs that occur as an incidental consequence of the location of a major federal installation. These 

substantial costs are not the result of a mandate. The conventional definition of a federal mandate is likely to prove 

equally inadequate when dealing with immigration or other 

policies that create significant incidental fiscal impacts, 

which are wholly or partially unreimbursed. 

The Scope of Federal Financial Impacts 

It is clear that many federal policy instruments canimpose financial impacts on state and local governments. 

They may include: 

rn Traditional direct mandates; 

Federal preemptions; 

?ax policy provisions; 

H 

Various forms of grant-in-aid conditions; 

Incidental and implied federal policy impacts; and 

Federal exposure of state and local governments 

to legal and financial liabilities. 

Although these instruments vary considerably in their 

degree of compulsion and regulatory intent, intergovernmental dialogue about federal “mandates” is often complicated by the varying definitions used. A thorough 

understanding of federal influences on state and local expenditures requires a recognition of the potential effects 

of all of these tools, including those that do not fit the standard definition of a mandate. 

The Approach of This Report 

In this report, ACIR develops a newconcept-federalZy induced cosfs-to explore more completely the fiscal dimensions of federal actions affecting state and local 

governments without the pejorative connotations and definitional baggage associated with the term “mandates.” 

Also explored are the ways in which the federal government assists state and local governments-which can be 

thought of as an offset to induced costs. This information 

can assist in considering the question of balance between 

costs and aid. 

Before presenting the research, it is helpful to examine the broad dimensions of the “mandate issue’’ as it 

has evolved into an important subject of intergovernmental concern. Many of the problems associated with mandates and other federally induced costs are relatively 

recent. They have become politically significant gradually 

as the scope and character of federal policy initiatives 

evolved from a traditional reliance on grants and other 

subsidies to influence state and local government behavior to a greater emphasis on unfunded regulation. 

Because this is a relatively new development, which 

has been encouraged by changing federal judicial doctrines and increasingly constrained federal budgets, a brief 

review of the dimensions of the mandate issue will help 

place federally induced costs into a broader perspective. 

Intergovernmental Tensions Associated 

with Federally Induced Costs 

From the federal government’s perspective, requiring 

state and local governments to undertake activities, provide benefits, or enact laws can appear to be an effective 

and efficient way to achieve desirable federal policy objectives. Few citizens would disagree with the federal objectives. Indeed, few state and local governments disagree 

with them. Equal employment opportunities for the handicapped, clean air, safe drinking water, and curbing alcohol abuse by teenagers are all worthy and widely accepted 

public policy goals. They produce many benefits, some of 

which would be impossible or unlikely to occur without 

federal action. 

U.S. Advisory Commission on Intergovernmental Relations 3 
Despite agreement on the merits, however, controversies have arisen about the methods used to implement 

some of these policy objectives. For many mandated programs, concerns have been raised about financing, effectiveness, and implications for federalism. These concerns 

include, among others: 

Excessive costs due to complex and rigidly specified implementation mechanisms, often not 

based on sound, peer-reviewed scientific studies; 

Inadequate consideration of the costs imposed 

and the benefits to state and local jurisdictions by 

growing numbers of judicial decisions, statutes, 

and regulations; 

Distortion of state and local government budgets 

and policy priorities; 

Erosion of state and local initiative and innovation; 

Inefficiencies due to the application of single, 

uniform (one size fits all) solutions to geographically diverse problems; 

Inadequate consideration of the varying state and 

local financial and personnel resourccs; 

Attenuated accountability to citizens, due to the 

separation of responsibilities for policy direction 

and public finance; and 

Existence of a double standard, whereby the federal government exempts itself from compliance, 

or complies only partially, with the regulations it 

imposes on state and local governments. 

These specific controversies are examined in Chapter 

2, after consideration of the evolution of the overall mandate issue. 

Evolution of the Mandate Issue 

The growth of federal intergovernmental regulations 

began to attract significant attention during the late 1970s. 

For example, then New York City Mayor Ed Koch characterized the proliferation of federal regulations as a “mandate millstone,’’ which was “threaten[ing] both the 

initiative and the financial health of local governments 

throughout the country.”’ 

Scholarly research lent support to such concerns. One 

study found that local governments in several states were 

subject to hundreds of specific administrative requirements and conditions of aid. Although no specific figure 

was calculated, the costs of these requirements were believed to have “significant fiscal impacts” on the communities. Only in about one-half of the cases were the costs of 

these requirements fully or partially reimbursed by the 

federal g~vernment.~ 

In another study of a small sample of local jurisdictions, the Urban Institute estimated that the costs imposed by several major federal regulations averaged about 

$25 per capita, a figure equal to about 20 percent of all federal aid received by those jurisdictions.1° 

Such findings helped inspire a series of federal regulatory relief initiatives during the 1980s. Some of them, 

such as the State and Local Government Cost Estimate Act 

of1981 and Executive Order 12612 on Federalism (October 1987), were aimed specifically at intergovernmental 

mandates.” Nevertheless, the growth of intergovernmental mandates and mandated costs continued throughout 

the 1980s and early 1990s, exacerbated by relative declines 

in federal aid, especially to local governments. As a result, 

the issue of federal mandates attracted more and more attention. 

In 1986, the National Governors’ Association and the 

Reagan administration undertook a two-year joint effort 

to identify and reduce federally imposed administrative 

burdens.12 In 1990, the National Conference of State Legislatures began publishing the Mandate Monitor (now the 

Mandate Watch List) to track proposed federal legislation 

that would impose new regulatory costs and requirements 

on state governments. 

Growing numbers of states and communities have 

launched independent efforts to inventory and assess the 

costs associated with federal mandates. Some notable examples include studies conducted by the cities of Anchorage, Columbus (Ohio), and Chicago, and the states of 

Tennessee, Ohio, and Virginia (see Appendix A).13 

By 1993, each major public interest group representing state and local elected officials had made unfunded 

mandates a top priority issue. In order to generate greater 

public awareness, the groups joined together to sponsor a 

“National Unfunded Mandates Day” on October 27,1993. 

AClR Examines the Issue 

ACIR’s concern for the intergovernmental implications of mandates and federally induced costs began almost 20 years ago. In its 1977 report Categorical Grunts: 

Their Role and Design,14 the Commission focused early 

attention on crosscutting grant requirements (termed 

“generally applicable national policy requirements”), 

maintenance-of-effort requirements, and other forms of 

grant conditions. The following year, the Commission examined financial issues arising from state mandates affecting local governments in State Mandating of Local 

Expenditures.I5 ACIR’s 1984 report Regulatory Federalism: 

Policy, Process, Impact and Reform traced the growth in federal mandates during the 1960s and 1970s and classified 

them into four mandate types.16 

Subsequent reports traced the growth of federal mandates and preemptions during the 1980s and began the 

difficult task of identifying the financial costs of intergov4 U.S. Advisory Commission on Intergovernmental Relations 
ernmental reg~1ations.l~ The Commission added to 

knowledge about this field with reports on individual programs and requirements, including Disability Rights Mandates, Medicaid: Intergovernmental Trends and Options, 

Intergovernmental Decisionmaking for Environmental Protection and Public Works, Mandates: Cases in State-Local 

Relations, and High Performance Public Works: A New Federal Infiastructure Investment Strategy for America. 

Through these and other efforts, ACIR has developed a growing body of recommendations (see Appendix 

B), which include: 

Elimination of crossover sanctions as an enforcement tool in federal statutes (1984);19 

Full federal reimbursement for all additional direct costs imposed by new legislative mandates 

(1984);20 

Establishment of a “preemption notes” process 

(1) within the Congress to analyze the impacts of 

proposed preemption legislation prior to enactment, and (2) within the Executive Branch aspart 

of the rulemaking process (1992);21 

Reexamination by the Supreme Court of the constitutionality of federal mandating (1993);22 

A two-year moratorium on unfunded or underfunded legislative, executive, and judicial mandates (1993);23 and 

Enactment of a Mandate Relief Act that would require (1) regular inventory and cost estimation of all 

existing and proposed federal mandates, (2)analysis 

of the incidence of costs and the ability to pay of 

those parties on whom the costs fall or would fall, 

and (3) equitable federal sharing of the mandated 

costs or an affordable prioritization and scheduling 

of compliance by the nonfederal parties (1994).24 

Congress Considers Federally Induced Costs 

In 1993, the question of what to do about federally induced costs began to be considered seriously by the Congress. Thirty-four bills to provide “mandate relief” were 

introduced in the 103rd Congress, hearings were held in 

both Houses, and legislative action began. 

It is clear that federally induced costs come from 

many sources and can be reimbursed in many ways. Thus, 

the question of what to do about federally induced costs 

has no simple answer. The proposed mandate-relief bills 

illustrate the diversity of approaches that could be taken. 

Overview of Mandate-Relief Bills 

gress are shown in Table 1-1 and are categorized below: 

The 34 mandate relief bills pending in the 103rd ConThe largest number of bills (12) would revise the 

fiscal notes process; some would extend the process to the Executive Branch. 

Seven bills would require that future federal 

mandates be funded in order to be enforceable. 

Three additional bills would seek a constitutional 

amendment to impose this requirement. 

Two proposed Senate resolutions would require 

two-thirds votes for (a) a Senate committee to report a bill with an unfunded mandate and (b) the 

full Senate to pass a bill with an unfunded mandate. A proposed House resolution would express the sense of the House that unfunded 

mandates should not be passed. 

Three bills would reimburse mandates. 

Two bills would require an explicit statement of 

“intent to preempt” in any federal statute that 

would displace state and local authority in order for 

the preemption to provide a valid basis for federal 

agency rulemaking and court adjudication. 

Other one-of-a-kind bills would (a) establish a federal mandates budget process, @) cap federally imposed regulatory costs, (c) establish a pilot program 

to study innovative regulatoy approaches, (d) require federal agencies to consider the views of state 

and local governments under the Reguiatory He& 

biiity Act, and (e) establish a Commission on Unfunded Federal Mandates to study federal-state 

responsibilities and develop plans for rationalizing 

mandates by recommending termination, suspension, consolidation, or simplification. 

Questions Raised 

In the process of holding hearings on a number of 

these bills, it became apparent that many hard-to-grasp 

details are crucial to finding workable solutions to the 

mandate relief issue. Questions raised by the hearings fall 

into the following categories: 

What is a “Mandate” 

and Who is Responsible for Funding It? 

Traditionally, the matching share in the federal grant 

programs was used to drive most federal initiatives. This has 

become less true as the federal government has moved away 

from grants toward unfunded regulatory initiatives (full 

funding of authorized grants has become increasingly rare). 

Thus, the search for legal principles has increased. 

For example, should the costs of complying with requirements to protect civil rights, voting rights, and the rights of 

Americans with disabilities be federally reimbursed, or 

should they be considered a basic constitutional responsibility of state and local governments? If state or local governments have the choice of whether or not to participate 

in a federal program, does that remove the federal government’s obligation to reimburse expenses? 

U.S. Advisory Commission on Intergovernmental Relations 5 
m 

c 

v, 

Table 7-7 

Mandate Relief Bills of the 103rd Congress 

2 

-. < 

8 

-7 

[Total Rellef Bills: 341 

Date CoTypeofReliel Author Bill Introduced sponsors Chamber Committee Referral Phone Comments 

12 Nickles S 81 

Hatch s 490 

hbeley-Braun S 563 

Dorgan S 1592 

Glenn S 1604 

Ewing HR830 

Clinger HR 886 

Shays HR1006 

Baker (LA) HR 1088 

Moran HR 1295 

DeLay HR3446 

cox HR 4006 

1/21/93 

3/3/93 

31 1/93 

10/27/93 

lot29193 

2/5/93 

2/16/93 

2/18/93 

2/24/93 

31 1/93 

1 1/4/93 

31 0/94 

17 Senate Governmental Affairs 

0 Senate Judiciary 

9 Senate Gov'tal Affairs, Budget 

7 Senate Gov'tal Affairs, Budget 

5 Senate Governmental Affairs 

251 House Judiciary 

60 House Gov't Operations, Rules 

22 House Rules 

16 House Gov't Operations, Rules 

243 House Gov't Operations. Rules 

4 House GovY Operations 

0 House Gov't Operations, Rules 

(202) 224-5754 for regs. and legis.; contains penalty; same as HR 1088 

(202) 224-5251 only to regulations 

(202) 224-2854 only to legislations 

(202) 224-2551 cost estimate for legis. and regs; with penalty if bill has no estimate 

(202) 224-3353 estimates for regulations on small governments 

(202) 225-2371 pertains only to regulations 

(202) 225-2738 for regs. and legis.: no pena1ty;also. sorting of state-fed. responsibilities 

(202) 225-5541 for legislation only: contains penalty if bill does not have estimate 

(202) 225-3901 for regs. and legis.: contains penalty if bill has no estimate; same as S 81 

(202) 225-4376 cost estimate for legis. and regs; with penalty if bill has no estimate 

(202) 225-5951 like S 81 and HR 1088. 

(202) 225561 1 for regs. and legis; no penalty 

3 Stump HR410 1/5/93 21 House Gw't Operations, (202) 225-4576 

Judiaary, Rules 

Barca HR 4127 3/24/94 5 House GovY Operations 

Sasser S 1606 11/1/93 1 Senate Governmental Affairs (202) 224-3344 reimburse for 20% of mandates: includes mandate moratonum 

Snowe HR369 1/5/93 21 House Gov't Operations (202) 225-6306 

Hefley HR894 2/16/93 29 House Rules (202) 225-4422 also indudes fiscal note; mth penalty provisions; no minimum impact 

Herger HR 3429 11/3/93 2 House Gov't Operations (202) 225-2665 

Dreier H Con Res 51 2/24/93 24 House Gov't Operations (202) 225-2305 

Kempthome S 993 5120193 53 Senate Governmental Affairs (202) 224-6142 

Cwerdell S 1 188 6/30/93 6 Senate Governmental Affairs (202) 224-8049 

Thomas HR2327 5/27/93 15 House GoVt Operations (202) 225-2311 clarify application of federal pre-emption of state 8 local laws 

3 Franks (NJ) HJRes 254 8/6/93 13 

Gillmor HJRes 282 10/26/93 5 

Brown SJRes 148 10/27/93 11 

7 Condit HRes277 10/15/93 26 

Smith (TX) HR 3421 11/1/93 79 

Torkildsen HR 3504 11/10/93 12 

Hatch S 13 1/21/93 5 

Gregg S648 3/24/93 20 

Gregg S Res 157 10/27/93 5 

Gregg S Res 158 10127193 5 

House Judiciary 

Senate Judiciary 

House GovY Operations 

House Gov Cps , Rulea Judlciary 

House Gov't Operations, Rules 

Senate Governmental Affairs 

Senate Governmental Affairs 

Senate Rules 8 Administration 

Senate Rules 8 Administration 

(202) 225-6405 constitutional amendment prohibiting unfunded mandates 

(202) 224-3270 constitutional amendment prohibiting unfunded mandates 

(202) 225-6131 expresses sense of the House regarding unfunded mandates 

(202) 2254236 institutes a federal mandates budget process 

(202) 2258020 mutli-faceted approach; reports, reimbursement, cost-estimates wlpenalty 

(202) 224-5251 caps regulatory costs 

(202) 224-3324 mutli-faceted approach: reports, reimbursement, cost-estimates wlpenalty 

(202) 224-3324 requires 2/3 vote for Senate cmte. approval of mandate bill 

(202) 224-3324 requires 2/3 vote for Senate approval of mandate bill or arnndmt. 

Source: National Conference of State Legislatures 
Legally, these questions have been considered to be 

largely settled by the U.S. Supreme Court-federal reimbursement generally is not required. Nevertheless, two recent federal cases reopen the possibility that federal 

mandates that “commandeer” state legislatures or executive officers into the service of a federal program may be 

impermissible if they are not paid for. The U.S. Supreme 

Court established this principle in New York v. United 

States, 112 S.Ct. 2408 (1992), in a hazardous solid waste liability case. The U.S. District Court applied the same reasoning in striking down the federal checks on handgun 

buyers required by the Brady Act in Printz v. United States 

(May 16, 1994). 

Politically, these questions are even more hotly debated. The federal deficit leaves little room for using federal money to calm this debate. The option of abandoning 

enforcement of federal requirements when the federal 

government does not pay for them is politically as difficult 

as finding new money to fund them. 

Would more sharply defined boundaries between federal, state, and local responsibilities help clarify mandate 

relief issues? How could these boundaries be defined? 

Should the Congress be better informed about state and 

local roles and responsibilities before it imposes new roles 

and costs on them? In particular, should the Congress be 

better informed about the effects of state mandates affecting local governments? 

How Should Reimbursement Amounts 

be Calculated? 

For example, if the federal, state, and local governments all share in the benefits of the federally required 

program, should they share proportionally in meeting the 

costs, or should the federal government pay all the costs 

because it initiated the requirement? Should a new reimbursement program cover past compliance costs as a matter of fairness to state and local governments that took 

early action? If the federal government changes a program in a way that increases state and local costs, should it 

reimburse the added costs even though it may not have 

covered the original program? Should a federal provision 

that allows costs to be passed on to those who cause a problem or benefit from compliance be considered reimbursement? If an independent federal commission or a federal 

court imposes extra costs on state and local governments, 

should the Congress be responsible for estimating those 

costs and finding reimbursement funds? 

Who Should Determine the Amounts 

to be Reimbursed? 

Should the Congressional Budget Office (CBO) be 

responsible for estimating the costs of requirements imposed by federal courts and administrative agencies? Is 

there a need to estimate the total costs imposed on state 

and local governments by federal requirements? Should 

these costs be compared with the amounts of federal aid? 

Should all forms of federal aid be counted? Should the 

benefits of federal requirements to state and local governments and to the national economy also be estimated? 

Should those benefits be considered reimbursements? 

Should the costs and benefits affecting states and localities be differentiated by government? How should these 

various estimates be related to each other? 

Should the Congress Take Further Action 

to Reform the Executive Rulemaking Process 

to Help Provide Mandate Relief? 

The Clinton Administration has taken steps to: 

1) Involve state, local, and tribal governments more 

deeply in the administrative rulemaking process; 

2) Avoid imposing new mandates not required by 

law; and 

3) Review regulations to ensure that they are need- ed and are no more burdensome than necessary. 

At the same time, some of the mandate relief bills introduced in the Congress would add fiscal notes and other 

requirements to the rulemaking process. Should such legislation be passed, and what should it include? In particular, should legislation provide an explicit basis for the 

Clinton administration reforms, and is there a need to 

amend the Federal Advisory Committee Act to make it easier for state, local, and tribal government officials to interact with federal agencies in the rulemaking process? 

Should a threshold be applied when determining which 

executive agency actions should include a cost estimate? 

Should executive branch cost estimates be exempt from 

judicial review? 

Potential Elements 

of the “Mandate-Relief” Solution 

Solutions are needed to three broad problems: (1) informing the process, (2) disciplining the system, and (3) 

funding federally induced costs. 

Informing the Process 

Estimates of the total annual cost impact of federal 

actions on state and local government budgets range from 2 

or 3 percent to 20 percent or more. There is no good fK on 

these figures, either nationwide or for individual state and 

local governments, yet they are at the heart of the issue. If 

the impact is negligible, it is not worth a lot of political attention and energy. If it is a fifth or more of a state or local government budget, it is a serious challenge to federalism. 

Estimates of costs to state and local governments 

from proposed federal actions also are inadequate. They: 

U.S. Advisory Commission on Intergovernmental Relations 7 
Are prepared quickly, without generally accepted 

methodologies or data bases representing major 

cost determinants and how the costs are imposed 

among the various types of government; 

Seldom take into account offsetting benefits and 

cost-recovey mechanisms to introduce the concept of net costs; 

Often are made too late to be used in developing 

the legislative or regulatory proposal; 

Seldom are recalculated for competing alternatives and modifications made to proposals before 

adoption; and 

Frequently are not based on detailed assumptions 

about implementation alternatives. 

Three potential means of better informing the process have been suggested: (1)better cost estimates forproposed federal actions, (2) cost accounting standards to 

facilitate the collection of reliable information, and (3) an 

inventory of federally induced costs updated annually to 

track their total impact over time. 

Better Cost Estimates. It has been suggested that the 

congressional fiscal notes process be improved and extended 

to agency rulemaking. Estimates could be made earlier, 

while legislative and regulatory proposals are being formed 

and while the most cost-effective and least burdensome alternatives are being sought. More time might be taken in 

making the estimates, and improved methodologies might 

be developed. Reactions to federal requirements by state 

and local governments, as well as the diverse effects of the 

requirements also might be explored. 

Costs to the private sector could be estimated to 

make the analysis more complete and realistic, and the related public and private benefits could be estimated and 

compared to costs to net out the effective impact. However, lest the amount of work involved in preparing these 

more ambitious analyses overwhelm the process, the government’s analytical resources might have to be either increased or more narrowly applied to relatively few major 

proposals each year. 

Aresearch study maybe needed to improve the methodologies for estimating costs and benefits. It has been 

suggested that these methods be able to accommodate 

proposals that incorporate risk assessments, prioritization 

of compliance schedules, and waivers allowing innovation 

and flexibility in compliance. 

Intergovernmental networks could be established, as in 

Florida and Virginia, to facilitate and improve the estimates. 

Using the expertise and specialized data bases of administering agencies also might improve the quality. As the methodologies improve, they could be shared between the executive 

and legislative branches of the federal government, and between the federal, state, and local governments. 

A cooperative process might (1) reduce the workload 

on any single agency, (2) broaden the number of programs 

for which estimates could be prepared, (3) improve the 

quality of estimates, and (4) improve intergovernmental 

confidence in the estimates. 

To assist in the congressional reauthorization process, 

for example, one suggestion is that the committee having 

jurisdiction ask the administering agency to supply, one 

year before the end of the current authorization period, an 

analysis of the federally induced costs, how and by whom 

they have been funded, and alternatives for improving 

program affordability and intergovernmental equity. This 

analysis could be prepared in consultation with state and 

local governments to help make it as realistic as possible. 

Cost Accounting Standards. One way of improving estimates of future costs is to build up historical data for similar and related activities. Such data also would provide an 

actual-cost baseline for calculating the current total of 

federally induced costs and for identifying the marginal 

costs added by new mandates. Cooperatively developed 

accounting standards would assure confidence in the figures, no matter who prepares them. Caution should be exercised in moving toward cost accounting, however, 

because it is likely to be costly. 

Inventory and Tracking System. If the total impact of federally induced costs on state and local governments is the 

nub of the problem, then some agency needs tobe charged 

with compiling the costs and reimbursements associated 

with the federal actions. On the legislative side, CBO is 

the logical choice. In the Executive Branch, OMB’s Office 

of Information and Regulatory Affairs (OIRA) would be a 

logical choice. The key questions are whether the costs arc 

increasing or decreasing, and by how much. Such a system 

would take time to establish and could be costly. Interagency cooperation might make it feasible. 

Disciplining the System 

Information alone may not be enough to limit federal 

imposition of added costs on state and local governments. 

The congressional fiscal notes process has been in place 

for over a decade without noticeably slowing new costs. 

The Federalism Executive Order, which calls for federalism assessments, also has had little effect since it was 

signed in 1987. 

The enhanced intergovernmental consultation provisions in the Clinton administration’s new executive orders 

on agency rulemaking (12866 and 12875) show promise, 

but they are still essentially informational, and they cannot ignore or contradict congressional intent. Thus, they 

alone may not be able to reduce new federally imposed 

costs significantly. 

Even the constitutional and judicial limits on federal 

intrusion into the affairs of state and local governments 

have lost their effectiveness in the eyes of the U.S. Supreme Court. Thus, any additional disciplining of the 

mandate process probably must come from the Congress. 

8 U.S. Advisory Commission on Intergovernmental Relations 
A number of the pending mandate relief bills seek to 

go beyond past attempts to discipline the process. Reflecting the frustration of state and local officials who see their 

political accountability and budget authority being eroded, 

these bills seek real limits on the creation of new mandated costs. To be effective in reducing the growing potential for federal-state-local conflict engendered by the rise 

in unreimbursed costs, these limits would hold federal 

policymakers responsible for thcir actions. 

