The Unfunded Mandates Reform Act of 1995 was enacted to address concerns expressed about federal statutes and regulations that require nonfederal parties to expend resources to achieve legislative goals without being provided 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. Instead, it generates information about the potential impacts of mandates proposed in legislation and regulations. In particular, title I of UMRA requires Congressional committees and the Congressional Budget Office (CBO) to identify and provide information on potential federal mandates in certain legislation. Title I also provides opportunities for Members of Congress to raise a point of order when covered mandates are proposed for consideration in the House or Senate. Title II of UMRA requires federal agencies to prepare a written statement identifying the costs and benefits of federal mandates contained in certain regulations and consult with affected parties. It also requires action of the Office of Management and Budget (OMB), including establishing a program to identify and test new ways to reduce reporting and compliance burdens for small governments and annual reporting to Congress on agencies’ compliance with UMRA. Title III of UMRA required the Advisory Commission on Intergovernmental Relations to conduct a study reviewing federal mandates. Title IV establishes limited judicial review regarding agencies’ compliance with certain provisions of title II of the act. 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 (intergovernmental mandates) or the private sector (private sector mandates) or that would reduce or eliminate the funding authorized to cover the costs of existing mandates. However, some other definitions, exclusions, and thresholds in the act apply and may vary according to whether the mandate is in legislation or a rule and whether a provision imposes an intergovernmental or private sector mandate. For example, UMRA includes definitional exceptions for enforceable duties that are conditions of federal financial assistance or that arise from participation in a voluntary federal program. UMRA also excludes certain types of provisions, such as any provision that enforces Constitutional rights of individuals, from its application. When, in aggregate, the provisions in proposed legislation or regulations equal or exceed UMRA’s thresholds, other provisions and analytical requirements in UMRA apply. For legislation, the thresholds are direct costs (in the first 5 fiscal years that the relevant mandates would be effective) of $50 million or more for intergovernmental mandates and $100 million or more for private sector mandates, while the threshold for regulations is expenditures of $100 million or more in any year. GAO has issued two previous reports addressing UMRA and federal mandates. In our May 2004 report we provided information and analysis regarding the identification of federal mandates under titles I and II of UMRA. In that report, we described the complex procedures, definitions, and exclusions under UMRA for identifying federal mandates in statutes and rules. For calendar years 2001 and 2002, we also identified those statutes and rules that contained federal mandates under UMRA and provided examples of statutes and 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 February 1998, we reported on the implementation of title II. In that report, we found that UMRA appeared to have had little effect on agencies rulemaking and most significant rules promulgated were not subject to title II requirements. Both of these reports had relatively consistent findings—that only a limited number of statutes and rules have been identified as federal mandates under UMRA. UMRA’s coverage, which includes its numerous definitions, exclusions, and exceptions, was the issue most frequently commented on by parties from all five sectors (see table 1). Most parties from the state and local governments, federal, business, and academic/think tank sectors viewed UMRA’s narrow coverage as a major weakness that leaves out many federal actions with potentially significant financial impacts on nonfederal parties. Conversely, a few parties, from the public interest sector and academic/think tank sector, considered some of the existing exclusions important or identified UMRA’s narrow scope as one of the act’s strengths. While there was no clear consensus across sectors on how to address coverage, some suggestions designed to expand UMRA’s coverage had support from parties across and within certain sectors. UMRA does not apply to legislative provisions that cover constitutional rights, discrimination, emergency aid, accounting and auditing procedures for grants, national security, treaty ratification, and certain parts of Social Security. CBO estimates that about 2 percent of the bills that it reviewed from 1996 to 2004 contained provisions that fit within UMRA’s exclusions. All sectors other than the public interest advocacy sector said they viewed UMRA’s narrow coverage as a significant weakness because it precludes an official accounting of the costs to nonfederal parties associated with many federal actions. This issue was described by one party who noted that any of the exclusions, as well as the exemptions, in UMRA may be justified in isolation, but suggested that it is their cumulative impact that raises concerns. Some parties from the