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UNFUNDED MANDATES AND REGULATORY

OVERREACH

HEARING

BEFORE THE

SUBCOMMITTEE ON TECHNOLOGY, INFORMATION

POLICY, INTERGOVERNMENTAL RELATIONS AND

PROCUREMENT REFORM

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

MARCH 30, 2011

Serial No. 112–20

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.fdsys.gov

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PATRICK T. MCHENRY, North Carolina

JIM JORDAN, Ohio

JASON CHAFFETZ, Utah

CONNIE MACK, Florida

TIM WALBERG, Michigan

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

ANN MARIE BUERKLE, New York

PAUL A. GOSAR, Arizona

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

TREY GOWDY, South Carolina

DENNIS A. ROSS, Florida

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

MIKE KELLY, Pennsylvania

ELIJAH E. CUMMINGS, Maryland, Ranking

Minority Member

EDOLPHUS TOWNS, New York

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, District of

Columbia

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

DANNY K. DAVIS, Illinois

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

CHRISTOPHER S. MURPHY, Connecticut

JACKIE SPEIER, California

LAWRENCE J. BRADY, Staff Director

JOHN D. CUADERES, Deputy Staff Director

ROBERT BORDEN, General Counsel

LINDA A. GOOD, Chief Clerk

DAVID RAPALLO, Minority Staff Director

SUBCOMMITTEE ON TECHNOLOGY, INFORMATION POLICY, INTERGOVERNMENTAL

RELATIONS AND PROCUREMENT REFORM

JAMES LANKFORD, Oklahoma, Chairman

MIKE KELLY, Pennsylvania, Vice Chairman

JASON CHAFFETZ, Utah

TIM WALBERG, Michigan

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

BLAKE FARENTHOLD, Texas

GERALD E. CONNOLLY, Virginia, Ranking

Minority Member

CHRISTOPHER S. MURPHY, Connecticut

STEPHEN F. LYNCH, Massachusetts

JACKIE SPEIER, California

(III)

C O N T E N T S

Page

Hearing held on March 30, 2011 ............................................................................ 1

Statement of:

Cutler, Joni, South Dakota State Senator; Raymond J. Keating, chief

economist, Small Business & Entrepreneurship Council; and John C.

Arensmeyer, founder & CEO, Small Business Majority ............................ 10

Arensmeyer, John C. ................................................................................. 31

Cutler, Joni ................................................................................................ 10

Keating, Raymond J. ................................................................................. 20

Letters, statements, etc., submitted for the record by:

Arensmeyer, John C., founder & CEO, Small Business Majority, prepared

statement of ................................................................................................... 33

Cutler, Joni, South Dakota State Senator, prepared statement of .............. 12

Keating, Raymond J., chief economist, Small Business & Entrepreneurship Council, prepared statement of ........................................................... 22

Lankford, Hon. James, a Representative in Congress from the State

of Oklahoma, prepared statement of ........................................................... 2

(1)

UNFUNDED MANDATES AND REGULATORY

OVERREACH

WEDNESDAY, MARCH 30, 2011

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON TECHNOLOGY, INFORMATION POLICY,

INTERGOVERNMENTAL RELATIONS AND PROCUREMENT

REFORM,

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 2:13 p.m., in room

2154, Rayburn House Office Building, Hon. James Lankford (chairman of the subcommittee) presiding.

Present: Representatives Lankford, Kelly, Chaffetz, Walberg,

Labrador, Farenthold, and Connolly.

Staff present: Ali Ahmad, deputy press secretary; Molly Boyl,

parliamentarian; Sharon Casey, senior assistant clerk; Katelyn E.

Christ, research analyst; Linda Good, chief clerk; Hudson T. Hollister, counsel; Ryan Little, manager of floor operations; Justin

LoFranco, press assistant; Mark D. Marin, senior professional staff

member; Kristina M. Moore, senior counsel; Kristin L. Nelson, professional staff member; Brian Quinn and Donald Sherman, minority counsels; and Cecilia Thomas, minority counsel/deputy clerk.

Mr. LANKFORD. The committee will come to order.

The opening statements for myself and our ranking member, Mr.

Connolly, I am going to have submitted for the record in writing

so we can go ahead and just move on as quickly as we can. I do

have one letter that I am also asking for unanimous consent to be

able to submit it for the record, a letter to Doug Elmendorf. With

no other reason to deny that, I would assume that we can receive

that by unanimous consent on that.

