22. Unfunded Mandates Reform Act

• Pages: 1135-1171

1135

UNFUNDED MANDATES REFORM ACT

22

1135

Unfunded

Mandates

Reform

Act

Citations:

2 U.S.C. §§1501-1571 (2000); enacted March 22, 1995 by Pub. L. No.

104-4, 109 Stat. 48.

Lead Agencies:

The Office of Information and Regulatory Affairs (OIRA) in the Office

of Management and Budget (OMB), Eisenhower Executive Office Building,

1650 Pennsylvania Avenue NW, Washington, DC 20502, (202) 395-4852;

Congressional Budget Office, Budget Analysis Division, 430 Ford House

Office Building, Second and D Streets, SW, Washington, DC 20515-6925,

(202) 226-2800.

Overview:

This legislation, which was enacted in 1995 with broad, bipartisan sup-

port, requires Congress and federal agencies (excepting independent agen-

cies) to give special consideration to proposed legislation and regulations

imposing mandates on state, local, and tribal entities. It also contains a spe-

cial provision (added at the end of the legislative process) requiring agencies

to prepare a special statement, in the nature of a regulatory impact analysis,

for any proposed rulemaking that is likely to result in an expenditure by the

private sector in excess of $100 million. The Act thus contains the only broad

regulatory impact analysis requirement currently mandated by statute, and as

such codifies many of the provisions in Executive Order 12,866. The Act’s

impact is, however, somewhat lessened because its provisions for judicial

review of agency compliance with the Act are somewhat limited.

1136 UNFUNDED MANDATES REFORM ACT

22

The Act’s purpose was to help reveal, and ultimately limit the high (and

often hidden) costs of federal mandates on state and local governments to

undertake regulatory activity without sufficient federal compensation for this

activity.

Title I of the Act modifies the legislative process by requiring any Con-

gressional authorizing committee that approves a bill containing a federal

mandate (with some exceptions) to identify that mandate in its committee

report. The Congressional Budget Office must then estimate the overall im-

pact of such mandates, and a point of order lies can be raised by any member

against a bill that lacks such an estimate or if the bill contains an unfunded

mandate exceeding $50 million burden on state and local governments or

$100 million on the private sector.

Title II of the Act addresses agency regulations containing regulatory

mandates of state, local and tribal governments and on the private sector. The

key requirement is for a “statement to accompany significant regulatory ac-

tions.” The statement is required in “any general notice of proposed rulemaking

that is likely to result in the expenditure by State, local, and tribal govern-

ments, in the aggregate, or by the private sector, of $100,000,000 or more

(adjusted annually for inflation) in any 1 year.”1

The statement must include (1) citation to the law under which the rule is

being promulgated; (2) “a qualitative and quantitative assessment of the antici-

pated costs and benefits of the Federal mandate. . . as well as the effect of the

Federal mandate on health, safety, and the natural environment,” along with an

analysis of the availability of federal funds to help governments pay for the

mandate; (3) estimates of future compliance costs and of disproportionate bud-

getary effects on regions or particular governments or segments of the private

sector; (4) estimates of the effect on aspects of the national economy; and (5) a

summary of the agency’s consultations with elected representatives. The agency

must also develop a plan to specially notify small governments of such require-

ments and develop a process to receive meaningful and timely input from

elective officials. In that connection, an exemption from the Federal Advisory

Committee Act is carved out for such consultations. A summary of this state-

ment must appear in the notice of proposed rulemaking. However, the Act does

1In 2005, the inflation-adjusted amount on the original $100 million

amount was $123 million. See Congressional Budget Office, Statement of Dou-

glas Holtz-Eakin, Director, A Review of CBO’s Activities Under the Unfunded

Mandates Reform Act, before the Committee on Government Reform, U.S. House

of Representatives (March 8, 2005), available at http://www.cbo.gov/

showdoc.cfm?index=6141&sequence=0.

1137

UNFUNDED MANDATES REFORM ACT

22

allow agencies to prepare the statement “in conjunction with or as a part of any

other statement or analysis. . . .”

Before issuing a final rule that was subject to the above requirements, the

agency must “identify and consider a reasonable number of regulatory alter-

natives and from those alternatives, select the least costly, most cost-effective

or least burdensome alternative that achieves the objectives of the rule.”

Judicial review of agency compliance with the Unfunded Mandates Re-

form Act is limited. The Act provides that judicial review of the agency

statements accompanying significant regulatory actions is subject to review

only under 5 U.S.C. §706(1)—which allows courts to “compel agency action

unlawfully withheld or unreasonably delayed.” This means that courts may

compel the production of such agency statements but cannot review the con-

tents of them. In fact, the Act makes clear that “the inadequacy or failure to

prepare such statement (including the inadequacy or failure to prepare any

estimate, analysis, statement or description) or written plan shall not be used

as a basis for staying, enjoining, invalidating or otherwise affecting such

agency rule.”2

The Act requires OMB to submit annual reports to Congress on agency

compliance with Title II of the Act, and OMB has submitted such reports

since 1996.

Legislative History:

In the 103d Congress, eight bills were introduced that addressed the issue

of unfunded mandates. This was directly in response to the pressure building

over the previous fifteen years from State and local governments. Over those

years, Congress continued a pattern of cutting federal funding while enacting

statutes that passed costs onto State and local governments without providing

funding to cover those costs. To demonstrate their dissatisfaction, the State

and local governments declared October 27, 1993 “National Unfunded Man-

dates Day.”

S. 993 had the strongest support in the 103d Congress. It was introduced

by Senator Dirk Kempthorne as the Community Regulatory Relief Act, and

2See Allied Local and Regional Mfrs. Caucus v. EPA, 215 F.3d 61, 80 (D.C.

Cir. 2000) (holding (1) that the Act precluded review of EPA’s alleged failure to

select the “least costly, most cost-effective or least burdensome alternative that

achieves the objectives of the rule,” [§ 1535(a)], and (2) that although the Act

allowed limited judicial review of compliance with the requirement to prepare a

written cost-benefit analysis, the Act did not apply because EPA estimated the

total cost associated with the challenged rule to be only $32 million per year).