We examined the implementation of UMRA during its first 2 years of operation and, for several reasons, concluded that it had little effect on agencies’ rulemaking actions. First, the act’s cost-benefit requirement did not apply to many of the rulemaking actions that were considered “economically significant”actions under Executive Order 12866 (78 out of 110 issued in the 2-year period). Second, UMRA gave agencies discretion not to take certain actions if they determined that those actions were duplicative or unfeasible. “an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities.” “(A) the agency proposing the rule or the Director (of the Office of Management and Budget) reasonably determines is likely to have an annual effect on the economy of $100,000,000 or more in reasonably quantifiable costs; or (B) is otherwise designated a major rule by the Director on the ground that the rule is likely to adversely affect, in a material way, the economy, a sector of the economy, including small business, productivity, competition, jobs, the environment, public health or safety, or State, local or tribal governments, or communities.”
Therefore, a rule that is economically significant under Executive Order 12866 because it is likely to have more than $100 million in benefits (but perhaps only $90 million in costs) would not be covered by the analytical requirements in S. 746 (unless designated by the Director). Mr. Chairman, in a 1998 report prepared at your and Senator Glenn’s request, we examined 20 cost-benefit analyses at 5 agencies to determine the extent to which those analyses contain the “best practices” elements recommended in the Office of Management and Budget’s (OMB) January 1996 guidance for conducting cost-benefit analyses. We concluded that some of these 20 analyses did not incorporate OMB’s best practices. Six of the cost-benefit studies did not assign dollar values to benefits, and only six analyses specifically identified net benefits (benefits remaining after costs have been accounted for)—a key element in OMB’s guidance. Eight of the 20 cost-benefit analyses that we examined in our 1998 report did not include an executive summary that could help Congress, decisionmakers, the public, and other users quickly identify key information addressed in the analyses. S. 746 addresses many of these areas of concern. Peer Review Can Improve Regulatory Decisionmaking

S. 746 also requires agencies to provide for an independent peer review of any required risk assessments and cost-benefit analyses of major rules that the agencies or the OMB Director reasonably anticipate are likely to have a $500 million effect on the economy. Given the uncertainties associated with predicting the future economic impacts of various regulatory alternatives, the rigorous, independent review of economic analyses should help enhance the quality, credibility, and acceptability of agencies’ decisionmaking. We believe that enactment of the public disclosure requirements in S. 746 would provide a statutory foundation to help ensure the public’s access to regulatory review information. In particular, the bill’s requirement that these rule changes be described in a single document would make it easier for the public to understand how rules change during the review process.
Why GAO Did This Study

Pursuant to a congressional request, GAO discussed S.746, the Regulatory Improvement Act of 1999, focusing on: (1) the effectiveness of previous regulatory reform initiatives; (2) agencies' cost-benefit analysis practices and the trigger for the analytical requirements; (3) peer review of agencies' regulatory analyses; and (4) the transparency of the regulatory development and review process.

What GAO Found

GAO noted that: (1) GAO examined the implementation of the Unfunded Mandates Reform Act (UMRA) during its first 2 years of operation and, for several reasons, concluded that it had little effect on agencies' rulemaking actions; (2) the act's cost-benefit requirement did not apply to many of the rulemaking actions considered economically significant under Executive Order 12866; (3) UMRA gave agencies discretion not to take certain actions if they determined that those actions were duplicative or unfeasible; (4) UMRA requires agencies to take actions that they were already required to take; (5) the centerpiece of S. 746 is its emphasis on cost-benefit analysis for major rules; (6) in 1998, GAO examined 20 cost-benefit analyses at 5 agencies to determine the extent to which those analyses contain the best practices elements recommended in the Office of Management and Budget's (OMB) guidance for conducting cost-benefit analysis; (7) GAO concluded that some of these 20 analyses did not incorporate OMB's best practices; (8) 6 of the cost-benefit studies did not assign dollar values to benefits, and only 6 analyses specifically identified net benefits; (9) 8 of the 20 cost-benefit analyses that GAO examined did not include an executive summary that could help Congress, decisionmakers, the public, and other users quickly identify key information addressed in the analyses; (10) S. 746 addresses many of these areas of concern; (11) enactment of the analytical, transparency, and executive summary requirements in S. 746 would extend and underscore Congress' previous statutory requirements that agencies identify how regulatory decisions are made; (12) S. 746 also requires agencies to provide for an independent peer review of any required risk assessments and cost-benefit analyses of major rules that the agencies or the OMB Director reasonably anticipate are likely to have a $500 million effect on the economy; (13) GAO believes that important economic analyses should be peer reviewed; (14) given the uncertainties associated with predicting the future economic impacts of various regulatory alternatives, the rigorous, independent review of economic analyses should help enhance the quality, credibility, and acceptability of agencies' decisionmaking; (15) GAO believes that enactment of the public disclosure requirements in S. 746 would provide a statutory foundation to help ensure the public's access to regulatory review information; and (16) in particular, the bill's requirement that rule changes be described in a single document would make it easier for the public to understand how rules change during the review process.