Hearing of the House Committee on Government Reform: Is Uncle Sam Still Passing the Buck? The Burden of Unfunded Mandates on State, County, City Gov..
Hearing of the House Committee on Government Reform: Is Uncle Sam Still Passing the Buck? The Burden of Unfunded Mandates on State, County, and City Governments
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Mr. Davis. This meeting will come to order.
I want to welcome everybody to today's hearing on the burden of Federal mandates on State, county, and city governments. This hearing will provide a look back at the Unfunded Mandates Reform Act of 1995--we call it UMRA-a decade after its passage, and begin this committee's work to determine how best to fulfill the promise of UMRA and strengthen the partnership among all levels of Government. The reports, surveys and testimony provided by our witnesses today are going to provide us with a good starting point in this discussion. As we begin, let me say that this issue is of particular importance to me.
As a former county official, I have personally experienced the strain that is often times placed on our localities by overly prescriptive and burdensome mandates from the Federal Government. Over the last decade, Congress and the rest of the Federal Government have rightfully worked to transfer power out of Washington, DC, down to State and local governments, who can more effectively and efficiently administer many governmental programs. Rooted in the belief that all issues not national in scope are most appropriately and effectively addressed at the levels of government that are closest to the people, UMRA was designed to restore balance to the Federal system. The law accomplishes this goal through ensuring informed decisions by the Congress and the executive branch about the effects of Federal mandates on other levels of government, as well as the private sector.
While many of the requirements placed on States and localities by the Federal Government are necessary, we need to be reasonable in their application. We also need to view the unfunded mandates issue through a post-September 11 prism,
understanding that a lot has changed over the last 4 years. A 21st century homeland security mission requires unprecedented
coordination, not only in terms of planning and information management sharing, but also in the dedication of resources. Looking at the world after September 11, it is clear that not every Federal mandate-whether or not it is 100 percent funded-is a bad idea. Citizens expect all governments to take necessary actions to provide for their safety and security, and all governments must share in the costs.
There is no denying States and localities are the backbone of our Nation. They deliver an overwhelming majority of government services, and are primarily responsible for the issues most important to our citizens-from crime prevention to education to transportation to economic development, to name just a few. If the Federal Government is not responsible in the imposition of Federal mandates, we will be heaping additional costs on our State and local governments that will inevitably displace and replace worthy and important State and local programs. It is basically a transfer, if you will, from the Federal income tax, which is progressive, to local property taxes, which are very, very regressive.
There have been signs that UMRA is working. According to CBO, the number of bills containing intergovernmental mandates
decreased by one-third between 1996 and 2002. In addition, the GAO has found that only three proposed intergovernmental
mandates, as defined by UMRA, with annual costs exceeding the thresholds, that have become law, an increase in the minimum wage in 1996, a change in Federal funding for food stamps in 1997, and an adjustment in premiums for prescription drug coverage in 2003.
Despite the improvements made in the last decade, disagreements between the various levels of government on the definition, the size and the scope of Federal mandates continues and are detrimental to the inter-governmental coordination and cooperation that UMRA was meant to foster. The situation is all the more problematic when the Federal Government is running deficits, eliciting complaints that we are simply shifting tax increases to lower levels of government.
It has become clear to this committee that, while UMRA has been a significant step in the right direction, it has not proven to be a "silver bullet." Indeed, many have begun to express concern that UMRA is not an effective tool in preventing the imposition of unfunded mandates as a result of exclusions in coverage and various loopholes in the law that exists. The fact is, Congress would exempt itself from the laws of gravity if it could. [Laughter.]
Questions and challenges remain, and it is our hope to begin the process of answering some of them today. Our new Subcommittee on Federalism and the Census, ably chaired by Chairman Mike Turner, a former mayor of Dayton, OH, will delve
deeper into this topic in the coming months in the hopes of providing proposals to strengthen UMRA. We are fortunate to have him on this committee. I look forward to working with him as the subcommittee's chairman on this and other issues as we move forward in the 109th Congress.
We have two panels today, with extensive experience working on this important issue, and I look forward to their testimony.
I want to especially thank NACo, the National Association of Counties, for their work in putting together a snapshot of the costs of Federal mandates, at our request, which is only a beginning, but it helps to bring home the importance of examining this issue carefully.