There are several ways to introduce greater discipline 

into the legislative and rulemaking processes to limit or 

reverse unfunded federal requirements: (1) process improvements, (2) criteria for federal funding, (3) caps, (4) 

realignment of the federal system, and (5) moratoria. 

Process Improvements. The fiscal notes process could be 

tightened by raising the standards for preparing federalism assessments, requiring that cost estimates be available 

for consideration before the markup of a bill, and providing a point-of-order procedure to ensure consideration of 

adequate information in developing the proposal before it 

can be brought forward for adoption. 

Criteria for Federal Funding. Both constitutional and 

practical criteria might be considered. For example, constitutional criteria might provide that civil rights protections (perhaps with certain exceptions) might not be 

rcimbursable, while clearly enumerated federal powers 

such as foreign affairs (including immigration-related 

costs) might be fully reimbursable. Implied powers under 

the Constitution might be candidates for shared funding 

on some consultative or negotiated basis. 

“Practical” criteria might include: 

Avoiding excessive financial and technical burdens on individual state and local governments 

that occur because of their size or particular circumstances; 

Demonstrating affordability and workability for 

the affected governments; 

Full federal funding of clear national goals that 

have strict deadlines and inflexible uniform standards of compliance; 

Full federal funding of required administrative 

costs in federal-aid programs to provide incentive 

for the federal government to keep these requirements simple and efficient; and 

Making all costs of meeting grant conditions (including crossover sanctions) reimbursable as part 

of project costs. 

These examples illustrate the complex nature of designing and establishing criteria for federal funding. Nevertheless, such criteria would be essential if the concept of 

“unfunded mandates” were to be used in a practical way. 

Caps. A cap on the rate of growth or total amount of federally induced costs could offer a solution to the problem 

because it is difficult for most state and local governments 

to adjust quickly to budgetary shocks. This introduces the 

idea of a regulatory budget. 

Federally induced costs are real dollar costs that show 

up in state and local budgets. Thus, it could be argued that 

the federal government has a responsibility to limit these 

costs because it creates them. 

Exceptions to caps could be provided through (1) a 

declaration of national emergency and (2) a separate (perhaps supermajority) vote in the Congress. 

Realignment of the Federal System. Reallocating functions and revenue sources among the federal, state, and 

local governments often has been proposed as a means of 

“sorting out” and rebalancing the federal system. If this 

were done carefully, it is argued, each government would 

have the resources it needs to meet its own responsibilities. A mandate review commission, with adequate time 

and resources, might reevaluate federal requirements and 

recommend terminations, consolidations, and other modifications of mandates to create a more perfect balance. 

Moratoria. In the view of many state and local officials, 

the solution for unfunded federal requi’rements is to call a 

halt-“no new money, no new mandates.” A moratorium 

could be statutory or constitutional. It could be complete 

or could have some exceptions that are either enumerated 

or enacted on an ad hoc basis by separate (perhaps supermajority) votes. 

If the moratorium option were adopted, the concept of 

“unfunded” would have to be carefully defined and applied. 

In the case of reauthorizations of requirements, would only 

“additional” costs or the whole reauthorization be counted 

as new? In the latter case, most existing requirements eventually would have to be federally funded. 

Funding Federally Induced Costs 

It is not enough to know how much a new federal requirement will cost. It also should be demonstrated how 

the costs can be met. Reimbursement of the estimated 

costs through direct funding in the federal budget is the simplest way to make this demonstration. The federal deficit 

limits the use of this method, however. Thus, the search for 

financial partners, “creative financing” techniques, and affordability analyses is increasingly attractive. 

Many solutions to these three problems have been 

proposed. Finding the money to fund new federal requirements will not be easy in today’s budget climate. Given this 

situation, it appears likely that creative approaches to reimbursement will be considered. Beyond appropriation of 

funds for grants or loans, there likely will be interest in: 

1) shared revenues; 

2) payments in lieu of taxes; 

3) userfees; 

U.S. Advisory Commission on Intergovernmental Relations 9 
mixed public and private funds; 

in-kind contributions; 

tax expenditures; 

stretched-out schedules for compliance (based 

on risk assessments, good peer-reviewed science, 

and local government priorities for using available funds most cost effectively to ensure the 

greatest possible improvements in the health, 

safety, and rights of their citizens); and 

waivers from the strict letter of requirements for 

hardship cases. 

How to “score” these reimbursements could become a key 

quest ion. 

Direct reimbursements for each new federal requirement, on an individual basis, could be cumbersome. Indirect reimbursement, such as a new general revenue 

sharing program recalibrated each year to be about the same 

amount as the total of all “unreimbursed mandates” for that 

year, would be simpler to administer, but it might not always 

make a perfect match with those governments that pay the 

costs and it would have to be based on a good estimate of 

total federally induced costs. The indirect route to reimbursement has been adopted in Conne~ticut.~~ 

Concl us ion 

The issues outlined above are difficult, and objective 

research alone is not likely to resolve them. Additional intergovernmental dialogue also is needed. This report suggests a framework for that dialogue. 

Notes 

‘See, for example, Susan A. MacManus, “ ‘Mad’ about Mandates: The Issue of Who Should Pay for What Resurfaces,” 

Publius: The Journal of Fedemlisni 21 (Summer 1991): 59-76. 

’National Conference of State Legislatures (NCSL), Mandate 

Catalogue (Washington, DC, December 1993). 

Several bills attracted considerable support. Early in 1994, a 

bill introduced by Rep. James P Moran to improve the congressional process for estimating mandate costs (H.R. 1295) 

had 243 cosponsors. Among the bills that would waive compliance with unfunded federal mandate requirements, H.R. 

140, introduced by Rep. Gary A. Condit, had 219 cosponsors 

in the House of Representatives and S. 993, sponsored by 

Sen. Dirk Kempthome, had 53 cosponsors in the Senate. 

4For analyses of state mandate reimbursement programs, see 

US. Congress, Senate, Subcommittee on Intergovernmental 

Relations, 1985 Hearings; U.S. General Accounting Office 

(GAO), Legislative Mandates: State Experiences Offer Insigiits 

forFederalAction (Washington, DC, 1988); and US. Advisory 

Commission on Intergovernmental Relations (ACIR), Mandates: Cmes in State-Local Relations (Washington, DC, 1990). 

’There is no universally accepted definition of a federal mandate. The definition used above is consistent with the concept 

as it is commonly understood in political debate, but it is 

broader than the definition used in several previous ACIR reports. 

6See ACIR, Regulatory Federalism, Appendix 1; and NCSL, 

Mandate Catalogue. ’ ACIR, Federal Statutory Preemption of State and Local Airtliority: History, Inventory, and Issues (Washington, DC, 1992), 

Edward I. Koch, “The Mandate Millstone,” 7lie Public Inter- est 61 (Fall 1980): 42. 

‘Catherine H. Love11 et al., Fedeml and State Mandating on Local Governments: An Exploration of Issues and Impacts 

(Riverside: University of California, Graduate School of Ad- ministration, 1979), p. 162. 

“Thomas Muller and Michael Fix, “The Impact of Selected 

Federal Actions on Municipal Outlays,” in US. Congress, 

Joint Economic Committee, Government Regrilation: Acliieving Social and Economic Balance, Vol. 5 of Special Study on 

Economic Change (Washington, DC, 1980), p. 327. 

“These initiatives are described and evaluated in ACIR, Fedeml 

Regulation of State and Local Governments: The Mired Record 

of the 1950s (Washington, DC, 1993). and Regulatory Federalism; and Marshall T Goodman and Margaret T Wriglitson, 

Managing Regirlatory Reform (New Yo*. F‘raeger, 1987). 

l2 White House Office of Intergovernmental Affairs and Office 

of Management and Budget, Regiclatory Refonii: TIIe Admiriistmtiori’s Impletnentation Status Report on the National Governors’ Association Regulatoty Refonn Initiatives, Phase II 

(Washington, DC OMB, August 1988, p. ii). 

l3 See Municipality of Anchorage, Pqing for Federal Envimimental Mandates: A Looming Ciisis for Cities and Cormties 

(Anchorage, 1992); City of Chicago and Roosevelt University, Putting Federalism to CVork for Americar Tackling the Problems of Uiifurided Mandates and Burdensome Regulations, 

(Chicago, 1992); Environmental Law Review Committee 

(Columbus, 0 hio), Envirorirneiital Legislation: The Increasing 

Costs of Regirlatoiy Compliance to the City of Columbus (Co- lumbus: Health Department, 1992); Tennessee Department 

of Finance and Administration, “The Impact of Federal 

Mandates” (Nashville, April 1992); and Virginia General Assembly, Joint Legislative Audit and Review Commission, 

Catalog of State and Federal Mandates on Local Govenirnenis 

(Richmond, 1992). 

14ACIR, Categorical Gmits: Their Role and Design (Washington, DC, 1997). 

”ACIR, State Mandating of Local Evenditures (Washington, 

DC, 1978). 

l6 ACIR , Regulatoly Fedemlisrn. 

I’ACIR, Fedeml Regulation of State and Local Governments and 

Fedeml Statutory Preemption of State mid Local Autlioti~. 

l8 ACIR, Mandates: Cases in State-Local Relations (1990), Intergovenimerital Decisionmaking for Environment and Public 

CVonks (1992), Medicaid: Intergoveniniental Trends and Options 

(1992), and Disability Rights Mandates: Federal and State Conipliance with Einploynient Protections and Architectural Banier 

Removal (1989). 

P. 9 

19 ACIR, Regulatory Federalism 

”Ibid. 

21ACIR, Federal Statutory Preemption of State and Local Au22 ACIR, Federal Regulation of State and Local Governments. 

tIlOIity. 

10 U.S. Advisory Commission on Intergovernmental Relations 
231bid. 

24ACIR, High Perfonname Public Works: A New Infrastnrctiire 

Investment Strategy for America (Washington, DC, 1993). 

25 Geary Maher, “Connecticut’s Consideration and Rejection of a 

Mandate Reimbursement Program,” in Michael Fix and 

Daphne A. Kenyon, eds., Coping with Mandates: Wzat Are the 

Alternatives? (Washington, DC: Urban Institute Press, 1990). 

See also a reprint of this article and descriptions of the approaches in six other states in ACIR, Mandates: Cases in StateLocal Relations. 

U.S. Advisory Commission on Intergovernmental Relations 11 
Intergovernmental Tensions 

Federally induced costs have given rise to eight specific intergovernmental concerns, which are described in this 

chapt er: 

rn The Environmental Protection Agency estimated 

that the costs of removing asbestos from public 

schools, as mandated by the 1986AsbestosHazard 

State and local governments perceive these costs 

to be high and growing. 

The combined costs of multiple federal actions 

are poorly considered. 

State and local priorities are distorted. 

State and local initiative is eroded. 

Some of the costs are unnecessary. 

State and local resource limitations are not considered. 

State and local political accountability is distorted. 

A double standard sometimes is applied to compliance. 

Costs Imposed 

Expenditures required by federal laws, regulations, or 

court orders can be large. For example: 

H The U.S. Department of Transportation estimated that the total costs of complying with its 

1986 handicapped nondiscrimination rules for 

mass transit systems would total over $5 billion in 

1992 dollars, spread out over 30 years.' 

Emergency Response Act, would total more than 

$2.5 billion over a 30-year compliance peri~d.~ 

These three examples present prospective cost estimates 

dcveloped by federal agencies prior to promulgating rules 

and regulations. Such estimates are by nature preliminary 

and sometimes highly inaccurate. 

The U.S. Conference of Mayors (USCM) and the National Association of Counties (NACo) sought to highlight 

the costs of several specific federal mandates in 1993 by 

reporting compliance costs based on a sample survey (see 

Table 2-1). The USCM survey produced responses from 

314 cities for the costs of ten federal mandates. Based on 

this survey, the estimated cost for all cities in 1993 was $6.5 

billion. NACo received survey responses from 128 counties for 12 mandates. Based on this survey, the estimated 

cost for all counties in 1993 was $4.8 billion. 

The level of confidence that can be placed in these 

cost estimates in unknown, and there has been no agreement on the various measures that might be used to put 

these figures into proper financial perspective. A staff report prepared for the Senate Committee on Environment 

and Public Works was highly critical of the methodology 

used in the USCM and NACo st~dies.~ 

ACIR Analysis of the Estimates 

A preliminary ACIR analysis of mandate cost estimates also raised scvcral questions about the scope, methodology, and interpretation of the re~ults.~ The estimates 

were prepared by USCM; NACo; EPA; Tennessee, Ohio, 

and Virginia; Columbus and a group of nine other Ohio 

w The U.S. Department of Labor estimated in 1987 

that the application of the Fair Labor Standards 

Act to state and local employees would cost those 

governments almost $1.5 billion over ten years.' 

cities; Lewiston, Maine; and Anchorage, Alaska (see Appcndk A). 

In general, ACIR found that, although several state 

and local governments have sought to provide good, com12 U.S. Advisory Commission on Intergovernmental Relations 
Table 2-1 

City and County Estimates 

of Total Annual Costs to Comply 

with Certain Unfunded Federal Mandates, 

Fiscal Year 1993 

(in millions) 

Program Cities Counties 

Clean Water Actmetlands 

Solid Waste Disposal/RCRA 

Safe Drinking Water Act 

Clean Air Act 

Americans with Disabilities Act 

Fair Labor Standards Act 

Underground Storage Tanks 

Endangered Species Act 

Asbestos Removal (AHERA) 

Lead-Based Paint Removal 

Immigration Act 

Bond Arbitrage Restrictions 

Superfund Amendments 

Davis-Bacon Act 

Total 

$3,613 

882 

562 

404 

356 

212 

138 

37 

129 

118 

NA 

NA 

NA 

NA 

6,451 

$1,186 

646 

164 

302 

294 

262 

176 

120 

NA 

NA 

1,536 

78 

43 

11 

4,818 

NA = Not asked 

Source: U.S. Conference of MayorsRrice Waterhouse, Inipact of 

Unfunded Federal Mandates on US Cities: A 314 Ci(y Sur- vey (Washington, DC: USCM, 1993) Table 1; National 

Association of Counties/Price Waterhouse, NACo Unfrmded Mandates Survey (Washington, DC: NACo, 1993), 

Table 1. 

prehensive information about federal mandate costs and 

their budget effects, there are still gaps and unresolved issues. Some studies have concentrated only, or primarily, 

on environmental mandates, or on a sample of mandates. 

All the estimates reviewed by ACIR were based on a 

limited number of federal actions that impose costs on 

state and local governments. In addition, the city and 

county estimates do not include many other local govcmments that are subject to mandate costs, including townships, school districts, and other special districts. 

Consequently, the USCM and NACo studies are neither 

comprehensive nor inclusive for all states or local governments. They do, however, provide some national perspective to mandate costs. 

According to the USCM study, “cities reported that 

unfunded mandate costs consume an average of 11.7 percent of their locally raised revenues.”The NACo study arrived at a comparable figure of 12.3 percent, but added 

that “individual counties reported much higher percentages.” No details were provided about how these percentages were estimated. 

The U.S. Bureau of the Census reports that 1991 general revenue from own sources totaled $118.1 billion for 

cities and $87.4 billion for counties. Based on these revenues, the costs of the federal mandates examined by 

USCM and NACo represented 5.5 percent of the revenues collected by the cities and counties in 1991. These 

percentages are less than half those in the city and county 

studies. The higher percentages reported by USCM and 

NACo may have resulted from greater effects of mandates on the larger governments that were sampled or 

from using a smaller revenue base, such as only general 

fund revenues, in the percentage calculations. 

The EPA study-which estimated in 1990 that the 

costs of complying with all of its mandates in 1995 would 

be $3.9 billion for states and $27.9 billion for local governments-took a different approach. EPA related municipal 

mandate costs to households, and estimated “that in the 

coming years, the average household will be charged an 

additional $100 annually for locally provided environmental services.” It is not clear whether this estimate is based 

only on city expenditures, or on cumulative state and local 

expenditures. County and state mandate costs are not expressed as costs per household in the study. 

Issues in Evaluating Mandated Fiscal Effects 

Any attempt to evaluate the fiscal effects of mandates 

must contend with a variety of difficult issues. Perhaps the 

most troublesome will be how comprehensive such studies 

should be and how to allocate costs. The studies ACIR 

evaluated raised questions about methodology and how to 

interpret results. For example: 

Should the definition of mandates be limited to outright 

unfunded directives, or should it include requirements associated with federalgrants and the effects offederal tax actions? 

There currently is a great range in the definitions. Federal 

mandates and state policies also have become intertwined 

in many instances, making it difficult to determine which 

government is responsible for the costs, especially the cost 

incurred by local governments. 

Medicaid illustrates one key definition problem, 

namely, how to treat matching grant programs. Some officials consider Medicaid a federal aid program that helps 

states meet their responsibilities; hence, they do not see it 

as a mandate. Others view the whole program as a federal 

mandate, while still others believe only nondiscretionary 

costs added since 1987 are mandates. 

The Tennessee study (see Appendix A) raises a tax issue that illustrates another type of definition problem. 

Should food stamps, which are provided at full federal cost 

(except for administration) to aid needy state residents, be 

considered a mandate because of loss of sales tax revenues 

on food purchased with them? 

When both state and federal laws or regulations require 

similar action, which government should be responsible for the 

unfunded local mandate? Solid waste disposal has been a 

U.S. Advisory Commission on Intergovernmental Relations 13 
persistent local problem in recent years, and has been subject to increasing state regulation. But hazards created by 

improper handling of solid wastes also have been a federal 

concern that has resulted in federal laws and regulations. 

This ambiguity illustrates the difficulty in determining which 

government should be responsible for mandate costs. 

Should costs that localgovernmentspass through to users 

in the form of fees and charges be diflerentiated from costs 

payable from general taxes? For example, water users pay 

for a direct benefit in terms of improved water quality. At 

the same time, however, individual users have little or no 

voice in the level of quality desired for use. The amount 

paid by the user is based on the amount of water used and 

on the extent of water treatment needed to comply with 

federal or state mandates. In contrast, mandate costspayable from general taxes may provide no direct benefit to 

the taxpayer, and the amount of taxes paid usually is not 

related to benefits received. 

Should mandate costs that are incorporated into budget 

bases or rate schedules be diflerentiated from future costs that 

will add to spending or rates? Calculating those costs 

creates a practical problem of determining what percentage of existing costs is attributable to past mandate requirements, including how far back to go in determining 

such requirements. 

Should the effects of mandates be shown as apercentage 

of budgets, own-source revenues, costs per household, or on 

some other basis to make them more meaningful? In many 

cases, there is an important difference in effect between existing costs and future costs. Frequently, it is only new or additional costs that cause most governments to have budget 

problems. For example, a city that has upgraded its scwage 

treatment to required federal standards and has included the 

costs in its current sewer rates will have a problem only when 

new or increased requirements are imposed. Mandates that 

require annual operational or service expenditures, however, may become more burdensome during periods of fiscal 

stress for a state or local government. 

Other issues include (1) how to show future but unscheduled and unfinanced mandate costs to illustrate effects on annual budgets, and (2) how to treat these and 

other issues in mandate relief legislation. 

Combined Impacts are Poorly Assessed 

As suggested in Table 2-1, individual federal mandates should not be looked at in isolation. The combined 

effects of multiple requirements outweigh the costs of any 

single regulation. 

Yet, information about such additive costs is fragmentary at best and frequently unavailable, prompting the 

type of independent cost estimation surveys summarized 

above. Few cost data are available from the federal government for regulations imposed prior to 1981, when neither the Congress nor the Executive Branch routinely 

attempted to estimate the costs or benefits or the net fmancia1 effects of proposed rules or statutes. Although such procedures are now in place in the Congress, the resulting cost 

estimates are often incomplete, hastily prepared, and seldom updated. Not all legislative and regulatory mandates 

are included, and there is no procedure to provide mfomation about the costs of judicial mandates.'j 

Such information gaps undermine policymaking and 

performance in all units of government. Federal policy objectives may be unexpectedly undermined if policymakers 

are unaware of existing regulations and requirements that 

are competing for state and local attention and resources. 

For their part, state and local government officials cannot 

establish effective priorities if they are frequently blindsided by costly new federal requirements. 

The cumulative costs of multiple federal mandates 

may be substantial. Based on the data reported by cities 

and counties in Thble 2-1, local government associations 

have estimated that the sample of unfunded federal mandates selected for review were equal, on average, to about 

12 percent of local tax revenues in 1993.' Available data 

from federal government sources suggest comparable cumulative costs. 

Many of the most expensive federal requirements involve minimum environmental standards that must be 

met by states and their political subdivisions. Table 2-2 

contains EPA estimates of the total annualized state and 

local costs of complying with federal environmental directives in 1986 dollars. State costs were estimated to be $3.0 

billion in 1987, increasing to a projected $4.5 billion in 

2000. Spending by local governments was estimated to increase from $19.2 billion in 1987 to $32.6 billion in 2000. 

Table 2-2 

Annualized State and local Costs 

to Comply with Environmental Mandates, 

(millions of 1986 dollars) 

Funding Source 1972 1980 1987 1995 2000 

1972-2000 

State Government 1,542 2,230 3,025 3,911 4,476 

Local Government 7,673 12,857 19,162 27,913 32,577 

Source: U.S. Environmental Protection Agency, Eiiviiviimeiital 

Investiiieiits: The Cost of a Cleaii Eiiviioiiineiit (Washing- ton, DC, 1990), selected data from pp. 8-49 through 8-5 1. 

These estimates use a mid-range discount rate of 7 

percent and include funding to meet EPA's air, water, 

land, chemicals, and multimedia regulations. 

Although environmental regulations impose some of 

the greatest costs on state and local governments, they are 

not the only source of mandated expenditures. Othercostly regulations involve health care, access for the physically 

disabled, and employee pay and working conditions. nble 

2-3 includes a partial list of such mandates for which cost 

14 U.S. Advisoly Commission on Intergovernmental Relations 
Table 2-3 

Official Cost Estimates from Selected Fiscal Notes and Regulatory Analyses 

(m i I I ions) 

Estimated Cost 

Multi-Year 

Year Title 1991 Period1 

1983 

1983 

1984 

[ 19881 

1985 

1986 

1986 

1986 

1986 

1986 

1986 

1986 

1986 

1986 

1987 

1987 

1988 

1988 

1988 

1988 

1988 

1989 

1990 

Social Security Amendments of 19832 

National Oil and Hazardous Substances Pollution Contingency Plans3 

Hazardous and Solid Waste Amendments of 1984 

Training and Management 

Underground Storage Tanks 

Medicare Coverage for New State and Local Employees (COBRA) 

Pipeline Safety Authorization 

Water and Reclamation Projects 

DOT Handicapped Nondiscrimination Rules 

School Asbestos Removal 

Water Resources Development Act 

Employment for the Disabled Act 

Safe Drinking Water Amendments (SO WA) 

Education of the Handicapped Amendments 

Veterans Benefits and Health 

Hazardous Substances List Planning and Notification 

Fair Labor Standards Act Amendments 

Lead Contamination Control Act 

Medicare Catastrophic Coverage Act 

Family Support Act 

Ocean Dumping Ban Act 

Community Right-to-Know Act 

Medicare Catastrophic Repeal 

Hazardous Substances 

Total 

Removal and Cleanup 

Filtration 

$838 

6 

0 

100 

306 

57 

9 

178 

153 

548 

7 

269 

600 

2 

11 

85 

6 

190 

160 

33 

29 

460 

130 

$4,174 

$5,334 

651 

33 

2,250 

1,382 

213 

23 

5,357 

2,508 

1,458 

19 

3,295 

1,175 

10 

133 

1,447 

14 

780 

136 

165 

3 17 

1,115 

173 

Periods vary from 5 to 30 years. CBO estimates are generally made only for 5 years. Some agency estimates are for total lifetime costs, 

over 20 or 30 years. Total lifetime costs are used when available. 

Cost estimates for federal statutes highlighted in bold type were obtained from CBO estimates prepared for legislative consideration. 

Cost estimates for federal requirements highlighted in italics were obtained from regulatory impact analyses prepared by federal agencies during the rulemaking process. 

_____ 

estimates were available from the Congressional Budget 

Office or other federal agencies. For fiscal 1991, the estimated costs of these selected requirements totaled almost 

$4.2 billion. 

