Hearing of the House Committee on Government Reform: Is Uncle Sam Still Passing the Buck? The Burden of Unfunded Mandates on State, County, City Gov..

HEARING OF THE HOUSE COMMITTEE ON GOVERNMENT REFORM: IS UNCLE SAM STILL PASSING THE BUCK? THE BURDEN OF UNFUNDED MANDATES ON STATE, COUNTY, AND CITY GOVERNMENTS

BREAK IN TRANSCRIPT

Mr. Turner. Thank you, Mr. Chairman.

Chairman Davis, I would like to thank you for reviving what has been and continues to be an important subject, the issue of
unfunded Federal mandates. As a former mayor, I lived with the impact of Federal mandates and, yes, from a purely financial
standpoint, they were a burden. However, I also recognize that mandates do serve a purpose. And although there is a cost
associated with these mandates, there is likely a corresponding benefit as well. The question usually comes down to, does the
cost of the mandate outweigh the benefit, and if so, what can we do to reduce the burden on our local and State governments?

This is an issue of jurisdiction, and protecting the authority and control of State and local governments. In addition to the tax burden that these mandates represent, State and local governments face reduced resources for basic services, community priorities and economic development initiatives. At the root of the unfunded mandate debate is the fact that the ultimate responsible party is the taxpayer. Whether those taxes are paid to the State, the city or the Federal Government matters little. What matters to that individual taxpayer is that they can identify the government ultimately making the decision to tax and hold them responsible for that decision.

On this 10th anniversary of the Unfunded Mandates Reform Act of 1995, it is fitting that we again ask ourselves what we do when the Federal Government passes along mandates and how we can lessen that burden.

Chairman Davis, in organizing the Federalism and the Census Subcommittee, has charged us with working to improve communication between State and local stakeholders so that these issues are better understood on the Federal level.

Mr. Chairman, thank you for your leadership, and the opportunity to keep this issue in the forefront.

BREAK IN TRANSCRIPT

Mr. Turner. Thank you, Mr. Chairman.

Our chairman, in working with the National Association of Counties, has taken a lead in trying to get examples of unfunded mandates and a quantification of their impact. As you read the report that we have in the record and listen to the testimony that is going to follow, they have given us a snapshot of several areas in which an unfunded mandate has been identified and its actual costs, or the experiences that these counties are having as a result of that unfunded mandate.

I was wondering to what extent OMB or CBO, in retrospect, looks at the issues of the actual expenditures that local and State governments have when an unfunded mandate is identified, both in items that occurred prior to UMRA, whether or not the annual increase of those mandates exceeds our threshold expectation, whether or not the actual numbers exceed the
threshold estimates that we have, because in some instances where you identified the threshold, it's below the number an action can be taken.

The actual experience may be different. Do you look then as to whether or not the actual experience really does fall under the threshold, and also in the areas of the amount of funding. And in part of the testimony you discuss the issue of doing a
benefits analysis of a mandate. To what extent retrospectively do we go back and figure out the actual costs that are being
expended and whether or not that changes the picture of the cost benefit analysis?

Mr. Graham. I think you asked an excellent question. That is, even if we analyze and project the costs or benefits of these unfunded mandates before they are enacted, what do we actually learn over time about how much they actually cost and what their actual benefits are. I regret to report to you that there are probably over 20,000 Federal regulations, new Federal regulations that have been adopted since 1980 in this country. Most of them have never been looked at to determine what their actual costs were and what their actual benefits were.

There is a small literature in this area that is developing. What it finds is in some cases the costs of regulation proved to be less than expected, but in other cases, they proved to be more than expected. We don't yet have concrete evidence of a pattern across all these regulations that we could give you that would give you a simple result.

Mr. Holtz-Eakin. CBO concentrates under UMRA looking at the prospective costs of mandates and as a result, has no formal
responsibility to go back and re-examine the cost of existing mandates. To do so would change dramatically the character of
our responsibilities from identifying costs in the budget process to being more of a regulatory budget. It would be quite an undertaking.

Nevertheless, there are circumstances in which the ongoing review of responsibilities does give us indications that things
didn't turn out the way we expected. We always try to learn from the experience of previous analyses, and some examples jump to mind. For example, no one anticipated the costs of HIPA to be what they turned out to be. And by staying in consultation with the State and local governments, we have leaned a great deal about the cost of that mandate over time. That informs our future analyses, but is not brought into the process in any formal way.

Mr. Turner. One of the issues that Mr. Waxman raised touches on the area of economic competitiveness, which is not necessarily an issue that was laid out in the Unfunded Mandates Act. Does OMB undertake any effort in looking at these to
measure or consider what the impact might be on local communities and their economic competitiveness?

Mr. Graham. I don't recall there being any formal requirement in either Executive order or in statute that we review regulations for their impact on the competitiveness of a community or an industry or the country as a whole. There is an economic analysis requirement, and cost impact requirement. But it is not focused specifically on the competitiveness question, so you raise a good point.

Mr. Turner. Thank you. Thank you, Mr. Chairman.

BREAK IN TRANSCRIPT

http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=109_house_hearings&docid=20145.wais