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CBO's Activities Under the Unfunded Mandates Reform Act, 1996-2000 May 2001

What is the Unfunded Mandates Reform Act?

The Unfunded Mandates Reform Act of 1995 (UMRA) seeks to discourage the federal government from imposing mandates on state, local, and tribal governments or the private sector without paying the costs of those mandates. Through a variety of mechanisms, the law increases the amount of information available to the Congress and executive branch agencies about the impact of federal mandates. It also encourages policymakers to take that information into account when developing laws and regulations.

When did UMRA become law?

UMRA was enacted on March 22, 1995, as Public Law (P.L.) 104-4. Its provisions became effective on January 1, 1996.

Why was UMRA enacted?

The Congress and President Clinton enacted UMRA to respond to growing concerns that the federal government, through legislation and administrative actions, was imposing enforceable duties on other levels of government and the private sector without adequately considering the nonfederal costs that would result from complying with those duties.

What information did CBO provide before UMRA was enacted?

The Congressional Budget Office (CBO) has been providing estimates of the impact of federal legislation on state and local governments since 1982. The State and Local Government Cost Estimate Act of 1981 (P.L. 97-108) required CBO to estimate the costs that state and local governments would incur over five years in carrying out or complying with "any significant bill or resolution." During the 1982-1995 period, CBO provided the Congress with more than 7,000 such estimates, mostly for bills approved by authorizing committees.

UMRA repealed the State and Local Government Cost Estimate Act and narrowed the types of intergovernmental impacts that CBO is required to identify. It also lowered the cost that triggers the need for an intergovernmental estimate from $200 million a year to $50 million (adjusted annually for inflation). In practice, CBO continues to provide the Congress, when feasible, with estimates of all budgetary effects on state and local governments, regardless of their cost or whether they result from mandates as defined by UMRA.
 

Requirements and Responsibilities

What are the basic requirements of UMRA?

UMRA contains four titles that address how various parts of the federal government should handle proposed and existing mandates on state, local, and tribal governments and the private sector.

• Title I, Legislative Accountability and Reform, requires CBO and authorizing committees in the Congress to develop and report information about the existence and costs of mandates in proposed legislation. It also establishes a mechanism to bring that information to the attention of the Congress before legislation is considered on the floor of the House or Senate.



• Title II, Regulatory Accountability and Reform, applies to actions of federal agencies in implementing federal law. It requires most federal agencies in the executive branch (except some independent regulatory agencies) to assess the effects of their regulatory actions on state, local, and tribal governments and the private sector. It also requires that statements about such effects accompany certain significant regulations, that agencies seek input from other levels of government when developing regulations, and that agencies consider alternatives that would ease the financial burden of regulations.



• Title III, Review of Federal Mandates, required the Advisory Commission on Intergovernmental Relations (ACIR) to prepare three reports: a baseline study of the costs and benefits of federal mandates to state, local, and tribal governments; a review of the impact of unfunded federal mandates on those governments, along with recommendations for easing, consolidating, or terminating mandates; and an annual report identifying federal court rulings that required state, local, or tribal governments to undertake additional responsibilities and activities.⁽¹⁾



• Title IV, Judicial Review, allows for limited judicial review of certain agency actions and rules developed under title II of UMRA.

This report focuses on the provisions of title I.

What are CBO's responsibilities under UMRA?

The law requires CBO to give any authorizing committee that reports a bill a statement about the direct costs of mandates found in the bill. If the total direct costs of all mandates in the bill are above a specific threshold in any of the first five fiscal years in which a mandate would be in effect, CBO must provide an estimate of those costs (if feasible) as well as the basis of its estimate.

The CBO mandate statement must also include an assessment of whether the bill authorizes or otherwise provides funding to cover the costs of any new federal mandate. In the case of intergovernmental mandates, the cost statement must, under certain circumstances, estimate the appropriations needed to fund such authorizations for up to 10 years after the mandate takes effect. If CBO cannot estimate the cost of a mandate, its statement must assert that such an estimate is not feasible and explain why.

Conference committees must "to the greatest extent practicable" ensure that CBO prepares statements for conference agreements or amended bills if those measures contain mandates that were not previously considered by either House or if they impose greater direct costs than the version considered earlier. At the request of a Senator, CBO must estimate the costs of intergovernmental mandates contained in an amendment the Senator wishes to offer.

The Congress may also call on CBO to prepare analyses at other stages of the legislative process. If asked by the Chairman or Ranking Minority Member of a committee, CBO will help committees analyze the impact of proposed legislation, conduct special studies of legislative proposals, or compare a federal agency's estimate of the costs of proposed regulations implementing a federal mandate with CBO's estimate of those costs made when the mandate was considered by the Congress.