For instance, it is estimated that the $40 billion cost estimate reported in the survey only accounts for approximately 5 percent of actual costs stemming from Federal mandates. Imagine if all the counties who responded only provided 5 percent of their federally mandated costs, the $40 billion estimate could rapidly climb to as much as $800 billion, a crippling burden.
I am also particularly pleased that Gerry Connolly, who is the chairman of the Board of Supervisors from Fairfax County, my home county, was able to join us today. I look forward to Gerry's testimony and continuing to work with them on these important issues.
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Mr. Davis. I wonder if you could go back and have somebody look at these and see what the cumulative effect is. We set a
threshold, but I don't think anybody anticipated hundreds of proposals flying under the radar screen that when accumulated
could be worse than two or three giant mandates.
Mr. Holtz-Eakin. As a matter of doing the arithmetic, I think that's probably an insurmountable task. In many cases, we don't know the exact dollar figure of the mandate. It's either clearly well above the threshold, or clearly well below. The time necessary to identify the particular dollar figure didn't merit it under the circumstance. We didn't really have that in the records.
Mr. Davis. You also pointed out that hundreds of bills impose requirements on inter-governmental partners as a condition for receiving grant money. It's kind of a new unfunded mandate. Is there an aggregate of the cost of these requirements to State and local governments?
Mr. Holtz-Eakin. The CBO hasn't put that together. I know a variety of the interested parties have put together aggregates.
One of the real difficulties there is trying to examine the history and imagine what would have happened in the absence of this legislation, would the State governments themselves, for example, undertake some policy. So trying to figure out the incremental cost of the mandate per se is difficult in looking back.
Mr. Davis. In your statement, you give us a working definition of what an unfunded mandate that would be covered under UMRA would look like. I'm looking for a practical example of how CBO decides to call a proposal a covered mandate. For
example, let me give you two essentially voluntary acts: No Child Left Behind, which I think a lot of my legislators think is an unfunded mandate; and the driver's license requirement in H.R. 10 last year, which came from this committee. Neither act required a specific State action. Yet one is covered under UMRA and the other one isn't.
Mr. Holtz-Eakin. With respect to the No Child Left Behind, that's clearly a condition of Federal aid, and as a result is not a mandate under the definition by UMRA. The driver's license issue is one where the Federal Government essentially has made it impossible for States to continue under the status quo their own programs of licensing and provide a widely usable driver's license. It would be the case, for example, that driver's license would not allow you to get onto an airplane, you would not be able to use it to get a passport.Mr. Davis. But you could use the driver's license to drive. Fundamentally that's what driver's licenses are for.
Mr. Holtz-Eakin. But effectively as a means of identification, it would no longer be widely acceptable. The enactment of those provisions made it impossible for the States to continue voluntarily with the status quo and have their program continue in its current form.
Mr. Davis. I thought a driver's license is to be a driver's license. I guess if you want to call it driver's license and i.d., that would be different.
Mr. Holtz-Eakin. In both H.R. 10 and then more recently in H.R. 418, it was focusing on identification.
Mr. Davis. OK. I obviously disagree with you on that, but at least I understand your thinking.
Has OIRA considered scoring agencies' rulemaking processes based on their ability to comply with the mandate in UMRA to
analyze alternative rules and select the least costly, most cost effective or least burdensome one?
Mr. Holtz-Eakin. A good question on that. The current Executive order that governs OIRA's rulemakings has language similar to the Unfunded Mandates Act. We already score agencies on their compliance and regulatory analysis with the Executive order requirements. So while technically we may not score agencies exactly on the Unfunded Mandates Act language, we score them something very similar in Executive Order 12866.
Mr. Davis. OK, thank you very much. Mr. Waxman, I will yield, I've got time. I know you had one more question.
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Mr. Davis. Thank you very much, thank all of you very, very much.
Mr. Connolly, let me start with you. I think in the prepared testimony we note that Fairfax County spent $540 million to comply with Federal mandates, $148 million reimbursement. Basically that means a $395 million deficit in terms of what the Federal Government is forcing you to do.
Now, maybe the county would have chosen to do some of these things, maybe they would not have. But these are priorities set from Washington that we tell you you have to pay for. What does $395 million, how many cents of that is a tax rate?
