Unfunded Mandates and Regulatory Overreach

Chairman James Lankford Opening Statement

This is the first meeting of the Subcommittee on Technology, Information Policy, Intergovernmental Relations and Procurement Reform. This hearing will focus on, “Unfunded Mandates and Regulatory Overreach”

Since the founding of our Nation, the federal government has had to balance its own authority with that of the states, counties, and cities. While each has a unique responsibility to serve their constituents, they also have had to operate within their limitations, both budgetary and statutory. However, lately we’ve seen where dedicated (and probably well-intentioned) government staff can move from serving people to mandating the preferences and priorities of an agency or legislative body onto people.

In the modern regulatory environment, the probability that the federal government will overstep its clearly defined Constitutional boundaries to impose its preferences on state and local leaders has become increasingly likely. With apparently little check and balance, federal regulators can dramatically affect the budgets and staff structure of state and local governments.

Many state and local governments face severe budgetary shortfalls that threaten their ability to perform basic services. Private businesses are struggling against numerous impediments to job creation. They are hurting.

The preferences of a regulatory agency should not determine the budget or priorities of a local or state leader. While we are not addressing the issue of private business mandates today, I would also contend that there is a significant responsibility of the federal government to restrain its regulatory power to areas that are clearly constitutional in scope and are not redundant of state or local laws, codes or enforcement. I hear too many stories to recount where a federal regulation can cost a business millions of dollars, with little or no opportunity for recourse or reversal of the matter.

When the Government enacts a statute or issues a regulation mandating that a state or local government, or private sector entity perform certain actions — but fails to provide the funds needed to perform the actions – it has issued an unfunded mandate.

The Unfunded Mandates Reform Act of 1995 – or UMRA – was originally enacted to minimize the burden of unfunded mandates. This act sought to limit the growth of unfunded mandates by explicitly defining them, and by creating a Congressional point of order that could be used to help prevent the enactment of legislation creating them. However, multiple agencies and actions were excluded from UMRA, and the definition of an unfunded mandate it established has come under criticism.

This hearing today seeks to determine the effectiveness of UMRA. It is intended to focus on Title II of UMRA, which concerns unfunded mandates handed down by the Executive Branch in the form of new rules and regulations.

While the Unfunded Mandates Reform Act has a great name, it has limited reach because of its inapplicability to many regulatory actions. For instance, most rules issued to implement one of the major pieces of legislation enacted last year, the Dodd-Frank Wall Street Reform and Consumer Protection Act, are exempt from UMRA because they will be promulgated by the Securities and Exchange Commission, an independent regulatory agency. Rules issued by the new Bureau of Consumer Financial Protection created by Dodd-Frank will also be exempt from UMRA.

Today’s hearing focuses on local governments. I intend, in a future hearing, to bring in tribal and private sector witnesses to testify about their personal experience with burdensome federal mandates.

While we will hear today from the Mayor of Edmond, Oklahoma, I want to myself relate just a couple of anecdotes from my own State to illustrate why I have called this hearing today.

The city of Bethany, Oklahoma spent over a quarter million dollars in 1987 to put in two water wells, only to be required a few years later to take them out by the EPA because of their waste water levels. Then the EPA changed its waste water requirements in 2006, costing the city of Bethany over $9 million dollars. The street signs in Bethany must change to a new type of reflective material to meet new Department of Transportation regulations costing the city who knows how much. The Oklahoma DOT has to jump through millions of dollars of hoops to tear down an old bridge and put up a new bridge in the exact same spot. It has to navigate the Clean Water Act, the National Historic Preservation Act, the Endangered Species Act, the Migratory Bird Treaty Act, and many other federal laws – while people drive over an old, deteriorating bridge.

What I want to know is whether the Unfunded Mandates Reform Act is of any consequence in terms of limiting the issuance of these sorts of unfunded mandates?

Many observers, such as the Government Accountability Office, have commented on the numerous factors that limit the effectiveness of UMRA in minimizing unfunded mandates. We will hear from GAO today about these limitations, exemptions and loopholes.

The good news is that knowledgeable parties have also identified potential improvements to UMRA. We will hear about some of those ideas today as well.