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Senator VOINOVICH. I, for the life of me, cannot understand, with all the problems that they have, why they are bothering with this issue, particularly when there is such a unified opinion among State and local government officials that it ought to remain as is. That deals with this problem, because it talks about Federal agencies and the way they ought to approach things, does it not? If the Federal agencies were familiar with the current federalism Executive Order and honored it, some of the things that this legislation proposes to deal with might not be problems.

Governor LEAVITT. The current federalism Executive Order, if it were honored, does essentially what the construction rule that you spoke of earlier would do for legislation. It indicates that unless there is a clear, enumerated responsibility of the National Government, the National Government does not have a role and ought to honor the prerogative of the States and local governments. The amended order, as it was proposed, would have reversed that completely.

Again, it is a matter of where the presumption is. Their proposed order would have reversed the presumption. I would argue that, over time, Congress has reversed the presumption. That is the reason that there is a need for this legislation, because it would formally reverse the presumption again to be what was consistent with that of the founders, which is the Tenth Amendment. Unless it is a specific enumerated power, it belongs to the States and the people.

Senator VOINOVICH. I think one of the things that would help me, and I think Members of the Committee, would be to have your Big 7 organization come up with some of the most potentially onerous preemptions that are being considered currently and also to perhaps share with us some regulations that either have passed or are being anticipated that highlight why this kind of legislation is needed, because so often, when you do not have specific examples of it, you do not understand the problem.

Governor LEAVITT. Senator, that is something we would be happy to inventory and provide.

Senator VOINOVICH. The other thing that I am interested in is the unfunded mandates relief legislation, and for the most part, it is working in Congress. However, it was also supposed to deal with regulations in the various departments. I think where those regulations were over $100 million, it required consultation with State and local government people. Would you like to comment on how that is working?

Governor LEAVITT. Well, it is not. We heard earlier from Senator Thompson that in the last 11,000 Federal orders, only 5 have had federalism assessments, only 5. So it is clear to me that provision of the law is being essentially ignored.

Senator VOINOVICH. I might suggest that perhaps the State and local government coalition convey that to the President and to the administration. I think so often what happens, as you can well imagine, being a governor, is there are a lot of things that are scurrying around in agencies that you are responsible for, but it never gets to the top. People stop you and say, "Gee, did you know this,"

I think perhaps part of the problem is that, too often, we do not get that message to the White House and share the concern about, for example, Donna Shalala and the new regulations on the TANF legislation and how we think it would restrict the ability of States and remove some of the flexibility that we have had to do some innovative things that have really made a difference for the people that are receiving welfare in our respective States and have helped take them off the rolls.

Governor LEAVITT. Senator, I think you make a very valid point, in that there is in any government a culture, and it takes a long time for the culture to be changed. We have gone through a period of more than 35 years where the culture of federalism has essentially been squeezed out.

The legislation we are talking about, the whole idea of a devolution revolution, was really about the process of beginning to reinstill federalism as a meaningful part of the culture of our government. It is a mindset. It is something that you carry in your mind and in your heart, not just on the statutes. It is a desire to have things conducted at the local level where they can be. We have operated with a default to the opposite. All roads have tipped to Washington.

Until we are able to instill in the hearts and minds of the bureaucracy, and then have enough capacity for the States to formally resist, that will continue, and that is why the efforts that you are making and others on this Committee are so deeply appreciated by those of us in States and local governments, and I would argue by the people of this country, because there is an innate desire on the part of people to govern themselves. This culture of federalism that has been squeezed out of our government is in direct confrontation with that idea.

Senator VOINOVICH. The preemption legislation, in my way of characterization, would be a defensive effort. We have had great success with devolution of the welfare system and I do not think Congress fully appreciates what States have done with Medicaid.

I know in our State, 2 years ago, our Medicaid costs were less than they were the year before, for the first time in 25 years, and the Federal Government is saving a great deal of money because of that. That is because of waivers and the elimination of the Boren Amendment.

But I think that some of that information ought to be made known to the members of the Senate, because, again, the Boren Amendment meant nothing and we got it changed, but States and local governments should be really emphasizing how much money the Federal Government is saving because of what we have done in Medicaid.

Governor LEAVITT. We did not even get started on Medicaid the way we should have. There has been progress, but Medicaid remains one of the most inefficient, wasteful things that the National Government does. It is a great thing to be able to take care of the health care needs of the poor, but if the Federal Government would turn Medicaid over to the States and allow us to manage it in the way we have welfare, we would be talking about hundreds of billions of dollars of savings over time.

I referenced earlier the child health insurance plan in our State that we were able to implement and not be required to use Medicaid. I do not know if you were here, Senator, but we are able to cover in our State twice as many children, double the number of children, and give them the same health plan that the Governor of our State has for his children than if we were forced to use Medicaid.

We could do the same thing for the working poor. If the National Government would give the State of Utah a waiver that would allow us to manage our Medicaid program, we could begin covering the lives of the working poor. Today, there are many in our State who work hard but do not have health insurance because they cannot afford it. The recipe for having health care in our State is oftentimes not to work, and that is wrong.

Senator VOINOVICH. I think, again, you should be pointing out to the members of the Senate and Congress about how the CHIP program that the governors fought to have flexibility for has allowed you to do this. In our State, in Ohio-we are going to 200 percent of poverty and the people who are participating-it is still a Medicaid program because we have had some good experience with it, but the fact is, they are paying part of it now. I think we are reducing some of the benefits a little bit. But because of the CHIP program, we have had the flexibility.

So I would just suggest that as often as you can, you ought to highlight how this devolution is, indeed, helping the Federal Government with their financial problems and also how it is helping you to do a better job in taking care of our respective customers, because so often, as I am sure the Chairman knows, the stuff is all on pieces of paper and if you do not have the examples of it, then you just kind of take it for granted.

