UMRA Had Little Effect on
Agency Rulemaking

59-454 99-14

Statement

Federalism: Comments on 8. 1814-The Federalism Accountability Act of 1999

suggesting that the lack of implementation was unrelated to any pending revision of the order. In addition, the Acting Administrator said that the primary vehicles for improving federal-state consultation in the past 6 years have been Executive Order 12875 and UMRA. We have not examined the implementation of Executive Order 12875. However, we have examined the implementation of UMRA, and concluded that it has had little effect on agencies' rulemaking activities.

Title II of UMRA is one of Congress' primary efforts to address the effects
of federal agencies' rules on state and local governments. Section 202 of
the act generally requires federal agencies (other than independent
regulatory agencies) to prepare "written statements" containing specific
information for any rule for which a notice of proposed rulemaking was
published that includes a federal mandate that may result in the
expenditure of $100 million or more in any 1 year by state, local, and tribal
governments, in the aggregate, or the private sector. UMRA defines a
"mandate" to be an "enforceable duty" that is not a condition of federal
assistance and does not arise from participation in a voluntary federal
program. For rules requiring a written statement, section 205 requires
agencies to consider a number of regulatory alternatives and select the one
that is the least costly, most cost-effective, or least burdensome and that
achieves the purpose of the rule. Other sections of the act focus even more
specifically on the interests of state and local representatives. For
example, section 203 states that agencies must develop plans to involve
small governments in the development of regulatory proposals that have a
significant or unique effect on those entities. Section 204 requires agencies
to develop processes to consult with representatives of state, local, and
tribal governments in the development of regulatory proposals containing
"significant [f]ederal intergovernmental mandates."

Last year, we reported that these and other requirements in title II of
UMRA appeared to have had only limited direct impact on agencies'
rulemaking actions in the first 2 years of the act's implementation. Most of
the economically significant rules promulgated during UMRA's first 2 years
were not subject to the written statement requirements of title II. Some did
not have an associated notice of proposed rulemaking that triggered the
act's requirements. Many did not impose an enforceable duty other than as
a condition of federal financial assistance or as a duty arising from
participation in a voluntary program. Other rules did not result in
"expenditures" of $100 million. Because no written statement was required

Statement

Federalism: Comments on 8. 1214-The Federalism Accountability Act of 1999

for these rules, the requirements in section 205 regarding the identification and selection of regulatory alternatives were not applicable to these rules. Also, title II of UMRA contains excmptions that allowed agencies not to take certain actions if they determined the actions were duplicative or not "reasonably feasible."

Other provisions in title II also had little effect. During the first 2 years of UMRA's implementation, the requirement in section 204 that agencies develop an intergovernmental consultation process appears to have applied to no more than four EPA rules and no rules from other agencies. EPA generally used a consultation process that was in place before UMRA was enacted. Also, section 203 small government plans were not developed for any of the 73 final rules promulgated during this 2-year period. Officials in the four agencies that we contacted said none of their final rules had a significant or unique effect on small governments.

Section 208 of UMRA requires the Director of OMB to submit an annual report to Congress on agency compliance with UMRA. The fourth such report is scheduled to be delivered within the next few weeks. In his third UMRA report published in June 1998, the OMB Director noted that federal agencies had identified only three rules in the more than 3 years since the act was passed that affected the public sector enough to trigger the written statement requirements. Nevertheless, he said federal agencies had embraced the act's "overall philosophy," as evidenced by the range of consultative activities the report described.

Section 7 of S. 1214 contains several provisions that are similar to the

Federalism Act Similar requirements in Executive Order 12612. For example, the bill would, if

to But Different From Executive Order

enacted, require the head of each agency to designate a “federalism
officer" with responsibilities similar to the "designated official" in the
executive order. Both the bill and the order require this individual to
determine whether proposed or final rules have sufficient federalism
implications to warrant preparation of an assessment. The content of the
assessments required in the bill and the order are also similar. For
example, both assessments require agencies to determine the extent to
which a proposed or final rule affects traditional state authority. Whereas
the executive order says the assessments should identify the extent to
which a rule imposes "additional costs or burdens" on the states, the bill
says the assessments should describe "significant impacts" on state and
local governments—which logically would include (but not be limited to)
costs or burdens. Finally, neither the bill nor the executive order require
agencies to declare whether their proposed or final rules have federalism
implications. In contrast, the Regulatory Flexibility Act of 1980 requires

Statement

Federalism: Comments on 8. 1214-The Federalism Accountability Act of 1999

agencies to state whether or not their rules have a "significant economic impact on a substantial number of small entities.""

S. 1214 is also different from the executive order in some respects. For example, unlike the order, the bill requires agencies to notify and consult with officials in governments potentially affected by the rule before issuing a notice of proposed rulemaking." The bill also requires pre-publication consultation when agencies do not issue notices of proposed rulemaking. This is important because, as we reported last year, about half of all final rules are published without a proposed rule.' Another requirement not found in the order is that agencies publish a summary of any federalism assessment when the rule is published in the Federal Register. Doing so would clearly delineate when the designated officer believes a rule has federalism implications." Under the executive order, agencies do not have to publish the results of their federalism assessments.

S. 1214 also differs from Executive Order 12612 in that it more clearly defines the type of rulemaking actions that should trigger the preparation of a federalism assessment. Under the executive order, the designated official has broad discretion to determine whether a rule has "sufficient" federalism implications to warrant the preparation of an assessment. Some designated officials have used that discretion to conclude that preemption of state and local authority does not, in itself, constitute sufficient federalism implications.