[The prepared statement of Hon. James Lankford follows:]

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Mr. LANKFORD. Basic ground rules of the hearing: each of you

has been asked to submit a written statement for the record. We

have also asked you to prepare an oral opening statement no

longer than 5 minutes so we can allow time for questions and discussion after your statement.

You will see on your desk a series of lights and a clock which

will count down from 5 minutes. I know you all have been briefed

on this already. After the entire panel has given their oral statements, we will have a few questions for you. We will do those questions in 4-minute increments and get a chance to clip through that

as well. We will be strictly enforcing the time today. Obviously, we

have a very tight schedule; it has been interrupted by votes. So we

are grateful that you are here and that you have taken a significant amount of time to prepare your testimony.

Do you have any questions about going through the oral portion

of this?

[No response.]

Mr. LANKFORD. Thank you. I would like to now read the mission

statement of our committee, and then we will swear you in.

As the Oversight and Government Reform Committee, we exist

to secure two fundamental principles: first, Americans have a right

to know that the money Washington takes from them is well spent

and, second, Americans deserve an efficient, effective government

that works for them. Our duty on the Oversight and Government

Reform Committee is to protect these rights. It is our solemn responsibility to hold government accountable to taxpayers because

taxpayers do have the right to know what they get from their government. We will work tirelessly in partnership with citizen watchdogs to deliver the facts to the American people and bring genuine

reform to the Federal bureaucracy. This is the mission of the Oversight and Government Reform Committee.

We have three witnesses that we are receiving testimony from

today. The Honorable Joni Cutler is a member of the South Dakota

State Senate, representing the 14th District of South Dakota,

serves on the Executive Committee of the National Conference of

State Legislatures. Prior to her service in the State Senate, Senator

Cutler served in the South Dakota State House of Representatives

for 8 years. Thanks for being here.

Mr. Raymond Keating is the chief economist at the Small Business & Entrepreneur Council and serves as an adjunct professor in

the Business School at Downing College.

And Mr. John Arensmeyer is the founder and CEO of the Small

Business Majority. Prior to that he was the chief operating officer

of a multimedia business and an attorney in New York.

Thank you all for being here. It is our typical practice here that

we swear in guests when they come, so if you would please rise and

raise your right hands.

[Witnesses sworn.]

Mr. LANKFORD. Thank you very much. Let the record reflect that

all witnesses answered in the affirmative.

Please be seated.

I would like to receive the testimony first from Joni Cutler.

Please, you have 5 minutes. Thank you.

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STATEMENTS OF JONI CUTLER, SOUTH DAKOTA STATE SENATOR; RAYMOND J. KEATING, CHIEF ECONOMIST, SMALL

BUSINESS & ENTREPRENEURSHIP COUNCIL; AND JOHN C.

ARENSMEYER, FOUNDER & CEO, SMALL BUSINESS MAJORITY

STATEMENT OF JONI CUTLER

Ms. CUTLER. Thank you, Mr. Chairman. Good afternoon, Chairman Lankford, Ranking Member Connolly, and distinguished members of the Subcommittee on Technology, Information Policy, Intergovernmental Relations and Procurement Reform. I am Senator

Joni Cutler, a member of the South Dakota Senate. I am also a

member of the Executive Committee of the National Conference of

State Legislatures, on whose behalf I am testifying.

NCSL is a bipartisan organization representing the 50 State legislatures and the legislatures of our Nation’s commonwealth, territories, and District of Columbia. I am very appreciative of this opportunity to testify on the States’ experience with unfunded and

underfunded Federal mandates.

This hearing is particularly timely for three reasons: First, legislative, regulatory and fiscal burdens the Federal Government imposes on State and local governments are often overlooked and frequently underappreciated; second, we have just celebrated the 16th

anniversary of the enactment of the Unfunded Mandates Reform

Act and have learned much about its effectiveness and drawbacks

that I will share with you today; third, Congress and the administration are embarking on an effort to rein in annual deficits and

manage the national debt, and that effort will unavoidably put on

the table State-Federal partnerships, intergovernmental relationships, and basic issues regarding fiscal federalism.