Governor LEAVITT. Thank you for the opportunity to do it today. Senator VOINOVICH. I yield to the Chairman, and I understand you have a plane to catch.

Chairman THOMPSON [presiding]. Yes, Governor, you have already stayed past the time which you indicated that you could, and we appreciate that very sincerely. I am not going to detain you any longer.

Governor LEAVITT. Mr. Chairman, may I present both of you with a copy of a report that has been done by the Big 7 of the seven State and local organizations entitled "Governance in the Digital Age, The Impact of the Global Economy, Information Technology and Economic Deregulation on State and Local Government." It is a series of reports that we are putting out that I think you would find very helpful in your discussions.1

Chairman THOMPSON. Very good. We will make both of those a part of the record.

Governor LEAVITT. Thank you.

Chairman THOMPSON. Thank you very much, Governor. We sincerely appreciate your being here.

I would like to turn now to our second panel. The first witness will be the Hon. Daniel Blue, Jr., the senior Majority Leader for

1 The publication submitted by Governor Leavitt is retained in the files of the Committee.

the North Carolina House of Representatives and the President of the National Conference of State Legislatures.

Our second and final witness on this panel will be the Hon. Clarence Anthony, the Mayor of South Bay, Florida, and the President of the National League of Cities.

We appreciate you traveling here today, gentlemen, to share your testimony with us. Representative Blue, would you like to begin, please, sir?

TESTIMONY OF HON. DANIEL T. BLUE, JR.,1 MAJORITY LEADER, NORTH CAROLINA HOUSE OF REPRESENTATIVES, AND PRESIDENT, NATIONAL CONFERENCE OF STATE LEGISLATURES

Mr. BLUE. Thank you very much, Mr. Chairman. Good morning to you and Senator Voinovich.

As stated, I am serving this year as President of the National Conference of State Legislatures and it is in that capacity that I appear before you today representing the 50 States as well as the commonwealths and territories. I also appear today, Mr. Chairman and Senator Voinovich, on behalf of the Big 7 organizations. As you know, we have over the last several years had close consultation with you on many issues, and, in fact, over the last couple of days, have consulted over many common issues.

In response to that, or with respect to that, we have basically favored six bills that are pending before the Congress now. Some of them have been alluded to by Governor Thompson and Governor Leavitt a little bit earlier. This morning, I want to limit my discussion to the last of the six bills that we talked about in the written submission that I made to you, and that is the Government Partnership Act. We think that passage of that is important because it deals with the problem of Federal preemption of State and local law, and NCSL and the Big 7 truly believe that that is the most vexing of our current problems in dealing with State-Federal relations.

I want to, before I give the reasoning, state that there are three things that we are trying to do in the legislation that we are supporting. We are calling for legislation that deals with the problem of preemption of State law by doing the following three things:

The first is that it would provide the Congress with more information and better information about the preemptive effect of proposed legislation before that legislation is enacted.

Second, it would establish a process for making it much clearer to agencies and the Federal courts as to what the Congressional intention is when legislation is enacted and especially what that Congressional intention is with respect to the area of preemption.

Third, we think that there needs to be some procedural aspect that allows you to know when proposed legislation has the effect of preempting State or local authority.

Let me just hit a few high points because we think that preemption, as we have experienced it over the past several decades, is a direct threat to our constitutional system of federalism, and the problem is two-fold.

1 The prepared statement of Mr. Blue appears in the Appendix on page 163.

First, let me say that it results from the propensity of the Congress, of the courts, and Federal agencies to preempt State law without carefully thinking about what the impact is and how it may affect State and local governments and their ability to participate in this Federal system.

But second, and I think more pervasively, it results from Federal agencies and the courts in entering into this field of implied preemption, where there is no clear indication as to what the Congress may have meant. As you know, there has been a whole body of law, case law, that has developed on this doctrine of implied preemption. So we think that there needs clearly to be some procedure that makes clear what Congress means when it enacts laws and makes clear whether it intends to preempt the field so that State legislatures will know that we are forbidden from entering into those areas.

The cumulative effect of all of this Federal preemption in both regards, one, when there is simply not sufficient information, or at least not sufficient thought as to what the ramifications are, and second, not the direct Congressional preemption but with Federal agencies and with the courts, we think that it has reduced the effectiveness of State and local governments. We simply have too many policy options taken away from us.

As you know, the benefit of the concept of federalism, as Governor Leavitt talked about from the Tenth Amendment, is it gives us the opportunity as State and local governments to experiment, to figure out specific solutions for specific problems and to adjust those as things change. We can deal with them much more rapidly than you can at the national level. Our agencies are better suited to deal with them more quickly and deal with their unique nature. So we think that the ability to test something in one jurisdiction is what makes it basically our ability to make this system work as well as it does.

In our own organization, that is, in the National Conference of State Legislatures, we have two major committees, one, the Assembly on Federal Issues, the other, the Assembly on State Issues. The Assembly on State Issues essentially deals with ideas that have started in one State or one locality and it sort of works its way through the marketplace of ideas with legislative bodies around the country. We constantly borrow or appropriate each others' ideas that work, ideas that are unique to a specific State, a best practices approach. I think what we are coming to find is that there is an inability to always use these best practices because some preemptive effort, quite frankly, limits our ability to be creative.

One would argue that we have a .900 batting average when it comes to stopping some of these bills over the last decade or two that may have been preemptive, but the cumulative effect of all of that, even if you have a .900 batting average every year, is at the end of a decade, you still have had 10 areas preempted. Slowly but surely, that takes away the ability of those of us at State and local government to be as effective as we could.

Let me suggest that the harm done is perhaps even more considerable than I am alluding to, because, again, I talk about the slow

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