As I noted previously, the agencies indicated in 21 of the major rules without a federalism assessment that the rules would take precedence in the event they conflicted with state or local laws or regulations. One of the

'However, the Small Business Administration's Office of Advocacy reports that some agencies have uned "boilerplate" certifications indicating that their rules do not have a significant impact. Contributing to this problem is the fact that the Regulatory Flexibility Act does not define key terms, resulting in different agencies having different interpretations. See Ragulatory Flexibility Act Inherent Wealmesacs May Limit Is Usefulness for Small Governments (GAOHRD-91-16, Jan. 11, 1991). *Executive Order 12866 says "[w]herever feasible, agencies shall seek views of appropriate State, local, and tribal officials before imposing regulatory requirements that might significantly or uniquely affect those governmental entities." Also, Executive Order 12875 requires agencies to develop an effective process to permit representatives of state, local, and tribal governments to provide meaningful and timely input in the development of regulatory proposals containing significant unfunded mandates. 'Sea Federal Rulemaking: Agencies Often Published Final Actions Without Proposed Rules (GAO/GGD98-126, Aug. 31, 1998).

"We have previously supported the use of executive sunumaries in regulatory economic analyses. See Regulatory Reform: Agencies Could Improve Development. Documentation, and Clarity of Regulatory Economic Analyses (GAO/RCED-98-142, May 26, 1998).

Statement

Federalism: Comments on S. 1214-The Federalism Accountability Act of 1999

Consultation Enhances
Intergovernmental
Partnership

rules was an HHS regulation on organ procurement and transplantation."
In the preamble to the rule, HHS noted that at least one state had passed a
law that limited organ-sharing policies, and that such limitations were in
conflict with a national organ-sharing system based on medical need.
Therefore, the agency added a section to the regulatory text stating that
"[n]o state or local governing entity shall establish or continue in effect any
law, rule, regulation, or other requirement that would restrict" compliance
with the regulations. However, on the same page in the Federal Register
preamble as its preemption discussion, HHS said "[w]e have determined
that this rule will not have consequential effects on States, local
governments, or tribal governments.”

S. 1214 appears to require agencies to prepare a federalism assessment if they determine that their rules will have a preemptive effect on state and local governments. Subsection 7(b) of the bill requires the previouslymentioned consultation process with state and local officials "for the purpose of identifying any preemption of State or local government authority or other significant federalism impacts that may result from the rule." Subsection 7(c) says that the federalism officer "shall identify cach proposed, interim final, and final rule having a federalism impact, including cach rule with a federalism impact identified under subsection (b), that warrants the preparation of a federalism assessment." (Emphasis added.)

However, it is less clear what other "federalism impacts" might trigger a federalism assessment. For example, if an agency proposes a rule that has a sizable financial impact on state or local governments, the agency's federalism officer may determine that those financial impacts alone do not require an assessment. Therefore, the drafters of S. 1214 may want to consider clarifying in the bill what is meant by a “federalism impact."

Finally, I would like to briefly comment on section 8 of S. 1214, which says

that federal agencies may not include any agency activity that is a state administered federal grant program in its annual performance plans developed pursuant to the Government Performance and Results Act of 1993 (Results Act) "unless the performance measures for the activity are determined in cooperation with public officials." The bill defines "public officials" as elected officials of state and local governments, including certain organizations that represent those officials (e.g., the National Governors' Association and the United States Conference of Mayors).

"See 69 FR 16296, April 2, 1998.

Statement

Federalism: Comments on 8. 1214-The Federalism Accountability Act of 1999

The Results Act already requires agencies developing their strategic plans to "solicit and consider the views and suggestions of those entities potentially affected by or interested in the plan." The Senate Governmental Affairs Committee report on the Results Act noted that the strategic plan "is intended to be the principal means for obtaining and reflecting, as appropriate, the views of Congress and those governmental and nongovernmental entities potentially affected by or interested in the agencies' activities."

In that regard, we believe that working with state and local governments or their representative organizations to develop goals and performance measures in federal grant-in-aid programs can strengthen the intergovernmental partnerships embodied in those programs. For example, in 1996, we reported on a joint goal and performance measure-setting effort between the federal Office of Child Support Enforcement (OCSE) and state governments. Initially, the federal-state relationship was not so cooperative. In 1994, OCSE specified the performance levels that states were expected to achieve in such areas as the establishment of paternity and collections of child support. State program officials strongly objected to this federal mandate because they did not have an opportunity to participate in the planning process.

Following these initial planning efforts, OCSE sought to obtain wider participation from program officials at the federal, state, and local government levels. OCSE also established task forces consisting of federal, state, and local officials to help focus management of the program on longterm goals. During the planning process, participants agreed that the national goals and objectives would be based on the collective suggestions of the states and that the plan's final approval would be reached through a consensus. For each goal, the participants identified interim objectives that, if achieved, would represent progress toward the stated goal. At the time of our review, OCSE and the states were also developing performance measures to identify progress toward the goals, and planned to develop performance standards to judge the quality of state performance. They created a Performance Measures Work Group to develop statistical measures for assessing state progress toward achieving national goals and objectives. OCSE also encouraged its regional staff to develop performance agreements with states, specifying both general working relationships between OCSE regional offices and state program officials and performance goals for each state.