In 1995, NCSL and our fellow State and local organizations

hailed bipartisan passage and enactment of UMRA. That law enhanced the visibility of potential unfunded Federal mandates and

cost shifts, and in some instances changed the nature of the discussions leading to passage of Federal legislation. It has led to the development of an able division within the Congressional Budget Office that produces vital intergovernmental mandate analysis and

an annual report on UMRA. UMRA’s procedural hammer, or more

so the threat of using this hammer, has seemingly acted to douse

some efforts to impose unfunded mandates and shift costs to States

and localities.

A reading of any annual CBO report on UMRA shows how few

mandated actions exceed the law’s threshold. However, UMRA’s

limitations make it a candidate for improvement and strengthening, and legislation accomplishing such originating in this subcommittee would be very helpful. UMRA’s limits will not serve the

essential conversation needed to address reduced future Federal

funding or discretionary mandatory programs. Its limits and loopholes, much the result of negotiations that took place 16 years ago,

omit many mandates in the eyes of State legislators and other

State and local elected officials. These omissions include new conditions of grants in aid, reduction of Federal funds without commensurate reduction in program or administrative requirements, sancVerDate 11-MAY-2000 11:55 Sep 12, 2011 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67619.TXT KATIE PsN: KATIE
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tions for failure to comply with unfunded mandates, and creation

of underfunded national expectations.

Therefore, NCSL is urging a three-pronged approach to improve

UMRA, broaden cooperation and discussion on State and Federal

programs. First, NCSL’s policy supports legislation that would correct UMRA’s limitations. For example, H.R. 2255 from the 111th

Congress serves as an excellent example of bipartisan-sponsored

legislation that would enjoy support from me and my fellow lawmakers if offered again in the 112th Congress.

Such legislation needs to include open-ended entitlements in any

mandatory or entitlement program with capped Federal funding

participation in the definition of an unfunded mandate. It should

also eliminate program exclusions in the underlying current statute

and include new conditions imposed through older programs under

the definition of a mandate. It must also include conditions of

grants in aid. And among several points made in my written testimony, a revised UMRA law should require Federal reimbursement

to State and local governments for costs imposed on them by any

new Federal mandates for as long as the mandate exists.

Second, the House and Senate budget resolutions for fiscal year

2012 should contain general instructions to appropriators and committees of jurisdiction to avoid creating or expanding existing unfunded or underfunded mandates. I urge this subcommittee’s membership to prod your leadership and budget committee chairs to include this instruction in the fiscal year 2012 and subsequent year

budget resolutions.

Third, finally, there are several pending reauthorizations before

the 112th Congress. For the most part, committees other than

Oversight and Government Reform have jurisdiction over them;

however, any effort to reauthorize an existing program, such as No

Child Left Behind, the Temporary Assistance for Needy Families

Block Grant, and the SAFETEA-LU transportation program should

be seen as an opportunity for this subcommittee to explore, repeal,

or minimize the provisions that shift costs to States. They should

also be seen as opportunities to provide program and administrative savings for all levels of government simultaneously, while

maintaining essential public services.

Mr. Chairman and Ranking Member Connolly, NCSL offers to

work together with you to address what are hopefully mutual concerns regarding these authorizations. Mr. Chairman, thank you for

inviting me and the National Conference of State Legislatures to

testify before you today. I look forward to responding to questions

subcommittee members may have.

[The prepared statement of Ms. Cutler follows:]

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Mr. LANKFORD. Thank you very much.

Mr. Keating.

STATEMENT OF RAYMOND J. KEATING

Mr. KEATING. Chairman Lankford, Ranking Member Connolly,

and members of the committee, the Small Business and Entrepreneurship Council is pleased to provide testimony today regarding

the Unfunded Mandates Reform Act and how it relates to small

business and the economy. My name is Raymond Keating. I am

chief economist with SBE Council, a nonpartisan, nonprofit advocacy, research, and training organization dedicated to protecting

small business and promoting entrepreneurship. SBE Council

works with leaders at local, State, Federal, and international levels

to improve the environment for entrepreneurship and enhance competitiveness.

Unfortunately, government too often erects obstacles to improving the climate for entrepreneurship and to enhancing the competitiveness of U.S. business, including regulations and mandates that

raise costs, diminish incentives and resources for risk-taking, reduce opportunities and/or create uncertainty.

