Unfunded Mandates: Definition, Examples, Need for UMRA

How the Feds Force Your State to Pay for Something You Don't Want

Unfunded mandate
Congress doesn't always consider whether there are funds for a new law.. Photo: Getty Images

Definition: An unfunded mandate is when a new piece of Federal legislation requires state, local or tribal government, or a private-sector entity, to perform functions for which it has no funds. Similarly, it occurs when the Federal government reduces, or even eliminates, the ability of another entity to fund an existing mandate. That happens when the federal government cuts funds earmarked for the program, when it changes the requirements for receiving the funds, or when it interferes with the ability to raise funds through taxes.

Understandably, those affected by unfunded mandates claim they are unfair. Congress shouldn't create laws for other bodies without providing the funding. In fact, some local leaders argue that most of a state or city's budget is made up of activities designed to fulfill Federal laws. In this way, they become an arm to implement Federal policy. It reduces the ability of state and local jurisdictions to develop, fund, and manage programs according to their particular needs. 

Examples

A great example is a national election. It has to be managed and paid for by the states. Here are 6 other examples:

  1. Increasing the U.S. minimum wage.
  2. Reducing federal funds to administer Food Stamps or other welfare programs.
  3. Prohibiting states from taxing Internet services and transactions.
  4. Eliminating federal matching funds for states to administer child support enforcement.
  5. Requiring public transit agencies to upgrade security measures, training programs and background checks.
  1. Requiring commuter railroads to install train control technology.

UMRA

In response, Congress passed the Unfunded Mandate Reform Act (UMRA) on March 15, 1995. It requires the Congressional Budget Office (CBO) to identify and estimate costs of unfunded mandates throughout the budgetary process. It must analyze any bill that would cost state, tribunal, or local governments more than $50 million, and the private sector $100 million or more.

 These thresholds are adjusted annually for inflation. In 2013, the threshold was $75 million for intergovernmental mandates and $150 million for private-sector mandates.

House and Senate committees that propose such a bill must show where the funding will come from. If they don't, then the bill will be removed unless a majority vote keeps it alive.

Each March, the CBO releases its annual UMRA report. In 2013, CBO reviewed 437 bills, of which 39 contained intergovernmental mandates and 53 contained private-sector mandates. However, none of them exceeded the UMRA mandate. UMRA appears to be working, because there were fewer unfunded mandates in 2013 than the average from the 2009–2012 period. 

There were 72 bills that became laws, and only three had intergovernmental mandates and eight had private-sector mandates. Since UMRA was enacted, there were only 13 laws that exceeded the intergovernmental mandates threshold, and the last one passed in 2010. There were 92 laws that exceeded the private sector mandates, including three enacted in 2013.

Those three had five mandates that extended government fees, increased premiums for mandatory federal insurance, and regulated dispensers of pharmaceuticals. (Source, "A Review of CBO's Activities Under the Unfunded Mandate Reform Act," Congressional Budget Office, March 27, 2014.) 

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