Unfunded Mandates: Analysis of Reform Act Coverage
Published: 2004-05-12T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Unfunded Mandates Reform Act of 1995 (UMRA) was enacted to address concerns about federal statutes and rules that require state, local, and tribal governments or the private sector to expend resources to achieve legislative goals. UMRA generates information about the nature and size of potential federal mandates to assist Congress and agency decision makers in their consideration of proposed legislation and rules. However, concerns about actual or perceived federal mandates continue. To provide information and analysis regarding UMRA's implementation, GAO was asked to (1) describe the applicable procedures, definitions, and exclusions under UMRA for identifying federal mandates in statutes and rules, (2) identify statutes and final rules that contained federal mandates under UMRA, and (3) provide examples of statutes and final rules that were not identified as federal mandates, but that affected parties might perceive as "unfunded mandates," and the reasons these statutes and rules were not federal mandates under UMRA. GAO focused on statutes enacted and final rules issued in 2001 and 2002 to address the second and third objectives.
section_title: What GAO Found
paragraphs: UMRA generally requires congressional committees and the Congressional Budget Office (CBO) to identify and estimate the costs of federal mandates contained in proposed legislation and federal agencies to do so for federal mandates contained in their rules. Identification of mandates is a complex process with multiple definitions, exclusions, and cost thresholds. Also, some legislation and rules may be enacted or issued via procedures that do not trigger UMRA reviews. In 2001 and 2002, 5 of 377 statutes enacted and 9 of 122 major or economically significant final rules issued were identified as containing federal mandates at or above UMRA's thresholds. Of the other federal actions in those 2 years, at least 43 statutes and 65 rules contained new requirements on nonfederal parties that might be perceived as "unfunded mandates." For 24 of those statutes and 26 of those rules, CBO or federal agencies had determined that the estimated direct costs or expenditures would not meet or exceed applicable thresholds. For the remaining examples of statues, most often UMRA did not require a CBO review prior to their enactment. The remaining rules most often did not trigger UMRA because they were issued by independent regulatory agencies. Despite the determinations made under UMRA, some statutes and rules not triggering UMRA's thresholds appeared to have potential financial impacts on affected nonfederal parties similar to those of the actions that were identified as containing mandates at or above the act's thresholds.

section_title: Letter
paragraphs: The Unfunded Mandates Reform Act of 1995 (UMRA) was enacted to  address concerns expressed by state and local governments about federal  statutes and regulations that require these nonfederal parties to expend  resources to achieve legislative goals without being provided federal  funding to cover the costs. Although UMRA was intended to “curb the  practice of imposing unfunded Federal mandates,” the act does not  prevent Congress or federal agencies from doing so. Rather, UMRA  generates information about the nature and size of potential federal  mandates on other levels of government and the private sector to assist  Congress and agency decision makers in their consideration of proposed  legislation and regulations.  UMRA requires congressional committees and  the Congressional Budget Office (CBO) to identify and provide information  on potential federal mandates in certain legislation and federal agencies to  identify the costs and benefits of federal mandates contained in certain  regulations.
Concerns about actual or perceived federal mandates continue.  In the fall  of 2003, for example, the presence of an intergovernmental mandate as  defined by UMRA was one of the issues raised by senators opposing the  Internet Tax Nondiscrimination Act (S. 150). The proposed legislation  would have permanently extended and expanded a federal moratorium  prohibiting state and local governments from levying new taxes on Internet  access and electronic commerce and also eliminated the “grandfather”  protection for existing access taxes granted under the previous statutory  moratorium, which expired November 1, 2003. Pursuant to UMRA, CBO  estimated that repealing the grandfather clause would result in revenue  losses for as many as 10 states and several local governments totaling from  $80 million to $120 million annually, beginning in 2007, and that a change in  the definition of Internet access under the legislation could result in  additional substantial revenue losses for states and local governments.  In  recent months, criticisms of the No Child Left Behind Act of 2001 because  of perceived “unfunded mandate” implications have also received  increasing attention. No Child Left Behind contains a number of new or  expanded requirements, such as the design and implementation of  statewide achievement tests, imposed upon states and local educational  agencies that receive federal assistance.
You asked us to provide information and analysis regarding UMRA’s  implementation and identify options for refining the act.  As agreed with  your staff, this report addresses the first portion of that request, in which  you asked us to describe and provide examples of how federal statutes and  rules with potentially significant financial implications for state, local, and  tribal governments or the private sector may be enacted or issued without  being identified as federal mandates under UMRA. Specifically, you asked  us to: (1) describe the applicable procedures, definitions, and exclusions  for identifying federal mandates in statues and rules under UMRA,  (2) identify statutes and final rules that contained federal mandates under  UMRA, and (3) provide examples of statutes and final rules that were not  identified as federal mandates, but that affected parties might perceive as  “unfunded mandates,” and the reasons these statutes and rules were not  federal mandates under UMRA.  In the body of this report, we address the  three objectives separately for title I, which covers the legislative process,  and title II, which covers the regulatory process.
We reviewed UMRA and related guidance documents, analyses, and reports  on the act’s implementation, interviewed persons knowledgeable about the  implementation of UMRA in OMB, CBO, and other congressional offices,  and examined and analyzed sets of statutes and final rules.  As agreed with  your staff, we focused on statues enacted and final rules published during  2001 and 2002.  We conducted our review from August 2003 through  February 2004 in Washington, D.C., in accordance with generally accepted  government auditing standards.  We have not previously reported on the  implementation of title I.  We reported on the implementation of title II in  February 1998, concluding that UMRA appeared to have had a limited  direct impact on agencies’ rulemaking actions.
subsections: section_title: Background
paragraphs: Many federal statutes, and the regulations that implement them, impose  requirements on state, local, and tribal governments or private sector  parties in order to achieve certain legislative goals.  Such statutes and their  regulations can provide substantial benefits, as well as imposing costs.  OMB’s 2003 final report on the costs and benefits of federal regulations  estimated that the total annual quantified benefits of major rules issued  from October 1, 1992, to September 30, 2002, ranged from $146 billion to  $230 billion, while the total annual quantified costs ranged from $36 billion  to $42 billion.
Title I of UMRA focuses on the legislative process, and title II focuses on  the regulatory process.  For both legislation and regulations, UMRA was  intended to provide more information on and prompt more careful  consideration of the costs and benefits of federal mandates that affect  nonfederal parties.  UMRA generally defines a federal mandate as any  provision in legislation, statute, or regulation that would impose an  enforceable duty on state, local, or tribal governments or the private sector  or that would reduce or eliminate the amount of funding authorized to  cover the costs of existing mandates.  However, as discussed in the body of  this report, some other definitions, exclusions, and thresholds in the act  vary according to whether the mandate is in legislation or a rule and  whether a provision imposes an intergovernmental or private sector  mandate.