I am also an adjunct professor at the Business School at Dowling

Collect in New York. In the MBA Program I frequently teach public sector economics, in which I emphasize the importance of understanding the incentives at work not just in the private sector, but

in the public sector as well. And, in fact, powerful incentives exist

within the governmental and political spheres when it comes to imposing mandates, given the ability to take governmental actions

while others deal with the cost.

It is also critical to understand that the costs of regulations and

mandates fall much harder on small businesses. Small businesses

often lack adequate resources both in terms of dollars and staff to

deal with the additional costs that come with governmental mandates.

For good measure, the taxes needed to fund intergovernmental

mandates come from small businesses and their customers.

Given the powerful incentives at work and often substantial

costs, it is important to have some kind of institutional checks and

balances in the system when it comes to unfunded mandates.

UMRA, which SBE Council supported, is one of those

counterbalancing measures. It has been beneficial by providing additional information about the direct costs of unfunded Federal

mandates, injecting the issue of costs further into the debate, and

discussion is a positive development from the small business perspective. However, problems do exist or, more accurately, shortcomings. I will name three very quickly.

First, new regulations being proposed under the Dodd-Frank

Wall Street Reform and Consumer Protection Act have the potential to restrict access to and raise the cost of capital and credit for

small business owners; proposed Federal Reserve rules regarding

interchange fees, for example, could make a currently challenging

problem much worse for small businesses. Yet, the independent

regulatory agencies that will be issuing these rules and are issuing

these rules are exempt from UMRA.

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Second, the FCC voted in December to impose net neutrality regulations on Internet broadband providers. The FCC inserting itself

into pricing and operational decisions would have consequences for

investment and innovation in broadband, with small businesses

likely experiencing negative consequences as consumers, content

providers, and app entrepreneurs, for example. But the FCC is another independent agency not covered by UMRA.

Third, the Patient Protection and Affordable Care Act included

unfunded mandate burdens far exceeding the thresholds in UMRA.

Those costs affect, either directly or indirectly, small businesses.

Unfortunately, recognition that this massive health care measure

did exceed the threshold levels of UMRA meant little in terms of

legislative reality, which raises some question about UMRA’s ultimate impact.

I would like to just quickly note six problems and limitations

that require some remedies. First, among the most glaring and

troubling is that the law does not cover a large swath of Federal

mandates, including rules issued by independent regulatory agencies. No. 2, shortcomings with UMRA’s point of order provisions

need to be remedied by having both informational and substantive

points of order apply to legislative and agency mandates on both

government and the private sector.

Third, problems regarding costs must be remedied. Indirect costs

impacting such areas as prices, risk-taking, economic growth and

employment need to be considered. Fourth, when it comes to agency mandates, an independent entity such as the GAO, a separate

entity within OMB, or an independent office should have responsibility for evaluating the cost of such mandates. Fifth, the judicial

review included in UMRA lacks teeth, to say the least, and offers

no real incentives to challenge agencies or for agencies to deal more

legitimately with UMRA requirements.

Sixth, UMRA needs to be built upon or amended to establish

means for evaluating the effectiveness, the actual cost, and the

emergence of unintended consequences of existing regulations and

mandates. Requiring sunsetting and periodic evaluation of existing

regulations and mandates makes sense given the realities of a dynamic economy. Along with this, a required congressional vote on

all rules, mandates and regulations being proposed would enhance

accountability.

SBE Council appreciates the opportunity to provide input to the

committee, and I look forward to your questions.

[The prepared statement of Mr. Keating follows:]

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Mr. LANKFORD. Thank you very much.

I now recognize Mr. Arensmeyer. Thank you.

STATEMENT OF JOHN C. ARENSMEYER

Mr. ARENSMEYER. Thank you, Mr. Chairman. Good afternoon,

Chairman Lankford, Ranking Member Connolly, and members of

the committee. Small Business Majority is a nonpartisan small

business advocacy organization founded and run by small business

owners. We represent the 28 million Americans who are self-employed or own businesses of up to 100 employees. Our organization

uses scientific opinion and economic research to understand and

represent the interests of all small businesses.

I ran two small businesses for 15 years and have run a nonprofit

organization for the past 5. Other members of our senior team have

long careers as entrepreneurs. As such, we are well aware there

are times when small businesses are overburdened by government

regulation and that regulation often affects small businesses more

than big businesses. This is why we support President Obama’s initiative to review government regulation on business and we support the Small Business Administration’s role in monitoring compliance of the Regulatory Flexibility Act. We share the view that

any regulations that impact small businesses should be carefully

scrutinized and we support the requirements already in the Unfunded Mandates Reform Act that require government to analyze

and report on the impacts of new regulations.