Mr. Connolly. If we divide that by 17.9, this year, that would be----
Mr. Davis. I won't ask you to do that.
Mr. Connolly [continuing]. That would be about 20 cents on our tax rate.
Mr. Davis. So that's a pretty good-and the tax rate is going down to what this year?
Mr. Connolly. It will go down to at least $1.03 from $1.13.
Mr. Davis. So that's almost 20 percent?
Mr. Connolly. Very significant.
Mr. Davis. And in local jurisdictions in Virginia, and I don't know what it's like in Oklahoma City or Maryland, or Lake County, IL, property tax is basically it for you. You don't have a lot of options, do you?
Mr. Connolly. No, sir, the only source of revenue that we outright control is the real estate tax rate. All other sources are capped or controlled outright by the State of Virginia.
Mr. Davis. What's the story in Illinois, Mr. Kyle? Is it similar?
Mr. Kyle. Yes. We also have tax caps in the State of Illinois, Mr. Chairman.
Mayor Cornett. Mr. Chairman, most of our money comes from sales tax in the State of Oklahoma. That's how municipalities are largely funded.
Mr. Davis. So basically you're moving it from a progressive income tax that the Federal Government paid for to a much more
regressive taxation at the local level, which is sales taxes and property taxes, which everybody-similar situation in Maryland?
Mr. Hurson. Yes, it is. We have a fairly progressive income tax structure in Maryland. But at the same time, moving all these costs down to the States, to a situation where we have balanced budget requirements in most of the States, it means that $1 that we're spending on this is going to be taken away from some other program somewhere else.
Mr. Davis. OK, thank you very much. I think that puts it in perspective, what we're talking about. I know when I was in local government, we always tended to just put on the bill the Federal Government sent us as just an additional bill, I'm not suggesting you do that. [Laughter.]
But it does bring home. What is the problem with State mandates, Mr. Connolly?
Mr. Connolly. I am so glad you asked, Congressman Davis.
[Laughter.]
Mr. Davis. This was not rehearsed, by the way.
Mr. Connolly. I would say that the State mandates, for our county including education, would actually exceed the Federal burden. We think that if a State paid its bills or lifted its mandates, we could probably reduce our tax rate another 20 cents or so.
Mr. Davis. So if 20 percent of your budget is dictated but unfunded from the Federal Government, another 20--that makes you basically a tax collector.
Mr. Connolly. Yes, in many ways, that's right. [Laughter.]
I can give you even one little example, and I know with respect to Federal incarceration, it does apply to States sometimes. But in the Commonwealth of Virginia, for example, in Fairfax County, for us to incarcerate a prisoner costs $125 a day. And once someone is convicted of a State crime, the State takes its time about picking that prisoner up and taking them to a State penal institution, and meanwhile the State only reimburses us $14 a day. That's called an outright unfunded mandate.
Mr. Davis. Pretty good deal.
Mr. Kyle, let me ask, one of the problems with UMRA is that it allows for death by 1,000 cuts. If you are underneath the review threshold, you can have an unfunded mandate, hundreds of them that go down to State and local governments, but they don't total enough, any one by itself, to be subject to the review that we would get under the act.
Should we look at the threshold? Should the law require a review of the compounding cost of multiple mandates on State and local governments?
Mr. Kyle. Yes, most definitely, Mr. Chairman. And to also piggyback on what Mr. Connolly was saying, we reflect some of that also with the Medicaid program through States, where we are required-in Lake County, IL, we run Winchester House, which is primarily a senior facility, a nursing home if you will. With the various cuts in Medicaid, the difference in the funding that Medicaid provides is quite inadequate in what we are able to provide as far as quality health care. So there is a major gap in those services.
However, we are required by law to provide adequate quality health care and medical services to those individuals. So there
is a great gap of difference between the appropriations and the budgeted amount.
Mr. Davis. Mr. Hurson, let me ask you a question, and you can include your answer to that. Medicaid is just killing the Virginia budget, it's forcing them to force more unfunded mandates on the States as they pay for this, which is probably the largest-it's partially funded, but as you know, the impact on State government, what's happening in Maryland with that?