If legislation or a rule contains a federal mandate, as defined by UMRA, a  major consequence is that other requirements in the act are triggered.  Under title I, when a committee of authorization of the Senate or the House  of Representatives reports a bill or joint resolution that contains any  federal mandates to the full legislative body, the committee is required to  provide the bill or resolution to the Director of CBO and identify the  mandates it contains.  UMRA then requires CBO to analyze each of these  bills and resolutions—and, on request, other legislative proposals—for the  presence of such mandates and to estimate their associated costs.  CBO  prepares UMRA statements that are to be included in the authorizing  committees’ reports.  The CBO mandate statements must also include an  assessment of whether the legislation authorizes or otherwise provides  funding to cover the costs of any new federal mandates.
UMRA’s specific enforcement mechanism for the requirements of title I is a  point of order, which a member of Congress may raise to indicate that a  rule of procedure has been or will be violated. Generally, a point of order  is available under UMRA if there is no CBO UMRA statement for the  legislation or if the legislation contains an unfunded intergovernmental  mandate with costs over UMRA’s threshold or if it was not feasible to  estimate the costs of the intergovernmental mandate.  However, points of  order are not available under UMRA for private sector mandates that  exceed the cost threshold or if the private sector mandates’ costs are not  feasible to estimate. UMRA’s rules are not self-enforcing and a point of  order must be actively raised to hinder the passage of unfunded federal  mandates.  Specifically raising an UMRA point of order may serve to  heighten the profile of “unfunded mandate” implications in the challenged  legislation.  As of March 2004, 13 points of order had been raised in the  House of Representatives and no points of order had been raised in the  Senate under UMRA.  Only 1 of these 13, regarding the minimum wage in  the Contract with America Advancement Act in 1996, resulted in the House  voting to reject consideration of a proposed provision.
For rules that contain federal mandates, title II of UMRA requires the  agencies to prepare written statements containing specific descriptions  and estimates, including a qualitative and quantitative assessment of the  anticipated costs and benefits of the mandate.  For such rules, agencies are  to “identify and consider a reasonable number of regulatory alternatives  and from those alternatives select the least costly, most cost-effective, or  least burdensome alternative that achieves the objectives of the rule” or  explain why that alternative was not selected. UMRA requires OMB to  collect the written statements prepared by the agencies on federal  mandates in rules and periodically forward them to CBO.  UMRA also  requires OMB to submit annual reports to Congress detailing agencies’  compliance with title II.  OMB’s Office of Information and Regulatory  Affairs (OIRA) has the primary responsibility for monitoring agencies’  compliance with this title.
CBO and OMB regularly produce reports on, respectively, activities under  titles I and II of UMRA. CBO has prepared an annual report on its  activities under title I each year since UMRA’s enactment.  Included in these  reports is information on two requirements placed on CBO by title I,  identifying (1) proposed legislation that would have imposed federal  mandates on another level of government or the private sector and (2) the  subset of the legislation examined by CBO that was found to contain  mandates with costs at or above the relevant thresholds.  Although not  required by UMRA to do so, CBO also reviews all statutes enacted to  identify mandates enacted into law for its annual reports.  Since 2001, OMB  has fulfilled its requirement to report to Congress on compliance with title  II in the same document used to fulfill a statutory requirement for reporting  to Congress on the costs and benefits of federal regulations.  OMB’s reports  provide information on the rules that agencies have identified as containing  federal mandates and also discuss agencies’ efforts to consult with state,  local, and tribal governments in the development of significant rules.
section_title: Scope and Methodology
paragraphs: To describe the applicable procedures, definitions, and exclusions for  identifying federal mandates in statues and rules under UMRA, we  reviewed the act, other related guidance documents, and CBO and OMB  reports on the implementation of UMRA.  We also interviewed persons  knowledgeable about the implementation of UMRA in OMB, CBO, and  other congressional offices.  To identify statutes and final rules that were  and were not identified as containing federal mandates under UMRA and  analyze the reasons for those determinations, we focused our review on  statutes enacted and final rules published during 2001 and 2002, as agreed  with your staff.
For our review and analysis of the implementation of title I, we relied on  information provided to us by the CBO officials responsible for preparing  UMRA statements on proposed legislation and the annual CBO reports on  UMRA.  At our request, CBO identified from that 2-year period the 5  statutes that contained federal mandates at or above UMRA’s cost  thresholds and 43 examples of statutes that were not so identified but  nevertheless contained provisions having impacts on nonfederal parties.  We did not ask CBO to compile a comprehensive list of all statutes in those  years that might have impacts on nonfederal parties.  For our review and  analysis of the implementation of title II, we reviewed all 122 major and/or  economically significant final rules—generally, those that would have an  annual effect on the economy of $100 million or more or raise other  significant economic or policy issues—that federal agencies issued during  2001 and 2002.  Parallel to the information on statutes provided by CBO, we  focused on identifying two sets of final rules—those that were identified as  containing federal mandates at or above UMRA’s threshold and those that  were not but included provisions affecting nonfederal parties that might be  perceived by those parties as potential “unfunded mandates.”  To determine  whether the statutes and final rules we examined were perceived by  affected parties as potentially having “unfunded mandate” implications, we  shared them with the following national organizations representing  nonfederal levels of government: National Association of Counties,  National Conference of State Legislatures (NCSL), National Governors  Association, the National League of Cities, and the U.S. Conference of  Mayors. We then analyzed the statutes and rules to identify how they had  been treated under UMRA, in particular identifying the application of  procedural, definitional, and other provisions of UMRA that guide the  identification of federal mandates.
The scope of our review was limited to a 2-year period and, within that  period, only to examples of legislation enacted and rules that were finalized  (i.e., we did not include all legislation considered by Congress or rules that  were proposed but not finalized).  Therefore, the examples we reviewed  might not illustrate all possible ways that a statute or rule with a perceived  mandate could be enacted or issued without being identified as a federal  mandate under UMRA.  However, the representatives from external public  sector organizations who reviewed the statutes and rules we examined  generally concurred that they were perceived as potential “unfunded  mandates” and that we did not exclude any major examples that they  believed should have been included.  It is also important to recognize that  perceived “unfunded mandates” could result from nonstatutory,  nonregulatory federal actions, such as Homeland Security threat level  adjustments, which are not covered by UMRA and therefore were outside  the scope of our specific objectives.  (See app. I for a more detailed  description of our objectives, scope, and methodology.)
