10 Years of the Unfunded Mandates Reform Act: ten years after its adoption, most agree that the Unfunded Mandates Reform Act has raised awareness about the burden unfunded mandates place on state and local governments.

In 1995, after two years of one of the most effective and aggressive joint lobbying efforts by organizations representing state and local governments, (1) Congress passed and President Bill Clinton signed the Unfunded Mandates Reform Act of 1995, commonly known as UMRA (Public Law # 104-4). In his speech before signing the legislation into law, then-President Clinton said "this bill is another acknowledgement that Washington doesn't necessarily have all the answers, that we have to continue to push decision making down to the local level, and we shouldn't make the work of governing at the local level any harder than the circumstances of the time already ensure it will be." To achieve this intended effect, President Clinton explained that the UMRA "for the first time limits the ability of Congress to pass laws which impose unfunded mandates on state, county, local governments and tribal governments."

Congressional leaders who were instrumental in the passage of the legislation included former Sens. Dirk Kempthorne (R-Idaho) and John Glenn (D-Ohio), and former Reps. Bill Clinger (R-Pennsylvania), Gary Condit (D-California), and Rob Portman (R-Ohio). Rep. Tom Davis (R-Virginia), who is currently chairman of the House Committee on Government Reform, was also instrumental in the legislation's passage, and continues to play an essential role in the area of unfunded mandate reform.

The UMRA requires the Congressional Budget Office to calculate the projected costs of any proposed federal legislative mandate. If those costs exceed $50 million, Congress must appropriate money, raise taxes, or create an entitlement; otherwise, a member of Congress can object to the mandate. However, regardless of the CBO estimate, members of Congress can, by a separate majority vote of the House or the Senate, maneuver around these roadblocks to enact legislation containing an unfunded mandate. In addition, the UMRA does not apply to mandates created pursuant to certain kinds of legislation, including legislation addressing certain broad policy areas, such as national security, constitutional rights, and Social Security; legislation requiring new conditions associated with federal grant programs; and legislation creating costly preemptions for state and local governments.

A SECOND LOOK

March 22 marked the 10th anniversary of the signing of the UMRA. Lawmakers at the federal, state, and local levels, many of whom were involved in efforts to enact the legislation, took time to reflect on the Act and consider whether it is achieving its intended result. Most agree that the UMRA has served a valuable purpose in raising awareness about unfunded mandates included in proposed legislation, and holding members of Congress accountable for imposing new mandates. However, lawmakers acknowledge that certain mandates often escape the purview of the UMRA as currently written.

Congressional Hearings. At a March hearing before the House Committee on Government Reform, entitled "Is Uncle Sam Still Passing the Buck? A 10-year Retrospective on the UMRA," House Committee Chair Tom Davis (R-Virginia) captured these sentiments best, noting "while the 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 the UMRA is not an effective tool in preventing the imposition of unfunded mandates as a result of exclusions in coverage and various loopholes that exist in law."

In April, the Senate Subcommittee of Oversight of Governmental Affairs also held a hearing to review the UMRA. This subcommittee hearing held particular significance because its chair is Sen. George Voinovich (R-Ohio). As governor of Ohio and a member of the National Governors Association in the 1990s, Voinovich took a lead role in efforts to curb the practice of unfunded federal mandates by working tirelessly on behalf of states and localities to urge Congress to pass the UMRA.

Local and state elected officials who were called to testify before these House and Senate committees consistently told members of Congress that the UMRA has not been the perfect solution to the problem of unfunded mandates, and presented evidence demonstrating that state and local governments are still faced with significant costs as a result of unfunded burdens imposed at the federal level.

The National Conference of State Legislatures testified that it had identified a $51 billion cost shift for fiscal years 2004 and 2005 combined, and a potential $30 billion cost shift in fiscal 2006. NCSL also cited three examples of legislation enacted within the last three years that were not considered intergovernmental mandates under UMRA, but that nonetheless shifted considerable costs onto states. These included the American Jobs Creation Act of 2004, the reauthorized Individuals with Disabilities in Education Act, and the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The National League of Cities, the National Association of Counties, and the U.S. Conference of Mayors also highlighted recent laws that escaped the UMRA, but nevertheless imposed considerable burdens on local governments. These included the No Child Left Behind Act, the Help America Vote Act, and the Internet Tax Nondiscrimination Act, which CBO estimates will result in revenue losses to states and localities totaling at least $325 million through 2007.

Reports. In addition, reports recently released by the CBO and the General Accountability Office suggest that while the UMRA has made a difference in making Congress more cognizant of federal unfunded mandates, states and localities are still being burdened by costly, unfunded federal requirements.

A report issued by the CBO in March noted that Congress has enacted fewer federal mandates that impose significant costs on states and localities since the UMRA took effect in 1996. One reason, according to the report, is that Congress amended several pieces of legislation before their enactment to comply with the Act's $50 million mandate threshold. However, the report went on to state that of the legislation CBO reviewed between 1996 and 2004, 617 legislative initiatives (12 percent) contained intergovernmental mandates and 1 percent of the bills imposed costs higher than the $50 million threshold set forth in the UMRA. The report also noted that since 1996, five laws exceeding the $50 million threshold have been enacted into law.

At the request of Voinovich, the GAO prepared and released in May 2004 a report analyzing the effectiveness of the UMRA. The GAO found that in 2001 and 2002 only five of 377 laws contained mandates above the UMRA thresholds. However, over the same time period, 43 other laws were passed that might be perceived as intergovernmental mandates because they "resulted in new costs or negative financial consequences" but were not identified as such because they fell outside the scope of the definitions of unfunded federal mandates under the UMRA or were made part of the Act's exceptions.

TIME FOR REFORM?

As the budgets of state and local governments continue to be constrained, many state and local advocates are using this 10th anniversary of the UMRA to highlight to Congress the Act's limitations, its less than perfect ability to significantly curb a large number of unfunded federal mandates that are currently not captured as a result of the Act's definitions and other loopholes, and, ultimately, the need for its reform. Federal lawmakers in both the House and the Senate are acknowledging that greater recognition of the burdens imposed on state and local governments is necessary, and are considering possible amendments to the UMRA to provide greater protections against unfunded federal mandates.

Sen. Lamar Alexander (R-Tennessee), a former governor of Tennessee and an advocate for state and local governments, proposes amending the UMRA to require 60 votes in the Senate to impose unfunded mandates, rather than just a simple majority. He also wants to ensure that federal laws do not preempt local laws unless the federal legislation makes clear that there is a direct conflict between state and federal law. Other proposed changes supported by state and local governments include reconsidering the $50 million threshold amount established in the UMRA, as well as reexamining many of the Act's exclusions and exceptions. Voinovich and Reps. Tom Davis and Michael Turner (R-Ohio), all of whom have backgrounds in state and local government and chair committees with jurisdiction over the issue of unfunded mandate reform, have echoed the need to begin to reexamine the effectiveness of the UMRA.

Both state and local leaders and federal lawmakers would likely agree that the enactment of the Unfunded Mandates Reform Act of 1995 was landmark legislation because, at the very least, it encouraged Congress to think differently about intergovernmental relations. The 10th anniversary of the Act has already caused federal lawmakers to consider the effectiveness of the law to date and the fiscal responsibilities of all levels of government in our federal system.

Note:

(1.) In addition to GFOA, these organizations included the National League of Cities, the U.S. Conference of Mayors, the National Association of Counties. the National Governors Association, the National Conference of State Legislatures, the Council of State Governments, and the International City/County Management Association.

BARRIE TABIN BERGER is assistant director of GFOA's Federal Liaison Center in Washington, D.C.