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provide for a point of order, and I would ask you to keep that in mind.

The other point, I think this deals with Section 6(b), and the rules of construction would apply to all rules promulgated after enactment of this legislation. Let me try to get this straight. I think the way the bill is written it says that you would affect Federal rules promulgated pursuant to legislation enacted previously. So that is a rule or regulation promulgated after the passage of this bill where it could be promulgated with respect to legislation that was previously adopted. And what we would encourage you to consider is amending that subsection so that the rules of construction apply only to Federal rules promulgated pursuant to legislation enacted after S. 1214.

In conclusion, let me just say that the legislation I worked on down here was never perfect. I don't know that this is either. It is good. I don't know that you are going to be finished or we are going to be finished on this front. But I just want to encourage you to continue your efforts and to expand your good work to this threat to federalism, and that is preemption.

We want to urge you to join us as States and as governors in a working partnership involving all of America in our system of government through all of its elected officials, whether we are in State houses or here on Capitol Hill. And I think that we can best meet the needs of the folks that we are all elected to serve if we meet the collective needs of the people and we pull together as you tried to do here in this partnership.

Again, it is a good bill, and we have got a couple points we would like for you to keep in mind as you go forward. We would like to urge you to mark it up and send this baby over to the House of Representatives.

Thank you very much.

Chairman THOMPSON. Thank you very much, governor. I really appreciate the leadership that you have shown in this area, and it is something that is kind of misunderstood by a lot of people. It has to do with the benefits of moving in this direction, and we have had a lot of activity in terms of devolution, are first of all it is consistent with sound constitutional principles, and there is a reason that it is set up that way in the Constitution, because what we are talking about is power and the distribution of power. And we all know what the Founding Fathers thought about that and how important it was.

There seems to be a tendency in democratic societies to centralize as time goes on, and we are trying to fight against that not only for constitutional reasons and for distribution of power reasons, which is important in a democratic society, but for very practical reasons. And governors such as yourself who have come up recently with such innovative ideas, so much of the good things that are happening in this country are going on at that level, and we have learned that not all the good ideas come from up here, and that we ought to be very careful in preempting these fields.

As far as this bill is concerned, I appreciate your suggestions. I would like a point of order, too. Frankly, there may be some practical difficulties in getting that done. Maybe we can work together and maybe you can help us get that done.

Governor CARPER. Be happy to try.

Chairman THOMPSON. I think that would be a good idea.

I think in terms of the other point, the bill does have to do with statutes that have already been previously passed, and I must say that there undoubtedly, of course, will be additional rules, many, many rules coming down that have to do that are done pursuant to statutes that have already been passed. But it is not meant to preempt those statutes that have already been passed. The bill says that preemption can be authorized by the statute, and if courts have previously determined, for example, that a statute preempts certain areas, I think that would be incorporated in the rule. In other words, I am a little bit concerned about the wording of this and making sure it was clear enough as to what we were trying to do, and I think it needs a little work, perhaps. But we want it to apply to old statutes, but we are not trying to rewrite or preempt all the old statutes, if you know what I mean. So we are on the same track there, I think, and we will continue to work on that.

Thank you very much. Senator Voinovich.

Senator VOINOVICH. I am pleased that we included in this legislation a problem we had, and that is the issue of Medicaid caps, whether they are unfunded mandates, and the issue of whether or not, if you have some of the changes in administrative costs, whether or not that is an unfunded mandate. Mr. Chairman, that is real important because it is a follow-through

Chairman THOMPSON. You were on to us about that before you ever got here. I remember.

Senator VOINOVICH. Right. The other thing is that on the record I would like your comment about the fact that under the unfunded mandates relief legislation there was to be agency review of impact on regulations. I would be interested in your opinion on whether or not that has happened or not, just for the record.

Governor CARPER. I wish I could tell-I think there has been, but, Senator, I could not tell you for sure.

Senator VOINOVICH. Well, one of the things was that they were supposed to be looking at the regs, and from my experience that has been pretty well ignored in terms of

Governor CARPER. By some it has been, by others not. It has been uneven.