section_title: Identification of Federal Mandates in Statutes under Title I
paragraphs: Statutory provisions that impose requirements on nonfederal parties might  not be identified as federal mandates under UMRA because some  legislative actions do not trigger a review and even if the provisions are  subject to review, UMRA circumscribes the definition of a federal mandate.  When legislation containing “mandates” does undergo UMRA’s formal  scrutiny, it has to meet three definitional requirements, not fall into any of  seven exclusions, and impose costs at or above certain thresholds to be  identified as containing federal mandates exceeding the cost thresholds  under UMRA.  In 2001 and 2002, 5 of the 377 statutes enacted were  identified as containing provisions that were federal mandates exceeding  the thresholds.  From the remaining statutes, CBO identified 43 examples  that had some kind of impact on nonfederal parties but were not identified  during the legislative process as containing federal mandates at or above  UMRA’s thresholds.  For 24 of those examples, this was because their  estimated direct costs were below the thresholds.  There is some evidence  that the existence of UMRA served to hinder the introduction of  intergovernmental mandates, or led to their modification before enactment  in the past.  There is also evidence that suggests that some of CBO’s cost  estimates under UMRA may have led lawmakers to reduce the cost of some  mandates before enactment.
subsections: section_title: Legislation Must Undergo a Multistep Process to Be Identified as Containing Federal Mandates at or Above Applicable Cost Thresholds
paragraphs: The type of legislation that a provision is contained in and how the  legislation is considered determines if it is subject to automatic review by  CBO.  If provisions are subject to automatic CBO review, they are analyzed  based on UMRA’s definitional requirements and exclusions.  The feasibility  of developing a cost estimate and the level of the cost estimate is then  compared to applicable thresholds.  Figure 1 depicts this general sequence  of conditions that must be met before a statutory provision would be  identified as a federal mandate at or above UMRA’s cost thresholds.
The following sections discuss these procedures, exclusions, definitions,  and cost thresholds in more detail.
subsections: section_title: UMRA Procedures Do Not Require All Legislative Provisions to Be Automatically Reviewed by CBO
paragraphs: Provisions that are (1) not contained in authorizing bills, or (2) not  reported by an authorizing committee are not automatically subject to CBO  review before going to the floor (see fig. 1), and thus a CBO UMRA  statement may not be issued.  For example, appropriations bills are not  automatically subject to CBO review under UMRA.  In addition, even if a  provision is contained in an authorizing bill, it still must be “reported” by  that committee—as opposed to going directly to the full House or Senate or  “discharged” by the committee without a vote to send it to the full House or  Senate—to be subject to automatic CBO review.
CBO was not required to review seven bills that contained federal  mandates during 2001 and 2002 that ultimately became law because they  either were appropriations bills or were authorizing bills not reported by  authorizing committees.  For example, a provision prohibiting states from  issuing a permit or lease for certain oil and gas drilling in the Great Lakes  was not reviewed by CBO prior to enactment because it was contained in  the Energy and Water Development Appropriations Act of 2002.
Although UMRA does not require an automatic CBO review of provisions  not contained in authorizing bills or bills not reported by authorizing  committees, CBO told us that it initiates an informal review of provisions in  appropriations bills and the results of these informal reviews are  communicated to appropriations committee clerks when CBO finds  potential mandates in these bills.  During these informal reviews, CBO does  not estimate costs unless CBO already has cost data from an earlier review  or unless Congress requests it.  CBO will also review any legislation on  request.
UMRA does not require automatic CBO review of provisions added after  CBO’s initial review.  Amendments containing mandates may be added to  legislation after CBO issues its statement about whether the legislation  contains any federal mandates.  UMRA states, however, that “the  committee of conference shall insure to the greatest extent practicable”  that CBO prepare statements on amendments offered subsequent to its  initial review that contain federal mandates. According to CBO’s annual  report for 2002, three laws were enacted in 2002 that contained federal  mandates not reviewed by CBO prior to enactment because they were  added after CBO reviewed the legislation.  For example, a provision  requiring insurers of commercial property to offer terrorism insurance was  added to the Terrorism Risk Insurance Act of 2002 after CBO’s UMRA  review, and thus not identified as a private sector mandate under UMRA  prior to enactment.
There is one other important caveat regarding legislative provisions for  which a CBO UMRA review is not required.  The Joint Committee on  Taxation (JCT), rather than CBO, has jurisdiction over proposed tax  legislation and produces revenue estimates for all such legislation  considered by either the House or the Senate.  In addition, JCT examines  legislative provisions that affect the tax code for federal mandates and  estimates their costs.  According to a JCT legislative counsel, a statement  regarding the existence of federal mandates should be included in the  House or Senate committee report. Also, according to CBO, JCT estimates  of revenue impacts are included in CBO cost estimates for legislation.
section_title: When Provisions Are Reviewed, They Are Subject to Many Definitional Requirements and Exclusions
paragraphs: A provision must meet the formal definition of a mandate and not be not be  classified as an “exception” to be identified as a federal mandate.  UMRA  defines a federal mandate as a provision that would impose an enforceable  duty upon state, local, or tribal governments (intergovernmental mandate)  or upon the private sector (private sector mandate).  Exceptions are  defined as enforceable duties that are conditions of federal financial  assistance or arise from participation in a voluntary federal program.
UMRA does include as intergovernmental mandates certain conditions on  federal assistance programs and reductions in the authorization of  appropriations for federal financial assistance and the control of borders  under certain conditions. A provision would also meet the definition of a  intergovernmental mandate if it relates to an existing federal program of  $500 million or more (annually) to state, local, and tribal governments if the  provision would increase the stringency of conditions of funding, place  caps or reduce the funding and the state, local, or tribal governments  cannot modify their financial or programmatic responsibilities regarding  the federal program.
A private sector mandate is also a provision that would reduce or eliminate  the amount of authorization of appropriations for federal financial  assistance that would be provided to the private sector for the purposes of  ensuring compliance with such an enforceable duty.
UMRA also excludes certain provisions from its application.  Specifically,  UMRA does not apply to any provision in legislation that:  1.  enforces Constitutional rights of individuals;  2.  establishes or enforces any statutory rights that prohibit discrimination  on the basis of race, color, religion, sex, national origin, age, handicap,  or disability;  3.  requires compliance with accounting and auditing procedures with  respect to grants or other money or property provided by the federal  government;  4.  provides for emergency assistance or relief at the request of any state,  local, or tribal government or any official of a state, local, or tribal  government;  5. is necessary for the national security or the ratification or  implementation of international treaty obligations;  6.  the President designates as emergency legislation and that Congress so  designates in statute; or  7.  relates to the old age, survivors, and disability insurance program under  title II of the Social Security Act (including taxes imposed by sections  3101(a) and 3111(a) of the Internal Revenue Code of 1986 relating to  old-age, survivors, and disability insurance).
If provisions are excluded, CBO will state the reason for the exclusion and  make no statement regarding mandates in those provisions.