For local governments in particular, the financial burdens of mandates have also grown because of reductions 

in federal financial assistance. By one estimate, federal 

aid as a share of local revenues declined 73 percent for 

counties and 57 percent for cities between 1980 and 1986: 

and continued to decline at an average annual rate of 8.3 

percent for cities and 10.3 percent for counties between 

1985 and 1991.9 

There also have been recent changes in federal tax 

law that make state and local revenue raising more difficult. Volume caps and other limitations were placed on 

certain state and local government bonds in 1982, 1984, 

1986, and 1990. The federal income tax deduction for state 

and local sales taxes was eliminated in 1986, and deductions for state and local income taxes were restricted for 

high-income individuals in 1990. 

Distortion of State and local Priorities 

Another problem arises from the impact of federally 

induced costs on state and local budget priorities. When 

state and local officials are required to change laws or appropriate funds to comply with federal rules, they are unable to allocate budgets in accordance with locally 

determined needs. In some cases, federal mandates may 

dramatically skew the priorities of state and local jurisdicUS. Advisory Commission on Intergovernmental Relations 15 
tions. As one governor recently explained his problem 

with federal Medicaid requirements: “One of my major frustrations is I need more money for education and in€rastructure. It’s all gobbled up by skyrocketing health care.”’O 

The cumulative effect of multiple federal mandates 

creates a particularly difficult problem for 49 state governments, which, unlike the federal government, must meet 

constitutional or statutory balanced budget requirements.” 

With rare exceptions, additional spending requirements are 

financed by reductions in other areas or by tax increases. 

Erosion of Initiative 

Uniform national standards and procedures often are 

favored as a way to guarantee a minimum level of effort in 

meeting certain federal goals. Imposing one level of services or method of implementation, however, erodes the 

ability of state and local governments to experiment and 

test varying programs under different circumstances. 

Bilingual Education. One example of rigid federal directives 

is in the bilingual education program. The rules governing 

this program, intended to enhance learning by students who 

speak limited English, favor partial instruction in a student’s 

native language. Alternative approaches-such as language 

immersion and “English as a Second Language”-are strictly limited, despite serious obstacles to implementing transitional bilingual education in many jurisdictions and an 

absence of scientific evidence to justify such an approach. As 

one comprehensive evaluation study concluded: 

The case for the effectiveness of transitional 

bilingual education is so weak that exclusive reliance on this instructional method is clearly not 

justfied. Too little is known about the problems of 

educating language minorities to prescribe a specific remedy at the federal level. . . . Each school district should decide what type of special program is 

most appropriate for its own unique setting.I2 

Medicaid. Similarly, the federal-state Medicaid program, 

which is intended to provide basic health care to the indigent, 

is beset by serious problems that are widely acknowledged by 

federal, state, and local officials. Medicaid costs have been 

growing exponentially, while millions of low-income individuals lack health insurance coverage. Yet, innovative state 

proposals to restructure health care-including those that 

promise to provide broader coverage at potentially lower 

costs-frequently have been blocked by federal rules and a 

reluctance to provide waivers for experimental programs. 

Relying on waivers, moreover, can subject state experimentation to the vagaries of presidential-congressional relations 

and interest-group politics. 

Unnecessary Costs 

Federal directives also may produce waste and inefficiency in government. Sophisticated solutions or complicated administrative procedures that assume the 

availability of highly skilled personnel or advanced technology may force unduly expensive requirements on jurisdictions when a simpler solution may be as effective or 

more cost effective. 

Testing for Pollution. For example, federal water pollution regulations require the use of “best available control 

technology” (BACT). Jurisdictions may be required to 

adopt a more costly treatment method even when it will 

have a marginal effect on pollution levels. At the same 

time, rigid technology-based standards lack incentives for 

experimentation with innovative pollution abatement 

procedures that may prove more effe~tive.’~ 

Drinking Water. Similarly, the Safe Drinking Wuter Act requires that localities invest in testing for a variety of pollut- . 

ants, including those unlikely to appear in the local water 

supply. For example, some cities in the continental U.S. have 

criticized requirements to test their drinking water for an 

agricultural pesticide currently used only on pineapples in 

Hawaii. EPA argues, however, that past use of this long-lasting chemical may pose future dangers in other parts of the 

nation and that waivers are available where justified. 

Inattention to State and Local 

Resource Limitations 

Just as the problems confronting communities 

throughout the United States often vary widely, so do 

their resources. Severe problems of poverty, aging infrastructure, and eroding tax bases confront many large cities, 

for example. 

Many Small Communities. Less well recognized are the 

unique problems that confront many smaller, mostly rural 

communities. Although a majority of Americans lives in 

metropolitan areas, two-thirds of the nation’s general local governments sene fewer than 2,500 pe0p1e.l~ Such 

small governments typically operate on minimal budgets 

(see Table 2-4) with few full-time employees and even fewer specialists. Thus, many lack an adequate governmental 

infrastructure for managing the fiscal, administrative, and 

technical requirements of federal mandates. 

Communicating with 85,000 Governments. Given 

that the Census Bureau counts nearly 85,000 local governments in the United States, there may be no way to determine accurately the costs and benefits of federal mandates 

on particular communities. No federal agency is equipped 

to communicate regularly and individually with these local 

governments to help them resolve compliance problems. 

Even if an agency wishes to establish a partnership for 

more effective and efficient mandate management, the 

number of local governments is too large to allow assistance to any significant number of communities directly. 

EPA has estimated that the greatest fiscal impacts of 

environmental mandates will likely fall on many of the 

16 US. Advisory Commission on Intergovernmental Relations 
Table 2-4 

Average Annual Revenues 

of Small General Local Governments, 1986-1 987 

Population 

Average Number of 

Revenue Governments 

Less than 250 $4935 7,032 

250-499 119,207 5,269 

500-999 219,490 6,252 

2000-2999 97 1,223 2,873 

3000-3999 1,535,796 1,673 

4000-4999 2,402,382 1,187 

1000- 1999 477,844 5,975 

Source: U.S. Department of Commerce, Bureau of the Ccnsus, 

unpublished data. 

very smallest and the very largest local governments (see 

Table 2-5). Although not all of these governments have responsibility for every EPA program, they are the jurisdictions which, on average, can least afford them. 

Nevertheless, geographic impacts and variations in fiscal 

capacity generally are not accounted for when new regulations are promulgated by federal officials. 

Distortion of Accountability 

In order to evaluate government performance accurately and hold elected officials accountable for their 

actions, citizens must be able to identify the policymakers 

responsible for designing, adopting, financing, and implementing government services. Intergovernmental mandating interferes with this chain of democratic accountability 

Size 

by breaking key linkages between policy adoption and implementation. Officials responsible for setting policy objectives are freed from the responsibility for financing 

their decisions. This can distort public choices about government services and taxes and create confusion and intergovernmental conflict. 

For example, recently enacted federal mandates are 

expected to require many local governments to more than 

double user fees and taxes for environmental services.15 

Faced with such increases, many local taxpayers have begun to object to local officials, who have little choice but to 

obey the regulations. Rather than starting a productive public dialogue about the benefits and costs of alternative politics, such mandates are prompting some local governments 

to engage in blame avoidance by itemizing federal and state 

mandated costs on their utility bills and encouraging citizens 

to direct their complaints to the responsible parties. 

Double Standard 

Adding to state and local officials'concerns about federally induced costs is the fact that the federal government 

or the Congress sometimes exempts itself from compliance with the mandates. Even if they are not exempt, 

compliance with mandated standards across federal agencies may be uneven and problematic.16 

Exemptions also may be extended to federally sponsored enterprises, such as Amtrak. For example, California, Florida, Idaho, Nevada, and Oregon sued to stop the 

passenger rail corporation from flushing train toilets directly onto the tracks. Amtrak escaped liability in 1990 

when the Congress amended an unrelated bill to grant 

Amtrak immunity from suit, retroactive to February 5, 

1976, and to permit Amtrak to continue flushing toilets 

onto tracks for six more years.17 

Table 2-5 

Potential Increase in Annual User Charges from Environmental Regulations 

(dollars per household) 

Types of Regulations 

Waste Drinking Solid 

Water Water Waste Miscellaneous* Total 

0-2,500 

2,501-10,000 

10,001-50,000 

50,001-250,000 

Over 250,000 

$45 $40 $26 $59 $170 

20 15 23 32 90 

20 5 32 23 80 

20 10 28 12 70 

60 15 51 34 160 

Includes school asbestos removal and underground storage tank requirements. 

Source: Jasbinder Singh, Raffael Stein, Sanjay Chandra, and Brett Snyder, Municipal Sector Study: Impact of Environmental Regulations 

on Municipalities, prepared for the Sector Study Steering Committee, U.S. Environmental Protection Agency, Washington, DC, 

1988, p.v. 

U.S. Advisory Commission on Intergovernmental Relations 17 
Local officials also express concerns about cases in 

which the federal government exempts itself and the 

states, but not local governments, from the reach of federal statutes and regulations. Alan Beak, former executive 

director of the National League of Cities, has referred to 

the tendency of EPA to view local governments as “the 

regulated community”: 

In developing regulations for underground storage tanks, EPA exempted the federal government and States from requirements to obtain 

virtually unavailable insurance. Municipalities, 

on the other hand, none of whom are permitted 

to deficit spend, some of whom have budgets bigger than some of the small States, are not.18 

Conclusion 

These intergovernmental concerns have developed 

over many years. They raise serious issues that deserve answers. 

Notes 

‘Sec Marcella Ridlen Ray and Timothy Conlan, ‘At What 

Price? The Costs of Federal Mandatcs in the 1980s,” paper 

presented at the 54th Annual Conference of the American Society for Public Administration, San Francisco, July 18,1993, p. 

6. The Department of Transportation’s cost estimate was $4.04 

billion in 1983 dollars, which has been converted here to 1992 

dollars. 

21hid. The Department of Labor estimate was $1.13 billion in 

1984 dollars, which has been converted to 1992 dollars. Sce also, 

for example, John Kincaid, “From Cooperation to Coercion in 

American Federalism: Housing, Fragmentation and Preemp- tion, 1780-1992,” The Journal of Law and Politics 9 (Winter 

Ibid., pp. 6, 15. EPA cost estimates have been updated to 1992 

dollars, and costs applied to nonpublic schools have bcen 

omitted. 

‘Analysis of the Unfunded Mandate Surveys Conducted by the 

U.S. Conference of Mayors and the National Association of 

Counties,” June 14, 1994. 

US. Advisory Commission on Intergovernmental Relations 

(ACIR), “Estimating the Financial Effects of Federal Mandates on State and Local Govcrnnients” (draft discussion paper), Docket Book, Commission meeting, April 14, 1994. 

1993): 333-431. 

For a more detailed analysis of the procedures, performance, 

and limitations of the congressional fiscal notes process and Executivc Orders 12291 and 12612, see ACIR, Federal Regirlation 

of State and Local Governments: The Miwd Record of the 19SOs 

(Washington, DC, 1993). E.O. 12291 was superseded by E.O. 

12866, “Regulatory Planning and Review,” on October 4,1993. 

E.O. 12612 was superseded by E.O. 12875, “Enhancing the Intergovernmental Partnership,” on October 26, 1993. Howevcr, 

many of the basicprocedures and limitations of the early executive orders remain in effcct. 

’US. Conference of Mayors/Price Waterhouse, Impact of Unjiinded Federal Mandates on US. Cities: A 314 City Siiivq 

(Washington, DC, 1993) p. 2; and National Association of 

CountiedPrice Waterhouse, NACo Unfunded Mandates Srrivey 

(Washington, DC, 1993), p. 2. 

Lillian Rymarowicz and Dennis Zimmerrnan, Federal Bridget 

and Tar Policy and the State-Local Sector: Retrenclinient iii the 

1980s (Washington, DC, Library of Congress, Congressional 

Research Service, 1988) cited in US. General Accounting OEfie (GAO), Federal-State-Local Relations: Perids of the Put Decade arid Enieiging Issires (Washington, DC, 1990), p. 18 

GAO, State and Local Finances: Some hirisdictioiu Corifioorited 

by Short- and Long-Emi Problenis (Washington, DC, 1993), p. 

69. 

lo Gov. Evan Bayh, quoted in Ceci Connolly, “If Governors are 

Harbingers, Clinton Faces Tough Road,” Congressional Qiiarterly Weekly Report, August 31, 1993, p. 2261. 

“Vermont is the sole exception. 

‘*Andriana dcKanter and Keith Baker, “Bilingual Education 

May Not Be Best Way to Educate Limited-English Childrcn, 

Report Says,” Ediicatioti Times, October 5, 1981, p. 2. 

13See Robert Stavins and Thomas Grumbly, “The Greening of 

the Market: Making the Polluter Pay,” in Will Marshall and 

Martin Schram, Mandate for Change (New York, Bcrkley 

Books, 1993), pp. 197-216. 

l4 U.S. Department of Commerce, Bureau of the Census, Govern- nient Otganization, 1987 Census of Goveninierits, Vol 1, No. 1 

(Washington, DC, 1988). 

”Jasbinder Singh, Raffael Stein, Sanjay Chandra, and Brett 

Snyder, Miinicipai Sector Study: Iinpactsof Envimnniental Regiclatiorison Mirnicipalities, prepared for the Sector Study Steering 

Committee, US. Environmental Protection Agency (Washington, DC, September 1988), p. v. 

‘?See, for example, ACIR, Disability Rights Mandates: Federalanrl 

State Con pliarice with Enployrnent Ptotectioiu and Architectirra1 Bairier Retnoval (Washington, DC, 1989). 

17National and Community Service Act of 1990,104Stat. 3127,42 

U.S.C. 12401 note. 

l8 Alan Beak, “Meeting the Environmental Challenges,” in Paying for Pmgms: Perspectives on I;iriaricing Eiivim~iriiental Ptotecti017 (Washington, DC: US. Environmental Protection Agcncy, 

1990), p. 20. 

18 U.S. Advisory Commission on Intergovernmental Relations 
Federally Induced Costs 

Practices that Impose 

Federally Induced Costs 

The federal government imposes financial costs on 

state and local governments in at least nine ways. Most familiar is the concept of direct mandates-statutory, regulatory, or judicial orders requiring state and local 

governments to offer a benefit, establish a program, or enact laws or regulations. Other actions and inactions by the 

federal government also can increase state and local expenditures. 

Federally induced costs can be generated by: 

Statutory direct order mandates; 

Grant-in-aid matching requirements; 

Grant-in-aid conditions on spending and administration; 

Total statutory preemption; 

Partial statutory preemption; 

Federal income tax provisions; 

Mandates, preemptions, and grant conditions implied by federal courts and administrative agencies; 

Regulatory delays and nonenforcement; and 

Federal exposure of state and local governments 

to liability lawsuits. 

Some of these techniques require affirmative state 

and local obligations or activities. Other federal laws or 

regulations may induce costs by prohibiting or restricting a 

cost-effective state or local practice and requiring a more 

expensive alternative. Other federal rules or statutes reduce the capacity of state and local governments to raise 

revenues. Finally, costs may be imposed as an indirect or 

ancillary consequence of an independent federal policy 

that implies a role for state or local governments, as when 

federal immigration policies create a larger local school 

population that must be served. 

A matrix of the principal policy instruments and their 

financial impacts is presented in Zible 3-1. Some, such as 

direct mandates, can have both direct and indirect financial effects on state and local governments. Others, such 

as tax policy provisions, have more focused effects. Each 

of these techniques and types of financial impact is discussed below. 

Statutory Direct Order Mandates 

Direct order mandates imposed by federal statute direct a constitutionally subordinate jurisdiction to take certain actions. Such orders may be supported by civil 

penalties, fines, or criminal sanctions for noncompliance. 

Direct order mandates can take both positive and negative forms. They may order a single jurisdiction or an entire class of governments to establish a new program or 

alter an existing one to improve the level of services or to 

raise minimum standards. Alternatively, a direct order 

may prohibit, halt, or restrict a specific governmental 

practice or program. 

The Congress has used direct order mandates to require specific and sometimes costly actions by state and local governments. For example: 

1) The Fair Labor Standards Act (FLSA) requires 

that local governments meet minimum national 

standards for pay and overtime conditions for 

their employees.' 

2) The Asbestos Hazard Emergency Response Act of 

I986 requires local school systems to inspect for 

and remove hazardous asbestos materials from 

school buildings. 

3) The Voting Accessibility for the Elderly and Handicapped Act of 1984 requires that all state and local 

polling places used in federal elections be made 

accessible to the physically disabled. 

U.S. Advisory Commission on Intergovernmental Relations 19 
Table 3-1 

Instruments and Types of Federally Induced Costs 

More Direct Less Direct 

Fiscal Effect Fiscal meet 

Statutory Judicial Cross Crossover Tax Policy Mandate Mandate Cut Sanction Action Partial Full Policy Action 

Direct Order Condition of Aid PreemDtion 

Impose Direct Costs X X X X X X 

Restrict Revenues X X X 

Prohibit Cost-Effective Alternative X X X X X X X 

Ancillary Impact X 

In other instances, the Congress, like the courts, has 

issued negative directives that impose incidental or indirect costs. For example, as a result of the federal ban on 

dumping sewage sludge in the oceans, contained in the 

Ocean DumpingBan Act of 1988,2 some municipalities had 

to adopt more expensive disposal methods.‘ 

Other statutes have combined prohibitions with affirmative mandates. For example, amendments to the Social 

Security Act of 1935; adopted in 1983, prohibited state and 

local governments from terminating participation? Subsequent amendments increased contribution rates several 

times for all employers, including the public sector? 

These changes cost state and local governments an estimated $470 million in 1984, $750 million in 1988, and $810 

million in 1989.7 

Expenses associated with Social Security also grewbecause the amendments required state and local governments to deposit the tax withholdings twice instead of 

once a month. Deposits were accelerated further by the 

Omnibus Budget Reconciliation Act of 1986.8 Overall, between 1983 and 1990, state and local governments paid an 

additional $7.5 billion in OASDI and health insurance 

taxes as a result of these changes? 

In large part, the costs associated with these Social 

Security requirements were incurred because state and 

local governments lost their special status under the 

act. Once these governments were required to provide 

coverage like most other employers, they had no recourse from the increases. 

In other cases, federal mandates have imposed higher 

standards on the public sector than on the private sector. For 

example, small businesses with fewer than 15 employees are 

exempt from the employment requirements of the Americans with Disabilities Act.’* Local governments must comply 

with the act regardless of size or number of employees.” 

Statutory Crant-in-Aid Conditions 

Public dialogue about federal mandates is often complicated by the tendency to equate federal grant-in-aid 

conditions with direct order mandates. Even though the 

two types of requirements can be equally expensive, they 

are quite different conceptually and constitutionally. 

Program- Specific Grant Conditions. Theoretically, conditions of aid are distinguishable from direct order mandates because a state or a local government can refuse to 

apply for or accept the federal grant. Although this legalistic approach seemed plausible when federal aid constituted a small and highly compartmentalized part of state 

and local revenues, it overlooks current realities. Many 

grant conditions have become far more integral to state and 

local activities-and far less subject to voluntary forbearance-than originally suggested by the contractual 

model. 

In addition, in what state and local officials liken to a 

governmental version of “bait and switch,” new requirements may be added after a program is in effect, service 

populations may be expanded or redefined, and existing 

local practices may be restricted or prohibited. Even if 

such changes are expensive, politically and administratively a recipient government may find it difficult to withdraw 

from the program because: 

It has already incurred substantial start-up costs. 

It may have abolished its own program in favor of 

the federal initiative. 

The public may have come to rely on the benefits 

provided by the grant program. 

The jurisdiction may depend heavily on thefedera1 money. 

A clear example is Medicaid, which provides health 

care to eligible individuals who fall below certain income 

levels or are medically needy. With its inception in 1965, 

all states except Arizona elected to join the program, 

which is funded jointly by the federal and state governments.I2 Initial state expenditures of $680 million in FY 

196613 grew to $27.325 billion in FY 1989.14 Now the sole 

source of health care for millions of low-income Americans, Medicaid has become an indispensable government 

service, and even Arizona participate^.'^ 

H 

m 

20 U.S. Advisory Commission on Intergovernmental Relations 
Such mandated service expansions are particularly 

troublesome to states. The National Association of State 

Budget Officers (NASBO) estimates that Medicaid expansions since 1988 cost states an additional $2 billion in 

FY 1991. Through fiscal year 1995, the estimated cumulative costs total $17.4 billion.16 

Seeking a degree of cost control, the National Governors’ Association (NGA) urged the Congress either to 

fund Medicaid expansions or permit states to adopt program expansions at their option.” To assure federal 

policymakers that coercive federal action was not necessary and that states would not forget the health care needs 

of the poor, NGA emphasized that in 1986 it had recommended a federal law “allowing States to expand Medicaid 

programs to cover all pregnant women and children up to 

age 18 with family incomes below the federally established 

poverty level.” Most states adopted the option.’* 

The Congress ignored NGA’s recommendation for 

federal funding of voluntary compliance with such expansions. In 1990, the Congress expanded benefits further for 

children, low-income elderly individuals, and mentally retarded persons. Federal laws also required Medicaid coverage for children under age 19 over a five-year period.lg 

Prior to that time, the coverage applied only to children 

55 miles per hour by threatening to withhold up to 10 percent of their federal aid highway funds if they did not comply.22 The states reluctantly agreed. Other laws have 

required the withholding of 5 or 10 percent (occasionally 

more) of highway funds unless states enact certain statutes. 

These requirements have increased the minimum legal age 

for purchasing alcoholic beverages, imposed new licensing 

procedures for commercial truck drivers, required helmets 

for motorcyclists, and produced many other actions. 

Noncompliance with these requirements could have a severe impact on state budgets. For example, Wisconsin’s Department of Transportation recently estimated that the state 

could lose all of its federal aid highway funds if one or more 

of the applicable penalties were assessed (see ’Mle 3-2). 

State and local officials object to crossover sanctions 

because: 

1) They involve several, often basic, programs si- multaneously and are difficult to avoid. 

2) The monitoring, enforcement, and compliance 

expenses increase costs of operation. 

3) They can be used to invade the most basic areas of 

state and local responsibility 

For example, in 1990, the Congress ordered that 25 

percent of FY 1991 funds that might be obligated for fedbe withheld from my state that has a public responsible for public transportation an u~ized area with 

a 1980 population of 3 million or more but did not have, by 

October 1. 1ggo. state lam that authorize: 

under age 7. These changes are estimated to cost states an 

additional $33 billion over the five-year period.20 

for expansion and increased expenditures do not come 

SOkly from the Congress. The U.S. Supreme court ruled 

in 1990 that the Virginia Hospital Association had the 

right to sue the state for failing to adopt Medicaid reimOnce a program Of this nature begun, the pressures era1 aid highway and highway safety construction program 

bursement rates that were deemed adequate and reasonable.*’ Virginia was supported in opposition to this suit by 

amicus curiae briefs filed by 37 other states. 

Matching Requirements. Many federal aid programs are 

established explicitly to draw state and local governments 

into activities in which they did not previously operate, 

getting them to spend some of their own funds and ensuring that they do not decrease the amount of own-source 

funds by substituting federal money. Program expansion is 

the federal goal. Matching requirements, maintenanceof-effort provisions, and “non-supplant” clauses are used 

to achieve this goal. 

Crossover Sanctions. Crossover sanctions are conditions 

not directly related to the purpose of the grants. Over the 

last two decades, the Congress has used this mechanism to 

require state and local governments to take actions that 

the federal government lacked the constitutional authority to order directly. 

Crossover sanctions have been used most commonly 

in conjunction with federal transportation spending. One 

of the first came during the Arab oil embargo of the early 

1970s. In an effort to conserve gasoline, the Congress persuaded the states to lower their maximum speed limits to 

Subject 

Table 3-2 

Crossover Sanctions 

in Federal Highway Programs 

Possible Sanctions 

as a Percentage 

of Federal 

Highway Funds 

Highway maintenance up to 100.0% 

Interstate maintenance 6.2 

Maintenance of user fee effort 33.3 

Truck size and weight enforcement 6.2 

Access to Interstates for 80,000 lbs. trucks 100.0 

Mandatory urban planning 5.0 

55 m.p.h. speed limit 100.0 

55 m.p.h. speed compliance 3.5 

Vehicle inspection/maintenance 4.0 

Outdoor advertising 6.2 

Junkyard control 6.2 

Nondiscrimination 100.0 

Minimum drinking age (21 years) 6.2 

Source: Wisconsin Department of Transportation. 