What thresholds does UMRA set for CBO to provide estimates of mandate costs?

UMRA set the cost threshold for intergovernmental mandates at $50 million in 1996, adjusted annually for inflation. CBO estimates that for fiscal year 2000, the threshold was $55 million. For private-sector mandates, the annual threshold was $100 million in 1996 and $109 million in 2000.

What are the responsibilities of Congressional committees under UMRA?

In general, when an authorizing committee reports a bill or joint resolution that contains a federal mandate, the report must identify and describe that mandate and include a statement from the Director of CBO on its estimated costs. If that statement cannot be published with the report, the committee is responsible for ensuring that it is published in the Congressional Record before the bill or resolution is considered on the floor of the House or Senate. The committee is responsible for promptly providing CBO with a copy of the bill and for identifying mandates contained in it. (In practice, CBO reviews each bill approved by a committee to identify mandates and estimate their costs.)

In addition, the report must contain a qualitative--and, if practical, a quantitative--assessment of the costs and benefits expected to result from the mandates (including the effects on health, safety, and the protection of the natural environment). The committee must also state the degree to which a federal mandate affects both the public and private sectors and the impact on the competitive balance between those sectors if federal payments are made to compensate for costs imposed on the public sector.

If the bill would impose an intergovernmental mandate, the committee report must contain a statement of how that mandate will be funded by the federal government, whether the committee intends for the mandate to be partially or fully funded, how the funding mechanism relates to the expected direct costs to the respective levels of government, and any existing source of funds besides those already identified that would help governments meet the direct costs of the mandate.

For amended bills, joint resolutions, and conference reports, the committee of conference must ensure, to the greatest extent possible, that the Director of CBO prepares a mandate cost estimate if the amended measure contains a federal mandate not previously considered by either House or contains provisions that would increase the direct costs of a previously considered mandate.

If a bill or joint resolution would cap or reduce federal spending for a large entitlement program, the authorizing committee must specifically say how it intends for the states to implement the change and to what extent the legislation provides additional flexibility, if any, to offset states' costs.

Finally, authorizing committees are required, in their annual views and estimates reports to the budget committees, to identify issues they plan to consider that will have costs for state, local, or tribal governments or the private sector.

How are the provisions of title I enforced?

Section 425 of the Congressional Budget and Impoundment Control Act, as amended by UMRA, sets out rules for both the House and Senate that enforce the requirements of title I of UMRA. Subsection (a)(1) prohibits the consideration of a reported bill unless the committee has published a CBO statement about the costs of any mandates.⁽²⁾

Subsection (a)(2) prohibits the consideration of any bill, amendment, motion, or conference report that would increase the direct costs of intergovernmental mandates by more than the statutory threshold, unless the legislation provides direct spending authority or authorizes appropriations sufficient to cover the costs. If the bill authorizes the appropriation of funds to pay for an intergovernmental mandate, it must also provide a way to terminate or scale back the mandate if the appropriated funds are not large enough to cover those costs. In such cases, authorizations of appropriations would have to be specified for each year (up to 10 years) after the effective date of the mandate; in the Senate, they would also have to be consistent with the estimated costs of the mandate as determined by the Senate Budget Committee. That provision applies to bills that impose new mandates as well as ones that increase the cost of existing mandates.

Finally, although UMRA does not specifically require CBO to analyze the cost of mandates in appropriation bills, subsection (c) of section 425 of the Congressional Budget Act prohibits the consideration of legislative provisions in appropriation bills (or amendments to them) that increase the direct costs of intergovernmental mandates, unless an appropriate CBO statement is provided.

Those rules are not self-enforcing; a Member must raise a point of order to enforce them. In the House, if a Member raises a point of order against a bill, the full House votes on whether to consider the bill regardless of whether there is a violation. In the Senate, if a point of order is raised, the bill may not be considered unless either the Senate waives the point of order or it is overturned by the chair or the full Senate.⁽³⁾

Has CBO ever prepared a mandate statement for an appropriation bill?

As noted above, UMRA does not expressly require CBO to prepare mandate statements for appropriation bills, and CBO has never done so. In general, UMRA's points of order do not apply to the provisions of bills or resolutions reported by the appropriations committees (except legislative provisions) even if they would increase the direct costs of an intergovernmental mandate without providing funding and do not have a mandate statement.