business, academic/think tank, public interest advocacy, and state and local governments sectors made general comments on the clarity of certain UMRA definitions and exemptions and whether this results in different interpretations across agencies. One party who said UMRA’s coverage was narrow often cited UMRA’s definitional exceptions for mandates, including conditions of federal financial assistance (such as grant programs) or that arise from participation in voluntary federal programs, saying some laws enacted under these exceptions imposed significant mandates. A prominent example of a grant condition excluded from UMRA cited by parties in the state and local government sector is the No Child Left Behind Act of 2001, which places various requirements on states and localities, including that their schools measure the progress of students through annual tests based on challenging academic standards and that teachers are highly qualified as defined in the act. Other parties commented about various other definitional issues involving the exclusion of certain types of costs (indirect costs) and UMRA’s cost thresholds for legislative and regulatory mandates, which result in excluding many federal actions that may significantly impact nonfederal entities. Other parties cited the general exclusions for appropriations and other legislation not covered by the act and for rules issued by independent regulatory agencies, which are also not covered by UMRA. CBO estimates that 5 of the 8 laws containing federal mandates (as defined by UMRA) that it did not review before enactment, were appropriations acts. A few parties from academic/think tank and state and local government sectors commented about UMRA’s lack of coverage for certain tax legislation that may reduce state or local revenues. Even though federal tax changes may have direct implications for state tax revenue for the majority of states whose income tax is directly linked to the federal tax base, these impacts are not considered as mandates under UMRA because states have the option of decoupling their tax systems from federal law. Finally, parties from the state and local government sector also identified concerns about gaps in UMRA’s coverage of federal preemption of state and local authority. Although some preemptions are covered by UMRA such as those that preempt state or local revenue raising authority, they are covered only for legislative actions and not for federal regulations. According to CBO’s 2005 report on unfunded mandates, “Over half of the intergovernmental mandates for which CBO provided estimates were preemptions of state and local authority.” Despite the widespread view in several sectors that UMRA’s narrow coverage leaves out federal actions with potentially significant impacts on nonfederal entities, there was less agreement by parties about how to address this issue. The options ranged from general to specific but those most frequently suggested were: Generally revisit, amend, or modify the definitions, exceptions, and exclusions under UMRA and expand its coverage. Clarify UMRA’s definitions and ensure their consistent implementation across agencies to ensure that all covered provisions are being included. Change the cost thresholds and/or definitions that trigger UMRA by for example lowering the threshold for legislative or executive reviews and expanding cost definitions from beyond direct to cover indirect costs as well. Eliminate or amend the definitional exceptions for conditions of federal financial assistance or that arise from participation in voluntary federal programs. Expand UMRA coverage to all preemptions of state and local laws and regulations, including those nonfiscal preemptions of state and local authority. The level of agreement for each suggested option varied across sectors. The first option came from parties in every sector except public interest advocacy. Although parties representing businesses did not comment on preemption during our data collection, the business sector has generally been in favor of federal preemptions for reasons such as standardizing regulation across state and local jurisdictions. (See appendix V for a more complete list of suggested options by theme.) The results of our January symposium confirmed support for generally revisiting and expanding UMRA coverage. See appendix VI for a list of the symposium results. The symposium participants also raised a cautionary note about potential consequences of some of the suggested options. For example, if UMRA coverage were expanded by changing exclusions and limitations or lowering or eliminating UMRA thresholds or including regulations issued by independent agencies, the workloads of CBO and the regulatory agencies would increase substantially. Another issue raised by a few parties that evoked some reaction at the symposium was whether private sector mandates should be included in UMRA. Some parties, from the federal agency, academic/think tank and public interest advocacy sectors, questioned whether private sector mandates should be included in UMRA. According to one party, the inclusion of the private sector seems contrary to the intent of the action, which they viewed to be intergovernmental mandates. Parties from the state and local government and academic/think tank sectors indicated during our symposium that they would not support dropping private sector mandates from UMRA.