U.S. Advisory Commission on Intergovernmental Relations 21 
A general source of tax revenue to take effect on 

or before January 1,1992, dedicated to paying the 

nonfederal share of projects for mass transportation eligible for assistance under the Urban Mass 

Transportation Act of 1964; or 

The establishment of regional or local sources of 

tax revenue dedicated to paying such nonfederal 

share or for paying operating expenses of mass 

transit service so as to satisfy financial capacity 

standards as may be required by the Secreta’ry of 

lhnsportation.” 

The sanction was to be continued for calendar year 

1992 if enabling statutes had not been enacted before October 1,1991. A waiver could be obtained if the governor 

submitted to the Secretary of Transportation by October 1, 

1991, a written certification stating that: 

(1) He or she is opposed to the enactment of a law 

described in subsections (a)(l) and (2), and that 

funding as described in subsections (a)(l) and 

(2) would not improve public transportation 

safety; and 

(2) The legislature (including both houses where 

applicable) has adopted a resolution, by a simple 

majority, expressing its opposition to a law described in subsections (a)(l) and (2).24 

Despite the disruptive potential of crossover sanctions, 

constitutional challenges have been rejected by the courts. In 

1984, for example, President Ronald Reagan signed into 

law legislation depriving states of federal aid highway 

funds if they failed to raise the minimum alcoholic beverage purchase age to 2LZ5 South Dakota sued to overturn 

this limitation, maintaining that the 21st Amendment to 

the Constitution granted power to regulate alcohol consumption solely to the states. The statute was upheld by 

the U.S. Supreme Court as a legitimate use of the conditional spending power in South Dakota v. Dole.% 

The Congress has shown some signs of sensitivity in recent 

years to the objections leveled at crossover sanctions. Some 

recent crossover sanctions have had an “opt out” provision 

for states to use under certain conditions. 

In addition to the waiver provision described above, 

the Congress recently added a waiver when it required 

that 5 percent of federal highway funds be withheld if a 

state, effective October 1, 1993, failed to suspend for six 

months the driver’s license of any person convicted of a 

drug offense. The withholding will increase to 10 percent 

on October 1, 1995.27 That sanction will not be invoked, 

however, if a governor submits to the Secretary of Transportation written certification of opposition to the enactment or enforcement of a mandatory suspension law and 

that the state legislature has adopted a resolution expressing its opposition to such a law. 

Crosscutting Requirements 

Crosscutting requirements apply to all or many different federal aid programs simultaneously. Many of these 

requirements, in fact, apply to any recipient of funds from 

any federal assistance program. 

One of the earliest examples of a crosscutting requirement was the 1940 Hatch Act, which prohibits public 

employees in federally assisted programs from engaging in 

various political activities.28 Other examples include Title 

VI nondiscrimination standards and requirements of the 

National Environmental Policy Act for consideration of environmental protection issues during review of certain 

federally funded projects.B 

Some crosscutting requirements are controversial be- cause of their specific provisions or their application. For example, the Davis-Bacon Act3’ requires federal aid 

recipients to pay the prevailing wage scale for work on 

construction projects funded with federal dollars. Many 

small and rural governments, in particular, complain that 

this often can add considerably to the cost of construction 

projects when the “prevailing wages” are based on union 

scales in the higher cost metropolitan areas. Similarly, the 

Endangered Species Act of 1973 has sometimes halted federally assisted projects in order to protect plants and animals. 

Otherproblems stem from the sheer numbers andproliferatinguse of thispolicy tool. By one official count, there were 

59 crosscutting requirements in effect as of 19@13’ Since 

that time, additional requirements have been enacted to 

ensure that federal aid recipients (1) maintain a drug-free 

workplace, (2) prohibit discrimination against the disabled, and (3) follow new cash management procedures 

for federal aid funds. 

Because they apply to all or most federal grant programs, the proliferation of such requirements has undermined efforts to deregulate the federal aid system and 

provide greater discretion to state and local governments 

in the use of federal Even federal block grants and 

other “few strings” forms of federal aid must comply with 

many crosscutting requirements. 

Statutory Preemption 

Federal preemption may impose costs by substituting 

federal jurisdiction for state and local a~thority.~~ Federal preemption statutes may be total or partial. In a traditional case of total preemption, the federal government 

asserts full regulatory authority over some function or activity, thereby excluding state or local participation. Partial 

preemption typically is a joint enterprise, whereby the federal government exerts its constitutional authority to 

preempt a field and establish minimum national standards, but allows regulatory administration to be delegated to the states if they adopt standards at least as strict 

as the federal rules. 

Total Preemption. Preemption, such as the prohibition on 

state regulation of bankruptcies, often involves no direct 

22 U.S. Advisory Commission on Intergovernmental Relations 
cost to state and local governments, although they may object to what they regard as federal intrusion on other 

grounds. In some cases, however, a preemption that bars 

state or local government exercise of a specific power can 

have financial consequences because it may: 

rn Erect barriers to new revenue sources or reduce 

collections from existing sources; 

rn Impose direct costs; or 

rn Generate indirect expenses. 

From a fiscal standpoint, restraints ofgreatest concern are 

those that block or reduce state or local government authority 

for raising revenue. The Airport Development Acceleration 

Act of 1973, for example, prohibited state and local governments from levying a tax or any other charge “on persons traveling in air commerce’’ or a gross receipts tax on 

airline revenues.34 That ban stood until 1990, when the 

Congress repealed it and authorized a tax on travelers, not 

exceeding $3.00 per boarding or $12.00 per round trip, depending on the number of boarding^.^^ 

Traditional sources of state and local government revcnue, such as the property tax, are targets of fcderal bans 

as well. The Railroad Revitalization and Regulatory Reform 

Act of 1976 prohibits state or local governments from levying a discriminatory property tax on railroad 

Court challenges to such barriers have been rejected. The 

California Board of Equalization, for example, maintained that an additional property tax levied on railroad 

cars was an attempt to correct an earlier miscalculation of 

taxes. This argument was rejected by the U.S. Court of 

Appeals for the Ninth 

Afederal preemption restraint also may contribute to 

a loss of revenue for a state or local government. Federal 

law, for example, stipulates that tolls on the Verrazzano 

Narrows Bridge connecting Brooklyn and Staten Island, 

New York, may be collected only as vehicles leave the 

bridge on Staten Island.38 This has resulted in the Triborough Bridge and Tunnel Authority losing approximately 

$2 million annually in toll revenues. It also increased congestion in the Holland Tunnel under the Hudson River as 

motorists returned to Staten Island through New Jersey to 

avoid payment of the toll.39 

Federally imposed constraints on state and local government authority may sometimes lead directly to additional expenditures. As noted earlier, the federal ban on dumping 

sewage sludge in the oceans, contained in the Ocean 

Dumping Ban Act of 1988,40 means that some municipalities must utilize other, sometimes more expensive, means 

of disposing of the sludge. This prohibition was premised 

on federal preemption of the authority to regulate ocean 

waters and the portion of the continental shelf that falls 

within the territorial limits of the United States. 

Federally imposed constraints on state and local government authority also may have indirect or unintended eflects on 

eqenditures. States are forbidden by federal law (based on 

the Interstate Commerce Clause of the Constitution) 

from conditioning the issuance of a franchise to operate 

buses between two major cities on agreement by a carrier 

to provide service to small communitie~.~~ To ensure bus 

service to these communities, many states now provide direct subsidies to these carriers. 

Partial Preemption. As noted earlier, partial preemption 

programs are those in which the federal government has 

exerted its legal authority to preempt a field of regulation 

and to establish minimum regulatory standards. States are 

allowed to administer the standards, subject to federal approval, and often to develop stricter ones if they so desire. 

Many of the most important environmental programs take 

this approach, including the Clean Air Act, the Clean Water 

Acr, and the Safe Drinking WaterAct, as do the Occupational Safety and Health Act and the federal meat and poultry 

inspection programs. 

Such programs can involve substantial costs for compliance and administration. Some of these costs can be 

viewed as voluntary, but others are not. For example, if a 

state government wishes to establish a regulatory program 

in a particular area, it must be consistent with federal standards. Requirements in existing state or local laws or ordinances must be upgraded if they fall below federal 

standards. Standards above those set by federal law usually are allowed to stand. 

Legally, the state decision to administer a partial 

preemption program is voluntary. States that do not have 

a program in a particular area or do not wish to assume the 

costs of administration and enforcement can opt out and 

allow the federal government to enforce the standards. 

Thus, programs such as OSHA and the Suqace Mining 

Control and Reclamation Act of 1977 have a pattern of 

mixed administration throughout the country. 

This voluntary approach is less evident in other partial 

preemption programs. All states are responsible for devising implementation plans to enforce standards under the 

Clean AirAct. The U.S. Environmental Protection Agency 

does not have the staff or the resources to implement the 

program directly, and it has effectively resisted occasional 

state efforts to withdraw from program implementation. 

If a state fails to develop an acceptable plan, EPA is 

empowered to do so. To “encourage” the state to enforce 

this federally devised plan, the law allows the federal government to withhold federal highway funding. The threat 

of this crossover sanction has prevented states from withdrawing from the program, but the result has been likened 

to “legal conscription,” in which the federal government 

has been able to “draft” state and local government resources “into national service.”42 

Many partial preemption programs have another regulatory dimension that can impose costs on states, and especially on local governments. For example: 

1) Local sewage treatment plants must meet federal 

standards under the Clean Water Act. 

U.S. Advisory Commission on Intergovernmental Relations 23 
2) Local water systems must meet federal standards 

under the Safe Drinking Water Act. 

3) State and local governments must meet safety 

standards under the Occupational SaIety and 

Health Act, as well as underground storage tank 

requirements under the Hazardous and Solid 

Waste Amendments of 1974. 

Such mandates, which are administered through partial 

preemption programs, often impose multi-billion dollar 

costs on affected governments. 

Statutory Tax Policies 

As illustrated by the discussion of preemption, some 

federal policy actions affect state and local finances by limiting their ability to raise revenues and promote local economic de~elopment.~~ Such impacts have become increasingly 

important features of federal income tax law, particularly 

during the 1980s when certain restrictions on state and local 

bond activity were written into federal revenue statutes. 

The Tar Equity and Fiscal Responsibility Act of 1982 

was one of the first statutes to contain this sort of limitati~n.~~ The act requires states and local governments to issue only registered bonds instead of traditional bearer 

bonds. If a jurisdiction fails to do so, the interest on the 

bonds will be subject to the federal income tax. The constitutionality of the bond registration provision was upheld 

by the U.S. Supreme Court in 1988.45 

In addition, the 1982 act removed the federal tax exemption from any industrial revenue bond (IRB) that financed “private activity” projects, such as small 

businesses, and all small issue IRBs were to be eliminated 

by 1986. (They were eliminated in 1992, but were reinstated retroactively in 1993.) 

Additional tax limitations followed the 1982 act. In 

the Deficit Reduction Act of 1984, the Congress placed a 

cap on the issuance of industrial development bonds. Two 

years later, the Tar Reform Act of 1986 imposed tighter 

limitations on such private-activity bonds and restrictions 

that affected traditional public-purpose borrowing. For 

example, state and local government issuers of long-term 

bonds must rebate any arbitrage profit to the U.S. Treasury or lose the income tax e~emption.~~ In addition, some 

tax exempt interest was made subject to a new alternative 

minimum tax. Some of these changes have made it more 

difficult to privatize public functions and to establish publicprivate partnerships. 

Intergovernmental tax competition represents another form of fiscal impact. When the federal government 

competes with state and local governments for an identical source of tax revenue (such as the income and gasoline 

taxes), the financial consequences can be substantial. This 

is true even though, unlike restrictions on the tax treatment of certain state and local bonds, there may be no intention to restrict state or local revenue sources. 

~ ~ ~~ 

24 U.S. Advisory Commission on Intergovernmental Relations 

Implied Mandates, Preemptions, 

and Grant Conditions 

Frequently, policy decisions by federal courts and executive branch agencies cause state and local government 

expenditure increases. These increases may be as significant as those imposed by statutes enacted by the Congress. 

Historically, the federal courts relied on negative 

remedies to influence state and local government behavior. For example, they placed restrictions on police interrogation practices, prohibited religious activities in public 

schools, and overturned local ordinances. Although still 

commonplace, such prohibitions have been supplemented 

in recent years by judicial orders that impose affirmative 

duties on state and local governments. For example, 

courts have ordered governments to: 

1) Meet higher minimum standards in the housing 

and treatment of prisoners; 

2) Improve conditions in state mental health facilities, 

3) Integrate local school systems; and 

4) Improve public housing conditions. 

Although such affirmative responsibilities often address 

important needs, they can be costly-often much more 

costly than traditional negative remedies. 

To illustrate further the impact of implied federal regulations, consider the costs of illegal immigration, overcrowding in public institutions, and administrative 

rulemaking. 

Immigration. Because the federal government has exclusive constitutional authority to control immigration and 

determine the process of nat~ralization,~’ the U.S. Supreme Court has declared that state and local governments have no authority to close their borders to legal or 

illegal immigrants or to refuse public services to them. In 

fact, court orders give priority for certain services to illegal 

immigrants. 

Thus, federal decisions to admit large numbers of refugees, the failure to prevent illegal immigration, and the 

lack (or inadequacy) of federal aid for serving and assimilating immigrants, all impose major costs on “gateway” 

state and local governments where immigrants concentrate. In fiscal year 1989, for example, approximately 

107,000 refugees were admitted to the United States. 

Many of them did not speak or understand English; some 

lacked job skills; some had health needs they could not pay 

for; and some had to be incarcerated. Thus, the costs of 

providing services to immigrants can be substantial!* 

The autumn 1989 annual survey of refugees from 

Southeast Asia who had been in the United States less 

than five years revealed that only 37 percent of those aged 

16 and older were in the labor force compared to a 63 percent rate for the United States population as a whole.49 

Lack of English proficiency was the major reason for failure to participate in the labor force. Refugees who spoke 
no English had a labor force participation rate of 7 percent 

and an unemployment rate of 29 percent. In comparison, 

refugees who spoke English well had a labor force participation rate of 55 percent and an unemployment rate of 

only 3 percent.50 

Mayor Pam Slater of Encinitas, California, sent to the 

federal government a bill for $225,356.20 for services provided by the city to illegal immigrants. Explaining her frustration over the financial burdens of providing for these 

additional residents, she characterized the federal government’s view of this problem: 

They’ve said, “O.K., we’re not going to enforce the 

border and we are not going to take charge of immigration, but it’s up to your local hospitals, your local 

schools, your local social services agencies to provide for the needs of these indigent people.”” 

Similarly, Virginia A. Collins, of the Los Angeles 

County Chief Administrator’s Office, testified in 1990 before a U.S. House of Representatives subcommittee that 

the county’s budget problems are, in part, due to federal 

immigration policies over which they have no control. She 

added that more than 850,000 undocumented aliens 

applied for legal status under provisions of the Immigration Reform and Control Act of 1986; approximately onequarter of them settled in the county and more than 

70,000 went on welfare.s2 

Demands placed on local education services can be particularly costly. Operating costs and state assistance to educate foreign-born students in the Dade County, Florida, 

public schools are shown in able 3-3. Federal and state assistance and unreimbursed costs are included in Thble 3-4. During the academic year 1989-90, for example, unreimbursed 

operating expenses totaled $3,233,642. Inclusion of the capital costs would increase the total amount significantly. 

Table 3-3 

Operating Costs and State Assistance 

for Foreign-Born K-12 Students 

Dade County Public Schools 

1987-88 to 1989-90 

School Number Operating State 

Year of Students costs Assistance 

1987-88 13,047 $45,246,996 $37,601,454 

1988-89 18,391 69,083,482 57,894,868 

1989-90 14,699 60,207,104 50,020,697 

Source: Letter from Stanley R. Corces, Executive Director, Division of the Budget, Dade County Public Schools, dated 

November 2, 1990. 

Although there are federal provisions for some reimbursement of state and local government costs by the federal government (described in Chapter 4), even this 

assistance is being reduced.53 Furthermore, state and local 

governments face special challenges in documenting their 

expenses for reimbursement. 

Speaking before a U.S. Senate subcommittee in 1990, 

Dade County, Florida, Manager Joaquin Avino referred to 

the inherent difficulties involved in identifying 

the amount and cost of public assistance and public health services provided to legalized aliens 

who are reluctant to identify themselves as such 

to our service providers. The confidentiality restriction set by IRCA [Immigration Reform and 

Table 3-4 

Estimated Unreimbursed Costs of Foreign-Born Students K-12, Dade County Public Schools, 

1987-88 to 1989-90 

1987-88 1988-89 1989-90 

Average state revenue per full-time student 

Average cost per full-time student 

Unreimbursed costs per full-time student 

Foreign-born student registrations 

Costs unreimbursed by state 

Federal revenues: 

Targeted assistance/entrant 

Emergency immigrant 

Transitional refugee 

Total 

Unreimbursed operating costs 

$2,882 

3,468 

13,047 

7,645,542 

4,786,800 

1,215,654 

1,105.887 

7,108,341 

(537,20 1) 

(586) 

$3,148 

3,702 

18,391 

10,188,614 

4,729,400 

922,294 

1,055.626 

6,707,320 

(3,481,294) 

(554) 

$3,403 

4,096 

14,699 

10,186,407 

4,154,019 

1,004,215 

1.794.531 

6,952,765 

(3,233,642) 

(693) 

Source: Attachment to a letter from Stanley R. Corces, Executive Director, Division of the Budget, Dade County Public Schools, dated 

November 2, 1990. 

U.S. Advisory Commission on Intergovernmental Relations 25 
Control Act] has placed Dade County and other 

county programs at a disadvantage, and in some 

cases, in the impossible position of having to 

scramble after the fact to identify legalized aliens 

who use county ser~ices.5~ 

Some observers argue that immigrants and refugees, 

as a whole, make up for the financial burdens they impose. 

Dan Stein, Executive Director of the Federation for 

American Immigration Reform, however, wrote that it is a 

myth that “immigrants pay more in taxes than they use in 

benefits.” He added: 

Those making this claim use a definition of “benefits” that excludes medical care, education, public 

housing, physical infrastructure, and a wide range 

of other social services. At the federal level, immigration is about a break-even proposition, but at the 

state and local levels, where most of these services 

are provided, immigration is costly.55 

Overcrowding in Public Institutions. Citing Section 1983 

of a post-Civil War civil rights act and the Constitution’s 

protection against cruel and unusual punishment, the 

U.S. Supreme Court has affirmed federal court decisions 

that mandate hundreds of state and local construction 

programs designed to relieve overcrowding in jails, prisons, and mental hospitals. One effect of this decision has 

been to make state and local spending on corrections the 

fastest growing part of many public budgets. 

Administrative Rulemaking. Many federal statutes that 

regulate state and local governments go into effect only 

after the executive branch makes the administrative rules. 

This process also is a source of added costs for state and 

local governments. A recent ACIR report, based on GAO 

research, illustrates this point using the Clean Air Act, Fair 

Labor Standards Act, and Occupational Safety and Health 

Act 

Regulatory Delays and Nonenforcement 

The administration of many federal regulations and 

the availability of judicial remedies in addition to administrative appeals may introduce substantial delays and uncertainties that translate into extra costs. ACIR research 

into environmental decisionmaking procedures illustrates 

this point?’ 

In addition, lack of enforcement, or delayed or selective enforcement, of certain federal requirementson 

federal lands allows pollution to spread to other jurisdictions, increasing the costs that state and local governments must bear. 

Statutory Liability Exposures 

It has become common in federal statutes to provide 

an alternative enforcement mechanism that allows citizens to bring lawsuits against state and local governments 

if they are thought to be complying inadequately with federal regulations. This has the potential to induce state and 

local costs for legal defense, additional compliance, and 

penalties. One program with potentially large liabilities is 

the Superfund toxic wastes cleanup program in which 

state and local governments may be held liable for very 

large costs of cleaning up wastes produced by others. 

Determining Costs 

The growing magnitude of costs associated with these 

federal practices has sparked interest in establishing some 

form of systematic reimbursement. Yet, such costs cannot be 

reimbursed directly unless they can be calculated reliably. 

Determining the magnitude of federally induced 

costs is a difficult task that is not being done well. It requires at least two steps, which are examined here: (1) 

identifying the types of expenses to be counted, and (2) devising practical and replicable methods for preparing reliable estimates of projected costs. 

Estimating associated benefits and effects on the economy are beyond the scope of this report. Although those issues are important for other reasons, they are not essential 

to the first-order imperative to get costs under control. 

Identifying the Types of Expenses Incurred 

Federally induced costs fall into the following general 

categories: (1) direct financial expenses; (2) indirect financial expenses; (3) lost revenues; and (4) ancillary costs and 

expenses. 

Direct Financial Expenses. A variety of direct financial expenses may be incurred by state and local governments that 

are mandated to provide new services, meet higher regulatory standards, or serve new client populations. Among other 

things, they may be required to hire additional personnel; 

enhance training; provide new personnel benefits; construct 

new facilities; mod@ existing facilities and infrastructure; 

test for and remove hazardous substances; purchase new 

equipment; serve additional clients; and pay legal fees, fines, 

and penalties for noncompliance. 

For example: 

The Safe Drinking Water Act Amendments of 1986 

require local water systems to test for up to 83 potential contaminants and meet new filtration and 

disinfection requirements. 

The Americans with Disabilities Act of 1990 requires modifications to public facilities and more 

accessible public transportation vehicles. 

The Fair Labor Standards Act Amendments of 1986 

require changes in the pay and overtime compensation of various categories of state and local government employees. As noted earlier, recent 

26 U.S. Advisory Commission on Intergovernmental Relations 
federal amendments to the Medicaid program 

have significantly expanded the eligible population that states must serve under this program. 

Indirect Costs. Additional expenditures may be an indirect 

result of federal regulations and mandates. For example: 

A jurisdiction may be forced to purchase a new or 

more costly computer system to accommodate 

the accounting or reporting requirements associated with mandated activities. 

Additional management time may be required to 

coordinate the expanded government activities. 

Part-time elected officials may feel pressured to 

become full-time public servants in order to properly monitor an expanded and more active government. 

A preferred or more cost-effective method of service delivery may be prohibited by a federal mandate, requiring the implementation of a new and 

more costly alternative. 

An example of this fourth point is the Ocean Dumping 

Ban Act of I988 prohibition on dumping municipal sewage 

sludge in offshore ocean areas. The Congressional Budget 

Office estimated that the affected jurisdictions would be 

required to pay an extra $33 million in 1991 to dispose of 

sludge in landfill sites. The act also has led to fines being 

levied on violating municipalities. Nassau County, New 

York, paid $30,000 per day, beginning on May 16,1990, for 

failing to implement a 1989 U.S. District Court consent 

decree resulting from a suit brought under the The 

county had paid over $1 million dollars in penalties as of 

August 25, 1990. 

More broadly, the Colorado Municipal League released the results of a 1990 survey, which reportcd that: 

Local government costs associated with environmental mandates often arise not just from the direct requirements of the mandates., , , but from 

the lack of organization and coordination within 

and between various parts of the federal and state 

governments charged with administering these 

mandatess9 

Quantifying these costs can be especially difficult. 

The league also reported bba disturbing trend in developing 

environmental regulatory programs” that impose “upon 

local governments the policing and enforcement function 

to back up the federal regulatory scheme. No financial 

support is provided to local governments for execution of 

this function. . . .’’60 Furthermore, “the ever-changing nature of environmental mandates” restricts the ability of local governments to utilize their “resources efficiently to 

meet these ‘moving targets.’ ”61 

Lost Revenue. Reductions in state and local revenue collections constitute another category of financial impact associated with certain federal statutes and regulations. As 

noted earlier, several changes in federal tax law during the 

1980s reduced the relative financial attractiveness of certain state and local bond offerings, thus making borrowing 

more difficult or costly. In addition, caps or limitations 

were placed on certain kinds of local bonds, and the personal income-tax deduction for state and local sales taxes was 

eliminated. Some federal statutory preemptions and regulations have restricted or eliminated user fee revenues. 