Because in many cases it is difficult and controversial to determine what constitutes a legislative provision in an appropriation bill, CBO will prepare mandate statements for those bills only when requested. On an informal basis, however, CBO reviews all appropriation bills as they move through the legislative process and alerts the appropriations clerks to any intergovernmental mandates that it identifies.
 

Definitions

How does UMRA define "mandate"?

The law defines a 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. Duties that arise as a condition of federal assistance or from participating in a voluntary federal program are not mandates.

What is the special definition for "mandates" in large entitlement grant programs?

Conditions attached to federal grant programs are not generally considered mandates under UMRA. In the case of some large entitlement programs, however, a new grant condition or a reduction in federal financial assistance can be a mandate if states lack the flexibility to offset the new costs or the loss of federal funding with reductions elsewhere in the program. UMRA defines large entitlement programs as a "then-existing federal program under which $500 million or more is provided annually to state, local, or tribal governments under entitlement authority." Today, those programs include Medicaid; Temporary Assistance for Needy Families (TANF); child nutrition programs; Food Stamps; the Social Services Block Grant; Vocational Rehabilitation State Grants; grants for foster care, adoption assistance, and independent living; family support payments for the Job Opportunities and Basic Skills program; and Child Support Enforcement. The special definition would also apply to any new entitlement programs that the Congress created that provided $500 million or more annually to state, local, or tribal governments.

Are preemptions of state and local government authority considered mandates under UMRA?

CBO assumes that a mandate can be a positive or negative duty. Thus, if a legislative proposal expressly limits or prohibits state or local regulatory activities, CBO considers such a limitation to be an enforceable duty on those levels of government. Consequently, it considers preemptions to be mandates as defined by UMRA.⁽⁴⁾

Are taxes considered mandates?

When the federal government assesses a tax, it uses its sovereign power to impose an enforceable duty on those affected by the tax. As such, taxes are considered mandates.

The Congressional Budget Act requires the Joint Committee on Taxation (JCT) to produce revenue estimates for all tax legislation considered by either the House or the Senate. In addition, the JCT examines legislative provisions that affect the tax code for federal mandates and estimates their costs. Such information is incorporated into CBO's mandate statements.

How does UMRA define "direct costs"?

The term "direct costs" means the total estimated amount that the private sector or state, local, and tribal governments would be required to spend to comply with the mandate. Such costs are limited to spending that results directly from the enforceable duty imposed by the legislation rather than from the legislation's broad effects on the economy. The direct costs of a mandate also include any amounts that state and local governments are prohibited from raising in revenues to comply with the mandate. Under UMRA, direct costs must be measured on a net incremental basis--that is, the costs above those required to carry out applicable laws, regulations, or professional standards in effect when the federal mandate is adopted, minus any direct savings related to the mandate that result from the proposed legislation.

What kinds of costs are not included in that definition?

Because the term "mandate" is defined narrowly, not all of the budgetary impacts on other governments or the private sector are the result of mandates as defined by UMRA. For example, as noted earlier, any costs associated with complying with grant conditions for most new or existing programs are not considered mandate costs under UMRA. Most of the "other" costs that CBO identifies when reviewing bills deal with conditions for receiving federal aid or participating in voluntary federal programs.

Determining what constitutes a mandate under UMRA can be complicated. Although an activity (such as sponsoring an immigrant's entry into the United States) may be voluntary, the federal program affecting that activity (immigration laws) is not. In that case, a bill imposing new requirements on sponsors of immigrants would constitute a mandate under UMRA. In contrast, other federal programs that are truly voluntary in nature may impose requirements on their participants that, by UMRA's definition, are not mandates. Those distinctions between what is voluntary and what is mandatory are not always clear. Because such other costs to state, local, or tribal governments can be significant, however, CBO identifies them whenever possible.

How does UMRA define "state, local, and tribal governments"?

Section 421(12) of the Congressional Budget Act defines "state" to mean a state of the United States, the District of Columbia, a territory or possession of the United States, or an agency, instrumentality, or fiscal agent of a state. According to section 421(8), "local government" is defined as a unit of general local government, a school district, or other special district established under state law.

Section 421(13) defines "tribal government" as an Indian tribe, band, nation, or other organized group or community that is recognized as eligible for special programs and services provided by the United States to Indians because of their special status as Indians. The term also includes Alaska native villages and regional or village corporations as established in the Alaska Native Claims Settlement Act.

Who is the "private sector"?

UMRA defines the "private sector" to mean all people or entities in the United States, including individuals, partnerships, associations, corporations, and educational and nonprofit institutions, but not including state, local, and tribal governments.

