check will help all levels of government track Federal activities dealing with preemption and provides information to local governments on the critical issues.

The above provisions taken together provide for a greater accountability of our Federal Government. They provide for the opportunity for increased input for most directly affected by rule or statute, and they provide the opportunity for a more meaningful and balanced federalism.

Thank you, Mr. Chairman and Mr. Voinovich, for allowing me to make the statement.

Chairman THOMPSON. Thank you very much. Senator Voinovich. Senator VOINOVICH. I have no questions. I think you have done a beautiful job of laying it out, both of you. And I could not help but think, Mr. Chairman, that we are now considering a bill this week, Patient Protection Plus, that has great implications in terms of federalism and preemption.

Several weeks ago, we had another piece of legislation that the Chairman and I spent a lot of time talking about, a need that was the Juvenile Justice bill, and its implication in terms of a preemption. And there is no question that this is a topic that is very, very important to the future of this country and also to the relationship that we have with our partners in State and local government.

So I just want to say thank you very much for being here.

Mayor FEKETE. Mr. Chairman, may I request that my testimony be part of the written record?

Chairman THOMPSON. The full statement will be made a part of the record. Thank you very much.

Mayor FEKETE. Thank you, sir.

Chairman THOMPSON. Senator, your point is really well made. The so-called Patients Bill of Rights on the floor would basically federalize all of the State laws or supersede all of the State laws that now have to do with HMOs. We have gone to managed care now. Costs were absolutely out of hand, and we had to do something. We went to managed care, and there are a lot of things that we are trying to work out.

But the fact that we are trying to work out the details means that we need for States to have the opportunity in the non-ERISA plans, to do what they feel like they need to do. And Tennessee, North Dakota, and Ohio might have different approaches, and some will work better than others. And we can do what you are doing on the Y2K thing, look and see what is working and what is not working, and what drives up costs, and what are the unintended consequences of what we do.

But we face it every day on something-federalizing crimes we have had. Before Senator Voinovich got here, once in a while we would have a 99 to 1 vote because it would be-we federalized you cannot bring lawsuits against Good Samaritans or something. Well, that is a perfectly noble thing, but there are State laws already on the books on that. And you look at the States on a particular issue, and if some of the States have passed a law about it and some have not, the argument up here is that, well, we need uniformity. And then if you look at another issue and all of the States have passed a law on it, they say, well, what is the harm in federalizing it? We have already got the laws that say we need it.

So it is a constant problem, and we really need the National Conference of State Legislators and the National League of Cities to weigh in on these things because you have a voice, you have clout, people listen to you, and I cannot overemphasize how important it is for you all to stay on the job and help us when these things get to the floor and when we bring them up to get them out of Committee and so forth to really weigh in because people do listen to what you have to say on these issues.

And I want to thank you again. I know you have been inconvenienced greatly, but it is a very worthwhile cause, as you have well stated. So thank you very much for being with us.

Mayor FEKETE. Thank you very much.

Chairman THOMPSON. Let us ask Ernest Gellhorn, professor of law, George Mason University, and Caleb Nelson, associate professor of law, University of Virginia, and Rena Steinzor, associate professor of law, University of Maryland.

Ladies and gentlemen, we apologize for the lateness of the hour. It could not be avoided today, but we really appreciate your bearing with us.

Mr. Gellhorn, would you like to proceed? Your full statements will be made part of the record. You have heard, I think most of you have heard what has been going on here today. And any comments or points that you feel like are especially noteworthy to be made from all of this, feel free to summarize those for us.

TESTIMONY OF ERNEST GELLHORN,1 PROFESSOR OF LAW, GEORGE MASON UNIVERSITY

Mr. GELLHORN. Thank you for the opportunity of appearing_before you. I will focus my remarks, Mr. Chairman, on Section 7 of the bill, which relates to how agencies would implement it. The bill really has two components. One is the Federal preemption component, which I am not addressing, and the second focuses more on federalism assessment, which I will discuss. What is the impact of the proposed rule on States and local governments? This is an important topic because the estimate of the impact of Federal regulations on State and local economies exceeds half a trillion dollars a year. So we are talking about something that is not only important in terms of its impact, but also is basically common-sense legisla

tion.