Federal laws regulating the development of wetlands62 also illustrate how federal policies may reduce 

state or local government revenue. These laws have resulted in some state and local governments losingproperty tax revenues when a developer cannot obtain the 

required permit from the U.S. hy Corps of Engineer~.~~ However, this is also a case where proponents of 

mandates argue that such mandates may have long-run 

economic benefits overlooked when estimating shortterm costs. 

Ancillary Financial Impact. Finally, new or additional financial demands may be placed on state and local governments as an unintended or incidental result of federal 

policy decisions. For example, one effect of the failure of 

federal drug interdiction programs to stem the supply of 

drugs into the United States is to increase demands on local law enforcement and drug treatment services. 

Another example involves nuclear power. The Atomic 

Energy Act of 1946 assigns complete responsibility for regulating nuclear power plants to the U.S. Nuclear Regulatory Commission. Due to a lack of resources, the 

commission relies on state and local governments for 

emergency personnel and equipment to protect public 

health and safcty in the event of a radioactive discharge at 

a nuclear generating station.” 

Confusion regarding the respective responsibilities of 

a state and the Nuclear Regulatory Commission induced 

Governor Mario M. Cuomo of New York to request U.S. 

Senator Daniel Patrick Moynihan of New York to 

initiate a hearing process to: (1) achieve a clarification and a precise specification of the respective responsibilities of local, state, and federal 

governments for off-site emergency plans at our 

nation’s nuclear plants, and (2) devise a federal 

system for the administration and funding of the 

extensive activities undertaken by all three levels 

of government in the implementation, and (3) examine the consequences of decisions required by 

this off-site emergency planning process.6s 

Estimating the Magnitude of Costs 

The full scope of federally induced state and local expenditures is unknown, in part because no government 

agency or individual has developed a comprehensive tabulation of such costs or established the relationship between 

costs and benefits. As indicated in Chapter 1, there has been 

an increasing number of efforts to estimate the financial imU.S. Advisory Commission on Intergovernmental Relations 27 
pacts of individual mandates and groups of requirements, 

but neither the Congress nor the executive branch has devoted the resources necessary to inventory, measure, and assess the full universe of federally induced costs. 

Technical and definitional problems also hamper efforts to estimate the widely varying financial impacts of 

disparate federal requirements. These include: 

Lack of knowledge and procedures within the 

federal government to develop accurate. estimates of cost impacts on state and local governments; 

Lack of consensus about what constitutes a federal mandate or a federally induced cost and who 

should be responsible for paying the costs; 

Lack of necessary data; 

Wide variations in implementation costs among 

jurisdictions and in the approaches they might 

take to comply with federal requirements if flexibility is allowed; and 

The large number of existing and proposed programs to be estimated. 

Institutional Knowledge and Procedures. Since 1980, various procedural mechanisms have been developed to help 

the Congress and federal agencies assess the scope of intergovernmental regulations and estimate regulatory 

costs. These included 

Executive Order 12291, which required a “regulatory impact analysis” for most major federal regulations. Such analyses require agencies to assess 

the benefits and costs of proposed regulations 

and to consider a variety of alternative approaches. 

Executive Order 12612, on Federalism, which required a “federalism assessment” of proposed 

federal rules and legislation likely to have a significant impact on state and local governments. 

This order stipulated a series of federalism principles and criteria intended to minimize unnecessary federal regulations and to assure that needed 

regulations grant maximum discretion to state 

and local governments. 

State and Local Cost Estimate Act of 1981, which 

requires the Congressional Budget Office 

(CBO) to prepare estimates of the anticipated 

costs imposed on state and local governments 

by “significant” bills approved by congressional 

committees. 

None of these procedures has lived up to initial expectations, nor have they generated a comprehensive portrait 

of federally induced costs. This is due in part to the difficult and ambiguous nature of the task, and in part to flaws 

in the design and implementation of the procedures. 

28 U.S. Advisory Commissiv on lntereovernmental Relations 

~ 

For example, the CBO fiscal notes process and the 

E.O. 12612 procedures have been limited in scope, lacking 

full institutional commitment, and applied inconsistently.“ For example, tax and appropriations bills are exempt 

from the fiscal notes process in the Congress, certain other bills are deemed to be too ambiguous or complex in 

their effects to enable the preparation of a reliable estimate, and some estimates are prepared in a humed and 

incomplete fashion. 

A preliminary analysis of CBO fiscal notes in the 

102nd Congress, prepared by ACIR in response to a GAO 

recommendation for a wrap-up at the end of each Congress, found that: 

38 laws were passed by the 102nd Congress that 

either CBO or the National Conference of State 

Legislatures (NCSL) identified as potentially affecting state and local costs significantly. 

Only five of these laws were identified by both 

CBO and NCSL; 10 were identified only by 

NCSL and 23 were identified only by CBO. 

CBO prepared fiscal notes for only 16 of these 38 

new laws. In none of these casesdid the estimated 

fiscal impact on state and local governments 

reach the $200 million threshold requiring a fiscal 

note. 

22 bills were enacted without fiscal notes-including surface transportation, crime, energy, 

child abuse, child support enforcement, and job 

training. 

Reasons given by CBO for not preparing fiscal 

notes included: the large size and complexity of 

the bill; cost uncertainties raised by court involvement in administering the bill, by provisions for 

negotiated cost-sharing, by provisions giving state 

and local governments discretion in compliance, 

and by determining state and local caseloads likely to fall within the provisions of the bill; and passage of the bill on the same day it was introduced. 

The cost effects of bills with linkages to otherprograms were not interrelated (for example, the job 

training relationship to welfare reform). 

Similarly, agency compliance with E.O. 12612 was 

limited and uneven. For example, numerous EPA rules 

with major intergovernmental impacts (including school 

asbestos removal, drinking water standards, and solid 

waste disposal) have been developed without a federalism 

impact assessment. 

Even E.O. 12291, which requires the most complete 

and reliable cost estimates of regulatory actions, was 

found not to have been fully utilized. Another study found 

that many regulatory analysts lack an awareness of intergovernmental i~sues.6~ Moreover, little effort has been 

made to utilize regulatory assessments to compile a comprehensive overview of federally induced costs. 
Lack of Definitional Consensus. Some confusion about 

the fiscal effects of intergovernmental regulations stems 

from ambiguity about what constitutes a “mandate.” Many 

policy instruments have financial implications for state 

and local governments, but only a portion of them can be 

considered direct mandates. There is often disagreement 

about whether the others should be considered in discussions about federal reimbursement. 

For example, many state and local government officials strongly disagree with the federal courts’ finding that 

fcderal aid conditions are voluntary contractual agreements rather than mandates. Meanwhile, the Congressional Budget Office considers certain aid conditions-even 

matching requirements-in its fiscal note calculations. 

Similarly, each of the three regulatory impact analysisprocedures discussed above takes a different approach to tax 

policy provisions, preemption, and grant conditions. Neither the fiscal notes process nor the regulatory assessment 

procedures incorporate the financial impact of judicial 

mandates. The argument also is made that constitutional 

interpretations do not constitute “mandatcs” at all. 

Although the concept of federally induced costs can 

neither resolve these disagreements about definition nor 

establish the scope of federal “mandates” that may be lcgitimately considered for reimbursement, it is intended to 

produce a comprehensive portrait of the potential financial impact of the multiple federal policies that create 

costs for state and local governments. It also can help isolate specific areas of consensus and disagreement as focal 

points for further analysis and deliberation. Reimbursement policies are considered in Chapter 4. 

Lack of Necessary Data and Methodologies. Data limitations have contributcd to the absence of comprehensive information about federally induced costs. Some data 

limitations have conceptual roots, while others involve problems of measurement and information collection. 

Conceptually, many analysts would agree that federally induced costs should be defined as incremental expenses that go beyond what a state or local government 

would do on its own accord. Thus, one should not consider 

the entire cost of a local sewage treatment plant to be federally induced, but only that portion of the expenditures 

rcquired to meet higher federal treatment standards. 

While relatively clear conccptually, incremental costs 

can be difficult to measure. Especially over time, such 

measurement requires judgments about what a jurisdiction would have done in the absence of federal instructions. 

Even when regulatory costs are relatively clear-cut, 

their accurate measurement can be difficult and costly. As 

indicated earlier, federally induced costs can involve a 

wide variety of direct and indirect expenses-from tangible expenses for personnel and equipment to less tangible 

factors, such as additional paperwork, coordination expenses, and even opportunity costs. 

Adding further to the lack of information about regulatory costs is the brief time available for developing many 

cost estimates,68 the wide variety of different regulations 

and jurisdictions that may be affected by federal requirements, and the general absence of any institutionalized reporting and estimating system that links regulatory 

analysts to knowledgeable state and local officials. As one 

CBO analyst observed: 

The diversity of the data required were simply too 

great to allow the creation of one comprehensive 

database or network of contacts that could be 

tapped routinely for all state and local estimates. 

For example, in the past few years, CBO has had 

to analyze the potential effects of immigration reform, safe drinking-water requirements, prohibitions against sex discrimination in pension plans, 

and requirements for handicapped access to voting facilities.69 

Variations in Implementation Costs. A comprehensive 

assessment of federally induced costs is often hampered 

by variations in regulatory and other policy impactsamong 

state and local jurisdictions. In some cases, like the Ocean 

Dumping Ban Act, only a handful of jurisdictions may be 

affected. Other requirements, such as the Americans with 

Disabilities Act, affect thousands of jurisdictions. Even 

here, however, the actual cost impacts can differ enormously from place to place. Large, older jurisdictions with 

nonaccessible subway systems and many older public 

buildings may require large expenses to bring their facilities into compliance, while newer communities may have 

planned their facilities with full accessibility in mind. Such 

wide variations in regulatory impacts are common; an extensive and comprehensive impact assessment process is 

needed to measure them accurately. 

The Large Number of Programs. The NCSL inventory of 

existing federal “mandates” lists about 180 statutory requirements. The Mandate Watch List listed over 150 proposals for added requirements introduced in the 103rd 

Congress. The Unified Agenda of Federal Regulations issued 

in April 1994 listed 5,105 administrative rulemakings under way or planned by federal agencies over the following 

12-month period. Developing estimates of the impact of 

each of these cost-inducers would be more than any single 

agency could do. 

In practice, estimates are prepared for only some 

cost-inducing actions. For proposed legislation that would 

increase state and local government costs, for example, 

only those reported out by a committee of Congress that 

would have an annual effect of $200 million or more are 

required to be estimated by CBO, and the estimates are 

not recalculated to reflect amendments to the bill before 

it is enacted. 

There is no requirement to estimate the costs induced 

by existing programs. However, some agencies (such as 

EPA) have prepared estimates of expected state and local 

compliance costs, and many new administrative rules are 

required to consider costs as well as benefits. The taskbeU.S. Advisory Commission on Intergovernmental Relations 29 
comes more manageable when spread among all the administering agencies. 

Conclusion 

A variety of federal policies can produce financial 

consequencesfor state and local governments. In addition to 

the traditional statutory mandates, these instruments include certain legislated grant conditions, preemptions, tax 

policies, and liability exposures, plus policies implied by 

courts and administrative agencies. A full understanding of 

federally induced costs affecting states and localities requires 

a recognition of the potential effects of all of these activities. 

It is also important to recognize that federal programs 

can impose several different types of financial impacts on 

affected jurisdictions. Some regulatory effects are clear 

and direct. Others are unintended and indirect. Some restrict state and local revenue sources rather than impose 

expenditure obligations. Moreover, each of these different cost impacts can be made up of a combination of specific expenditure items, from hiring new personnel or 

purchasing equipment to losses in efficiency. 

Such complexity has added to the difficulties of developing accepted methodologies for estimating or calculating the costs of federal mandates. Conceptual, 

institutional, and data limitations all have contributed to 

the lack of a clear, comprehensive portrait of the scope 

and content of the federally induced costs borne by state 

and local governments. Nevertheless, where sufficient 

commitment and resources have been employed-as in 

the preparation of regulatory impact analyses for major 

regulations, such as EPA’s underground storage tank requirements-a reasonably valid and reliable picture of the 

financial implications of federal policy actions is possible. 

Such efforts provide a foundation of information and experience that can be built on in other areas. 

Each of these issues-defining the different types of 

federally induced costs and developing better techniques for 

measuring their fisml effects-have important implications 

for the fundamental policy question of whether the federal 

government should reimburse state and local governments 

for their added expenditures. Although there is no systematic federal reimbursement program, elements of such a system are present in several existing programs. 

Chapter 4 examines the extent of current federal reimbursement of federally induced costs and discusses the 

need for criteria for helping to determine which of those 

costs should be reimbursed. 

Notes 

‘The extension of FLSA to state and local government em- ployees was upheld in Garcia v. San Antonio Metropolitan 

Transit Authority, 469 U.S. 528 (1985). See also John Kincaid, 

“Constitutional Federalism: Labor’s Role in Displacing Places 

to Benefit Persons,” PS Political Science & Politics 26 (June 

1993): 172-177. 

’Ocean Dumping Ban Act of 1988, 102 Stat. 4139, 33 U.S.C. f 

14OlA. 

The Congressional Budget Office estimated the added cost of 

this requirement would total $33 million in 1991 alone. 

Social Security Act of 1935,49 Stat. 620,42 U.S.C., 8 301 et seq. 

Initially, the act did not require state and local governments to 

provide coverage to their employees, although a number of 

state legislatures and local legislative bodies decided to providc 

such coverage voluntarily. 

6Social Security Amendments of 1983, 97 Stat. 71, 42 U.S.C., f 

4 18. 

Letter to author from Delmar D. Dowling of the Social Security 

Administration dated June 7, 1990. (Dowling letter). 

Omnibus Budget Reconciliation Act of 1986, 100 Stat. 1874,7 

U.S.C. If 1929 note et seq. 

Dowling letter. 

“Americans with Disabilities Act of 1990, 104 Stat. 327. 

llLocal governments also are governed by Section 504 of the Re- habilitation Act of 1973. 

12The federal government provides approximately 55.5 percent 

of total funding, with the states financing the remainder. In 15 

states, local governments contribute to the nonfederal share. 

U.S. Advisory Commission on Intergovernmental Relations, 

Medicaid: Intergovernmental Trends and Issues (Washington, 

DC, 1991), p. 16. 

13Total Medicaid expenditures that year were $1.323 billion. Ibid. 

I4Ibid., p. 23. 

15Arizona’s program, the Arizona Health Care Cost Containment System, operates under a general waiver granted by the 

Secretary of Health and Human Services, pursuant to Section 

1115(a) of the Social Security Act. 

“Ibid. 

17Govemors’ Weekly Bulletin, September 14, 1990, p. 3. 

l8 Ibid. 

”David Rapp, “Just What YQUr State Wanted: Great New Gifts 

2o bid. 

*’ Wilder v. Virginia Hospital Association, 110 S.Ct. 2510 (1990). 

22Emergency Highway Energy Conservation Act of 1974,87 Stat. 

23Transportation and Related Agencies Appropriations Act of 

241bid., p. 2189. 

2598 Stat. 437,23 U.S.C., f 158. See also Sarah E Liebschutz, “The 

National Minimum Drinking-Age Law,”Publius: Die Journdof 

Federalisin 15 (Summer 1985): 39-52. 

from Congress,” Governing (January 1991): 53. 

1046,23 U.S.C. f 154 (1975 Supp.). 

1990, 104 Stat. 2183,23 U.S.C. f 104 note. 

’%outh Dakota v. Dole, 483 U.S. 203 (1987). 

27Transportation and Related Agencies Appropriation Act of 

’’ EL 76-153. 

”EL 88-352 and PL 91-190. 

30Davis-Bacon Act, 46 Stat. 1494,40 U.S.C. 276 (a) et seq. 

31 Office of Management and Budget, Managing Federal Assistance in the 1980s, Working Papers, Vol. 1 (Washington, DC, 

1990, 104 Stat. 2184,23 U.S.C. 104(aX2), (aX3), @), (c). 

1980), pp. A-8-1 to A-8-6. 

30 U.S. Advisory Commission on Intergovernmental Relations 
32David R. Beam and Timothy Conlan, “Swimming against the 

Tide: The Growth of Intergovernmental Mandates in an Era of 

Deregulation and Decentralization.” 

33 U.S. Advisory Commission on Intergovernmental Relations, 

Federal Statutory Preemption of State and Local Airthority: Histoiy, Inventory, and Issues (Washington, DC, 1992); Joseph E Zimmerman, Federal Preemption: Vie Silent Revolution (Ames: 

Iowa State University Press, 1991); and Zimmerman, ed., “Fed- eral Preemption,” Publiiu: The Journal of Federalism 23 (Fall 

1993): entire issue. 

34Airport Development Acceleration Act of 1973,87 Stat. 90,49 

U.S.C., I 1513. 

350mnibus Budget Reconciliation Act of 1990,104 Stat. 1388,49 

U.S.C. 1513. 

36Railr~ad Revitalization and Regulatory Reform Act of 1976,90 

Stat. 54,49 U.S.C., I 11503. 

37Trailer Train Company v. State Board of Equalization, 697 E2d 

860 at 865 (1983). 

”Department of Transportation and Related Agencies Appro- priation Act of 1986, 99 Stat. 1288. 

391nterviewwith Mary Ann Crotty, Deputy Director of State Op- erations, State of Ncw York, Albany, August 9, 1990. Holland 

Tunnel tolls are collected only from vehicles traveling toward 

New York City. See also Mary Kihl, “The Impacts of Deregulation on Passenger Transportation in Small Towns,” Transportation Quarterly (April 1988): 243-268. 

40 Ocean Dumping Ban Act of 1988. 

41 Bus Regulatory Reform Act of 1982,96 Stat. 1104,49 U.S.C., I 

10521. 

42Mel Dubnick and Alan Gitelson, “Nationalizing State Poli- cies,” in Jerome Hanus, ed., The Nationalization of State Govenzment (Lexington, Massachusetts: D.C. Heath and Company, 

198l), pp. 56-57. 

43 For additional information, see Public Finance Network, TarExenzpt Financing: A Primer (Washington, DC Government Finance Officers Association, Spring 1994). 

44Tax Equity and Fiscal Accountability Act of 1982,96 Stat. 324, 

26 U.S.C. 5 310(b)(1). 

45 South Carolina v. Baker, 108 S.Ct. 1355 (1988). 

46Tax Reform Act of 1986, 100 Stat. 2085,26 U.S.C. I 1. 

47United States Constitution, Art. I, 5 8. 

4sU.S. Department of Health and Human Services, Office of 

Refugee Resettlement, Refugee Resettlement Program (Washington, DC, 1990), p. i. 

491bid., p. iv. 

Ibid. 

51 Seth Mydans, “Accident of Geography Prompts Local Protest,” 

New Yolk Times, November 13,1990. 

52Statement of Virginia A. Collins, Chief Administrative Office, 

Los Angeles County, before the US. House of Representatives, Appropriations Committee, Subcommittee on Labor, 

Health and Human Services, Education, and Related Agencies, Washington, DC, April 23, 1990, pp. 1-2. 

53 Gary Enos, “As Feds Cut Aid, Refugees Become Locals’ Burden,” City & State, January 15, 1990, pp. l, 30. 

54Joint Statement of Joaquin G. Avino, Dade County, Florida, 

and Virginia A. Collins, Los Angeles County, on behalf of the 

National Association of Counties, before the Senate Committee on Appropriations, Subcommittee on Labor, Health and 

Human Services, Education and Related Agencies, Washington, DC, June 27, 1990, p. 5. 

”Dan Stein, “Tempest in a Melting Pot,” Sunday Times Union 

(Albany, New York), October 21, 1990. 

56ACIR, Fedeml Regulation of State and Local Governments: Vie 

Mixed Record of the 1980s (Washington, DC, 1993), pp. 25-26. 

57ACIR, Intergovemmental Decisionmaking for Environmental 

Protection and Public Works (Washington, DC, 1992). 

”U.S. Department of Justice, “Federal and State Governments 

Seek Contempt Order against Nassau County, New York,” 

News Release, August 24, 1990. 

59 Colorado Municipal League, Information Received on Local 

Goventment Impact of Environmental Mandates (Denver, 1990), 

p. 1. 

@bid., p. 2. 

61 Ibid. 

62Federal Water Pollution Control Act Amendments of 1972,86 

Stat. 884, 33 U.S.C. I 1345. 

b31bid. See also Memorandum of Agreement between the Environ- mental Protection Agency and the Deparfment of the Army Concerning the Determination of Mitigation under the Clean Water 

Act Section 404(b)(I) Guidelines (Washington, DC, February 6, 

1990). 

64AtomicEnergyActof 1946,60Stat.755,42U.S.C. s2011etseq. 

65Congressional Record, May 25, 1983, pp. S7556-7557. 

“These problems are documented and discussed at length in 

ACIR, Fedeml Regulation of State and Local Governments, 

Chapters 3 and 5. 

67 Marshall Goodman and Margaret Wrightson, Managing Regulatory Reform (New York: Praeger, 1987). 

@‘For example, between the time a congressional committee 

completes markup of a bill and the committee report is pub- lished, CBO analysts frequently have only a few days in which 

to develop a state and local cost estimate. 

@Theresa A. Gullo, “Estimating the Impact of Federal Legislation on State and Local Governments,” and Ann Calvaresi 

Barr, “Cost Estimation as an Anti-Mandate Strategy,” in Michael Fix and Daphne Kenyon, eds., Coping with Mandates: 

I.V]iat Are the Alternatives? (Washington, DC: Urban Institute 

Press, 1990), p. 44. 

U.S. Advisory Commission on Intergovernmental Relations 31 
32 U.S. Advisory Commission on Intergovernmental Relations 
Federal Reimbursement 

Needs and Experiences 

Examining the Need for Reimbursement 

The proliferation of mandates in recent years has generated growing interest in federal reimbursement of costs 

incurred by state and local governments. Reimbursement 

raises important issues of legitimacy-whether and under 

what conditions one government should be allowed to require actions by another-as well as thorny practical issues involving method and approach. 

These are not entirely new concerns. Numerous federal programs provide various kinds of full and partial reimbursement. The following review of their features and 

characteristics is presented to help inform the broader reimbursement debate. 

Arguments for Federal Reimbursement 

Advocates commonly cite four principal arguments in 

support of reimbursement of federally induced costs: accountability, efficiency, equity, and effectiveness. 

Accountability. Advocates of mandatory reimbursement 

maintain that it fosters greater governmental accountability.' Intergovernmental mandating breaks the link in the 

voter's mind between policy and implementation. Those 

responsible for adopting a policy are freed from the constraints imposed by having to finance it. State and local officials, on the other hand, may be criticized by voters for a 

costly OT unpoplar poky that they were pow erhs to stop 

or change. 

Ultimately, this bifurcation of responsibilities can 

erode an important rationale for federalism. It disrupts 

the ability of local communities to respond to their own 

priority needs, turning them more into administrative 

arms of a superior government rather than independent 

policymaking entities. 

Efficiency. Supporters of reimbursement believe that it 

would promote government efficiency. Mandated services 

can appear to be free goods to the government that issues 

them. With reimbursement, those enacting policies would 

be encouraged to become more judicious in mandating 

new programs or benefits-and seeking the most efficient 

means of providing them-because they would be forced 

to finance them through revenue increases or reductions 

in other government spending. 

Efficiency might be promoted locally as well. One of 

the principal economic advantages of federalism is that it 

allows local constituencies to tailor government services 

and tax levels to their own needs and preferences. In contrast, mandated activities are often designed to establish a 

uniform, national standard, which may be too high in some 

places and too low in others. 

Equity. Equity is cited as a further argument for reimbursement.2 This begins with a recognition that revenue 

raising capacity and expenditure demands vary enormously among governments, and that the federal, state, and local revenue systems are interrelated by virtue of drawing on 

the same overall pool of taxpayer-voters. Wide disparities in 

fiscal capacity mean that the impacts of a required program 

or benefit also differ from one jurisdiction to another. If the 

government requiring the costs were responsible for paying 

them, such inequities would be reduced. 

Effectiveness. Finally, the major motivating factor underlying most existing reimbursement schemes is national inteiest. Mthough mandatingmay appear tobe a cheap and 

easy way for the Congress to advance national objectives, 

the results may be more akin to empty symbolism if a state 

or local government lacks the resources and expertise. 

