CBO busy during the first year of the Unfunded Mandates Reform Act

The Unfunded Mandates Reform Act of 1995 (UMRA) established procedures designed to ensure that the Congress considers the effects of unfunded mandates before imposing them on state, local and tribal governments.

Among other reforms, UMRA calls for the Congressional Budget Office (CBO) to provide statements to authorizing committees about whether reported bills contain mandates, and, if so, what their costs would be.

After operating under UMRA for one year, CBO has reviewed and analyzed more than 700 bills and legislative proposals to determine whether they contain mandates. In at least some cases, that information was used to reduce the costs of proposed mandates.

A preliminary review of laws enacted in 1996 shows that the Congress enacted few mandates with costs exceeding the $50 million threshold established in the law. Whether UMRA can be credited with that outcome, however, is an open question.

Sixty-nine of the bills and proposals reviewed (10 percent) contain intergovernmental mandates as defined by the new law; of those, 11 (two percent of the total) contained mandates with costs above the threshold. Those 11 bills included five mandates: increasing the minimum wage, providing mental health parity in insurance plans, pre-empting state securities fees, requiring state and local workplaces to comply with certain occupational health and safety rules, and requiring states to include Social Security numbers on all driver's licenses and identification cards.

Only the increase in the minimum wage was enacted into law in a form that CBO estimates would impose costs on state and local governments that exceed the $50 million threshold.

The other four mandates either were not enacted or were amended before enactment to reduce costs below the threshold. Based on this work, CBO developed the following general observations about mandates and their costs in the 104th Congress:

• Most of the proposed mandates CBO reviewed - primarily pre-emptions - did not impose significant costs.
• Many of the costs imposed on states and localities resulted from conditions of federal aid, such as matching funds, which are not mandates under UMRA.
• Because UMRA limits "direct costs" to those incurred by the mandated party, some of the costs CBO identified as resulting from mandates - particularly costs incurred by nonmandated parties - did not count against the $50 million threshold.
• Most significant mandates CBO reviewed would have imposed costs on state and local governments as employers, not as governing bodies.

(For more information about CBO and UMRA, please contact Theresa Gullo, chief of CBO's State and Local Government Cost Unit at 202/225-3220.)