	Identification of Mandates Under UMRA Is Complex

The procedures under UMRA for the identification and analysis of  intergovernmental and private sector mandates are very complex. Even if  proposed legislation or regulations are reviewed under UMRA, those  provisions are subject to various definitions, exclusions, and exceptions  before being identified as containing mandates at or above UMRA’s cost  thresholds. As mentioned  previously, in 2001 and 2002, the period of our review, only 5 of the 377  statutes enacted and 9 of the 122 major rules issued contained federal  mandates at or above UMRA’s thresholds. Specifically, we  identified at least 43 statutes and 65 rules issued in 2001 and 2002 that  resulted in new costs or other negative financial impacts on nonfederal  parties that the affected parties might perceive as unfunded or under  funded mandates even though they did not meet UMRA’s definition of a  mandate or did not meet or exceed UMRA’s thresholds. To begin to address this question,  you asked us to obtain the views of a diverse group of parties  knowledgeable about UMRA and federal mandates. Views of Parties Regarding UMRA and Unfunded Mandates

Parties from the various sectors provided a variety of comments but they  generally fell into several broad themes. UMRA’s coverage was the most  frequently cited theme, with comments provided by all the sectors  (academic/think tank, business, federal agencies, public interest advocacy  groups, and state and local governments). UMRA Coverage Generally Viewed as a Weakness but a Few Parties Disagree

Given the findings from our May 2004 report, it’s not surprising that UMRA’s  coverage, including its numerous definitions, exclusions, and exceptions,  was the most frequently cited issue by parties from all five sectors. Others provided more specific  comments,  including points regarding issues with the exclusion of 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. 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. Parties  across and within sectors had differing views on both the enforcement  mechanisms provided in the law itself and the level of effort exercised by  those responsible for implementing UMRA’s provisions. The few  parties commenting about judicial review suggested expanding it to  provide more opportunities for judicial challenges and more effective  remedies when noncompliance of the Act’s requirements occur. A few  parties primarily from the academic/think tank and public interest  advocacy groups sectors said that efforts to limit or stop implementation of  mandates through legal action might be unwarranted, because UMRA was  not intended to preclude the enactment of federal mandates. Sectors Also Raise Concerns About Federal Mandates in General

Parties from all sectors also raised a number of broader issues about  federal mandates—namely, the design and funding and evaluation of  federal mandates—and suggested a variety of options. About half the parties, representing most sectors commented on the  evaluation of federal mandates and offered suggestions to improve  mandates, whether covered by the Act or not. Finally, as we move forward in an environment of constrained fiscal  resources, the issue of unfunded mandates raises broader questions about  the assignment of fiscal responsibilities within our federal system. Part of this  public policy debate includes a reexamination of the federal government’s  role in our system and a need to sort out how responsibilities for these kinds of programs should be financed in the future.
Why GAO Did This Study

The Unfunded Mandates Reform Act of 1995 (UMRA) was enacted to address concerns about federal statutes and regulations that require nonfederal parties to expend resources to achieve legislative goals without being provided funding to cover the costs. UMRA generates information about the nature and size of potential federal mandates but does not preclude the implementation of such mandates. At various times in UMRA's 10-year history, Congress has considered legislation to amend aspects of the act to address ongoing questions about its effectiveness. This testimony is based on GAO's reports, Unfunded Mandates: Analysis of Reform Act Coverage ( GAO-04-637 , May 12, 2004) and Unfunded Mandates: Views Vary About Reform Act's Strengths, Weaknesses, and Options for Improvement ( GAO-05-454 , March 31, 2005). Specifically, this testimony addresses (1) UMRA's procedures for the identification of federal mandates and GAO's analysis of the implementation of those procedures for statutes enacted and major rules issued in 2001 and 2002, and (2) the views of a diverse group of parties familiar with UMRA on the significant strengths and weaknesses of the act as the framework for addressing mandate issues and potential options for reinforcing the strengths or addressing the weaknesses.

What GAO Found

The identification and analysis of intergovernmental and private sector mandates is a complex process under UMRA. Proposed legislation and regulations are subject to various definitions, exceptions, and exclusions before being identified as containing mandates at or above UMRA's cost thresholds. Also, some legislation and rules may be enacted or issued via procedures that do not trigger UMRA reviews. In 2001 and 2002, 5 of 377 statutes enacted and 9 of 122 major or economically significant final rules issued were identified as containing federal mandates at or above UMRA's thresholds. Despite the determinations under UMRA, at least 43 other statutes and 65 rules resulted in new costs or negative financial consequences that affected nonfederal parties might perceive as unfunded or underfunded federal mandates. GAO obtained information from 52 knowledgeable parties, who provided a significant number of comments about UMRA, specifically, and federal mandates, generally. Their views often varied across and within the five sectors we identified (academic/think tank, public interest advocacy groups, business, federal agencies, and state and local governments). Overall, the numerous strengths, weaknesses, and options for improvement identified during the review fell into several broad themes, including, among others, UMRA-specific issues such as the act's coverage and enforcement, and more general issues about the design, funding, and evaluation of federal mandates. UMRA's coverage was, by far, the most frequently cited issue by parties from the various sectors. Parties across most sectors said that UMRA's numerous definitions, exclusions, and exceptions leave out many federal actions that might significantly impact nonfederal entities and suggested that they should be revisited. However, a few parties, primarily from the public interest advocacy sector, viewed UMRA's narrow coverage as a strength that should be maintained. Another issue on which the parties had particularly strong views was the perceived need for better evaluation and research of federal mandates and more complete estimates of both the direct and indirect costs of mandates on nonfederal entities. The most frequently suggested option to address these evaluation issues was more post-implementation evaluation of existing mandates or "look backs" at their effectiveness. Going forward, the issue of unfunded mandates raises broader questions about assigning fiscal responsibilities within our federal system. The long-term fiscal challenges facing the federal and state and local governments and the continued relevance of existing programs and priorities warrant a national debate to review what the government does, how it does business, and how it finances its priorities. Such a reexamination includes considering how responsibilities for financing public services are allocated and shared across the many nonfederal entities in the U.S. system.