If a provision is not excluded and meets the definition of a federal mandate  without exception under UMRA, CBO identifies the provision as a federal  mandate under UMRA, and then determines if a cost estimate is feasible.  For intergovernmental mandates, if a cost estimate is feasible, the direct  costs (to state, local, or tribal governments) of all mandates contained  within the legislation must equal or exceed $50 million (in 1996 dollars) in  any of the first 5 fiscal years that the relevant mandates would be effective  for CBO to determine that the mandate meets or exceeds UMRA’s cost  threshold.  The same requirements apply for private sector mandates,  except that the cost threshold is $100 million (in 1996 dollars) or more.  CBO adjusts both the intergovernmental and private sector cost thresholds  annually for inflation.  If an intergovernmental mandate exceeds the cost  threshold, a point of order is available under UMRA.  However, if a private  sector mandate exceeds the cost threshold, a point of order is not available.  If an intergovernmental or private sector mandate is below the applicable  threshold, CBO states that a mandate (intergovernmental or private) exists  with costs estimated to be below the threshold.  Although this highlights  the provision as mandate, it does not provide for a point of order under  UMRA.
section_title: Cost Estimates May Not Be Feasible or Complete
paragraphs: Developing a cost estimate for federal mandates must be feasible, and their  direct costs must meet or exceed applicable cost thresholds for CBO to  identify them as such under UMRA.  However, in some instances, it is not  feasible to develop a cost estimate.
CBO indicated in its annual report for 2002 that common reasons why a  cost estimate may not be feasible include (1) the costs depend on future  regulations, (2) essential information to determine the scope and impact of  the mandate is lacking, (3) it is unclear whom the bill’s provisions would  affect, and (4) language in UMRA is ambiguous about how to treat  extensions of existing mandates.  If a cost estimate for legislation is not  feasible, CBO specifies the kind of mandate it contains, but that the agency  cannot estimate its costs.  This does not prevent the legislation from  moving through the legislative process, but in the case of an  intergovernmental mandate, UMRA would still allow a member of  Congress to raise a point of order.
CBO reported that it could not estimate the costs of mandates in nine bills  that ultimately were enacted during 2001 and 2002.  Of these nine laws,  seven contained intergovernmental mandates and two contained both  private sector and intergovernmental mandates.  For example, CBO could  not estimate the costs of provisions requiring manufacturers of medical  devices to comply with certain labeling and notification conventions and to  submit their registrations electronically contained in the Medical Device  User Fee and Modernization Act of 2002. CBO stated that since many of  the requirements in the act would depend on the future actions of the  Secretary of Health and Human Services, CBO could not determine  whether their direct costs would exceed UMRA’s threshold.
Even if costs can be estimated, UMRA focuses only on the direct costs  imposed by federal mandates in legislation.  According to UMRA, such  costs are limited to spending that results directly from the mandates  imposed by the legislation, rather than from the legislation’s broad effects  on the economy.  The direct costs of a federal mandate also include any  new revenues that state and local governments are prohibited from raising.  While CBO has estimated the indirect costs of some federal mandates, CBO  is limited to including only direct costs when determining if the aggregate  total costs of federal mandates in legislation meet or exceed the applicable  cost thresholds under UMRA.  CBO testified in July 2003 that, “federal  mandates often have secondary effects, including the effects on prices and  wages when the costs of a mandate imposed on one party are passed along  to other parties, such as customers or employees.”  CBO told us that if it  determined that indirect costs (including secondary effects) would be  significant, it would include the estimate in its UMRA statement, but that its  determination of whether a mandate meets or exceeds the applicable  thresholds is based only on direct costs.  Therefore, although information  on indirect costs may be available, legislation with significant total costs  (direct and indirect) on nonfederal parties may not be identified as  exceeding the cost thresholds under UMRA.
CBO may conclude that legislation contains a federal mandate and is  funded because the legislation authorizes funds to be appropriated to carry  out or comply with the mandates.  However, if the appropriation  subsequently provided is less than the amount authorized, the federal  mandate’s costs may be at or above the threshold.
UMRA contains a mechanism designed to help curtail mandates with  insufficient appropriations, but it has never been utilized.  UMRA provides  language that could be included in legislation that would allow agencies  tasked with administering funded mandates to report back to Congress on  the sufficiency of those funds. Congress would then have a certain time  period to decide whether to continue to enforce the mandate, adopt an  alternate plan, or let it expire, meaning the provision comprising the  mandate would no longer be enforceable.  A CBO official did not recall any  legislation ever containing this provision, and our database search has also  resulted in no legislation found containing this provision.
section_title: CBO Identified Few Laws in 2001 and 2002 as Containing Federal Mandates at or Above UMRA’s Cost Threshold, But UMRA May Have an Indirect Effect
paragraphs: Although few laws have been identified as containing federal mandates at  or above applicable cost thresholds, there is some evidence that UMRA has  a discouraging effect on the enactment of intergovernmental mandates and  the magnitude of costs to nonfederal parties in proposed legislation.
Of 377 laws enacted in 2001 and 2002, CBO identified at least 44 containing  a federal mandate under UMRA.  Of these 44, CBO identified 5 containing  mandates at or above the cost thresholds, and all were private sector  mandates (see tables 1 and 2 below).  From 1996 to 2000, CBO identified 18  mandates (2 intergovernmental and 16 private sector) with costs at or  above cost thresholds that became law.
UMRA may have indirectly discouraged the passage of legislation identified  as containing intergovernmental mandates at or above UMRA’s cost  threshold.  Since 1996 only three proposed intergovernmental mandates  with annual costs above the applicable threshold had become law (an  increase in the minimum wage in 1996, a reduction in federal funding for  Food Stamps in 1997, and a preemption of state laws on premiums for  prescription drug coverage in 2003).
Between 1996 and 2002, CBO reported that 21 private sector mandates with  costs over the applicable threshold were enacted.  Of these, 8 involved  taxes, 4 concerned health insurance, 4 dealt with regulation of industries, 2  affected workers’ take home pay, 1 imposed new requirements on sponsors  of immigrants, 1 changed procedures for the collection and use of  campaign contributions, and 1 imposed fees on airline travel to fund  aviation security.
UMRA may have also aided in lessening the costs of some mandates.  From  1996 through 2000, CBO identified 59 proposed federal mandates with  costs above applicable thresholds.  Subsequent to CBO identification, 9  were amended before enactment to reduce their costs below the applicable  thresholds, while 18 mandates were enacted with costs above the  threshold, and 32 were never enacted. Although CBO has not done an  analysis to determine the role of UMRA in reducing the costs of mandates  ultimately enacted, it did state in its report that “it was clear that  information provided by CBO played a role in the Congress’s decision to  lower costs.”