Senator VOINOVICH. The other is the question of judicial review in terms of federalism impact statements. How important do you think that is?

Governor CARPER. In a perfect world, I think it is desirable. I don't know if you can get it done. And as you go forward, I wouldwhat is the old adage? Don't let the perfect be the enemy of the good. If you can get it done, fine. If you can't, then get what you

can.

Senator VOINOVICH. In terms of the suggestions that were made by representatives of the administration today, I would be very interested to have your response to some of those suggestions. We certainly want to make sure that once this legislation is marked up that we have a good chance of having the President sign it. I think that where you feel they may have made some good suggestions

we are trying to accomplish here, I would sure like to hear about them.

Governor CARPER. Good, and we would welcome the opportunity to submit something in writing. I was in and out of the room while they testified. We will have some really smart people who heard the whole thing and who know this stuff backwards and forwards to help us prepare something that would be helpful.

Chairman THOMPSON. Thank you very much, Senator.

Governor, I know you have other obligations. Thanks again for being here with us. We look forward to working with you.

Governor CARPER. Thanks very much. Let me just say again to Senator Voinovich, if you had something to do, Senator, with getting that Medicaid cap-the language included on the appropriations bills-the entitlement programs, rather, that you alluded to earlier, thank you. That is much appreciated.

Senator VOINOVICH. He heard us.

Chairman THOMPSON. I can attest to the fact that you beat up Senator Glenn and me both over that.

Governor CARPER. Good work. And, Senator, I look forward to being in your State. Your governor, Governor Sundquist, is going to be hosting the Nation's governors and a bunch of people at a technology conference, education technology conference, in about a week.

Chairman THOMPSON. Great.

Governor CARPER. We want to get, naturally, and learn as much as we can from Tennessee.

Chairman THOMPSON. There is a lot to be learned down there. Governor CARPER. Most of us governors learned what we know from George Voinovich. [Laughter.]

Chairman THOMPSON. Thank you very much. We appreciate your being with us.

Mr. Dorso and Mr. Fekete, we appreciate your forbearance, and, Mr. Dorso, thank you again for coming back. You are getting to be a regular customer to this Committee, and we appreciate the work you are doing in this area. Would you make your statement, please?

TESTIMONY OF HON. JOHN M. DORSO,1 MAJORITY LEADER, NORTH DAKOTA HOUSE OF REPRESENTATIVES, ON BEHALF OF THE NATIONAL CONFERENCE OF STATE LEGISLATURES Mr. DORSO. Good afternoon, Senator Thompson. I guess I will skip through all of the majority leader stuff and just say, as the governor said, the staff of NCSL and I have put together written testimony which I think is very good, and I encourage you and the Members to read it.

Chairman THOMPSON. We will make the full statement a part of the record.

Mr. DORSO. OK. As I listened to the proceedings here today, it is fairly obvious that you-and I have heard you in some of the presentations that you have made-understand the problem. The problem obviously is the increasing frequency of preemption, not only by Congress but by agencies of government. And, certainly I

1 The prepared statement of Mr. Dorso appears in the Appendix on page 324.

guess we all understand that the Supremacy Clause is there, and if you have a will to do that, certainly you can.

I don't have a problem with that, and as you have said, if that is your intention, let us know what your intention is as you debate whatever your bill is in front of you that contains that type of activity. I mean, we will all be part of the debate at that time as to whether, in fact, that is exactly what you intend to do.

So I really don't have a problem with preemption from the standpoint as you have pointed out. If we all know that that is what is going to happen, then we should all understand it and what it really means.

Certainly I think that we as States from the other standpoint think that we do a good job in what we do, and we don't like preemption any more than it has to be. We understand that sometimes it has to be. But I think that we all understand that States are probably the basis of a democracy. It is part of the Constitution, a cornerstone of the Constitution, that we keep government as close to the people as possible, and certainly the States are there.