Such symbolism, however, may be viewed as an effort by 

the federal government to take unfair advantage of its 

state and local partners, thereby damaging the partnership needed to implement what should be shared goals. 

U.S. Advlso'y Commlsslon on Intergovernmental Relations 33 
Arguments against Reimbursement 

Practical and philosophical objections have been 

raised against federal reimbursement on grounds of constitutional principles, efficiency, equity, and administrative costs. 

Constitutional Principles. First, it is argued that certain 

federal requirements are an expression of basic constitutional responsibilities. As such, the federal government 

and courts need not bear responsibility for costs associated 

with the legal obligations of state or local governments to 

live up to provisions of the U.S. Constitution. Such provisions might include federal statutes designed to guarantee 

basic civil rights, as well as judicial mandates regarding 

such issues as prison overcrowding and school integration. 

Efficiency. Economists also raise efficiency arguments on 

behalf of certain types of mandates. Although they argue 

that certain goods may be provided more efficiently byunhindered local governments, other goods that produce 

“negative spillovers” may require provision or regulation 

by a unit of government with a greater geographic reach. 

Water pollution represents a classic example of such a spillover. Why, it is asked, should the nation’s taxpayers bear 

the costs of a sewage treatment facility to prevent one 

community’s pollution from poisoning another community’s water supply? 

Equity. Despite the argument that reimbursement promotes equity, the counter-argument is that it does so only 

among governments, not among citizens and between the 

public and private sectors. For example, leaving an issue to 

state and local governments may lead to unequal treatment of U.S. citizens, depending on where they live. In addition, many federally induced costs are not unique to 

state and local governments; private enterprises bear 

many of the same To reimburse one sector and not 

the other would create competitive inequities, particularly 

in the provision of goods and services that may be either 

public or private, such as electric power, trash collection, 

or hospital care. 

It is also argued that reimbursement may create inequities among governments. For example, starting a new 

reimbursement program for requirements that have previously been in effect will reward governments whose 

compliance has lagged. Conversely, discontinuing or reducing a reimbursement program, but not the federal requirement, will afford a disproportionate benefit to 

governments that were able to participate most fully in 

earlier years. In addition, the prospect of new reimbursement may cause state and local governments to delay activities they would have undertaken so they will be eligible 

for the new program. 

Administrative Costs. Opponents of federal reimbursement fear the administrative and financial COS~S.~ They ar34 U.S. Advisory Commission on Intergovernmental Relations 

gue that the federal government is burdened with large 

deficits and is unable to assume the potentially sizable 

costs of a comprehensive reimbursement program. Indeed, for some programs, monetary and personnel costs 

may outweigh the perceived benefits. Most reimbursement programs are, by nature, labor intensi~e.~ Developing an equitable reimbursement system would be a major 

administrative challenge, especially for requirements that 

involve thousands of local governments with widely varying costs. Without a way to simplify the system, reimbursement might be impractical. 

The Need for Reimbursement Criteria 

Strong arguments and principles have been advanced 

in support of and opposition to federal reimbursement of 

federally induced costs. Broad principles can serve as useful guideposts for determining the wisdom and feasibility 

of reimbursement, but they are often blunt instruments 

for crafting public policy. For example, the principle of 

negative spillovers may create a prima facie case for federal intervention, but the specific standards and the mode of 

regulation may be inappropriate. Excessive federal standards and overly intrusive forms of administration or enforcement-which may be encouraged by the lack of 

federal fiscal responsibility-may justify some form of reimbursement. 

Debates about federal reimbursement may be clarified if the term “mandates” is replaced by attention to the 

more specific federal practices that induce increased state 

and local costs. Federal reimbursement may be more appropriate and practical in some cases than in others. 

To inform these debates, it is helpful to examine the 

types of reimbursement programs that now exist. 

Types of Reimbursement 

States as well as the federal government issue mandates that affect local government services, administrative 

practices, and revenues. Several states have established 

mandate reimbursement programs, sometimes to help 

compensate for the imposition of a property tax limitation 

or other revenue cap on local governments. The structure 

of some state programs and varying state and local experiences are reviewed and analyzed in ACIR’s report Mandates: Cases in State-Local Relations. 

Although no federal statute sets forth a comprehensive scheme for reimbursing federally induced costs, state 

and local governments now recover a portion of their expenses through a variety of ad hoc programs. These include both direct and indirect reimbursement 

mechanisms, covering some, if not all, of the costs incurred in implementing certain federal directives. 
Direct Reimbursement Mechanisms 

A variety of tools has been used to channel funds directly to state and local governments to compensate them 

for the costs of federal program implementation. These 

mechanisms include: 

1) Grants-in-aid, loans, loan guarantees, and tax ex- penditures to support required services or benefits; 

2) Reimbursement of administrative or enforce- ment costs, in whole or in part, if the states assume implementation of a federal program or 

enforcement of a federal law; and 

3) Payment for services rendered. 

Program Costs. In some cases, the Congress has appropriated money to a program designed to help state and local governments meet the costs associated with a federally 

required activity. This was more common in the past; federal budget strictures now are more limiting. This practice 

provides a finite number of dollars not tied to actual costs. 

Anoteworthy example is theRefugeeActof 1980.7The 

act assigned key roles to states for planning, administering, and coordinating refugee resettlement.The Office of 

Refugee Resettlement of the U.S. Department of Health 

and Human Services promulgated regulations providing 

grants to cover state assistance through Aid to Families 

with Dependent Children (AFDC), Supplemental Sccurity Income (SSI) adult assistance, refugee cash assistance, 

and refugee medical assistance? The initial reimbursement period was an individual’s first 36 months in the 

United States. This subsequently was reduced to 24 

months and later to four months, effective in 1990.1° 

The Indochina Migration and Refugee Assistance Act of 

1975 provided full reimbursement to states of the cost of 

operating a placement program for Indochinese minors” 

until the act was allowed to sunset in fiscal year 1981. In 

addition, the Emergency Immigrant Education Act of 1984 

authorized $30 million in grants to assist school districts 

with large numbers of immigrant children.12 

The Refugee Assistance Extension Act of 1986 directed 

the U.S. Attorney General to compensate states and 

counties for costs of confining certain Cuban nationals in 

prison.13 The act also provided grants to states to assist 

counties with “unusually large refugee populations” and 

“high use of public assistance by refugees.”14 

States received approximately $315 million from the 

Office of Refugee Resettlement in FY 1989 for assisting 

refugees from Cuba and Haiti. Reimbursements covered 

cash and medical assistance, children’s assistance, social 

services, and administrative expense^.'^ The Division of 

State Legalization Assistance of the U.S. Department of 

Health and Human Services reported in 1990 that state 

costs resulting from legalization of aliens were minimal 

and “grants made to the States since 1988 have exceeded 

reported State costs.”16 

On the other hand, the U.S. Court of Appeals for the 

Ninth Circuit ruled, on October 26,1990, that an alien was 

entitled to free legal assistance from the Utah Legal Services under the amnesty provisions of the Immigration 

Control and Legalizdion Amendments Act of 1986.’’ The 

act provides for federal reimbursement of all state and local costs associated with legal aliens during their first five 

years in the United States.” The act, as amended, authorized $4 billion annually for fiscal years 1988-1992, to be 

spent over a seven-year period ending in 1994. 

In other cases, the federal government has created 

grant programs to help state and local governments pay a 

portion of the costs sustained in complying with federal 

standards. Prominent examples of such programs include: 

The Federal Water Pollution Control Act Amendments of 1972, which provided grants to local governments for the construction of wastewater 

treatment facilities; 

The Education forAll Handicapped Children Act of 

1975, which provided federal assistance to cover a 

portion of the costs associated with providing a 

“free and appropriate education” for physically 

and learning disabled children; and 

The Intermodal Surface Transportation Eficiency 

Act of 1991, which contains grant programs for 

congestion mitigation and air pollution control. 

Similarly, loans and tax exemptions have been made 

available for construction of environmental protection facilities. Loan guarantees and insurance also are frequently used federal aid techniques with potential application to 

mandate compliance. 

Reimbursement of Administrative and Enforcement 

Costs. Reimbursement occurs most frequently when 

states voluntarily assume responsibility for enforcing federal standards. Varying amounts of administrative costs 

may be reimbursed in these cases. 

The Egg Products Inspection Act of 1970, for example, 

authorizes states to enter into cooperative agreements 

with the Secretary of Agriculture for the inspection of 

eggs according to federal standard^.'^ The U.S. Department of Agriculture compensates cooperating states for 

operating the shell egg surveillance program. As of 1991, 

45 states were performing shell egg inspections under 

cooperative agreements.20 

Enforcement expenses also are reimbursed under 

many environmental programs. The Environmental Pesticide ControlAct of 1972 authorizes state cooperation in enforcement and provides that the administrator of the 

Environmental Protection Agency may grant funds to 

states to cover part of their enforcement costs.21 

A similar provision was contained in the Migrant and 

Seasonal Agricultural Worker Protection Act of 1983, which 

authorizes the Secretary of Labor to (1) enter into agreements with states to utilize their facilities, (2) delegate enU.S. Advisory Commission on Intergovernmental Relations 35 

A 
forcement authority to the states, and (3) reimburse the 

states for costs they incur in the cooperative agreement.22 

Payment for Services Rendered. A third method of reimbursement allows federal agencies to pay state and local governments for specific services. An example of this approach 

is found in the Federalfirelkvenfion and ControlAct of 1974, 

which authorizes reimbursement of costs incurred by fire 

companies in fighting fires on federal pr0perties.2~ 

The U.S. Customs Service pays state and local law enforcement agencies for expenses sustained in any joint operations, including costs of equipment, fuel, overtime, and 

rent. As of October 11,1990, over $80 million in disbursements from the Customs Forfeiture Fund had been made 

to law enforcement agencies in four states.24 

Indirect Reimbursement Mechanisms 

Indirect reimbursement mechanisms may be easier to 

adopt because most do not involve the expenditure of 

many tax dollars. Nor do they seem to smack of “pork barrel” politics, a common complaint against many direct appropriations. These alternatives typically do not cover the 

full costs of implementing a federal requirement. They 

do, however, help cushion the impact of federal requirements. Such indirect reimbursement tools include: 

General revenue sharing; 

Payments in lieu of taxes; 

Low-cost loan programs begun with federal startup funds; 

Authorization for state and local governments to 

assess user fees to cover costs of a federally required program; 

Sharing of fines and penalties with states and local governments; and 

Provision of free training and equipment to state 

and local governments. 

General Revenue Sharing. General Revenue Sharing 

(GRS) provided essentially no strings formula grants to 

virtually all state and local governments between 1972 and 

1980, and to local governments until 1986. Although not 

designed originally to be a program of mandate reimbursement, and not distributed according to variations in 

mandated burdens, GRS distributed up to $6 billion annually. GRS funds could be applied to mandated activities at 

the discretion of the recipient government. One study of 

federal mandates affecting local governments in the late 

1970s found that the average costs of such requirements 

were roughly comparable to the amount of General Revenue Sharing the jurisdiction received.25 

Payments In Lieu of Taxes. Instead of reimbursement, the 

federal government, in certain cases, provides financial 

assistance in the form of a payment in lieu of taxes 

(PILT).26These payments compensate state and local governments for the presence of tax-free federal property. 

Appropriated annually according to a formula set by the 

federal government, the payment is intended to replace 

the tax revenue that is lost through the tax exemption and 

to compensate the state or local government for services 

rendered to the federal government. 

Loan Programs. The Congress occasionally reimburses 

state and local governments indirectly by establishing a 

loan program to assist in the costs of mandate implementation. A prime example of this approach may be found in 

the Clean Water Act.” Following the creation of strict new 

federal standards for municipal wastewater treatment in 

1972, the construction grant program expanded from $1.6 

billion in 1973 to over $6 billion in 1977.** In 1985, the federal matching share for sewage treatment facility construction was reduced from 75 percent to 55 percent, and 

federal grant assistance fell to $2.3 billion in 1988. Beginning in 1988, this grant program was phased out in favor of 

partial capitalization of state revolving loan funds. Starting in 1994, these funds will offer low-interest loans to local governments constructing water treatment facilities. 

Federal grant assistance is scheduled to decline to $434 

million by 1994 and to be terminated thereafter.zg 

User Fees. The US. Grain Standards Act of 1968 authorizes the Federal Grain Inspection Service of the U.S. Department of Agriculture to delegate to states authority to 

perform official inspection and weighing of grains. States 

incur no unreimbursed costs because the inspection and 

wcighing are financed by user charges, which the federal 

government authorizes them to 

User fees may be authorized to compensate states and 

local governments in a more indirect way as well. The Surface Transportation AssistanceAct of 1982 prohibited states 

from excluding “big” trucks from their Interstate highways, segments of the federal-aid highway system designated by the Secretary of Transportation, and local access 

roads to these high~ays.~’ Reaching a compromise with 

the trucking industry and the states, the Congress included 

in the statute a 5-cent per gallon increase in the federal excise tax on diesel fuel. Revenues collected from that tax increase were to provide additional federal grants to states to 

maintain and repair the highways and bridges to compensate 

for the wear and tear caused by the heavy trucks. 

Collections from Fines and Penalties. Frequently, individuals and businesses are fined for violating federal law. 

Funds collected in this fashion often are directed to the 

general treasury. Occasionally, however, they are earmarked for specific purposes. One purpose may be to help 

reimburse state and local governments for federally induced costs. 

For example, the U.S. Department of Justice Assets 

Forfeiture Fund was established in 1984. It receives income from the disposition of seized and forfeited proper36 U.S. Advisory Commission on Intergovernmental Relations 
ty. Funds from this account may be used to finance seizing 

and forfeiting drug dealers’ and racketeers’ illegally 

owned, used, or acquired property.32 These funds, administered by the U.S. Marshals Service, totaled $701.9 million in fiscal year 1990.33 

The enabling statute provides for equitable sharing of 

payments from the fund to state and local law cnforcement agencies for assistance in targeting or seizing the 

property. A total of $157.3 million was disbursed from the 

fund in fiscal year 1989.34 

Training and Equipment. This form of federal help to 

state and local governments offers free or reimbursed 

training and equipment needed by state and local governments to implement a project or provide a service.35 

The federal government commonly uses this method 

for emergency response situations. Seven fcderal entiprovide funding to, or conduct training programs for, 

state and local emergency response personn~l.~’ 

The Federal Emergcncy Management Agency 

(FEMA) also gives financial assistance to state and local 

governments through a comprehensive cooperation 

agreement.38 From 1987 through 1989, FEMA financed 

attendance by 8,191 students from New York State in 

more than 150 training activities involving hazardous material~.~~ 

In addition, the National Fire Academy offers twoweek training programs for dealing with hazardous materials. 

Other hazardous materials emergency training programs are sponsored by the U.S. Department of Energy 

and the U.S. Coast Guard. The Coast Guard also offers 

two programs for civilians-the On-Scene Coordinator/ 

Regional Response Team Pollution Exercise and the Hazardous Chemical Training Course.4o 

The Superfund Amendments and Reauthorization Act of 

1986 authorized $10 million per year for five years for 

training nonprofit organization employees engaged in 

hazardous waste removal, containment, and emergency 

Eleven grants have been made to several organizations, including the International Association of Fire 

Fighters, the Scattle (Washington) Fire Department, and 

various uni~ersities.~~ 

Weaknesses of Existing 

Reimbursement Approaches 

Although the federal government has dernonstratcd 

its good intentions with the enactment of a variety of rcimbursement programs, states and local governments still 

bear a heavy load of federally induced costs. In part, these 

governments suffer the shortcomings of the reimbursement programs that are designed to help them. 

An examination of the reimbursement programs reveals several difficulties, such as: 

Reimbursement is authorized, but no funds or 

only a portion of authorized funds are appropriated. 

Payment is conditioned on compliance with certain unrelated requirements. 

Restrictions are placed on the types of governments eligible for reimbursement. 

The costs that may be recovered are prorated. 

Applying for the funds is expensive, difficult, and 

uncertain. 

Authorization 

but No (or Reduced) Appropriation 

The Federal Railroad Sasety Act of 1970, for example, 

authorizes federal reimbursement of part of the costs sustained by states that assume responsibility for railroad 

safety inspections in accordance with federal 

The Congress, however, has not appropriated funds for 

the program since FY 1989. Nevertheless, 31 states continue to participate in the program. 

In other cases, federal funding may continue but at 

substantially lower levels. For example, the Education for 

All Handicapped Children Act authorized federal grants 

equaling 40 percent of the detailed and costly special education requirements. Appropriations never totaled more 

than 12 percent of the program’s funding. 

During the 1980s, partial funding also was a general 

pattern in many partial preemption programs delegated to 

the states. For example, ACIR and GAO examined trends 

in funding for ten federal-state regulatory programs between 1981 and 1986. In every instance, federal funding 

was reduced in constant dollar terms, in amounts that varied from 2 percent to 40 percent of original funding levels 

(see Table 4-1). 

Now that the hard budget caps agreed to by President 

Clinton and the Congress have kicked in for deficit reduction purposes, new authorizations frequently are met with 

appropriations worth only 10-20 cents on the dollar. 

Accompanying Conditions 

Although reimbursement may be authorized, payments may be conditioned on compliance with additional 

and unrelated requircments. An example maybe found in 

programs under the Occupational Safety and Health Act of 

1970.44 The law authorizes a state to submit a plan to the 

Secretary of Labor to assume responsibility for the regulatory function, but the state must agree to extend to state 

and local employees protection equivalent to that given to 

private employees.45 If the plan is approved by the Secretary, the Occupational Safety and Health Administration 

will pay up to half of the operating costs of the program. 

U.S. Advisory Commission on Intergovernmental Relations 37 
Table 4-1 

Funding for Administrative Costs 

in “Intergovernmental Partnership Programs 

(millions of constant 1981 dollars) 

FY FY Percent 

Program 1981 1986 Change 

Clean Air Act 

Endangered Species Act 

FIFRA: 

Certification 

Enforcement 

Flood Disaster Protection 

Handicapped Education 

Historic Preservation 

Occupational Safety 

Safe Drinking Water 

Wholesome Meat Act 

& Health Act (OSHA) 

$83.6 

5.4 

3.0 

10.1 

4.5 

899.5 

25.3 

63.3 

37 .O 

28.3 

$71.4 -14.6 

3.3 -38.9 

2.0 -33.3 

9.2 -8.9 

2.6 -42.2 

884.0 -1.7 

15.2 -39.9 

56.8 -10.3 

27.0 -27.0 

23.5 -17.0 

In 1990,23 states, Puerto Rico, and the Virgin Islands 

had federally approved programs, and $60 million was appropriated to help reimburse operating 

Reimbursement Limited to Certain Governments 

For reasons that may not be clear to the affected government, reimbursement may be limited to certain types of 

governments. The Superfund Amendments and Reauthorization Act of 1986 recognizes what might be termed an 

“implied mandate” by authorizing reimbursement of costs 

incurred by local governments in providing an emergency 

rcsponse to the release of hazardous sub~tances.~’ State 

governments are ineligible to receive these reimbursements. 

Reimbursement Prorated 

A state or local government may qualify for federal 

reimbursement, but may be eligible for only partial compensation. The Superfund Act cited above offers a prime 

example of this condition. Reimbursement decisions are 

based chiefly “on the ratio of eligible response costs to the 

applicant locality’s per capita income adjusted for population, with consideration given to their relevant financial 

information provided at the applicant’s di~cretion.”~~ As 

of 1988, EPA had received only four applications for reimb~rsement.~~ 

Cost, Difficulty, and Uncertainty 

of Applying for Reimbursement 

Even if a statute or regulation calls for reimbursement and funds are available, state and local governments 

may still face difficulties in obtaining the funds. The FederalFire Prevention and Control Act of 1974, for example, authorizes reimbursement of costs incurred in fighting fires 

on federal properties?’ In 1987, the U.S. Fire Administration handled four claims involving eight fire services. Of 

the four, one claim was disallowed, one claimant was requested to provide verification of costs, which was never 

submitted, and two fire companies were reimbursed 

$1,400 and $435, re~pectively.’~ 

In 1988, five claims were received by the administration. Two claimants did not respond to letters requesting 

additional information, and two fire companies were reimbursed $6,218.37 and $7,700.96, respecti~ely.~~ An additional claim involving ten fire companies was determined 

to be eligible for reimbursement of $27,409.45, but the 

funds were not released by the federal agency where the 

fire 0ccurred.5~ 

Under this reimbursement program, only fire companies are eligible claimants, and claims must include only 

direct expenses and losses above normal operating costs. 

Claims typically involve loss or damage of equipment, fuel 

expended, repaid costs, overtime pay, and pay for specially 

hired personnel. No reimbursement is made for death 

benefits, injury costs, ordinary salaries, depreciation, normal maintenance, or administrative costs. 

Special difficulties arise when the federal government 

creates a loan program to reimburse local governments 

for the costs of implementing federal requirements. Communities that may need the assistance the most also may 

be poor credit risks, thus making it difficult, if not impossible, to qualify for this aid program.54 

Conclusion 

Devising a system of reimbursement for federally induced expenditures by state and local governments raises 

issues of conflicting principles and administrative complexity. Faced with massive federal deficits and new statutory caps on discretionary federal spending, the political 

obstacles to a major reimbursement program are likely to 

be substantial. 

Nevertheless, strong arguments can be made for reimbursement in a number of programs. This is true not 

only from the standpoint of state and local interests but in 

order to advance federal statutory goals. In such cases, it is 

important to recognize that there is a series of models that 

could suggest the basis for a more comprehensive program 

of reimbursing federally induced costs. 

Notes 

Ray D. Whitman and Roger H. Bezdak, “Federal Reimbursement for Mandates on State and Local Governments,” p. 52. 

Ibid., p. 54. 

Ibid. 

Ibid. 

*Iblid., pp. 52-53. 

38 U.S. Advisory Commission on Intergovernmental Relations 
U.S. Advisory Commission on Intergovernmental Relations, 

Mandates: Cases in State-Local Relations (Washington, DC, 

1990). 

Ibid. See also, U.S. Department ofHcalth and Human Services, 

Office of Refugee Resettlement, Refiigee Resettlement Program 

(Washington, DC, 1990). 

45 CFR 1OO.1l(a). 

Gary Enos, “As Feds Cut Aid, Refugees Become Locals’ Burden,” City & State, January 15, 1990, pp. l, 30. 

l1 Indochina Migration and Refugee Assistance Act of 1975,89 

Stat. 87, 22 U.S.C. J 2601 note. 

”Emergency Immigrant Education Act of 1984,98 Stat. 2366,20 

U.S.C. JJ 4101 et seq. 

13Refugee Assistance Extension Act of 1986, 100 Stat. 3455, 8 

U.S.C. $1522. 

l41bid., 100 Stat. 3453-3454,8 U.S.C. 0 1522(c). 

Is HHS, Refiigee Resettleriient Pmgratii, p. i. 

16Letter from David B. Smith, Director, Division of State Legalization Assistance, U.S. Department of Health and Human 

Services, dated September 14, 1990. 

I7Gail D. Cox, ‘aliens Held Entitled to Legal Aid,” TlzeNational 

Law Jozinial Vovember 12, 1990): 3. 

lS Immigration Control and Legalization Amendments Act of 

1986, 100 Stat. 3359,8 U.S.C. I 1101 note. 

”Egg Products Inspection Act of 1970,84 Stat. 1623,21 U.S.C. 5 

301. 

”Letter from D. Michael Holbrook, Director, Poultry Division, 

US. Department of Agriculture, dated January 15, 1991. Only 

Michigan, Missouri, Ohio, Tennessee, and Texas have not entered into cooperative agreements. 

“Environmental Pesticide Control Act of 1972,86 Stat. 996-97,7 

22Migrant and Seasonal Agricultural Worker Protection Act of 

1983, 96 Stat. 2599,29 U.S.C. $ 1871. 

23Fcdcral Fire Prevention and Control Act of 1974,88 Stat. 1535, 

15 U.S.C. J 1511. 

”Funds expended included $56,884,439.44 (California); 

$14,535,054.94 (Florida); $7,613,425 (Texas); and $3,764,323.10 

(New York). This information was provided in a letter from 

John E. Hensley, Assistant Commissioner, U.S. Customs Service, dated October 15,1990, p. 1 and attachment, pp. 2-4,8, and 

10. 