There is also some testimonial evidence regarding the effectiveness of  UMRA on legislation.  CBO stated in its July 2003 congressional testimony  that “both the amount of information about the cost of federal mandates  and Congressional interest in that information have increased considerably.  In that respect, title I of UMRA has proved to be effective.”  The Chairman  of the House Rules Committee was quoted in 1998 as saying that UMRA  “has changed the way that prospective legislation is drafted... Anytime  there is a markup , this always comes  up.”  Although points of order are rarely used, they may be perceived as an  unattractive consequence of including a mandate above cost thresholds in  proposed legislation.  The director of policy and federal relations at the  National League of Cities stated, “This is like a shoal out in the water.  You  know it is there, so you steer clear of it.”
section_title: Nonfederal Parties Perceived Some Enacted Provisions as Having Unfunded Mandate Implications
paragraphs: Overall, CBO’s annual reports from 2001 and 2002 showed that most  proposed legislation did not contain federal mandates as defined by UMRA.  Further, most of the proposed legislation with mandates would not have  imposed costs exceeding the thresholds set by UMRA. We asked CBO to  compile a list of examples from among those laws enacted in 2001 and 2002  that it perceived as having impacts on nonfederal parties but were not  identified as containing federal mandates meeting or exceeding UMRA’s  cost thresholds.  We then analyzed these 43 examples to illustrate the  application of UMRA’s procedures, definitions, and exclusions on  legislation that was not identified as containing mandates at or above  UMRA’s threshold, but might be perceived to have “unfunded mandates”  implications.  We shared CBO’s list of 43 examples with national  organizations representing nonfederal levels of government, and they  generally agreed that those laws contained provisions perceived by their  members as mandates.
For 12 of the 43 examples, an automatic UMRA review was not required of  at least some provisions prior to enactment because of the legislative  process used to enact the bill, for example, not being reported by an  authorizing committee.  Out of the remaining 31 laws that did undergo a  cost estimate, 24 were found to contain mandates with costs below  applicable thresholds, 3 contained provisions that were excluded, 2  contained provisions with direct costs that were not feasible to estimate, 1  contained a provision that did not meet UMRA’s definition of a mandate,  and 1 was reviewed by JCT and found not to contain any federal mandates  (see fig. 2).  It should be noted that the number of laws in any of the  categories listed do not necessarily correlate with the magnitude of  perceived or actual impact on affected nonfederal parties.
Of the 12 examples of laws with provisions that CBO was not required to  review prior to enactment, CBO later determined how they would have  been characterized under UMRA:  5 laws contained mandates with direct  costs below UMRA’s thresholds, 4 laws contained mandates with direct  costs that could not be estimated, 1 was excluded under UMRA for national  security so would not be reviewed for the presence of mandates, 1 did not  meet the definition of a mandate, and 1 had some provisions with costs  below the threshold and some provisions excluded (again, for national  security). (See app. II for more detailed information on the 43 examples.)
Some Legislation Had Potentially  Although cost estimates of the full impact (including direct and indirect  Significant Impacts on  costs) are not available for all 43 examples discussed previously, table 3  Nonfederal Parties  describes 10 laws among the 43 that we consider important to highlight  and/or have multiple uncertainties surrounding the magnitude of their  potential impacts on nonfederal parties.
Procedurally, the identification of federal mandates under title II of UMRA  is simpler than under title I.  Although regulatory agencies generally are to  assess the intergovernmental and private sector effects of all their actions,  under UMRA title II they only need to publicly identify and prepare UMRA  “written statements” on those rules that the agencies believe include a  federal intergovernmental or private sector mandate that may result in  expenditures of $100 million or more (adjusted for inflation) in any year.  However, there are 14 definitional exceptions, exclusions, or other  restrictions applicable to the identification of federal mandates in rules,  compared to 10 that are applicable to identifying mandates in legislation.  Agencies identified 9 of the 122 major and economically significant final  rules published in 2001 and 2002 as containing federal mandates as defined  by UMRA.  However, based on our review of the published rules, we  determined that 65 of the remaining rules imposed new requirements on  nonfederal parties.  Agencies cited, or could have cited, a variety of reasons  that these 65 rules did not contain federal mandates under UMRA.  Nevertheless, at least 29 of the 65 rules appeared to have significant  financial impacts on affected nonfederal parties of $100 million or more in  any year.
section_title: UMRA Procedures for Rules Are Less Complex than for Legislation, But More Restrictions Apply to Identifying Federal Mandates
paragraphs: UMRA’s process of identifying and reporting on rules with federal mandates  is more straightforward than that for legislation.  UMRA generally directs  agencies to assess the effects of their regulatory actions on other levels of  government and the private sector.  However, the agencies only need to  identify and prepare written UMRA statements on those rules that the  agencies have determined include a federal mandate that may result in  expenditures by nonfederal parties of $100 million or more (adjusted for  inflation) in any year.  Thus, unlike CBO’s reviews of proposed legislation,  one cost threshold applies to both intergovernmental and private sector  mandates in rules, and there is no public identification of potential federal  mandates in rules before agencies determine whether such mandates  exceed the threshold.  As is the case for legislation, UMRA contains many  definitions and exclusions that affect the extent to which agencies’ rules  are considered to have federal mandates at or above the threshold.
The three definitional provisions and seven general exclusions from UMRA  that we previously identified as applicable to legislation also apply to  federal rules.  However, there are four additional restrictions to the  identification of federal mandates in rules (i.e., in an UMRA statement):    UMRA’s requirements do not apply to provisions in rules issued by  independent regulatory agencies.
Preparation of an UMRA statement, and related estimate or analysis of  the costs and benefits of the rule, is not required if the agency is  “otherwise prohibited by law” from considering such an estimate or  analysis in adopting the rule.
The requirement to prepare an UMRA statement does not apply to any  rule for which the agency does not publish a general notice of proposed  rulemaking in the Federal Register.  This means that UMRA does not  cover interim final rules and any rules for which the agency claimed a  “good cause” or other exemption available under the Administrative  Procedure Act of 1946 to issue a final rule without first having to issue a  notice of proposed rulemaking.
UMRA’s threshold for federal mandates in rules is limited to  expenditures, in contrast to title I which refers more broadly to direct  costs.  Thus, a rule’s estimated annual effect might be equal to or greater  than $100 million in any year—for example, by reducing revenues or  incomes in a particular industry—but not trigger UMRA if the rule does  not compel nonfederal parties to spend that amount.  Under title I,  though, the direct costs of a mandate in legislation also include any  amounts that state and local governments are prohibited from raising in  revenues to comply with the mandate.  However, as in reviews of  legislation, indirect costs of rules are not considered when determining  whether a mandate meets or exceeds UMRA’s threshold.