Mr. Hurson. Medicaid is the Pac-Man of State budgets. It is the thing that is absolutely eating away at every State budget. It is in many States now becoming the largest expense, even over education. A lot that is driving that is mandates from the Federal Government. It is not a program, people act like it's a partnership that we can choose to participate in. Not any more. Medicaid is for many States the sole thing that takes care of many of our uninsured.
So Medicaid is a major expense at the State level. With requirements that we recently got in the Medicare Part D program to fund a lot of the eligibility determinations for Medicare Part D, that is in and of itself a huge expense for States, that is again an unfunded mandate.
Just to respond quickly to your other question, I would applaud the chairman's call for OMB to really aggregate all of those unfunded mandates that never meet the threshold. Because altogether, they cause enormous impacts upon the States. I think that's an excellent suggestion to try to aggregate all the ones that don't reach up to the threshold, because they have impacts nonetheless, even though they don't pass the threshold.
Mr. Davis. Thank you. There was in fact in the Medicare Part C and D that we-there was a huge clawback provision. I don't think Members were even aware of it. I appreciate your raising that.
Mr. Hurson. Right. The clawback provision is the first of its kind, where the States are actually going to be paying for Federal programs.
Mr. Davis. It's how we hold the costs down and look tough to our Members trying to sell it.
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Mr. Davis [presiding]. Mr. Shays.
Mr. Shays. Thank you, Mr. Chairman. Just one question. When the executive branch comes in and tells us they are reaching
out to State, local, county and local governments for rulemaking issues, I wonder if you can share with us instances in which you are aware where agencies are reaching out to State and local governments to consult in early stages of drafting the rules? Can you give me an example or two of where this is happening?
Mr. Davis. Would the gentleman yield? Are you asking basically if they have been consulted, or maybe your groups, maybe you can have a minute to confer with groups and see if in fact the executive branch is reaching out.
Mr. Shays. So if you don't have an answer now, we would like one for the record.
Mr. Kyle. I can say on behalf of the National Association of Counties, for the most part we have not been consulted in these areas.
Mr. Davis. If you're not consulted, you end up paying for it.
Mr. Kyle. Correct.
Mr. Davis. If you're not in the room, that's where it ends up going.
Mr. Hurson. On behalf of the State legislatures, I would say that in terms of homeland security, we have had an excellent relationship with that department in terms of them reaching out, in terms of rulemaking. We have had a fairly good situation with DHS and with EPA, at least this is what the staff is telling me, not reaching out to me down in Annapolis, but they are reaching out to the staff here in Washington.
Mr. Connolly. Mr. Shays, I would agree, especially in the homeland security relationship that has, there has been a lot of consultation in part because Congress was wise enough to create a national capital region coordinator who has facilitated a lot of input from us in the National Capital Region. But you know, in other areas, frankly, the relationship is one of regulation, here are the regulations you must comply with. I don't think that the mentality is always very cognizant of, and here are the costs that go along with that regulation. That is your problem. I think that is kind of the mentality that all too often occurs.
If we could shift that mentality, in what your committee is about today, if we could shift that mentality so that there actually is the requirement of the cognizance of the costs, I was saying earlier, I think the game here is intention versus impact. We can stipulate the attorney is almost always noble and good, but the impacts can be quite severe. You are asking local taxpayers all too often to bear that burden of your good intentions.
As the Mayor pointed out, if it's your idea, you pay for it, and if it's our idea we'll pay for it.
Mr. Shays. Thank you, Mr. Chairman.
Mayor Cornett. The EPA has some level of communication with the U.S. Conference of Mayors, and mayors in general. We don't feel like it is enough, we feel like it should be a higher level of communication.
Mr. Shays. Thank you.
Mr. Davis. Thank you. All that will be part of it as we move to the next stage. This will not be our last hearing on this. I think Mr. Turner has expressed a willingness to try to pursue this at the subcommittee level, and we will at the State level.
This has been very helpful to us and we appreciate all of you coming forward with your testimony today and answering our questions on behalf of each of you and your organizations. We thank you.
Does anybody want to add anything?
Mr. Connolly. Thank you for your leadership, Mr. Davis, in this issue.
Mayor Cornett. I would also like to thank you, Mr. Davis.
The only thing I would add is that these costs are really filtering down to our citizens in some very basic services that are not being provided at the level they need to be provided.
Thank you for your time.
Mr. Davis. Thank you very much. Hearing is adjourned.
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