That said, there is a legitimate role for government in passing

laws that address private sector business activity. Business owners

are pragmatic, bottom line-oriented, and preventing or delaying all

regulation that might in some way affect small business would be

shortsighted and could actually remove an important tool that can

stimulate small business innovation and contain costs. Indeed, our

research has shown that small business supports government as a

facilitator and an arbiter that sets rules of the road.

The effects of legislation on the private sector should be carefully

considered as each bill is being debated, not by a blanket one-sizefits-all approach. The first items on Small Business’s list of concerns are the need for customers and finding ways to deal with

burdensome expenses. In many cases government can help. I am

going to focus on two successful examples of this, the Patient Protection and Affordable Care Act and the Clean Air Act.

The No. 1 problem we hear from small businesses about is the

cost of health care. Small businesses want to offer health coverage,

but our scientific bipartisan survey show that 86 percent of them

cite cost as the biggest barrier. A major study that we conducted

found that, without reform, small employers would pay $2.4 trillion

over the next 10 years, costing us 178,000 jobs and $52.1 billion in

profits. This crisis compelled Congress to take action. The status

quo was just simply unacceptable.

The Affordable Care Act addresses all these issues and more.

While reducing the Federal deficit by more than $200 billion over

the next 10 years and more than $1 trillion over 10 years after

that. Our research shows that 4 million small businesses, that is

84 percent of all businesses, are eligible for tax credits in the law

and that 33 percent of them tell us in the scientific polling we have

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done that they are more likely to cover their employees because of

the tax credits and the marketplaces that are being set up under

the law starting in 2014.

For example, Mark Hodash, owner of Downtown Home and Gar- den, in Ann Arbor, Michigan, qualified for a $15,000 tax credit this

year. Knowing he had that credit gave him the confidence to add

another person to his staff. His new employee, who was unemployed previously, now has a job and is contributing to the economy

by paying taxes and buying goods.

Government support to the clean energy sector of the economy is

also providing much-needed aid to small business. Indeed, without

a strong government role in setting goals and standards, we will

never successfully compete in the interconnected 21st century global economy that is becoming more and more centered on innovative

clean energy solutions.

Over the last 40 years, the Environmental Protection Agency has

proven itself as much a protector of the economy as of the public’s

health. Indeed, during the last two decades under the Clean Air,

gross domestic product has increased 64 percent, while emissions

of the most common air pollutants have declined by 41 percent. Between 2010 and 2015 alone, capital investments in pollution control

and new generation will generate an estimated 1.46 million jobs.

And the EPA’s clean air standards for automobiles are projected to

save owners $3,000 per vehicle, this amount rising to $7,400 for

2017 to 2022 model vehicles. This will have a substantial benefit

for small business owners, especially for those businesses who rely

on transportation.

Our bipartisan polling shows that 61 percent of small businesses

agree that moving the country to clean energy is a way to restart

the economy and make their businesses more competitive. A majority supports an active role for government in this process. For example, the Clean Air Act and Regulating Greenhouse Gases helps

Cody Metcalf, President of LED light distributor WinderLumen

LED in Windermere, Florida. Cody says if someone is paying attention to greenhouse gases, then there is more demand for our product.

As these examples show, a constructive partnership between

business and government can provide economic opportunity and

can help entrepreneurs cut some of the unnecessary and onerous

costs of doing business. Wielding a legislative hammer, rather than

employing a judicious and precise scalpel risks squashing a role for

government that is often a boon to small business.

Thank you.

[The prepared statement of Mr. Arensmeyer follows:]

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Mr. LANKFORD. Thank you very much.

Based on our prior agreement that I had with the ranking member, I am going to recognize myself for 4 minutes, and we will do

4 minute questioning time on that.

Senator Cutler, thank you for being here. Thank all of you for

being here, in fact, and for your testimony, both written and oral.

I would like to also add that if anyone else wants to be able to submit a statement, that they can certainly do that in writing and we

will receive those for the next 7 days.

Senator Cutler, you talk about statutory caps, for instance, and

talk about when caps are added, you would like to have some basic

statutory relief that would offset that; that it may be a situation

where you are not looking for additional funds, but looking for additional offsets. Can you elaborate more on that, what you mean?