S. 1214 covers three things: First, before an agency adopts a rule, the bill requires that the agency talk to the local and State Government and local individuals who will be affected by the rule and get their input. Second, S. 1214 also requires that before a rule is adopted the agency must make an assessment of the local effects. Third, the agency must explain how it has taken the assessment into account. The results should be more rational rules that are consistent rules with the legislative intent.

Now, the alternative proposed by the administration of adopting an Executive Order is not meaningful. We have already seen that the existing Executive Order has not really been followed so something more is required. In addition, there is another problem, and that is the Executive Order does not apply to independent agencies

because of a concern expressed, apparently, by the President as to whether or not orders can reach the independent agencies. I happen to think they can, but they have not chosen to do so. So under the Executive Order alternative, a significant area of its potential regulation would not be reached by the federalism requirement.

The issue that I would call to your attention, where I think additional effort should be given, is to the provisions for judicial review. There is not any in the bill, and as a consequence, the Administrative Procedure Act's judicial review standards would apply. If an agency does not follow all of the procedural requirements, the rule could be stricken under Section 706(2)(D) of the Administrative Procedure Act. That is, a challenge could be brought that not each aspect of the law has been followed, allowing for a challenge under 706(2)(C) of the Administrative Procedure Act. Finally, a challenge made to the agency rule as to whether or not the rule is arbitrary and capricious for a failure to comply with the assessment requirement.

I believe that this broad approach to judicial review should be cut back. Instead, the judicial review provisions, such as set forth in S. 981 that was before this Committee in the last Congress or that is in the Unfunded Mandates legislation, be applied. Indeed, I think there is a parallel between those bills and acts and this bill because under S. 981, the agencies would take into account the costs and benefits of regulation and consider them. That is the very same thing here. It urges agencies to take into account the federalism aspects of every proposed rule and consider them.

There is another thing I do want to emphasize, particularly because of some additional testimony that will be provided, I think this bill is neither pro-regulation or anti-regulation. What it is, it is a plea for sensible regulation. It says, "Look before you leap." Take into account what the rule is likely to do. And that, it seems to me, is sensible whether you are adopting more regulations, fewer regulations, intensifying them or deregulating.

Finally, I would suggest to this Committee that it is perhaps time to engage in an assessment of regulatory assessments and impacts. This is the eighth area in which either Congress or the President has said to the agencies: Analyze what you are doing. I think that many of these requirements make sense. But, of course, there is at some point, analytical paralysis.

Chairman THOMPSON. We do enough assessments to where we come to an assessment of the assessment.

Mr. GELLHORN. I think that is exactly right, Senator, and that is the way I think one ought to put it.

Indeed, if you put all assesstment requirements together, you could accomplish a couple of things. One is, it seems to me, you might find out that some are not necessary. But the more important point is you would put in one place for the agencies to look at the assessments that they ought to undertake.

Right now, they have eight different assessment requirements that agencies must comply with. They are all different; they have requirements that are not always clear; and the agencies aren't certain how to comply. You could have a single process for engaging a regulatory impact assessment, simplify the process, and reduce the number of laws on the books.

Thank you.
Chairman THOMPSON. Thank you very much. Professor Nelson.
TESTIMONY OF CALEB E. NELSON,1 ASSOCIATE PROFESSOR
OF LAW, UNIVERSITY OF VIRGINIA SCHOOL OF LAW

Mr. NELSON. Mr. Chairman and Members of the Committee, thank you for the opportunity to speak with you today about Federal preemption of State law. My testimony will focus on the rules of construction that courts currently apply to determine the preemptive effect of Federal statutes, a subject that is relevant to Section 6 of S. 1214. I will make my remarks brief.

My views on Section 6 are summarized in the written statement that I would ask to be made a part of the record.

Chairman THOMPSON. All statements will be made part of the record.

Mr. NELSON. Thank you, Mr. Chairman.