Is any legislation excluded from consideration under UMRA?

Section 4 of the law excludes bills or provisions from consideration under UMRA if they:

• Enforce the constitutional rights of individuals;



• Establish or enforce statutory rights that prohibit discrimination;



• Require compliance with certain accounting and auditing procedures;



• Provide emergency assistance at the request of state, local, or tribal governments;



• Are necessary for national security or the ratification or implementation of international treaty obligations;



• Are emergencies as designated by the President and the Congress; or



• Relate to certain programs of the Social Security Act.

How broadly or narrowly does CBO apply the exclusions?

The question of how broadly to interpret those exclusions is one that CBO has grappled with many times over the past five years. According to sections 2(3)(A) and 2(4) of UMRA, two of the basic purposes of the law are to provide "for the development of information about the nature and size of mandates in proposed legislation" and "to promote informed and deliberate decisions by Congress on the appropriateness of federal mandates in any particular instance." Applying the exclusions broadly would limit the information provided to the Congress and could defeat those purposes. For those reasons--and on the basis of discussions with Congressional staff involved in the development and passage of UMRA--CBO applies the exclusions narrowly to ensure that lawmakers receive as much information as possible about potential mandates.⁽⁵⁾
 

Proposals to Change UMRA

Has UMRA ever been amended?

The Congress has made only one change to UMRA in the five years since the law took effect. The State Flexibility Clarification Act of 1999 (P.L. 106-141) requires authorizing committees and CBO to provide more information in committee reports and mandate statements for legislation that would "place caps upon, or otherwise decrease, the federal government's responsibility to provide funding to state, local, or tribal governments" under various large entitlement grant programs (such as Medicaid, TANF, or Food Stamps). Under that law, if a bill or joint resolution would limit or reduce federal spending for such a program, the authorizing committee must state specifically how it intends for the states to implement the change and to what extent the legislation provides additional flexibility, if any, to offset states' costs.

The new information that CBO must provide depends on whether the bill would provide flexibility to states. If it caps or reduces federal spending for a large entitlement grant program but does not provide additional flexibility to states to offset that reduction, CBO must describe whether and how states can offset the reduction under existing law. If the legislation would provide additional flexibility, CBO must estimate whether the resulting savings would offset the reductions included in the bill, assuming that states took full advantage of the flexibility. To date, no bills that are covered by those requirements have been reported by authorizing committees.

What other proposals have there been to change UMRA?

UMRA imposes a point of order against a bill that contains intergovernmental mandates with costs over the specified threshold. Some Members have proposed expanding the law's provisions to include a similar point of order for private-sector mandates. In addition, despite the enactment of the State Flexibility Clarification Act, state and local governments remain concerned that future legislation could impose new requirements or reduce federal spending for large entitlement programs, possibly leaving them to make up the difference. Their concern has resulted in efforts to amend UMRA's definition of a mandate as it relates to such programs.

In 1998 and again in 1999, the Congress considered legislation that would address both of those issues. The Mandates Information Act (MIA) would have established new procedural hurdles for private-sector mandates, directed CBO to furnish additional types of cost information about them, and changed the definition of intergovernmental mandates in the context of large entitlement programs. Companion legislation was introduced in the Senate. The MIA passed the House in both 1998 and 1999 but was never considered on the floor of the Senate.

1. ACIR completed and released the report on judicial mandates in July 1995 (Federal Court Rulings Involving State, Local, and Tribal Governments, Calendar Year 1994: A Report Prepared Under Section 304, Unfunded Mandates Reform Act of 1995). The commission also published a preliminary report in January 1996 on the impact of federal mandates on state and local governments (The Role of Federal Mandates in Intergovernmental Relations: A Preliminary ACIR Report for Public Review and Comment). ACIR received its last Congressional appropriation in fiscal year 1996 and was terminated at the end of that year.

2. If CBO provides a statement for intergovernmental mandates but determines that a cost estimate is not feasible, then the bill is not in order, as if no CBO statement had been provided.

3. For more information about points of order, see House Committee on Rules, The Unfunded Mandate Point of Order: A Parliamentary Outreach Program Newsletter, vol. 106, no. 11 (June 18, 1999), or the committee's Web site (www.house.gov/rules/).

4. For more information about federal preemptions of state and local government authority, see Congressional Budget Office, Preemptions in Federal Legislation During the 106th Congress (forthcoming).

5. For a more complete explanation of the national security exclusion, see Congressional Budget Office, An Assessment of the Unfunded Mandates Reform Act in 1999 (March 2000).

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