Two of these restrictions on UMRA’s scope in the regulatory process are  essentially procedural.  If a rule’s path to issuance was through an  independent regulatory agency or a final rule with no prior proposed rule,  any “mandate” included in the rule would not be subject to identification  and review under UMRA.
subsections: section_title: OIRA Monitors Agencies’ Compliance with Title II Requirements
paragraphs: OIRA is responsible for the centralized review of significant regulatory  actions published by executive branch agencies, other than independent  regulatory agencies.  Under Executive Order 12866, which was issued in  September 1993, agencies are generally required to submit their significant  draft rules to OIRA for review before publishing the rules.  As part of this  regulatory review process, OIRA monitors agencies’ compliance with  UMRA.  In the submission packages for their draft rules, federal agencies  are to designate whether they believe the rule may constitute an unfunded  mandate under UMRA.  According to OIRA representatives, consideration  of UMRA is then incorporated as part of these regulatory reviews, and draft  rules are expected to contain appropriate UMRA certification statements.
OIRA’s guidance to agencies notes that the analytical requirements under  Executive Order 12866 are similar to the analytical requirements under  UMRA, and thus the same analysis may permit agencies to comply with  both analytical requirements. However, OIRA representatives pointed out  that UMRA might also require agency consultations with state and local  governments on certain rules, and this is something that OIRA will look for  evidence of when it does its regulatory reviews.  The officials also pointed  out that UMRA provides OIRA a statutory basis for requiring agencies to do  an analysis similar to that required by the executive order (which can be  rescinded or amended at the discretion of the President).
section_title: Agencies Identified Few Final Rules Published in 2001 and 2002 as Containing Federal Mandates
paragraphs: Federal agencies identified 9 of the 122 major and/or economically  significant final rules that federal agencies published in 2001 or 2002 as  containing federal mandates under UMRA (see fig. 3).
Only one of the nine rules that agencies identified as containing federal  mandates under UMRA—EPA’s enforceable standard for the level of  arsenic in drinking water systems—included an intergovernmental  mandate.  The remaining rules imposed private sector mandates:    four Department of Energy rules that amended energy conservation  standards for several categories of consumer products, including  clothes washers and heat pumps;    three EPA rules that adopted emission standards to reduce air pollution  from various sources, including paper and pulp mills and heavy-duty  highway engines and vehicles; and    a Department of Transportation (DOT) rule that established a new  federal motor vehicle safety standard that required tire pressure  monitoring systems, controls, and displays.
In each of these final rules, the agencies addressed the applicable UMRA  analytical and reporting requirements.  (See app. III for more detailed  information on these rules.)  The limited number of rules identified as  federal mandates during 2001 and 2002 is consistent with the findings in  our 1998 report on UMRA and in OMB’s annual reports on agencies’  compliance with title II.
section_title: Most Often Rules with Financial Effects on Nonfederal Parties Did Not Trigger UMRA’s Requirements Because They Did Not Require Expenditures at or Above UMRA’s Threshold
paragraphs: Of the 113 major and/or economically significant rules not identified as  including federal mandates under UMRA, we determined that 48 contained  no new requirements that would impose costs or have a negative financial  effect on state, local, and tribal governments or the private sector.  Often,  these were economically significant or major rules because they involved  substantial transfer payments from the federal government to nonfederal  parties.  For example, the Department of Agriculture (USDA) published a  final rule that expanded loans, loan deficiency payments, and working  assistance loans for certain agricultural commodities, such as cotton and  honey, and was expected to increase federal outlays by about $1.1 billion  annually.  The Department of Health and Human Services (HHS) published  a notice updating the Medicare payment system for home health agencies  that was estimated to increase federal expenditures to those agencies by  $350 million in fiscal year 2002.
However, we determined that 65 of the 113 rules contained new  requirements that would impose costs or result in other negative financial  effects on state, local, and tribal governments or the private sector.  We  shared this list of rules with national organizations representing other  levels of government affected by these rules.Representatives of those  organizations generally confirmed that all of the 65 rules were perceived by  their members to have at least some “unfunded mandates” implications.
In 41 of the 65 published rules, the agencies cited a variety of reasons for  determining that these rules did not trigger UMRA’s requirements (see fig.  4).  There were 26 rules in which the agencies stated that the rule would not  compel expenditures at or above the UMRA threshold and 10 rules in which  the agencies stated that rules imposed no enforceable duty.  For 24 of the  65 rules, the agency did not provide a reason.  However, independent  regulatory agencies, which are not covered by UMRA, published 12 of these  24 rules, and there is no UMRA requirement for covered agencies to  identify the reasons that their rules do not contain federal mandates.
Our review of the 65 rules indicated that agencies did not cite all of the  applicable reasons they could have for determining that the rules did not  trigger UMRA’s requirements (see fig. 5).  For example, although in only 3  of the 65 rules did the agencies identify the absence of a notice of proposed  rulemaking as the reason the rule did not trigger UMRA, this reason applied  to another 25.   Similarly, although 5 rules cited the exclusion that any  enforceable duties would occur as a consequence of participation in a  voluntary federal program, another 21 rules could have claimed this  exclusion.  Between what agencies cited or could have cited, 47 of the 65  rules (72 percent) had more than one applicable reason.  (For each of the  65 rules, app. IV identifies the reasons that agencies cited or could have  cited for their rules not triggering UMRA.)
At least 29 of the 65 rules with new requirements appeared to result in  significant costs or other negative financial effects on state, local, and tribal  governments or the private sector.  In these 29 rules, the agencies either  explicitly stated that they expected the rule could impose significant costs  or published information indicating that the rule could result, directly or  indirectly, in financial effects on nonfederal parties at or above the UMRA  threshold.  (Appendix V provides more detailed information on each of the  29 rules that were not identified as federal mandates under UMRA, but that  could impose significant costs or have other negative financial effects on  state, local, and tribal governments or the private sector.)
These 29 rules not identified as federal mandates under UMRA, but with  significant financial impacts on nonfederal parties, can be roughly  categorized as follows:  9 that imposed costs on individuals—a category included in UMRA’s  definition of the private sector—exceeding $100 million in any year;    5 that reduced the level of federal payments to nonfederal parties by  more than $100 million in any year;   4 with substantial indirect costs or economic effects on nonfederal   4 from independent regulatory agencies that imposed substantial fees or  other costs on regulated entities;   3 published by DOT on aviation security in the aftermath of the  September 11, 2001, terrorist attacks, which the agency noted “may  impose significant costs,” although it did not prepare quantified  estimates;   2 with voluntary options that might increase Medicaid costs to states by  over $125 million in some years;   1 amending the Federal Acquisition Regulations that could result in  nonfederal costs ranging from $92 million to $377 million annually,  depending on the “uncertainty of manufacturers to distribute these  costs over the general population;” and  1 USDA rule imposing private-sector costs to limit retained water in raw  meat and poultry products.