25Thomas Muller and Michael Fix, “The Impact of Sclected Federal Actions on Municipal Outlays,” in Govenuiient Regrilation: 

Achieving Social and Economic Balance, vol. 5 of Special Stridy on Econoriiic Change, U.S. Congress, Joint Economic Coniniittee (Washington, DC, 1980). 

I6Payment in Lieu of Taxes Act, 90 Stat. 2662. For more information on PILT programs, see ACIR, The Adequacy of Federal 

Coinpensation to Local Goveninients for Tar Exempt Federal 

Lands (Washington, DC, 1978). 

27See the Clean Water Act as amended by the Water Quality Act 

of 1987, 101 Stat. 7, 33 U.S.C. JJ 1251 et seq. 

28 US. Environmental Protection Agency, Environmental Invest- 

~nents: The Cost of u Clean Environment (Washington, DC, 

1991), p. 4-2. 

291bid., p. 4-3. 

’94 Stat. 102, 8 U.S.C. 1101,22 U.S.C. 2601. 

U.S.C. $5 136~-136~. 

30United States Grain Standards Act of 1968, 82 Stat. 769, 7 

U.S.C. J 71. 

31S~rfaceTransportation Assistance Act of 1982,96 Stat. 2097,23 

U.S.C. J 101. States restrict many types of heavy trucks because 

they produce more wear and tear on roads and bridges than automobiles and light trucks. 

32C~mprehen~i~e Forfiture Act of 1984,98 Stat. 2052,28 U.S.C. 

J 524~). See also the Anti-Drug Abuse Act of 1986, 100 Stat. 

3207,28 U.S.C. 524(c) and the Anti-Drug Abuse Act of 1988, 

102 Stat. 4181,28 U.S.C. J 524 (c). 

33Letter from Jeffrey Fratter, Chief, Seized Assets Division, US. 

Marshals Service, dated November 16, 1990. 

34 US. Department of Justice, The Attorney General’s Annual Re- port on the Justice Assets Fofeitiire Airid for Fiscal Year 1989 

(Washington, DC, 1990), p. 2. 

35Altho~gh the agencies do not charge for their training pro- grams, state and local governments do incur costs in sending 

their employees to receive such training. 

36The agencies are the Federal Emergency Management Agency 

(FEMA), the Environmental Protection Agency, the National 

Fire Academy, the Coast Guard, the Department of Transportation, the Dcpartment of Energy, and the Department of 

Health and Human Services. 

37For a detailed description of the programs offered by five agencies, see US. General Accounting Office, Hazardous Materials: 

Federal Paining for Fint Responders to Highway and Railroad In- cidents (Washington, DC, 1989). 

38Federal Emergency Management Agency, CCA General Program Guidelines (Washington, DC, 1987). 

39Letter from Gerald Boyd, National Energy Training Center, 

Federal Emergency Management Agency, dated December 12, 

1989. 

40Letter from Commander D.A. Sande, Marine Safety Branch, 

US. Coast Guard, dated October 18, 1989. 

4’ Superfund Amendments and Reauthorization Act of 1986,100 

Stat. 1613, 42 U.S.C. 3 9601 note. 

42Letter from the National Institute of Environmental Health 

Services, dated December 12, 1989. 

43Federal Railroad Safety Act of 1970,84 Stat. 971, 45 U.S.C. $ 

431 et seq. 

4484 Stat 1590.3 

450ccupational Safety and Health Act of 1970, 84 Stat. 1590, 5 

U.S.C. 3 5108. 

&Letter from Bruce Hillenbrand, Occupational Safety and 

Health Administration, dated May 31, 1990. 

47Superfund Amendments and Reauthorization Act of 1986,100 

Stat. 1729, 42 U.S.C. $ 11001. 

4BFederal Register, October 21, 1987, p. 39388. See also 40 CFR 

Part 3 10. 

49 Letter from Karen Z. Burgan, U.S. Environmental Protection 

Agency, dated June 17, 1988. 

soFederal Fire Prevention and Control Act of 1974,88 Stat. 1535, 

15 U.S.C. 8 1511. 

51Letter from Edward M. Wall, Deputy Administrator, US. Fire 

Administration, dated May 30, 1989. 

521bid. 

53 Ibid. 

54Ge~rgina Fiordalisi, “Tough Mandates, Limited Funds,” City & 

State, January 15, 1990, p. 16. 

U.S. Advisory Commission on Intergovernmental Relations 39 
40 US. Advisory Commission on Intergovernmental Relations 
Appendix A 

Mandate Effects 

on Individual Governments 

One way of viewing the financial impact of federal 

mandates is to examine the estimates of costs reported by 

individual governments. Although a variety of reports has 

been issued about mandates on state and local govemments, onlya few haveattempted topresent acomprehensive financial assessment of the impacts. Some of the 

problems of making such assessments and interpreting the 

results can be illustrated by looking at such reports from 

the states of Tennessee and Ohio, and the cities of Columbus, Ohio, and Lewiston, Maine. 

Tennessee 

Tennessee compiled a list of every new federal mandate that had caused additional state expenditures from 

the General Fund since FY 1986-87. The estimated costs 

of these mandates in 1993 and 1995 are shown in Bble 1: 

~~ ~~ 

Table 7 

State of Tennessee Federal Mandate Costs 

(millions) 

1993 1995 Increase 

Medicaid $113.4 $141.6 $28.2 

Non-Medicaid 24.0 36.6 12.6 

Loss of Sales Tax 

on Food Stamps 16.3 16.3 0.0 

Total $153.7 $194.5 $40.8 

The estimated mandate costs of $153.7 million for 

1993 were equal to about 2.7 percent of the state’s $5.6 billion own-source revenues in 1991, as reported by the Bureau of the Census. The projected increase of $40.8 

million in mandate costsfrom 1993 to 1995 is equivalent to 

about 0.7 percent of 1991 revenues. Only general fund 

mandates were included in the study. The percentages 

might be somewhat higher if special fund mandates, such 

as transportation, were included. 

The Tennessee report raises two important issues in 

evaluating cost effects. First, the estimates include only 

state Medicaid costs resulting from federal directives issued since 1987. This represents a middle ground between 

counting all Medicaid matching (about $750 million in 

1991 for Tennessee) as a federal requirement imposed on 

states and not counting any of the matching as a mandate 

because states are not required to participate in Medicaid. 

The second issue is whether states should, like Tennessee, count as a mandate cost the taxes not received on 

food stamp purchases because they are exempt from sales 

taxes by federal law. This issue arises only in the 20 states 

that tax food sales. 

Ohio 

Ohio, in an August 1993 report, estimated the cost of 

unfunded federal mandates on the state government for 

1992 to 1995 (see nble 2). The 1992 estimated cost of 

$260.1 million is about 1.7 percent of Ohio’s own-source 

revenues in fiscal year 1991. The increase of $129.1 million 

from 1992 to 1995 is equivalent to about 0.8 percent of 

1991 own-source revenues. Although the bases for calculating the Ohio and Tennessee estimates are somewhat 

different, the percentages of own-source revenues spent 

Percent of Own-Source 

General Revenues in 1991 

($5,612.4 million) 2.7% 3.5% 0.7% 

on mandates are remarkably similar. 

U.S. Advisory Commission on Intergovernmental Relations 41 
Ohio’s estimated cost of Medicaid mandates includes 

only the new federal requirements enacted since 1987, 

and reflects only a small portion of total state Medicaid 

spending of about $1.8 billion in 1991 (see Table 2). Ohio 

exempts food purchases from the sales tax and shows no 

loss due to the federal exemption for food stamps. 

Table 2 

State of Ohio Federal Mandate Costs 

(in millions) 

1992 1995 Increase 

Medicaid $185.4 $262.7 $77.3 

Other Human Services 48.7 68.5 19.8 

Clean Water Act 16.6 26.7 10.1 

Transportation 4.9 31.3 26.4 

Other 4.5 0.0 -4.5 

Total 260.1 3893 129.1 

Percent of Own Source 

General Revenues in 1991 

($15,623.0 million) 1.7% 2.5% 0.8% 

Note: These cost figures do not include an additional $430 million in total Americans with Disabilities Act compliance 

costs, which will be incurred by Ohio over several years. 

~ ~ 

Ohio, unlike Tennessee, includes some estimated 

transportation mandate costs. These result primarily from 

federal requirements to (1)use rubberized asphalt, (2) follow the International Registration Plan, and (3) change requirements for commercial driver’s licenses. 

Although Ohio estimates that the state will incur $430 

million in costs from the Americans with Disabilities Act, it 

is not able to allocate those costs by years. Most of these 

costs involve nonrecurring capital expenditures over several years, perhaps funded by bond issues requiring 

debt-service payments over an extended period. The additional annual mandate costs that should be added will depend on when and how these costsare ultimately incurred. 

Columbus, Ohio 

The Columbus city government, in 1991, identified estimated mandate costs it would incur from 1991 to 2000. 

The costs are estimated for each year from 1991 to 1995, 

but are summarized in total amounts for 1996 to 2000. The 

study includes federal and state mandates. In most instances, the state laws either parallel or implement federal laws, with the federal law providing the underlying 

mandate. However, in the case of solid waste disposal and 

infectious waste, the state appears to be the principal 

source of the mandate. The estimated costs for 1991 and 

1995 are shown in Tible 3. 

The city estimates that its $62.1 million in 1991 mandate costs were about 10.6 percent of its total $591.5 million budget, with this percentage increasing to 18.3 

percent in 1995. If the solid waste disposal and infectious 

waste costs are considered state mandates, then the remaining federal mandates are 10.4 percent in 1991 and 

15.0 percent in 1995. 

Table 3 

City of Columbus, Ohio, 

Federal and State Environmental Mandate Costs 

(in millions) 

1991 1995 Increase 

Clean Water Act $54.7 

Resource Conservation 4.2 

Safe Drinking Water 1.4 

Solid Waste Disposal 0.5 

Other 1.3 

Total 62.1 

Percent of Total City Budget 

Percent Without 

($591.5 million) 10.6% 

State Mandates 10.4% 

$75.5 

2.8 

7.5 

18.9 

2.7 

107.4 

18.3% 

15.0% 

$20.8 

6.1 

18.4 

1.4 

45.3 

-1.4 

7.7% 

4.6% 

In preparing the estimates, the city surveyed every 

municipal department and looked for costs incurred under 

13 separate federal mandates. Just three programs-the 

Clean Water Act, the Safe Drinking Water Act, and solid waste 

regulations account for 95 percent of the total 1995 costs. 

The Columbus study provides additional perspective 

on mandate cost estimates by separating those supported 

by sewer and water charges from those supported by general taxes and converting both types to costs per household (see Thble 4). 

Table 4 

Columbus Mandate Costs by Source 

of Payments and by Household Costs 

1991 1995 Increase 

Source of Payments (in millions): 

Sewer and Water $56.6 $84.8 $28.2 

General ’hes 5.5 22.6 17.1 

Total 62.1 107.4 45.3 

Sewer and Water $163.00 $244.00 $81.00 

General Taxes 21.00 86.00 65.00 

Total 184.00 330.00 146.00 

Payments per Household (in dollars): 

42 U.S. Advisory Commission on Intergovernmental Relations 
By 1995 nearly 80 percent of the total estimated costs 

of mandates will be charged to sewer and water users, 

leaving a relatively small amount, almost entirely for solid 

waste, to be charged to general taxpayers. In some local 

governments, solid waste costs are also charged to users. 

No estimates are provided of how these costs are split 

between charges and taxes, nor are the costs shown on a 

per household basis. However, because most of the anticipated costs are associated with safe drinking water and 

clean water activities, it appears they would mainly result 

in increased sewer and water charges. 

Lewiston, Maine 

The city, in 1992, analyzed the capital, operational, 

and maintenance costs of complying with federal mandates. Lewiston’s estimates include the amounts actually 

budgeted in 1992, the amounts projected based on existing 

requirements, and the amounts needed to meet proposed 

regulations under consideration by federal agencies (see 

Table 5). 

These results do not include solid waste costs that the 

city considers to be state requirements, even though they 

may relate indirectly to federal requirements. It also was 

necessary to estimate annual debt service costs based on 

the lump-sum capital spending estimates. 

The $414,000 currently budgeted for federal mandates represents about 0.8 percent of Lewiston’s budget. 

Complying with projected requirements at a cost of $1.6 

million would add 3.1 percent, and complying with all proposed regulations would add 14.5 percent. Thus, at some 

time in the future, the costs of complying with all potential 

federal requirements could equal about 18.4 percent of 

the city budget. 

Chicago, I I I i noi s 

The City of Chicago, in conjunction with Roosevelt 

University’s Institute for Metropolitan Affairs, surveyed 

all city departments for the costs (1991) of unfunded mandates and regulations. This survey included federal and 

state-imposed costs. The federal costs totaled $191.2 million, or the equivalent of 8.3% of the city’s 1991 

own-source revenues (seeTable 6). No projections of costs 

were made for subsequent years. 

However, a separate estimate for environmental 

mandates projects those costs as declining from $95.1 million in 1991 to $68.2 million in 1995. Unlike the other cities, 

most Chicago environmental costs result from the Resource Conservation and Recovery Act and clean air requirements, and not from water-related mandates. The 

responsibility for drinking water and sewage treatment 

rests with noncity agencies in Chicago. As a result, the environmental costs to residents are undoubtedly much 

higher than shown in this analysis. 

Table 5 

Lewiston, Maine Cost of Federal Mandates 

(i n thousands) 

Current Projected Proposed 

Safe Drinking Water 

Debt Service 

Operation and Maintenance 

Debt Service 

Operation and Maintenance 

Occupational Safety 

Debt Service 

Operation and Maintenance 

Debt Service 

Operation and Maintenance 

Percent of 1992 Budget ($53 Million) 

Clean Water 

Totals: 

Grand Total 

$305.1 

30.0 

18.4 

10.0 

10.5 

40.0 

334.0 

80.0 

414.0 

0.8% 

$ 392.3 

300.0 

453.4 

410.0 

5.2 

70.Q 

850.9 

700.0 

1,630.9 

3.1% 

Note: Debt service based on projected capital costs amortized with level debt service over 20 years at 6%. 

$1,107.2 

1,250.0 

4,322.6 

1,000.0 

0.0 

00 

5,429.8 

2,250.0 

7,679.8 

14.5% 

U.S. Advisory Commission on Intergovernmental Relations 43 

L- - ~ ~ - 
Table 6 

City of Chicago, Illinois, 

Unfunded Federal Mandates 

1991 Costs 

Agency Direct $88.2 

Indirect Administrative 27.3 

Airport Restrictions 12.7 

Bond Refinancing Restrictions 45.0 

Total 191.2 

Percent of 1991 General Revenues 

Arbitrage Rebate 18.0 

from Own Sources ($2,307.9 million) 8.3% 

~~ 

There are several unique features in the Chicago 

study. The city estimates that it incursannual costs as a result of federal limitations on slots at O’Hare Airport. The 

city also considers the costs of arbitrage rebates a federal 

mandate. These costs stem from the 1986 federal tax reform that prohibited state and local governments from 

profiting by investing federally tax-exempt bond funds in 

higher yielding taxable securities. Similarly, the 1986 law 

permits only one advance refunding of tax-exempt bonds, 

secured by escrowed higher interest federal securities. In 

both instances, the city believes its debt management has 

been impaired by federal laws intended to eliminate an 

abuse of the federal income tax laws. 

Other Studies 

Anchorage, Alaska, estimated the costs of federal 

mandates in 1993 using a method similar to that used in 

the Columbus study (see nble 7). 

Expressed as a percentage of own-source revenues, 

the costs were less than 1 percent in 1993 and are expected 

to increase to only 1 percent by 1996. This impact is much 

lower than the Columbus and Lewiston estimates, and 

Anchorage cautions that “they should not be viewed as 

representative of other cities or counties for several reasons.” These reasons include limited problems of industrial development, relatively new infrastructure, and 

considerable wealth from oil production. 

Table 7 

AnchoraGe, Alaska, 

Costs of Federal Environmental Mandates 

(in millions) 

1993 1996 Increase 

Clean Water $4.4 $13.1 $8.7 

Clean Air 3.9 11.0 7.1 

Resource Conservation 

and Recovery 7.8 6.0 -1.8 

Toxic Substances 1.2 1.1 -0.1 

All Other 5.26.4 - 1.2 

Total 22.5 37.6 15.1 

Percent of 1991 

General Revenues 

from Own Sources 

($386.9 million) 0.6% 1.0% 0.4% 

Nine Ohio cities, including Columbus, attempted to 

compile uniform financial costs for 14 environmental 

mandates. Only five cities submitted complete data. The 

information that was available was converted to an average cost per household for the nine cities. The resulting 

estimate was $137 in 1992, estimated to increase by $88 to 

$225 in 1996. These amounts, as in the Columbus study, 

include solid waste disposal costs that are technically a 

state mandate. 

Virginia, in a 1993 report, concluded that “at least 20 

percent of annual general fund expenditures are driven by 

federally mandated programs.” This far exceeds the Tennessee and Ohio estimates, and results from a very broad 

definition of mandates to include any program that is either “driven, defined, or constrained by federal laws, regulations, or federal agency decisions.” As a result, the 

entire state matching payments of over $1 billion for Medicaid and AFDC are included in the estimate, as are avariety of other federal grant programs generally classified as 

being subject to state discretion. 

44 U.S. Advisoly Commission on Intergovernmental Relations 

r 
Appendix B 

Excerpts of Recommendations 

From ACIR Reports on the Unfunded 

Federal Mandates Issue 

ACIR Reports 

The Federal Role in the Federal System: The Dynamics of 

Growth. An Agenda for American Federalism: Restoring 

Confidence and Competence, Report A-86, June 1981, 

(Approved June 20,1980). 

Regulatory Federalism: Policy, Process, Impact and Reform, Report A-95, February 1984. 

Federal Statutory Preemption of State and Local Authority: History, Inventoy, and Issues, Report A-121, September 1992. 

Intergovemmental Decisionmaking for Environmental Protection and Public Works, Report A-122, November 1992. 

Federal Regulation of State and Local Governments: The 

Mixed Record of the 1980s, Report A-126, July 1993. 

High Performance Public Works: A New Federal Infrastructure Investment Strategy for America, Report 

SR-16, November 1993 (Action agenda endorsed by 

the Commission, February 14, 1994). 

THE FEDERAL ROLE IN THE FEDERAL SYSTEM: 

THE DYNAMICS OF GROWTH 

An Agenda for American Federalism: 

Restoring Confidence and Competence 

(Report A-86, June 1981) 

Recommendation 2 

Avoiding Unintended Impacts on State and local 

Governments.. . Fiscal Notes.. . 

The Commission recommends that Congress amend 

the Congressional Budget Act of 1974 to require the Con 

gressional Budget Office (CBO), for every bill or resolution reported in the House or Senate, to prepare and submit an estimate of the cost which would be incurred by 

state and local governments in carrying out or complying 

with such bill or resolution. 

Temporary Suspension of Crosscutting Policies. . . 

The Commission recommends that Congress enact 

legislation authorizing standby authority to the President 

(acting through the Office of Management and Budget) to 

suspend temporarily implementation of enacted crosscutting national policy requirements when it becomes clear 

that serious and unanticipated costs or disruptions will 

otherwise occur. The Commission further recommends: 

(a) that prior to any suspension, the President ascertain 

through an assessment of the requirement’s legislative 

history and, where needed, through direct contact with 

the appropriate congressional committees that the impending disruptions were not anticipated by Congress; (b) 

that the suspension of the implementation of any given 

policy requirement by the President be limited to no more 

than 180 days; (c) that the President immediately notify 

the appropriate committees of Congress of his action and 

the reasonsfor it; and (d) that within 60days of the suspension, the President present to Congress an alternative remedial legislative proposal. 

Regulatory Impact Analyses. . . The Commission recommends that the Congress enact legislation requiring each federal department and 

agency, including each of the independent regulatory 

agencies, to prepare and make public a detailed analysis of 

projected economic and noneconomic effects likely to result from any major new rule it may propose. 

U.S. Advisory Commission on Intergovernmental Relations 45 

~. 
REGULATORY FEDERALISM: 

POLICY, PROCESS, IMPACT AND REFORM 

(Report A-95, February 1984) 

Part A: 

POLICIES AFFECTING ALL FORMS 

OF FEDERAL INTERGOVERNMENTAL 

REGULATION. . . 

Recommendation A 7 

Principles Concerning Federal Regulation 

of State and Local Governments 

The Commission recommends that Congress and the 

Administration carefully consider the appropriate allocation of responsibilities among the different levels of government when establishing new regulatory programs or 

when evaluating existing ones. As a general principle, the 

Commission strongly recommends that the federal government strive to confine its regulation of state and local 

governments and their legitimate activities to the minimum level consistent with compelling national interest. 

Enactment of federal intergovernmental regulation may 

be warranted under the following circumstances: 

(1) to protect basic political and civil rights guaranteed 

to all American citizens under the Constitution; 

(2) to ensure national defense and the proper conduct of foreign affairs; 

(3) to establish certain uniform and minimum standards in areas affecting the flow of interstate 

commerce; 

(4) to prevent state and local actions which substantially and adversely affect another state or its citizens; or 

(5) to assure fiscal and programmatic integrity in the 

use of federal grants and contracts into which 

states and local governments freely enter. 

The Commission emphasizes, however, that these criteria do not justify every federal regulatory action that has 

a tenuous relationship to one or more of these principles. 

Rather, federal intergovernmental regulation is warranted only when a clear and convincing case has demonstrated both the necessity of such intervention and a 

marked inability of state and local governments to address 

the regulatory problem involved. In making this determination, the Commission strongly believes that the criteria 

above must be weighed against the federal government’s 

commensurate responsibility to maintain the viability of 

the federal system and to respect the institutional integrity of states and their localities. 

If, according to this test, the federal government’s involvement in a regulatory program is appropriate, the 

Commission further recommends that the federal government choose the least intrusive means of intergovernmental regulation consistent with the national interest, 

allowing state and local governments the maximum degree of flexibility possible. . . . 

Recommendation A2 

Assuring Adequate Funding 

for New Regulatory Statutes’. . . The Commission recommends that Congress establish a system that guarantees full federal reimbursement 

to state and local governments for all additional direct expenses legitimately incurred in implementing new federal 

statutory mandates, including costs imposed by federal direct 

order mandates, crosscutting requirements, partial preemptions and provisions enforced by crossover sanctions. 

The Commission further recommends that the legislation establishing such a system specify that no state or 

local government be obligated to carry out a federal statutory mandate that does not fulfill this requirement. . . . 

Recommendation A3 

Restoring Constitutional Balance 

in Intergovernmental Regulation. . . A3(a) Reassessing Constitutional Boundaries 

The Commission recommends a reassessment of the 

legal doctrines delimiting the boundaries of national constitutional authority vis-a-vis the reserved powers of the 

states so that those reserved powers again become meaningful and viable. To help restore a sense of balance between the levels of government, the Commission urges 

reconsideration by the national legislative, executive and 

judicial branches of current interpretations of the commerce and spending powers as they apply to the newer and 

more intrusive forms of federal regulation, such as partial 

preemptions, crosscutting grant requirements, crossover 

sanctions applied to federal aid, and direct orders. 

A3(b) Judicial Interpretations 

The Commission applauds the Supreme Court’s recognition in National League of Cities (NLC) v. Usery, 426 

U.S. 833 (1976), that “Congress may not exercise its power 

to regulate commerce so as to force directly upon the 

states its choices as to how essential decisions regarding 

the conduct of integral government functions are to be 

made.” At the same time, however, the Commission finds 

that several recent Supreme Court decisions and many 

lower court judgments have eroded the basic Tenth 

Amendment principles expressed in the NLC case. The 

Commission, therefore, expresses its hope that the federal judiciary will revive and expand upon the principles expressed in NLC v. Usery, particularly those addressing the 

“basic attributes of state sovereignty” and “integral functions” of state government. 

