Scope and Methodology

To describe the applicable procedures, definitions, and exclusions for  identifying federal mandates in statues and rules under UMRA, we  reviewed the act, other related guidance documents, and CBO and OMB  reports on the implementation of UMRA. Parallel to the information on statutes provided by CBO, we  focused on identifying two sets of final rules—those that were identified as  containing federal mandates at or above UMRA’s threshold and those that  were not but included provisions affecting nonfederal parties that might be  perceived by those parties as potential “unfunded mandates.”  To determine  whether the statutes and final rules we examined were perceived by  affected parties as potentially having “unfunded mandate” implications, we  shared them with the following national organizations representing  nonfederal levels of government: National Association of Counties,  National Conference of State Legislatures (NCSL), National Governors  Association, the National League of Cities, and the U.S. Conference of  Mayors. In 2001 and 2002, 5 of the 377 statutes enacted were  identified as containing provisions that were federal mandates exceeding  the thresholds. For 24 of those examples, this was because their  estimated direct costs were below the thresholds. Cost Estimates May Not Be Feasible or Complete

Developing a cost estimate for federal mandates must be feasible, and their  direct costs must meet or exceed applicable cost thresholds for CBO to  identify them as such under UMRA. 2). Nevertheless, at least 29 of the 65 rules appeared to have significant  financial impacts on affected nonfederal parties of $100 million or more in  any year. However, there are four additional restrictions to the  identification of federal mandates in rules (i.e., in an UMRA statement):    UMRA’s requirements do not apply to provisions in rules issued by  independent regulatory agencies. Agencies Identified Few Final Rules Published in 2001 and 2002 as Containing Federal Mandates

Federal agencies identified 9 of the 122 major and/or economically  significant final rules that federal agencies published in 2001 or 2002 as  containing federal mandates under UMRA (see fig. 3). Most Often Rules with Financial Effects on Nonfederal Parties Did Not Trigger UMRA’s Requirements Because They Did Not Require Expenditures at or Above UMRA’s Threshold

Of the 113 major and/or economically significant rules not identified as  including federal mandates under UMRA, we determined that 48 contained  no new requirements that would impose costs or have a negative financial  effect on state, local, and tribal governments or the private sector. Describe the applicable procedures, definitions, and exclusions for  identifying federal mandates in statutes and rules under UMRA. 2. Identify statutes and final rules that contained federal mandates under  UMRA. Provide examples of statutes and final rules that were not identified as  federal mandates, but that affected parties might perceive as  “unfunded” mandates, and the reasons these statutes and rules were  not federal mandates under UMRA. As agreed with your staff, we focused on statutes enacted and final rules  published during 2001 and 2002 to address the second and third objectives.
Why GAO Did This Study

The Unfunded Mandates Reform Act of 1995 (UMRA) was enacted to address concerns about federal statutes and rules that require state, local, and tribal governments or the private sector to expend resources to achieve legislative goals. UMRA generates information about the nature and size of potential federal mandates to assist Congress and agency decision makers in their consideration of proposed legislation and rules. However, concerns about actual or perceived federal mandates continue. To provide information and analysis regarding UMRA's implementation, GAO was asked to (1) describe the applicable procedures, definitions, and exclusions under UMRA for identifying federal mandates in statutes and rules, (2) identify statutes and final rules that contained federal mandates under UMRA, and (3) provide examples of statutes and final rules that were not identified as federal mandates, but that affected parties might perceive as "unfunded mandates," and the reasons these statutes and rules were not federal mandates under UMRA. GAO focused on statutes enacted and final rules issued in 2001 and 2002 to address the second and third objectives.

What GAO Found

UMRA generally requires congressional committees and the Congressional Budget Office (CBO) to identify and estimate the costs of federal mandates contained in proposed legislation and federal agencies to do so for federal mandates contained in their rules. Identification of mandates is a complex process with multiple definitions, exclusions, and 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. Of the other federal actions in those 2 years, at least 43 statutes and 65 rules contained new requirements on nonfederal parties that might be perceived as "unfunded mandates." For 24 of those statutes and 26 of those rules, CBO or federal agencies had determined that the estimated direct costs or expenditures would not meet or exceed applicable thresholds. For the remaining examples of statues, most often UMRA did not require a CBO review prior to their enactment. The remaining rules most often did not trigger UMRA because they were issued by independent regulatory agencies. Despite the determinations made under UMRA, some statutes and rules not triggering UMRA's thresholds appeared to have potential financial impacts on affected nonfederal parties similar to those of the actions that were identified as containing mandates at or above the act's thresholds.