Ms. CUTLER. Well, I think, really, if I could make one point and

have one takeaway point for you today, it would be that in all of

this what we are really looking for is the difference between theory

and effect, really, the idea that whatever is in the statute should

clearly reflect the effect that it is going to have on the States, as

we struggle so hard right now in these times to balance our budgets. So any time we have a cap, then we look toward what is it the

States would have to do to remedy that cap, and we should be able

to clearly identify through the process what it is that is going to

take place at a State-by-State level; and that would be so very

helpful to us in planning our budgets.

Mr. LANKFORD. You also made a statement about changing the

term direct cost or expenditure to a reasonably foreseeable direct

cost or indirect cost. Can you elaborate a little bit more on that as

well?

Ms. CUTLER. Thank you, Mr. Chairman. Those indirect costs

really are described now under the definition as an indirect cost,

but in reality they still have to come up and take their place in our

budgets. So by including things that are presently exempted, by

identifying the cost shifts that any piece of legislation may have on

shifting the burden of costs to the States that they presently don’t

have, and then adding to the definition those changes that are

made in the programs that presently exist, we will help the States

go a long way in really planning for taking care and coming into

compliance with the requirements of the Federal legislation that

you pass.

Mr. LANKFORD. OK, thank you.

Mr. Keating, you made some very specific recommendations. In

one of them you were talking about independent agencies that are

exempted from UMRA. Any specific examples that you can note? I

know you have a lot in your opening statement about dealing with

independent agency. You mention SEC at one point, but other examples you can give us on that?

Mr. KEATING. Well, I mentioned the FCC in terms of what they

are doing in terms of net neutrality regulation; I talked about the

new consumer protection agency that is being developed. These are

all going to have clear impacts on the small business community,

what they are putting forward. Net neutrality regulation, it is not

just the big broadband providers. When you look at all the costs,

again, getting to all the costs in the equation, it is going to be felt

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throughout the economy and small business and entrepreneurs as

well.

Mr. LANKFORD. Do you see any reason why Congress, when they

are making a decision about a particular piece of legislation, should

not be informed even if it affects some independent agency, why

the lack of information is somehow beneficial?

Mr. KEATING. No, I don’t understand that. Quite frankly, I would

say that there shouldn’t be any exclusions here across the board

because we are talking about information here, and, in my view,

more information is better. The more information you have, the

better decisions you can make. So no matter what we are talking

about, whether it is independent regulatory agency or legislation,

or all those other areas, quite frankly, that are excluded, I don’t

understand why they should be, why they are excluded. We should

have more information so we can make better, intelligent decisions.

Mr. LANKFORD. That would be my perception as well.

Mr. Arensmeyer, you mentioned several things that became regulatory benefits to smaller business, but in your opening statement

you made several statements about there are some burdensome

things that government does to small businesses, but you didn’t

mention any in particular. Are there any particular areas that you

look at and say this does become burdensome for us?

Mr. ARENSMEYER. Well, there is always the potential, any time

you are passing legislation, and we certainly endorse that Congress

needs to have all the information about potential burdens. I mean,

obviously, one thing that comes to mind now is that the 1089 provision that is in the health care law, it should not have been there;

it is a burden with not very much benefit coming the other way,

and we certainly wish that would go away as quickly as possible.

Mr. LANKFORD. OK. We are working on that.

Now I would like to recognize the ranking member, Mr. Connolly,

for 4 minutes of questioning.

Mr. CONNOLLY. Thank you, Mr. Chairman.

Mr. Keating, when Congress passed the Clean Air Act amendments of 1990, a lot of small businesses and industries claimed

that the cost of electricity would skyrocket, putting extreme financial pressure on individuals and small businesses’ electric bills. In

fact, did that materialize?

Mr. KEATING. I would have to take a look at exactly the provisions you are talking about and what the results of it were, so I

can’t——

Mr. CONNOLLY. Well, is it your impression that between 1990

and now electric bills have skyrocketed, putting an undue financial

burden on small businesses?

Mr. KEATING. I live in New York, so yes, I would have to answer

yes to that. But I would have to take a look at specifically those

provisions and see what the results were, because you have to obviously factor in a whole host of other measures that would come into

play in terms of impacting the cost.

Mr. CONNOLLY. Mr. Arensmeyer, is that your impression?

