STATEMENT OF MITCHELL E. DANIELS JR.
OFFICE OF MANAGEMENT AND BUDGET
ENERGY POLICY, NATURAL RESOURCES AND REGULATORY AFFAIRS
May 24, 2001
Good Morning, Mr. Chairmen and distinguished Members. Thank you
opportunity to discuss the effectiveness of the Unfunded Mandates Reform
of 1995, and, in particular, Title II of the Act.
This Administration fully supports the principles that gave rise to
of the Unfunded Mandates Reform Act (the Act) in 1995. The Act was
to ensure that Congress and Executive Branch agencies consider the impact
of legislation and regulations on States, local governments, and tribal
governments, and the private sector. With respect to States and
the Act was an important step in recognizing State and local governments as
partners in our intergovernmental system, rather than mere entities to be
regulated or extensions of the federal government through which to advance
Washington's priorities. President Bush and his Administration are
committed to working with
State and local governments to advance these principles not just on paper,
but in practice.
One of the purposes of the Unfunded Mandates Reform Act was to
"a process to enable the elected and other officials of State, local
tribal governments to provide input when federal agencies are developing
regulations." With improved communication and full consideration of
State and local government concerns and suggestions, regulatory processes
program delivery systems can work more effectively. In addition, we should
be able to eliminate unnecessary burdens and duplication of paperwork.
Unfortunately, experience to date suggests that the Executive
implementation of the Unfunded Mandates Reform Act has not moved Federal
agencies significantly closer to accomplishing these objectives. Indeed,
seems that Title II of the Act has been regarded by some agencies as a
exercise, rather than an opportunity to work in good faith with our
Not only have agencies attempted to shirk the duties assigned them
the Act, I believe they have failed to consistently meet the goals set
for intergovernmental consultation. Just this week, White House staff
a meeting of the governors' Washington representatives and asked which
or agencies were doing a good job consulting with the States; the answer
silence. No federal agency is consulting with State and local governments
in the methodical way that was intended when the law was developed. States
and localities report that many agencies think simply informing
and local governments of a rulemaking action is the equivalent of
They have also indicated that consultation processes lack uniformity, that
consultation does not occur early enough in the rulemaking process, and on
rare occasions when consultation does occur, agencies often contact their
State or local counterparts instead of the elected officials (or chief
appointed officials) entrusted by the public with running the government.
The purpose of consultation with State and local governments, who
are often in the position of enforcing federal rules in partnership with
the federal government, is to find the rulemaking alternative that best
accomplishes the objectives of the rule with minimum burden to all
When agencies fail to solicit or consider the views of States and
they deny themselves the benefit of State and local innovation and
This will not be accepted practice in this Administration. I will require
agencies to submit the dates at which stakeholders were contacted. Prior
OIRA's review of any new regulations, if there has not been adequate
consultation as called for by the Act, OMB will return regulations to the
originating agency for completion of this responsibility.
As OMB has noted in its five annual reports to Congress on the
of Title II of the Act, eighty rules have required the preparation of a
impact statement in the five years since the Act was passed. It is hard to
imagine that only eighty regulations had significant impacts on State,
or tribal governments, or the private sector. In fact, it appears that
have attempted to limit their consultative processes, and ignored potential
remedies, by aggressively utilizing the exemptions outlined in the Act.
For example, last June the EPA issued a new regulation known as the
Total Maximum Daily Load (TMDL). The rule requires States to develop and
implement plans to clean up impaired waters, which, of course, is a
goal. The Agency estimated the "incremental" cost of complying
the additional planning requirements at $23 million per year. Therefore,
regulation was not considered an unfunded mandate. However, EPA completely
from its analysis the costs of the pollution control measures that will be
by the new regulation. Compliance costs are expected to run into the
of dollars per year for the private sector and local governments. Yet, EPA
moved forward without deference to the requirements of the Act.
This is just one flagrant example of an agency evading the
analysis requirements set forth under the Act.
One of my priorities is to identify and close any loopholes that may
been created by agencies' interpretation of the law. It is not enough to
comply merely with the letter of the law; President Bush expects the
branch to comply with its spirit as well. In short, agencies should be
more mandates impact statements.
GAO, in reporting on the Act's first two years in 1998, noted that
was a limited direct impact of the Act on agencies' rulemaking." It
clear that more can be done, with respect to the Unfunded Mandates Reform
and beyond, to ensure that federal agencies consider the impact of
activities on States, local governments and the private sector.
President Bush, as a former governor, recognizes the need for more
cooperation with State, local, and tribal governments. On February 26, the
President established an Interagency Working Group on Federalism.
authority and responsibility to State and local governments, and to the
is a central tenet of our management of the Executive Branch.
The Interagency Working Group is responding to the President's call.
group consists of Cabinet secretaries, agency heads and senior White House
staff, including myself. Their participation in the drafting of a new
Order will ensure that the Order signed by the President will result in
action, rather than an Order on paper alone, unheeded and unenforced. The
Working Group has welcomed the input of State and local government
and others who share ideas to promote State and local innovation,
and accountability. The President has directed the Working Group to
him with a Federalism Executive Order, and a report with recommendations to
promote the principles of federalism, by the end of August.
In conclusion, the Unfunded Mandates Reform Act was an important
restoring greater balance and mutual respect to the federal system. It has
raised awareness of the importance of State, local and tribal government
private sector concerns among agency decisionmakers. However, more work is
needed in order to achieve the goals of the Act.
On behalf of the Administration, I am prepared to make the following
Mr. Chairmen, the Administration is committed to securing greater
with our intergovernmental partners in Federal decisionmaking. As
Bush noted, "I'm going to make respect for federalism a priority in
Administration." We look forward to developing this partnership, and
with the Congress as well, to ensure it is a successful one.
- First, we will do more to involve State and local governments early in
the rulemaking process. Consultation means little if it occurs after the
opportunity to improve a rule is passed. Agencies should consult with
and local governments, including their elected officials and Washington
representatives, before they have committed to any particular rulemaking
- Second, we will bring more uniformity to the consultation process to
both agencies and our intergovernmental partners know when, how and with
whom to communicate. States and localities should have a clear point of
contact in each agency, and agencies must understand that
"consultation" means more than making a telephone call the day
before a rulemaking action is published in the Federal Register.
- Third, we will enforce the Unfunded Mandates Reform Act to ensure that
agencies are complying with both the letter and the spirit of the law. The
Office of Information and Regulatory Affairs (OIRA) is under my direction,
and I will direct OIRA to return a rule that is not in compliance with the
Unfunded Mandates Reform Act to the agency from which it came. If an
is unsure whether a rule contains a significant mandate, it should err on
side of caution and prepare a mandates impact statement prior to issuing