Table 4 provides more detailed information about selected examples from  among the 29 rules.
We determined that 1 of the 29 rules, a USDA rule on retained water in raw  meat and poultry products, probably was a federal mandate under UMRA.   The rule establishes a requirement of zero retained water, unless the water  retention is unavoidable in processes necessary to meet food safety  requirements.  USDA did not mention UMRA in the rule but estimated that,  if extensive modifications to chilling systems were needed throughout the  poultry industry, the fixed costs could run to “well over $100 million.”   USDA provided only a “lower bound” estimate of $110 million in private- sector costs for the first year of implementation (representing the costs of  reducing retained water in the range of 1 percent to 1.5 percent).  While  that estimate was under the $113 million UMRA threshold (adjusted for  inflation) in 2001, the agency did not quantify median or upper bound cost  estimates, which reference to a lower bound estimate implies.   Because  the lower bound estimate was so close to the UMRA threshold, it is  reasonable to assume that a median or upper bound estimate would  probably have equaled or exceeded the threshold, and the rule would have  been a private sector mandate under UMRA.  No other UMRA exclusion  appeared to apply to this rule.  However, to address the requirements of  Executive Order 12866 the agency provided an analysis of the costs and  benefits of the rule, as well as an analysis of the regulatory alternatives  considered.  As noted earlier, OIRA guidance points out that the same  analysis may permit agencies to comply with both the executive order’s and  UMRA’s requirements.
For the remaining 36 of the 65 rules, either the agencies provided no  information on the potential costs and economic impacts on nonfederal  parties or the costs imposed on them were under the UMRA threshold.  For  example, a Federal Emergency Management Agency interim final rule on a  grant program to assist firefighters included some cost-sharing and other  requirements on the part of grantees participating in this voluntary  program.  In return for cost-sharing of $50 million to $55 million per year,  grantees could obtain, in aggregate, federal assistance of approximately  $345 million.  Similarly, USDA’s interim rule on the noninsured crop  disaster assistance program imposed new reporting requirements and  service fees on producers estimated to cost at least $15 million.  But  producers were expected to receive about $162 million in benefits.
Even when the requirements of UMRA did not apply, agencies generally  provided some quantitative information on the potential costs and benefits  of the rule to meet the requirements of Executive Order 12866.  Rules  published by independent regulatory agencies were the major exception  because they are not covered by the executive order.  In general, though,  the type of information that UMRA was intended to produce was developed  and published by the agencies even if they did not identify their rules as  federal mandates under UMRA.
section_title: Conclusions
paragraphs: UMRA was intended to restrain the imposition of unfunded federal  mandates on state, local, and tribal governments and the private sector,  primarily by providing more information and focusing more attention on  potential federal mandates in legislation and regulations.  There is some  evidence that the information provided under UMRA and the spotlight that  information places on potential mandates may have helped to discourage  or limit federal mandates.  CBO’s annual reports indicate that, at least with  regard to the legislative process, UMRA sometimes does have such an  indirect preventive effect.
However, there are multiple ways that both statutes and final rules  containing what affected parties perceive as “unfunded mandates” can be  enacted or published without being identified as federal mandates with  costs or expenditures at or above the thresholds established in UMRA.  Our  review demonstrated that many statutes and final rules with potentially  significant financial effects on nonfederal parties were enacted or  published without being identified as federal mandates at or above UMRA’s  thresholds.  Further, if judged solely by their financial consequences for  nonfederal parties, there was little difference between some of these  statutes and rules and the ones that had been identified as federal  mandates with costs or expenditures exceeding UMRA’s thresholds.   Although the examples cited in our review were limited to a 2-year period,  our findings on the limited effect and applicability of UMRA are similar to  the data reported in previous GAO, CBO, and OMB reports on the  implementation of UMRA.  The findings raise the question of whether  UMRA’s procedures, definitions, and exclusions adequately capture and  subject to scrutiny federal statutory and regulatory actions that might  impose significant financial burdens on affected nonfederal parties.
This report provides descriptive information and analysis regarding  UMRA’s implementation, focusing specifically on the coverage and  identification of federal mandates under UMRA.  We are making no specific  recommendations for executive action nor identifying any specific matters  for consideration by Congress at this time.  As requested, we will be  continuing our work on other aspects of UMRA.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we will not distribute it until 30 days from the date of  this letter.  We will then send copies of this report to the Director of OMB  and will provide copies to others on request.  It will also be available at no  charge on GAO’s Web site at http://www.gao.gov.
If you or your staff have any questions concerning this report, please  contact me at (202) 512-6806 or daltonp@gao.gov.  Key contributors to this  report were Curtis Copeland, Naved Qureshi, Michael Rose, and Tim Bober.
section_title: Objectives, Scope, and Methodology
paragraphs: In this report, you asked us to describe and provide examples of how  federal statutes and rules with potentially significant financial implications  for state, local, and tribal governments or the private sector may be enacted  or issued without being identified as federal mandates under titles I and II  of UMRA, which respectively address the legislative and regulatory  processes.  Our specific reporting objectives were to: 1. Describe the applicable procedures, definitions, and exclusions for  identifying federal mandates in statutes and rules under UMRA.
2.
Identify statutes and final rules that contained federal mandates under  UMRA. 3. Provide examples of statutes and final rules that were not identified as  federal mandates, but that affected parties might perceive as  “unfunded” mandates, and the reasons these statutes and rules were  not federal mandates under UMRA.
As agreed with your staff, we focused on statutes enacted and final rules  published during 2001 and 2002 to address the second and third objectives.
To address the first objective, regarding the procedures, definitions, and  exclusions applicable to the identification of federal mandates under titles I  and II of UMRA, we reviewed the act and other related guidance  documents and reports on the implementation of UMRA.  These other  related documents included the various annual reports on UMRA prepared  by CBO and OMB, materials used in a congressional parliamentary process  training seminar on unfunded mandates and points of order, and OMB’s  March 1995 guidance to federal agencies on the implementation of title II.   We also interviewed persons knowledgeable about the implementation of  UMRA in congressional offices, CBO, and OMB.
To address the second and third objectives regarding statutes that were and  were not identified as federal mandates under title I of UMRA, we  consulted with the CBO officials responsible for preparing UMRA  statements on individual bills.  The CBO officials identified the 5 statutes  enacted during 2001 and 2002 that contained federal mandates at or above  UMRA’s cost thresholds.  At our request, they also identified 43 examples of  statutes enacted during that 2-year period that they believed, based on  professional judgment, had potential intergovernmental or private sector  impacts but had not been identified as containing mandates at or above  UMRA’s thresholds.  (We did not ask CBO to compile a comprehensive list  of all statutes passed by the 107th Congress that may have had  intergovernmental or private sector impacts.)  To assure that this set of  examples was relevant for our purposes and to confirm CBO’s  characterization of the potential impacts of these statutes and the reasons  why provisions were or were not identified as federal mandates, we  reviewed available source material on each of these statutes.  In particular,  we examined the detailed descriptions and information on each statute that  were contained in CBO mandate statements, cost estimates, annual  reports, and testimony, as well as other relevant information on each  statute from the Legislative Information System of Congress.