Mr. ARENSMEYER. Our impression is that the opportunities that

have been created by the environmental regulations of the EPA

have spurred tremendous boon to new industries in this country,

new industries that are likely to be able to more adequately comVerDate 11-MAY-2000 11:55 Sep 12, 2011 Jkt 000000 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67619.TXT KATIE PsN: KATIE
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pete around the world. And all the studies that have been done

about increased costs have shown that they have been small or little, and they are completely offset by improvements in energy efficiency that are driven by the desire to move toward a more energyefficient economy.

Mr. CONNOLLY. I mention it because we heard many of the same

arguments 20 years ago on Clean Air Act amendments, in terms

of their impact on small businesses, almost none of which, dire predictions, that is, came true. As a matter of fact, quite the opposite.

You brought up health care and the assertion that health care

imposes onerous regulations on small businesses, requiring them to

offer health insurance. Do you know what percentage of small businesses fall under the 50 employee threshold?

Mr. ARENSMEYER. About 4 percent of businesses in this country

have over 50 employees, and of those 4 percent, 96 percent of those

already offer insurance.

Mr. CONNOLLY. So let me get this straight, Mr. Arensmeyer.

Therefore, 96 percent of all small businesses are exempt from these

so-called onerous regulations in requiring health care coverage for

their employees.

Mr. ARENSMEYER. Correct.

Mr. CONNOLLY. And of the remaining 4 percent of small businesses in America, 96 percent already offer health care insurance.

Mr. ARENSMEYER. Correct.

Mr. CONNOLLY. And therefore would also be exempt from this onerous regulation since they already provide.

Mr. ARENSMEYER. Yes.

Mr. CONNOLLY. Thank you.

The EPA issued a tailoring rule that limits greenhouse gas pollution regulations to sources that emit more than 75,000 tons of carbon dioxide annually. Is there a single small business that would

have a pollution source exceeding this extremely high threshold,

Mr. Keating?

Mr. KEATING. I would have to again take a look at the details

of that, but of course small businesses are going to be affected if

costs rise for utility firms and manufacturing. So even if you see

higher costs on larger firms and on utilities, that obviously is going

to affect small businesses.

Mr. CONNOLLY. Mr. Arensmeyer.

Mr. ARENSMEYER. My understanding is that limits on the traditional emissions, sulfur dioxide, things like that, and those completely exempted. There is no possible way any small business

would fall under those. And with the greenhouse gas rules, they

have raised that substantially so it kind of matches up with the

size of the facilities that would be covered by the traditional pollutants.

So basically even under the greenhouse gas rules there is no way

any small business would be directly impacted by that. And the indirect impacts, we have seen figures like half of a cent, which is

on a unit basis. And when you start to look at the energy efficiency

across the whole economy, the costs are going to come down dramatically as we sort of move in that direction.

Mr. CONNOLLY. Thank you.

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Senator Cutler, real quickly. I also came from local government,

spent 14 years in local government. Do you see a difference between unfunded mandates with respect to State and local government, and the regulation of private industry? Are those two different things?

Ms. CUTLER. Thank you for the question. I think oftentimes there

is an overlap. You can’t often move one piece without a resulting

effect on the other piece. So I don’t know if I am getting to the

heart of your question or not, but we certainly hear from our local

governments often in the legislature regarding all of the things

that we do and the impact that they have, and I think that is part

of why we are here today, is to say we really need to make sure

that all of the work that we do, that people clearly understand the

impact on their business and on State government and on local

government.

Mr. CONNOLLY. Thank you.

My time is up, Mr. Chairman.

Mr. LANKFORD. Thank you.

I recognize Mr. Farenthold for 4 minutes.

Mr. FARENTHOLD. Thank you very much.

I think I want to start off with Mr. Keating. You have heard Mr.

Arensmeyer’s testimony indicating that the Affordable Care Act

and Clean Air Act have actually created more jobs. That goes very

much against what I hear from the folks back home in South

Texas, that the burdens the Affordable Care Act would place and

that certainly the EPA’s overzealous enforcement of the Clean Air

Act and expansion of it in Texas, taking that over from the Texas

State government is adversely affecting business. Would your members agree with Mr. Arensmeyer statement?