Mr. Chairman, as you mentioned in your introductory remarks, the preemptive effect of any particular Federal statute is a matter of statutory interpretation. But the rules of construction that courts currently use in preemption cases risk making judges too quick to infer broad preemption clauses.

Suppose that a Federal statute does not contain an express preemption clause. The statute will still have preemptive effects. It will unquestionably displace whatever State law its substantive provisions contradict.

But the Supreme Court has said that, in addition, the statute will be read to preempt State law that, "Stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." In effect, then, the courts read every Federal statute that does not expressly address preemption as if it implied the following preemption clause: "No State may enact or enforce any law or policy to the extent that such law or policy stands as an obstacle to the accomplishment and execution of the full purposes and objectives behind this statute."

Imagine what would happen if a proposed bill actually contained such a preemption clause. I suspect that many members of Congress would find the clause both too vague and too broad.

First, the clause is too vague. In the absence of careful statutory specification of exactly what "purposes and objectives" the clause is referring to, it seems likely to lead to unpredictable results as a test for preemption. Many statutes will be the products of compromise. Members of Congress who want to pursue one set of purposes will have agreed on language that is acceptable to members of Congress who want to pursue a different set of purposes. Both sets of purposes will have shaped the statute, but they will have very different implications, quite possibly, for State law. Simply telling courts to base preemption decisions on the full purposes and objectives of Congress does not seem to provide much guidance.

Second, the clause is too broad. Even if all members of Congress can agree on the full purposes and objectives behind a particular Federal statute, they may not want to displace all State law that makes achieving those purposes more difficult. As the Supreme

Court itself has acknowledged in other contexts, "no legislation pursues its purposes at all costs," and "it frustrates rather than effectuates legislative intent simplistically to assume that whatever furthers the statute's primary objective must be the law."

This is particularly true in preemption cases. Our Federal system is premised on the assumption that Congress will not pursue Federal interests to the total exclusion of State interests. One of the principal safeguards on which the Constitution relies to protect State authority is the simple fact that members of Congress come from the States. In many contexts, Congress will hesitate to pursue Federal purposes at the expense of State policies that in the judgment of the relevant State authorities serve worthwhile interests in their own right.

Chairman THOMPSON. If we were still appointed by State legislatures, we would not have this problem. [Laughter.]

Mr. NELSON. The Seventeenth Amendment may, indeed, have affected that calculus. Of course, there still is a process for State constituencies to hold members of Congress accountable, and therefore members of Congress continue to take State interests into account to a degree that I think the Court's current tests for preemption fail to recognize. I think that the Court's current rules of construction make judges too quick to infer preemption clauses-to infer preemption clauses that members of Congress might well have rejected if they had actually come before them.

In recognition of this problem, S. 1214 seeks to establish new ground rules for the interpretation of Federal statutes, so that the courts are working off the same page as Congress. As I understand Section 6(a), it would tell courts not to read broad obstacle preemption clauses into new Federal statutes. When Congress enacts a statute that does not expressly address preemption, the statute would preempt all State law that is in "direct conflict" with it, but not State law that merely hinders the accomplishment of the full purposes and objectives behind it.

Of course, if Congress wants a particular Federal statute to include an obstacle preemption clause, it is free to enact one. Congress is already familiar with such provisions. At least one Federal statute includes an express obstacle preemption clause. But Federal statutes enacted after the effective date of S. 1214 would no longer be deemed to establish such provisions by default.

In the absence of a deliberate decision by Congress to preempt all State law that stands in the way of Federal purposes, courts would not try to reconstruct those purposes under the assumption that Congress wanted to pursue them at all costs. In sum, Section 6 would restrain the court's tendency to infer preemption clauses that Federal statutes do not actually establish.

My written testimony discusses Section 6 in more detail. But overall, I think that the rule of construction set out in S. 1214, and particularly the rule of construction set out in Section 6(a), would be an improvement upon the rules of construction that the courts currently apply in preemption cases.

I appreciate the opportunity to present these views. Thank you very much.

Chairman THOMPSON. Thank you very much. Professor Steinzor.