46 U.S. Advisory Commission on Intergovernmental Relations 
Although the Supreme Court in NLC v. Usery constitutionally limited Congress’ power to regulate the states 

under the interstate commerce clause, the Commission 

believes that in certain instances regulations promulgated 

under the conditional spending power may be equally injurious to state sovereignty. The Commission notes that 

despite vast differences between the grant system of six 

decades ago and that which exists today, the Court has 

done little to alter its original grant-in-aid doctrines. Thus, 

given the substantial fiscal reliance of state and local governments upon federal financial aid and the often intrusive nature of regulations attached to modern federal 

grants, the Commission expresses its further hope that the 

federal judiciary, when judging grantor-grantee disputes, will 

recognize that compulsion^' rather than “voluntariness” and 

“coercion” rather than “inducement” now characterize 

many federal grants-in-aid and their requirements. 

A3(c) The Solicitor General‘s Role2 

The Commission recommends that the Administration, through the Office of Solicitor General, show special 

sensitivity to the claims of state and local government in 

arguing or otherwise entering into relevant cases before 

the federal judiciary when such cases pertain to the ncwer 

and morc intrusive forms of regulation described above. 

A3(d) Supporting the State 

and Local Legal Center 

The Commission recommends that state and local 

governments and their associations give full institutional 

and adcquate financial support to the State and Local Legal Center in its monitoring, analytic and training efforts 

and in its effort to assist in presenting common state and 

local interests before the federal courts. . . . 

Part 6: 

A REFORM STRATEGY 

FOR THE NEWER FORMS 

OF INTERGOVERNMENTAL REGULATION. . . Recommendation B? 

Eliminating Crossover Sanctions 

in Federal Grant Statutes. . . 

The Commission recommends that Congress repeal 

the provisions of grant statutes that authorize the reduction or termination of funds from other specified grant 

programs, as well as from the grant program stipulating 

this requirement, when a recipient government fails to 

comply with all the conditions of such a program. . . . 

Recommendation B2 

Improving the Effectiveness 

of Partial Preemption Programs. . . The Commission recommends that the Congress and 

the President recognize that the device of partial preemption can be properly and successfully employed only in areas where Congress identifies broad national regulatory 

goals, while leaving primary responsibility for devising appropriate systems of implementation in the hands of the 

states. To this end, such programs must utilize regulations 

allowing states considerable flexibility in selecting among 

alternative effective and appropriate means for achieving 

national goals, in light of regional differences among the 

states and particular conditions unique to each state. 

To be administered effectively, such partial preemption programs require the full cooperation and joint effort 

of the federal and state governments in both planning and 

implementation. Therefore, in instances in which states 

are expected to assume a co-regulatory role, the Commission recommends that the Congress and the President 

provide for a system of improved consultation and coordination between the states and the federal government by: 

m 

rn 

rn 

authorizing participation by states at an early 

stage in developing federal intergovernmental 

regulations and program standards; 

providing for a system of joint standard setting or 

of state concurrence in developing national program standards, while recognizing the ultimate 

authority of the federal government to issue such 

standards in the event of irreconcilable conflicts; 

establishing joint committees of federal and state 

officials to review each program, identlfy implementation problems, and advise the cognizant department or agency head on appropriate remedies; 

incorporating realistic statutory timetables for issuing federal regulations and for state compliance with federal standards; and 

providing states with adequate advance notification of available federal funding to assist in meeting state program costs. 

To assure that opportunities for state participation are 

extended on a truly voluntary and cooperative basis, the 

Commission further recommends that states be authorized to elect the option of direct federal administration 

without incurring any other legal or financial penalty. . . . Finally, the Commission recommends, that, in those 

few program areas in which rigid, uniform national standards and implementation systems are clearly necessitated, the Congress consider full federal preemption, 

standard setting and administration, while allowing for 

state administration by contract. . . . 

Recommendation B4 

Administration of Generally Applicable 

(Crosscutting) Grant Requirements. . . The Commission recommends that the President and 

Congress examine all applicable statutes and regulations 

and modify or eliminate, by statutory action where necessary, crosscutting requirements that have proven to be exU.S. Advisory Commission on Intergovernmental Relations 47 
cessively burdensome, impracticable to implement, or 

otherwise no longer worth the effort required to implement them.. . . The Commission reiterates its 1978 recommendation 

that Congress and the President assign each crosscutting 

requirement to a single unit within the executive branch, 

with clear responsibility and authority for achieving, in 

consultation with other affected agencies, as well as state 

and local governments, standardized guidelines and simplified administration for effective compliance by all affected 

federal agencies; and that the Office of Management and 

Budget be authorized to establish a uniform procedure for 

developing, implementing, and evaluating, all such guidelines and monitor their administration. , . . The Commission recommends that Congress provide 

a clear statutory indication of those crosscutting requirements applicable to each block grant and of how responsibility for implementation is to be shared between the 

national government and recipient jurisdictions. . . . 

Part C 

IMPROVING THf FEDERAL 

REGULATORY PROCESS. . . Recommenda tion C 1 

Increasing 

State and local Government Participation 

in Intergovernmental Regulatory 

Policy Developmeni and Regulatory Drafting. . . The Commission recommends that Congress and the 

Executive Branch recognize the right of state and local officials “both as individuals and through their national associations” to participate from the earliest stages in 

developing federal rules and regulations that have a significant impact upon their jurisdictions. 

C1 (a) Amending the Federal 

Advisory Committee Act (FACA). . . The Commission recommends that Congress amend 

the Federal Advisory CommitteeAct to exempt from the requirements of the act any national organization composed 

wholly of elected officials of state and local governments 

when acting in their official capacities or their representatives or representatives of their national associations 

when engaged in consultation with agencies for the purposes of rulemaking.’ 

C1 (b) Instituting a State and local Government 

Consultation Process 

for Federal Agency Rulemaking 

The Commission further recommends that the President adopt a process providing for full state and local 

government consultation with federal agencies on rulemakings expected to have significant intergovernmental 

48 U.S. Advisory Commission on Intergovernmental Relatic 

effects, economic or noneconomic. The process should 

apply to grant as well as nongrant related rulemaking. To 

ensure full consideration of the views of state and local 

governments, consultation should occur as early as is practicable in the first stages of intergovernmental regulatory 

policy development and initial drafting, long before the 

publication of the Notice of Proposed Rulemaking in the 

Federal Register. , . . 

C1 (c) Providing a Statutory Basis 

for State and local Governments’ Consultation 

in Federal Agency Rulemaking 

To provide a firm statutory basis for such a consultation process in all rulemakings of intergovernmental significance, the Commission further recommends that Title 

IV of the Intergovernmental Cooperation Act of 1968, which 

requires that all viewpoints-national, state, regional and 

local-shall be fully considered and taken into account in 

planning federal or federally assisted development programs and projects, be amended to include regulatoryprograms of intergovernmental significance. . . . 

Recommendation C2 

State and local Participation 

in the Notice and Comment Stage 

of Rulemaking: Including 

Federal Grants and loans 

Under the Administrative Procedure Act. . . 

The Commission recommends that Congress amend 

provision 5 U.S.C. 553 (a)(2) of the Administrative ProcedureAct to eliminate its exemption of grants, loans, benefits and contracts from Notice and Comment rulemaking 

requirements. . . . 

Recommendation C3 

Ensuring Consideration 

of Intergovernmental Effects 

in Agenc Regulatory Impact Analysis 

an J Regulatory Review. . . 

C3(a) Consideration 

of Intergovernmental Effects.. . The Commission reaffirms its 1980 recommendation 

to the President that all federal agencies conduct regulatory analyses of proposed major rules and further recommends that agencies be required to incorporate into such 

analyses a full consideration of intergovernmental effects 

“economic and noneconomic” of proposed regulations. 

C3(b) Redefining Major Rules. . . The Commission recommends that the President, by 

executive order, expand the current definition of major 

rules to include regulations requiring state and local governments to make significant changes in their laws, regulations, ordinances, organization and fiscal affairs. The 
Commission further recommends that when state and local governments determine in the 60-day comment period 

that a proposed rule or regulation requires such changes, 

the fedcral agency should be required to designate the 

rule as major or to issue a statement indicating that no 

such changes are required, thereby establishing a judicially reviewable basis for its finding and enabling state 

and local governments to bring a court challenge to an 

agency s refusal to designate the rule as major. 

C3(c) Review of Nonmajor Rules. . . The Commission recommends that the President direct that in any review program or as part of the regulatory 

criteria established under such a program, full consideration be given to the intergovernmental effects-economic and noneconomic-that will be generated by any 

proposed rule. 

Recommendation C4 

An Omnibus Approach 

to State and local Government Certification 

in Meeting Federal Rules and Regulations. . . 

The Commission recommends that certification of 

state and local regulations, procedures, recordkeeping 

and reporting requirements be used increasingly by the 

federal government to avoid duplication by equivalent 

federal requirements. 

To encourage greater use of such certification, the 

Commission recommends that Congress and the President enact legislation encouraging the heads of all federal 

agencics regulating state and local governments to consider accepting the substitution of state and local regulations, 

procedures, recordkeeping and reporting requirements in 

lieu of fcdcral ones upon certification by the appropriate 

official or officials that applicable federal requirements 

will be met. Such self-certification shall no longer be accepted upon a finding by the head of the federal agency 

that the recipient government fails to complywith applicable federal laws and regulations adopted thereunder. . . . 

Recommendation C5 

Toward Greater Flexibility: 

The Use of Alternative Means 

in Regulating State and local Governments.. . The Commission recommends that the President, executive agencies, and independent regulatory commissions fully consider alternative means of regulation when 

making rules to implement legislation calling for federal 

regulation of state and local governments and that they 

seek to provide maximum flexibility to state and local governments consistent with national objectives and provisions of federal law. In cases where prescriptive federal 

law prohibits the flexible use of alternative means for 

achieving regulatory objectives, the Commission recommends that the President and Congress consider amending such legislation to allow the use of alternatives. 

Among the alternative regulatory means considered 

should be performance standards, special provisions for 

small governments, marketable rights, economic incentives and compliance reforms. 

FEDERAL STATUTORY PREEMPTION OF 

STATE AND LOCAL AUTHORITY: 

History, Inventory, and Issues 

(Report A-I 21, September 1992) 

Recomm en da tion 7 

Reaffirmation of Requirements for Explicit Intent 

to Preempt and Principles 

for limiting Federal Preemptions.. . The Commission, therefore, reaffirms its earlier recommendations to the effect 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; (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; and (4) the federal courts not confirm the validity of statutory and administrative preemptions unless 

accompanied by a clear statement of intent to preempt 

and unless the extent of preemption is no greater than 

necessary to give effect to that intent within the limits of 

constitutional authority. 

Recommendation 2 

Congressional Preemption Notes 

and Executive Agency Notifications. . . The Commission recommends, therefore, that the 

Congress provide by legislation for the preparation and 

consideration, in both committee and floor debate in both 

houses of the Congress, of preemption notes concerning 

any bill affecting the powers of state and local governments. Such notes should express, in clear language, any 

intent of the legislation to preempt or not to preempt state 

and local government powers, justify the preemption in 

accordance with the United States Constitution, stipulate 

and justify the scope of such preemption, present options 

for minimizing the extent of federal preemption and for 

providing flexibility to state and local governments in comU.S. Advisoly Commission on Intergovernmental Relations 49 
plying with any proposed preemption, and provide either for 

a sunset provision or for periodic review of the preemption. 

The Commission recommends, furthermore, that the 

Congress amend the Administrative Procedure Act to provide that any administrative rulemaking proposed by the 

Executive Branch that would affect the powers of state 

and local governments be required to be published in the 

Federal Register with a preemption note stating, in clear 

language, the extent of any federal preemption intended 

and citing the explicit statutory provision on which any 

preemptive rules would be based. 

Recommendation 3 

Preemption Notes in the Executive Branch.. . 

The Commission recommends, therefore, that the executive branch of the federal government prepare a 

preemption note for any legislative or regulatoly proposal 

affecting the powers of the states or their local governments and attach the preemption note to the proposal for 

consideration within the originating department or agency 

and any reviews by the Office of Management and Budget 

(OMB), the White House, the Congress, and formal 

rulemaking processes. The preemption note should be 

guided by the principles set forth in the Federalism Executive Order (No. 12612) and should be incorporated into 

any federalism assessment prepared thereunder. The 

preemption note should express, in clear language, any intent of the proposal to preempt or not to preempt state or 

local government powers, just$ the preemption in accordance with the United States Constitution, stipulate and justlfy the scope of such preemption, present options for 

minimizing the extent of federal preemption and for providing flexibility to state and local governments in complying 

with any proposed preemption, and provide either for a sunset provision or for periodic review of the preemption. 

INTERGOVERNMENTAL DECISIONMAKING 

FOR ENVIRONMENTAL PROTECTION 

AND PUBLIC WORKS 

(Report A-122, November 1992) 

Recommendation 7 

I ntegr ated Administration 

of Federal Environmental Laws 

throu h the National Environmental Policy Act 

and t fl e Council on Environmental Quality.. . 

The Commission recommends. . . 

(c) Directing each federal agency to exercise its permitting, grantmaking, licensing, and evaluation 

responsibilities in a cooperative, consultative 

fashion; to be receptive to state and local requests 

for administrative dispute resolution under P.L. 

101-552; and to provide assistance to state and local governments to advance the public purposes 

of proposed infrastructure projects by helping to 

identify cost-effective alternatives that can be 

granted permits;. . . 

(i) In the event of a proposed federal decision over- riding state and local decisions implementing federal environmental standards, require the 

federal government to provide the parties at interest reasonable access and time to review and 

rebut information in the public record on which a 

federal decision is to be based. In addition, the final decision should be required to be accompanied by a written explanation setting forth 

specifically the decision and the basis for that decision in relation to the criteria established for 

evaluating the project. The “record of decision” 

requirement in NEPA provides a good modcl for 

this procedure. . . . 

Recornmenda t ion 4 

State Implementation 

of Federal Environmental Protection Laws.. . The Commission recommends, therefore, that the 

federal government encourage the states to administer a 

greater number of federal environmental standards with 

appropriate safeguards and oversight. Furthermore, to 

encourage states to accept delegation of federal programs, the federal government should institute funding 

and program changes and give assurances that the states 

will not be overruled arbitrarily. . . . 

Recommendation 5 

Federal and State Use 

of Environmental Mediation for Dispute Resolution 

and Negotiated Rulemaking.. . 

The Commission recommends, therefore, that the 

federal government (1) create an environmental mediation service to help settle disputes and negotiate new regulations and (2) enhance the capacity of state and local 

governments to provide for mediation of diverse views. 

Such a service should provide for public involvement. 

The Commission recommends, further, that the federal government take evety possible opportunity to rely on 

state and local governments to convene the parties at interest, help broker suitable compromises, and make the 

situation-specific decisions necessary to implement standards established by the federal government. Federal 

agencies participating in this process should respect lawful 

state and local determinations of infrastructure needs, absent clear evidence of violation of federal law, and refrain 

from substituting federal agency discretion for the determinations made by the duly elected officials of state and 

local governments. Means of enhancing the capacity of 

state and local governments to provide for mediation of 

I 

50 U.S. Advisory Commission on Intergovernmental Relations 
diverse views, to help broker mutually satisfactory accommodations of competing goals, to make ecologically and 

economically sound development decisions, and to apply 

these decisions fairly, effectively, and efficiently, should 

include technology transfer, education, training, and financial assistance. 

Recommends tion G 

Federal Reimbursement of Mandated Environmental Protection Costs.. . 

The Commission recommends, therefore, that the 

Congress and the President enact legislation requiring the 

federal government to reimburse state and local governments for the additional costs of complying with federal 

environmental standards, over and above the costs of providing strictly state, local and private benefits. The costs to 

be shared equitably among all the benefited parties should 

include the full costs of maintaining healthy and stable 

ecologies over the long run. . . . 

I 

FEDERAL REGULATION 

OF STATE AND LOCAL GOVERNMENTS: 

The Mixed Record of the 1980s 

(Report A-I 26, July 1993) 

Recommendation 7 

Reconsidering the Constitutionality 

of Unfunded Federal Mandates. . . 

The Commission recommends, therefore, that the 

Congress, the Executive Branch, and the fcderal Judiciary 

declare and honor a moratorium on the imposition of unfunded or underfunded mandates by statutory, administrative rulemaking, and judicial means for a period of at 

Branch conduct a complete and thorough review of mandating for the purpose of restoring balance, partnership, 

and state and local self-government in the federal system. 

The Commission recommends, further, that the U.S. 

Supreme Court reexamine the constitutionality of mandating as a principle and also consider the constitutionality 

of particular mandates in the context of the cumulative 

impact of mandates on the federal fabric of the Constitution of the United States. 

I least two years, and that the Congress and the Executive 

1 

~ 

Recommendation 2 

Using Existing Mechanisms to Press Harder 

for Relief from Burdensome Federal Regulations 

The Commission recommends, therefore, that those 

parties responsible for administering and utilizing the congressional fiscal notes process, the Paperwork Reduction 

Act, the Regulatory Flexibility Act, and the Federalism Executive Order redouble their efforts to take fullest advantage of these mechanisms. The Commission recommends, 

further, that: 

(a) State and local governments (i) identify those 

bills pending in the Congress and regulations to 

be Dreuared within the executive branch of the 

fedkrai government that may have significant effects on state and local governments, (ii) press the 

committees and subcommittees of Congress responsible for the identified bills, early and often, 

to consider the effects on state and local governments, (iii) call for preparation of fiscal notes by 

the Congressional Budget Office on significant 

provisions of those bills before final subcommittee and committee action, (iv) provide the committees, subcommittees, and the Congressional 

Budget Office with relevant fiscal and other information that should be taken into account in 

the legislative process, (v) press for early access to 

the administrative rulemaking process, and (vi) 

educate the public and the press about the impact 

of federal regulation on state and local governments, for example, by indicating the cost of unfunded federal mandates on tax and utility bills. 

The Congress and all appropriate agencies of the 

federal government should make compliance 

with the letter and the spirit of the State and Local 

Cost Estimate, Paperwork Reduction, and Regulatory FIeXbility acts and the Federalism Executive 

Order a high priority. 

The federal, state, and local governments should 

continue to evaluate ways to improve regulatoxy 

relief mechanisms and give high priority to the 

development of a more effective, and equitable 

intergovernmental partnership to achieve shared 

objectives with minimal unilateral and costly regulation. . . . 

HIGH PERFORMANCE PUBLIC WORKS: 

A New Federal Infrastructure 

Investment Strategy for America 

(Report SR-16, November 1993; 

Action Agenda endorsed by the Commission, 

February 1 4, 1994) 

AN ACTION AGENDA 

PRESIDENTIAL AND CONGRESSIONAL 

LEADERSHIP.. . The President’s Role. . . 

ties to: 

The President should take advantage of.. . opportuniU.S. Advisory Commission on Intergovernmental Relations 51 
m Issue an Executive Order (1) establishinggovernmentwide principles, . . [that] should require federal agencies to: 

. . . Analyze existing and proposed regulations affecting infrastructure to ensure that 

they are necessary and that the least burdensome and most flexible forms of regulation 

that can get the job done are being used. 

Develop an infrastructure legislative program incorporating at least the following three proposals: 

The Infrastructure Investment Act. . . 

The Environmental Integration Act. . . 

The Mandate Relief Act, which would require (1) regular inventory and cost estimation 

of all existing and proposed federal mandates, 

(2) analysis of the incidence of costs and the 

ability to pay of those parties on whom the 

costs fall or would fall, and (3) equitable 

federal sharing of the mandated costs or an affordable prioritization and scheduling of compliance by the non-federal parties. . . . 

The Role of Congress. . . 

priority proposals: 

The Congress should consider the following high 

Hold hearings and act on the President’s infrastructure legislative program. . . . 

Take the opportunity, when reauthorizing infrastructure and environmental programs, to introduce the principles of. . . mandate reform. . . . 

GOVERNMENTWIDE GUIDANCE 

ON INFRASTRUCTURE INVESTMENT 

AND REGULATION 

In accordance with the President’s Executive Order 

on Infrastructure, the following agencies should issue additional guidance, in consultation with affected federal 

agencies, state and local governments, and other affected 

parties, and should exercise implementation oversight. 

The Office of Management and Budget (OMB) 

should revise its circulars on . . . legislative clearance (A-19), and benefit-cost analysis (A-94) . . . to emphasize the need to examine alternative 

program designs and the potential impacts of federal mandates more carefully from the viewpoint 

of the state and local partners. The principles of 

Executive Order 12612 (Federalism) should be 

incorporated into this clearance process. . . . 

OMB s Office of Information and RegulatoryAffairs (OIRA) should revise its regulatory review 

H 

guidance to emphasize (1) the need for mandate 

relief, performance-based regulation, market incentive regulation, the use of technologically advanced means of complying with regulations, and 

regulatory flexibility; (2) greater use of negotiated rulemaking in suitable cases; and (3) limiting the use of interim guidance in place of formal 

regulations (including provisions to sunset interim guidance after a reasonable time). 

OIRA should be charged with the responsibility 

for maintaining a cumulative inventory of federal 

mandates, ensuring that their costs are estimated, and requiring a cost and affordability 

analysis of proposed rulemakings (including an 

analysis of the incidence of costs, the ability-to-pay of those responsible for paying, and an 

evaluation of alternative rules that might be less 

burdensome). 

Periodically, OIRA should require federal agencies to conduct a zero-based review of their regulations affecting infrastructure to ensure that, as 

a group, they remain up to date, effective, practical, understandable, coordinated, and affordable. 

GOVERNMENTWIDE SUPPORT 

FOR INFRASTRUCTURE AGENCIES 

The following support activities should be provided in 

consultation and cooperation with relevant state, local, 

and Indian tribal governments, and the private sector. . . . 

The Administrative Conference of the United 

States (ACUS) should provide advice, referral 

services, and training in administrative dispute 

resolution and negotiated rulemaking. 

ACIR should develop and promote improved 

methods of regulatory analysis, federal mandate 

cost estimating, and intergovernmental impact 

analysis. 

GAO, in cooperation with agencies’ internal audit programs, should audit and evaluate . . . mandate cost estimates and regulatory analyses. . . . 

Notes 

’Sen. Dave Durenberger requested to be recorded as opposing 

this recommendation on the grounds that a selective, not a full, 

reimbursement policy is the only one that is currently realistic 

and fiscally responsible. 

Deputy Under Secretary Koch, County Executive William 

Murphy, and County Supervisor Peter Schabarum requested to 

be recorded as opposing this recommendation. Deputy Under 

Secretary Koch provided the following statement of her posi- tion, with County Executive Murphy concurring: 

It is the responsibility of the Solicitor General to repre- sent his client the United States Government in cases in 

52 U.S. Advisory Commission on Intergovernmental Relations 
which the U.S. is involved, and to defend the best interests of the U.S. as he sees them. The Solicitor General is 

not in a position to make policy decisions by modifying 

his actions to take account of the interests of opposing 

parties. In fact, this could be seen as running directly 

counter to his duty. Such policy issues are properly directed toward Congress and the President. Therefore, it 

is inappropriate for ACIR to ask the Solicitor General 

to alter his manner of meeting his responsibility to the 

US. government as this resolution suggests. 

Rep. L.H. Fountain requested to be recorded as opposing this 

recommendation on the following grounds: 

I agree that state and local officials, and their national 

associations, should have the right and the opportunity 

to participate fully in the development of federal rules 

and regulations affecting them. However, amending 

the FederalAdvisoty Committee Act to exempt state and 

local officials from the act’s requirements appears to be 

*US GOVERNMENT PRINTING OFFICE: 1994-0-523-591 

both unnecessary and unwise. I am sure there are many 

ways in which state and local governments can express 

their views on proposed rules and regulations without 

becoming subject to FACA. This legislation was enacted to assure openness and accountability in the operation of federal advisory bodies. To exempt state and 

local officials and their national associations from the 

act’s procedural safeguards would surely invite demands for the exemption of other groups and, ultimately, could lead to the destruction of an important federal 

law. I believe this is the wrong remedy if FACA has been 

interpreted by federal agencies in a manner that unnecessarily obstructs early consultation by state and local 

officials in the development of intergovernmental regulations. This, surely, was not the intent of Congress. 

The proper remedy, in my judgment, would be to elicit a 

more reasonable interpretation of the act’s requirements within the executive branch. 

U.S. Advisory Commission on Intergovernmental Relations 53