Unfunded Mandate Reform in the House

This week, the House is considering a dozen reform bills as part of Stop Government Abuse Week. The centerpiece bill, sponsored by Rep. Virginia Foxx, would add transparency to a shady practice called the unfunded mandate. The bill’s full title is the Unfunded Mandates Information and Transparency Act, or UMITA for short, and it will receive a floor vote today. It is expected to pass.

The goal of UMITA is to add teeth to the dentally-challenged Unfunded Mandate Reform Act of 1995 (UMRA), passed in the excitement of the Republican Revolution during the Clinton years.

Unfunded mandates were a problem back then, and they are an even bigger problem today, due in part to Presidents Bush and Obama’s record-setting deficit spending. Why do large deficits drive unfunded mandates? Suppose the federal government wants to enact a new job-training program. If it runs the program itself, it adds to the deficit, and runs the risk of making voters angry. But if it instead requires state governments or private companies administer and pay for the program, the federal balance sheet is unaffected. Unfunded mandates are a sneaky way to grow government.

The old 1995 UMRA bill made for great press conference fodder, but little else. One reason is that an unfunded mandate has to be very expensive before it triggers any UMRA actions. It would have to cost more than $100 million to state and local governments, so a $99 million unfunded mandate could slip through the cracks. Private sector burdens have to reach $146 million before drawing scrutiny.

If a mandate does reach the thresholds, the Congressional Budget Office (CBO) investigates and discloses its findings to Congress, which then has the option of striking down the mandate.

The trouble is that few unfunded mandates cost that much; their strength is in numbers rather than in size. And Congress rarely strikes down mandates that do meet the threshold for review. UMRA also exempts disaster aid and national security-related spending.

It gets worse. There are more than 60 federal agencies that issue regulations, but UMRA only covers the 17 cabinet-level agencies. The remaining three quarters of the regulatory state, called independent agencies, are exempt from this basic transparency measure.

Enter the new UMITA bill. It would expand UMRA’s disclosure requirements to cover independent agencies. It would also move mandate review from CBO to the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA), which specializes in regulatory review, and is better suited to the task.

UMITA also closes another UMRA loophole. UMRA only applies to rules that enter the rulemaking pipeline via a Notice of Proposed Rulemaking (NPRM) in the Federal Register. If an agency wants to avoid review of an unfunded mandate, all it has to do is avoid that step of the regulatory process. In that sense, UMRA actually reduces transparency. UMITA would fix that by making all rules subject to review, regardless of whether agencies skip the NPRM.

UMITA is not an earth-shaking reform, but it would improve transparency in both government spending and the regulatory process. Wayne Crews and I wrote about UMITA in 2012 here, and The Hill wrote about the bill here.

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