I have a number of instances in my testimony where I talk about instances where Congress has preempted States and it is causing big problems for us. One of them is the Internet Tax Freedom Act. North Dakota is one of those States that did pass a tax on Internet providers, and Congress did its will on that, and we are fighting through that problem.

Obviously, the whole problem about the Internet gets to be sales tax revenues, and I know State Senator Finan, Senator Voinovich-we are good friends, and we have talked considerably about what a terrible problem it is for Ohio. Obviously, Ohio has much bigger sales tax numbers to deal with, but in North Dakota, it is a big problem for us, too, and for the political subdivisions. And it would be unconscionable for Congress to take our right to sales tax away.

Chairman THOMPSON. You can imagine what it is like for a State that doesn't have an income tax.

Mr. DORSO. Well, yes, sir, I understand that.

Chairman THOMPSON. Which is Tennessee.

Mr. DORSO. And it is not only that we have got the State tax problem, but I have retailers in my home town of Fargo, North Dakota, that are going to be put in a terrible position competing against Internet sales and sales taxes is 7, or 8 percent, some of them going to the local subdivision, some of it to the State. I mean, it is just a bad situation, and I think we have got to work through that.

Now, that may take working together, I hope, States and Congress, to do that, but the Tax Freedom Act I think was a bad way to start, and obviously we have talked about the fact that that committee was put together, and we didn't like the way that was done very well either.

But, the Y2K liability bill, we have talked about that particular problem. I would like to talk a little bit about electric deregulation. I mean, that is a subject that comes up in Congress on a regular

I have a friend of mine, Chase Hibberd, who is the chairman of the tax committee in Montana, and we converse on a regular basis, sometimes about hunting dates, but we were just talking the other day about Montana has gone much more quickly than North Dakota as far as electric industry deregulation and a redo of their tax structure.

Well, we haven't moved as fast, but one of the reasons that I have not wanted-and we have an interim committee studying it. We really want to watch what Iowa and Montana, some of our neighboring States are doing to see if they have done it right before we get too far down the road and have to fix it.

Now, of course, on the other side of it, I think we can fix it faster than you could fix it here, because we seem to be able to move quicker on those types of issues. So I think that we as States can react to some of these things faster, and I think we can do it in an inventive kind of way. And we don't have a one-size-fits-all situation. Obviously, the Montana structure, as far as their electric industry, is completely different-well, not completely, but somewhat different than North Dakota's. We are going to have to approach things a little bit different than they. And on so many issues, that is the way it is, and I am sure you are aware of that.

Chairman THOMPSON. You mentioned Y2K. Could you state your concern there a little bit more?

Mr. DORSO. Well, Mr. Chairman, we in North Dakota-I will give it to you from the North Dakota perspective. We had a number of Y2K bills introduced in the last legislative session. We chose to defeat those bills that were introduced, the industry people one, other people different versions. We decided that this was an issue left to the courts, that it was only going to be something that lasted through the year 2000, maybe a couple years thereafter, and we didn't need a law to deal with Y2K liability that would be sitting there on the books for the next century waiting for another turn of the clock.

So we don't perceive that we are going to have a big problem with it in North Dakota, and we really didn't think when we saw what Congress was doing that it was necessary to have, again, a one-size-fits-all thing.

Chairman THOMPSON. I appreciate that.

Mr. DORSO. As I said, I am going to try and move through this fairly quickly in case you have got some questions.

You have already talked about the fact that this is increasing five times. I want to point out another example that I just came across because, being the chairman of the Law and Justice Committee at NCSL, we were dealing with some Native American issues. And the Department of Interior was proposing a rule on trust lands, and the staff at NCSL sent that to me, and I started reading it, and when I got to it, I just got livid because in it it says, "They acknowledge the local tax base may be affected, but the refusal to comply with the Executive Orders is based on a totally unsupported statement that because the loss of revenue is minimal." Well, I can tell you, in North Dakota, where we have a number of reservations, that that is just absolutely malarkey. And if that is the way that these agencies just go around and put you in a pen by just making statements like that—and, also, I called NCSL, and

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