To address the second and third objectives regarding final rules that were  and were not identified as federal mandates under title II of UMRA, we  conducted a content analysis of all 122 major and/or economically  significant final rules that agencies published in 2001 or 2002 to identify the  rules that could have significant financial effects on nonfederal parties and  determine why they were or were not considered federal mandates.  We  chose not to review other rules because, by definition, they were less likely  to have significant effects on nonfederal parties, although arguably some  could have had a significant effect.  To arrive at our final set of 122 rules,  we relied primarily on the list of 119 major rules published during the 2- year period, as identified in GAO’s compilation of reports on federal agency  major rules.  Our Office of General Counsel takes several steps to assure  the completeness of the list of major rules; however, to generally  corroborate that this list of major rules included those that could have  significant effects on nonfederal parties, we also compared GAO’s major  rules list to the rules identified as “economically significant” by the Regulatory Information Service Center (RISC).  As a result of this exercise,  we supplemented our initial list with 3 additional rules.  We then reviewed  the Federal Register notices that agencies published for all 122 of these  rules to confirm that they were major and/or economically significant and  to identify whether, and to what extent, they imposed requirements on  nonfederal parties.  On the basis of our comparisons and reviews, we  concluded that these data were sufficiently reliable for our purposes.
Because we were asked to identify rules that affected parties might  perceive as intergovernmental or private sector mandates, even if not  technically identified as such under UMRA, our initial screening used a  broader definition of a potential mandate than delineated in UMRA.  For  this screening, we used the information in the published rules to make a  team consensus judgment on whether a nonfederal party (state, local, and  tribal governments or the private sector) might consider provisions of the  rule to impose requirements or mandates that had at least some costs or  negative financial effects.  In particular, we focused on identifying rules  that imposed new requirements and costs (direct or indirect) on affected  parties.  For each rule identified as including a potential “mandate,” team  members then independently reviewed the text of each rule to code the  reasons agencies may have cited that their rules were not federal mandates  under UMRA, as well as other reasons available under UMRA that might  have applied to these rules.  The team members generally concurred in  their initial coding, and, based on team discussions, we were able to  resolve any differences and determine a team consensus judgment on the  appropriate coding for each rule.
To provide corroboration that the examples of statutes CBO identified and  final rules we identified to address objective three were perceived by  affected parties as having “unfunded mandate” implications, we shared our  draft lists of examples with national organizations representing other levels of government.  These organizations included the National Association of  Counties, National Conference of State Legislatures, National Governors  Association, the National League of Cities, and the U.S. Conference of  Mayors.  Their representatives generally concurred that the statutes and  rules we focused on were perceived by their members to have “mandate”  implications and that we had not left out any major examples from our time  period that they believed were important.
One limitation of our review was that, in agreement with your staff, we  focused on statutes enacted and final rules published during 2001 and 2002.   Those statutes and rules may not reveal all of the ways in which provisions  with significant cost effects might not be identified as federal mandates.   Neither CBO nor we reviewed the many bills that were not enacted and  rules that were proposed, but not finalized, during 2001 and 2002.   However, our findings and the specific examples we identified were  sufficient to illustrate how statutes and rules with potentially significant  effects on nonfederal parties might not be identified as federal mandates  under UMRA.  In addition, our findings for this review were consistent with  those in prior GAO, CBO, and OMB reports on the implementation of  UMRA.  In general, we also recognize that perceived “unfunded mandates”  could also result from other nonstatutory, nonregulatory federal actions,  such as Homeland Security threat level adjustments.  However, UMRA does  not cover such nonstatutory or nonregulatory actions, so they were out of  the scope of this review.
We conducted our review from August 2003 through February 2004 in  Washington, D.C., in accordance with generally accepted government  auditing standards.  On April 22, 2004, we provided a draft of this report to  the Director of the Office of Management and Budget (OMB) for his review  and comment.  On April 29, 2004, an OMB representative notified us that  OMB had no comments on our report.  We also provided the draft to CBO  officials for their technical review.  We incorporated their comments and  suggestions as appropriate.
section_title: Examples of Statutes with Impacts on Nonfederal Parties that Were Not Mandates at or Above UMRA Thresholds
paragraphs: CBO provided us the following examples of laws enacted in 2001 and 2002  that it believed had impacts on nonfederal parties, but were not identified  as federal mandates at or above applicable cost thresholds (see table 5). A  number of groups representing nonfederal parties generally agreed that  these examples were statutes perceived to have “unfunded mandate”  implications.
section_title: Final Rules with Federal Mandates under UMRA
paragraphs: The following table presents information on each of the nine final rules  published by federal regulatory agencies during 2001 and 2002 that the  agencies identified as federal mandates under UMRA (see table 6).  For  each rule, we provide (1) GAO’s identification number for the rule, (2) the  title of the rule and its date of publication in the Federal Register, (3) the  agency that published the rule, (4) summary information about the  potential costs or other negative financial effects of the rule on affected  nonfederal parties, and (5) the agency’s statement, as it appeared in the  Federal Register notice, regarding the applicability of UMRA.
section_title: Reasons that Selected Final Rules Did Not Trigger UMRA
paragraphs: The following table provides information on 65 major or economically  significant final rules published during that 2001 and 2002 that did not  trigger UMRA but that would result in at least some costs or negative  financial effects on state, local, and tribal governments or the private sector  (see table 7).  The table displays the various reasons that agencies cited or  could have cited to explain why the rules did not trigger UMRA.  Code “A”  identifies reasons the agencies cited, and code “O” identifies other reasons  that could have applied.  Note that only 11 of the 14 possible reasons under  UMRA were applicable to any of these rules.
section_title: Examples of Final Rules that Did Not Trigger UMRA But Had Potentially Significant Financial Effects on Nonfederal Parties
paragraphs: The following table presents information on 29 final rules published by  federal regulatory agencies during 2001 and 2002 that did not trigger UMRA  but that had potentially significant costs or financial effects on state, local,  and tribal governments or the private sector (see table 8).  For each rule,  we provide (1) GAO’s unique identification number for the rule, (2) the title  of the rule and its date of publication in the Federal Register, (3) the agency  that published the rule, (4) summary information about the potential costs  or negative financial effects of the rule on affected nonfederal parties, and  (5) the agency’s statement in the Federal Register notice, if any, regarding  the applicability of UMRA.
subsections: section_title: GAO’s Mission
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