Good news on the deregulation front. A House bill, The Unfunded Mandates Information and Transparency Act, sponsored by Rep. Virginia Foxx’s [R-NC] and a bipartisan list of colleagues, will get a floor vote this month. A Senate companion bill is sponsored by Senators Fischer [R-NE] and Lankford [R-OK]. These bills address the problem of federal unfunded mandates straining state and local budgets.
The Trump administration has already promised to end two rules for every new one it implements in Executive Order (EO) 13771. Through FY17, agencies issued 67 deregulatory actions and only 3 regulatory ones, saving $8.1 billion in costs. That figure may rise to $10 billion in FY18, according to the spring issue of the Unified Agenda released in May, a bi-yearly summary of all regulatory executive actions.
In addition, Congress has used the Congressional Review Act to end 14 Obama-era rules through the 60-day window it allows to review executive branch regulations. The American Action Forum estimated Congress’s use of the CRA in 2017 saved agencies $3.7 billion, industry $34.8 billion and both more than 4 million paperwork hours.
Now, with the Foxx bill, Congress has the opportunity to move the deregulation ball further up the field.
Unfunded mandates are generally defined as statutes in federal law or provisions in regulations carrying enforceable duties on lower levels of government or the private sector without appropriating the funds or granting the aid needed.
The existing framework for keeping these unpaid-for regulations in check is the Unfunded Mandates Reform Act (UMRA). Unfunded mandates surged through the two decades leading up to the passage of UMRA in 1995. UMRA requires the Congressional Budget Office and issuing agencies to estimate the direct costs of mandates when they surpass $100 million, whether in bills for the former or in regulations for the latter.
UMRA was hailed at the time as a major step towards a more cooperative form of federalism. However, the same coalition of state and local officials, private sector advocates and constitutional scholars that pushed for UMRA today point to agencies’ use of cracks in the system to keep imposing regulations without due funding or justification. The Government Accountability Office has identified a total of 14 such loopholes.
Rep. Foxx’s bill would strengthen that weak framework in a number of important ways.
Now, UMRA requires cost estimates only when a notice of proposed rulemaking is issued, and agencies have often skirted their reporting duties by skipping the routine notice-and-comment period prior to the issuing of a final rule. The new bill would force agencies to conduct UMRA analyses for all rules unless expressly prohibited by law.
Second, the bill would broaden the scope of UMRA’s reporting requirements to include indirect costs such as foregone private profits, costs passed onto consumers and even costs stemming from behavioral changes in the economy.
Third, the bill would allow congressional committee chairs to request CBO analyses of the fiscal effects on states and cities from changing the conditions of federal grant programs, resulting in a broader definition of costs than just enforced duties. Committees could even request retrospective analyses of rules that failed to pass the UMRA framework, opening the door for the undoing of further regulatory malpractice and costly regulations from prior years.
Fourth, the bill would bring higher levels of accountability into agencies’ rulemaking. Agencies would be required to seek input from the state, local and private parties affected by their rules and report on their consultations annually to Congress.
The Office of Information and Regulatory Affairs, the executive office that reviews regulations, would be named arbiter for determining whether regulations satisfy UMRA’s disclosure requirements, and the courts would be allowed to put rules on hold or outright invalidate them when requirements are unmet.
Federal environmental regulations are a major source of unfunded mandates to states. The Chamber of Commerce estimates that states administer 96 percent of all EPA programs with only 28 percent of the costs covered by federal grants—the rest coming from state appropriations, or fees collected by agencies allowed to charge regulated entities.
Fuel economy standards top the list of costliest mandates: $4.9 billion for the 2012 to 2016 period and $10.8 billion for the following 8 years, according to the American Action Forum. However, the Trump EPA released a plan in April to revise the standards.
CBO estimates that Rep. Foxx’s bill will cost the executive branch $6 million over the 2019 to 2023 period, including 1 to 3 additional staffers at an aggregate salary of $150,000 per agency. Any costs beyond that will be borne by agencies with permanent spending authority, meaning those able to charge their regulated entities higher fees to cover costs. To add perspective, $6 million over 4 years is less than half what the Department of Interior’s Fish and Wildlife Service will spend raising staff pay in 2019.
In short, while reforming the regulatory process would cost agencies $6 million over 4 years, the cost savings for states, counties and cities would be many multiples of that every year, with the final amount depending on Congress’ willingness to make use of the bill’s look-back provision.
The bill provides the checks on both agencies and Congress itself that are necessary for the United States to set a global precedent on reining in regulations. The day it passes will be a happy one for governors and mayors across the country and a welcome date for accountable, cost-effective governance.
Jorge González-Gallarza Hernández is a policy associate at Economics21. Follow him on Twitter here.
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