Legislation must go through several steps to be identified as containing a federal mandate. Once mandates are identified based on UMRA’s definitions, exclusions, and exceptions, CBO determines whether the mandate meets or exceeds UMRA’s cost thresholds. As we reported last year, in 2001 and 2002, CBO identified few statutes containing federal mandates at or above UMRA’s cost thresholds. In addition, CBO reports and testimonial evidence indicate that UMRA may indirectly impact the costs of and number of federal mandates enacted at or above UMRA’s cost thresholds. However, when asked, some nonfederal parties said they continue to be subject to costs associated with laws containing mandates that do not meet the statutory definition of a mandate at or above UMRA’s cost thresholds. UMRA does not require CBO to automatically review every legislative provision; further, the process takes several steps to determine whether a statutory provision would be identified as a federal mandate at or above UMRA’s cost thresholds (see fig. 1). Specifically, CBO does not automatically review provisions that are (1) not contained in authorizing bills or (2) not reported by an authorizing committee. This means that appropriations bills are not automatically subject to CBO review under UMRA. However, CBO told us that it will informally review provisions in appropriations bills and communicate their findings to appropriations committee clerks when CBO finds potential mandates in these bills. Although provisions contained in an authorizing bill are subject to automatic review by CBO, the bill also must be “reported” by that committee. UMRA also does not require an automatic CBO review of provisions added after CBO’s initial review. 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. For example, CBO reported that for 2002, three laws were enacted that contained federal mandates not reviewed by CBO prior to enactment because they were added after CBO reviewed the legislation. For example, the Terrorism Risk Insurance Act of 2002 includes a provision requiring insurers of commercial property to offer terrorism insurance, which was added to after CBO’s UMRA review and thus not identified as a private sector mandate under UMRA prior to enactment. Once a decision is made about CBO’s review, CBO analyzes the provision to determine whether the provision is excluded under UMRA. An exclusion applies 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). Next CBO applies UMRA’s definition of a federal mandate—a provision that would impose an enforceable duty upon state, local, or tribal governments or upon the private sector. To be identified as a mandate, a provision must meet this definition of a mandate and not be classified as an “exception.” Generally, exceptions are defined as enforceable duties that are conditions of federal financial assistance or arise from participation in a voluntary federal program. Once the provision is identified as a mandate under UMRA, CBO determines whether the cost estimate, if feasible, exceeds the applicable threshold ($50 million for intergovernmental and $100 million for private sector mandates, in any of the first 5 fiscal years during which the mandate would be effective). If CBO determines that a cost estimate is not feasible, CBO specifies the kind of mandate contained in the provision, but reports that the agency cannot estimate the costs. For example, CBO reported that it could not estimate the costs of mandates in nine bills that ultimately were enacted during 2001 and 2002. 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. For intergovernmental mandates that exceed the cost threshold or cost estimates that are not feasible, a point of order is available under UMRA. However, UMRA does not provide for a point of order for private sector mandates. For intergovernmental or private sector mandates below the applicable cost threshold, CBO states in its report that a mandate exists with costs estimated to be below the applicable cost threshold. Although this highlights the provision as a mandate, it does not provide for a point of order under UMRA. UMRA also 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. Our January 2004 database search has resulted in no legislation containing this language. Few laws containing federal mandates at or above the cost thresholds were enacted in 2001 and 2002. Further, there is some evidence that the existence of UMRA may have indirectly discouraged the enactment of some federal mandates in proosed legislation and reduced the potential costs of others. 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. As we previously reported, from 1996 through 2002, only three bills with intergovernmental mandates and 21 private sector mandates with costs over the applicable threshold became law. UMRA may have indirectly discouraged the passage of legislation identified as containing mandates at or above the cost thresholds. Similarly, UMRA may have also aided in lessening the costs of some mandates that were enacted. From 1996 through 2000, CBO identified 59 proposed federal mandates with costs above applicable thresholds. Following CBO’s identification, 9 were amended before enactment to reduce their costs below the applicable thresholds and 32 were never enacted. The remaining 18 mandates were enacted with costs above the threshold. Although CBO has not done an analysis to determine the role of UMRA in reducing the costs of mandates ultimately enacted, it reported that “it was clear that information provided by CBO played a role in the Congress’s decision to lower costs.” CBO also testified in July 2003 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.” Similarly, 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.” Finally, although points of order are rarely used, they may be perceived as an unattractive consequence of including a mandate above UMRA cost thresholds in proposed legislation. Although CBO’s annual reports for 2001 and 2002 showed that most proposed legislation did not contain federal mandates as defined by UMRA, we asked CBO to compile a list of examples from among those laws enacted in 2001 and 2002 that had potential 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 be unfunded mandates. We then shared CBO’s list of 43 examples with national organizations representing nonfederal levels of government, and they generally agreed that those laws contained provisions their members perceived to be mandates. As figure 2 shows, for 12 of the 43 examples, an automatic UMRA review was not required for one of the reasons I discussed earlier, such as that they were in an appropriations bill or were not reported by the 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 from UMRA coverage, 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 the Joint Committee on Taxation and found not to contain any federal mandates. Of the 12 examples of laws with provisions that CBO was not required to review prior to enactment, CBO later determined that 5 contained mandates with direct costs below UMRA’s thresholds, 4 contained mandates with direct costs that could not be estimated, 1 was excluded under UMRA because it involved national security, 1 did not meet the definition of a mandate, and 1 had some provisions with costs below the threshold and some provisions excluded because it involved national security. For example, the Sarbanes-Oxley Act of 2002 contained both intergovernmental and private sector mandates but CBO determined that a cost estimate was not feasible for all mandates.