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Time to Count the True Costs of Unfunded Mandates

By Rep. Virginia Foxx, Kernersville News

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Washington, July 10, 2018 | comments

Every year Washington bureaucrats impose thousands of regulatory mandates on state and local governments and small businesses. These mandates always come with a price—which is usually not paid by the federal government. Unfunded mandates strain city and state budgets; who pass costs on to North Carolina taxpayers and businesses. Businesses are then often forced to choose between employees and compliance. This far too common deferral of costs points to missing factors in Washington bureaucrats’ rule-making equation. However, this week the House of Representatives will have the chance to require regulators to consider real-world costs with a bill that I introduced, H.R. 50, the Unfunded Mandates Information and Transparency Act (UMITA).

Cities and towns are often hardest hit by unfunded mandates.  Kernersville, for example, has faced the real-world consequences of unfunded mandates for storm water drainage. Compliance with storm water regulations costs Kernersville taxpayers $1.8 million most years, and, due to needed capital improvement projects, is slated to increase to $2.4 million in Fiscal Year 2018-19. While these numbers speak only to direct costs, storm water regulations’ indirect costs directly impact the local economy by burdening businesses and making it more expensive to build new developments. Under current law, federal regulators are not on the hook for analyzing these indirect costs of unfunded mandates. 

UMITA will better assess the real-world costs of proposed rules by requiring regulators to consult with the private-sector. UMITA cost analyses would factor in costs passed on to consumers, lost profits, and changed behavior costs when considering the bottom-line impact of federal mandates. The public would also be guaranteed the opportunity to weigh in on regulations after the cost analyses are made known. Finally, judicial oversight would hold the federal agencies accountable for selecting the least costly or burdensome alternative to a proposed regulation. 

UMITA is not the first legislation aimed at ending abuse of unfunded mandates and bringing fairness to the regulatory process. The Unfunded Mandates Reform Act of 1995 (UMRA) requires agencies to report top-line costs of mandates (in terms of dollars) to local governments. However, it left some loopholes that have since been exploited. Not only are all independent government agencies exempted from UMRA, but other agencies can bypass the cost analysis process by not issuing a “notice of proposed rule-making.”

Washington should not get away with doing the very least it can to provide information and transparency in the rule-making process. UMITA eliminates paths regulators take to skirt the transparency necessary for public scrutiny in the first place and extends UMRA rules to most independent agencies.

The combined restoration of UMRA’s original intent and expansion of its scope to account for real-world costs will provide a more fair and transparent regulatory environment. For towns like Kernersville, UMITA increases local participation in the regulatory process and promises potential for returning greater control of spending to state and local governments. As Kernersville Mayor Dawn Morgan has noted, limited resources mean the priority of one issue comes at the expense of another. Extending cost analyses to the private sector will force regulators to think carefully about costs of mandates before passing them on to North Carolinians. Americans asked to pay the bill for unfunded mandates will know whether the costs of compliance will make it harder for businesses to meet payroll and stay afloat. Additionally, guaranteeing the general public and private-sector input creates opportunities to find local solutions that don’t drain municipality coffers. 

Mayor Morgan has observed how unfunded mandates and lack of regulatory transparency take a toll on the economy. As a federal representative who is also a business owner, I know that firsthand. During these times of economic expansion in North Carolina, more can and should be done to ensure regulatory costs to our local governments and job creators are given careful consideration. The House should pass UMITA this week if we want freedom for local governments to meet their top priorities, businesses to create jobs, and economies to prosper.
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