Mr. KEATING. No. We have some 100,000 members, and you can

pick and choose your studies, but if you want to look at the greenhouse gas regulations, the overwhelming work that has been done

on this shows that costs are going to skyrocket in terms of the costs

of carbon-based energy. There is no way you can reduce emissions

or cap emissions without, in effect, raising the costs of carbonbased energy; that is the reality of it. And when you look at how

that spreads throughout the economy, it is going to be devastating,

I would argue a devastating impact on small businesses, on our

competitiveness.

And in terms of the Health Care Reform Act, again, our members

would strongly disagree. You can go down the line, the pay or play

mandate, the individual mandate, the dictates on what exactly is

the government going to mandate through these exchanges that we

have. We keep hearing that we are going to have more competition

in choice. I think it is more of a vehicle for mandates and regulations. So all the way down the board I think these issues are major

cost worries and they certainly create a tremendous amount of uncertainty for small business.

Mr. FARENTHOLD. Thank you very much.

Senator Cutler, I was wondering if, in your State, it was similar

to what we experience in Texas, that the delay associated with

complying with specific Federal regulations, and getting things like

highway projects or building projects permitted through the various

agencies really seems to take an excessive amount of time. The

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numbers I hear are between 3 and 7 years, and drive the costs up

significantly. Are you seeing that in your State as well?

Ms. CUTLER. Yes. In fact, one example I would like to give you

is one that we don’t often think of, and that is the Adam Walsh

Sex Offender Registry Notification Act. I have been involved in several attempts to find out, through the rulemaking process in the

Department of Justice, just what the responsibilities for coming

into compliance would be. And even through two administrations

and 5 years of extensions to come into compliance, I believe there

are still, at this point, only four States that have been able to come

into compliance; and it is not because they aren’t trying. And

States have a lot to lose. Their Byrne grant funds hinge on coming

into compliance with Adam Walsh and SORNA, so it is an example

of the very thing you are talking about.

Mr. FARENTHOLD. All right, I have less than a minute left, but

I want to just do a quick question to each of the members of the

panel. There are some proposals being bantered around in this

Congress for perhaps a 24-month moratorium on new Federal regulations, just to give businesses time to catch up, catch their breath

and get going. What would each of you feel about that?

Ms. CUTLER. Well, I think 24 months, if that is all it is, doesn’t

go far enough to help us; and I don’t mean in terms of the time,

I mean in terms of the consultation and the dialog that needs to

go on and the impact of regulations and the input from the States

in making those rules and regulations.

Mr. FARENTHOLD. Mr. Keating.

Mr. KEATING. Any kind of break that we can get from regulations

would be much appreciated, I think, from the business community,

yes.

Mr. ARENSMEYER. I guess we would feel that one-size-fits-all is

not the way to go, that we strongly endorse that every piece of legislation be looked at carefully and analyzed. But because so much

of what government does is in partnership with business, and I

have cited two examples, pretty large examples, brings benefit,

that I think this needs to be looked at on a case-by-case basis.

Mr. FARENTHOLD. Well, I am out of time. Thank you all very

much.

Mr. LANKFORD. Thank you. This is a very important issue for us

and I know that we have been rushing to get through all this. Both

your oral and your written statements are vital and will obviously

be kept in the record, so we will get a chance to refer back to them

in the days to come. This is our second hearing. It is very important that both of you are here. We heard from county governments

and city governments last time as well as oversight. Obviously,

UMRA affects State governments and affects the private sector as

well, specifically noted into that law, so it is important to be able

to get your perspective, and I thank you very much for your time.

With that, other Members may submit something.

Mr. CONNOLLY. Mr. Chairman.

Mr. LANKFORD. Yes, sir.

Mr. CONNOLLY. Could I just note for the record that obviously,

at least on this side of the aisle, we make a profound distinction

between the issue of unfunded mandates on State and local governments and the issue of regulation on business? They are two sepaVerDate 11-MAY-2000 11:55 Sep 12, 2011 Jkt 000000 PO 00000 Frm 00048 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67619.TXT KATIE PsN: KATIE
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rate animals, they are not related, and we believe that if we are

going to have hearings on unfunded mandates, they should stick to

the former, not the latter.

Mr. LANKFORD. I do. I understand that very well, and we have

discussed that as well, but obviously UMRA references both of

them, so we want to have a chance to have hearings based on both

of them together. So I appreciate very much your time.

With that, this hearing is adjourned.

[Whereupon, at 2:46 p.m., the subcommittee was adjourned.]

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