Congress hasn’t given states and localities the kind of financial aid they wanted for coping with the pandemic and its economic fallout, but at least Washington isn’t telling states, cities and counties what to do and leaving them to pay the bill. That’s at least in part due to a ban on unfunded mandates signed into law 25 years ago.

That law – formally known as the Unfunded Mandates Reform Act, or UMRA – has not been foolproof. Since its passage, Congress has enacted laws that have cost states and localities plenty of money, notably Real ID, which calls for beefed-up identification security, and the education law known as No Child Left Behind, which required annual standardized tests.

But congressional mandates are not the big business they were prior to UMRA's passage. In 1993 alone, a total of 185 separate federal mandates were passed into law. That year, according to the U.S. Conference of Mayors, federal mandates cost 314 cities a total of $6.5 billion (the equivalent of $12 billion today). Back then, the National Association of Counties said its members spent 12 percent of their locally raised revenues complying with a dozen major mandates.

UMRA forced Congress to consider the effects of their actions on states and localities. Bills that contained $50 million worth of unfunded costs on other levels of governments were to be flagged by the Congressional Budget Office. (That provision is mandated for inflation; last year, the threshold amount was $82 million). Any member of Congress can then raise a point of order against the bill, potentially blocking it.

“The very threat of a CBO report has engendered efforts to reach out to state and local leaders before the fact, instead of after,” Ray Scheppach, then the executive director of the National Governors Association, testified before Congress in 2001. “It has changed the nature of our intergovernmental discussion in a very positive way.”

The number of bills identified by CBO as containing unfunded intergovernmental mandates had slowed to a trickle – there were only three during the last Congress – but they’re now back on the rise. Through June 30, 11 bills in the current Congress have contained such mandates, according to the Congressional Research Service.

The House has repeatedly passed bills that would strengthen protections against unfunded mandates over the past decade, most recently in 2018, but they’ve gone nowhere in the Senate.

Still, although the law is an imperfect safeguard, it did help to break Congress of the habit of routinely passing costs down to states and localities. Only 15 laws that violate UMRA limits were enacted between 1996 and 2018 – much fewer than had been the case prior to its adoption.

“Under this legislation, we are acknowledging for the first time, in a meaningful way, that there must be limits on the federal government’s propensity to impose costly mandates on other levels of government,” Dirk Kempthorne, a former Boise mayor who was a chief sponsor of the bill in the U.S. Senate, said during debate over its passage.

The Threat of a Balanced Budget

Federal mandates grew significantly during the 1970s, including big-ticket items such as special education, safe drinking water requirements and asbestos removal. This was at a time when the federal government was sending less money to states and localities. The federal revenue sharing program came to an end in 1986. “The federal government was increasingly relying on ‘new, more intrusive, and more compulsory’ programs and regulations,” the CRS report notes.

State and local officials were nervous that the situation would grow worse. Specifically, they were worried about the big push during the early 1990s to amend the U.S. Constitution to require balanced federal budgets. Congress would have been severely limited in its ability to approve new funding – but would have had no compunction about making states, cities and counties pay for new programs.

“Governors were deeply concerned that the feds were going to balance their budget by passing on their costs,” says Tim Conlan, a government professor at George Mason University.

State and local officials banded together to lobby for some form of limitation on unfunded mandates. Jurisdictions such as Missouri and Columbus, Ohio, drew up inventories detailing how much money federal mandates were costing them.

“It was one of the few times that the so-called Big 7, all the state and local groups, actually came together and came together very, very strongly,” Scheppach, now a public policy professor at the University of Virginia, recalled in a recent interview. “It was really driven by the members themselves, the mayors, the governors and so on.”

Finding a Receptive Audience

Bills addressing unfunded mandates were introduced in Congress, but the idea got its big break when it was included as part of the Contract with America.

That was the campaign platform signed by nearly every Republican who ran for the U.S. House in 1994. In that year’s elections, the GOP won both chambers of Congress, including House control for the first time in 40 years. The Contract with America became the new majority’s governing agenda, with the House GOP holding votes on all 10 of its ideas within the first 100 days of taking office.

Much of that agenda involved placing limits on federal power, including term limits for members of Congress and the balanced-budget amendment. The proposed restrictions on unfunded mandates fit well within that framework. “Members of Congress vied with each other for leadership of the issue,” Paul Posner wrote in his 1998 book The Politics of Unfunded Mandates.

There was still some resistance to the idea within the Clinton administration. Scheppach was able to secure a meeting with Leon Panetta, President Bill Clinton’s chief of staff, and won his blessing.

“He decided that it was a legitimate issue,” Scheppach says. “That freed up Democrats and the White House to go along with it. I don’t think they ever necessarily liked it, but it wasn’t a big enough issue to threaten a veto or anything like that.”

Senate Democrats argued that there were needs for national standards in areas such as environmental protection and occupational safety. Republicans, sensitive to the history of civil rights and Southern states’ resistance, specifically exempted civil rights protections from UMRA. But they voted down all the Democratic proposals, a total of 44 amendments shot down during two weeks of Senate floor debate.

Clinton signed the bill on March 22, 1995 – the first idea from the Contract with America to enter into law.

Finding Tools 

Suddenly, the brakes had been put on congressional efforts to tell states and localities what to do. (UMRA also includes protections against mandates on private-sector entities, but these have been ignored more often.)

Twenty years ago, Congress was considering legislation regarding underground storage tanks. The bill’s sponsor wanted to create a liability shield for oil companies that were being sued for the cost of cleaning up leaking tanks at abandoned gas stations when the owner could not be found. They were being sued by states and localities, who were doing well in court, so CBO determined the bill represented a cost to them that was well above UMRA’s threshold.

“I don’t think it ever dawned on them to even think about the mandates law in the context of that bill,” says a CBO analyst, who spoke on condition of anonymity. “They were quite unhappy with us.”

Over the years, points of order that bills violate the unfunded mandates law have been raised 64 times, all but once in the House. Usually, it doesn’t come to that. When members of Congress realize there might be an unfunded mandate question, they try to find some other way of achieving their policy goal.

In other words, there’s been a deterrent effect. “Because of the requirement that any member could get a point of order and a specific vote, they look for another way of doing it, as opposed to the mandate,” Scheppach says.

One technique is to offer some money. As long as Congress provides funding, it can’t be an unfunded mandate. The problem, though, is that the amount of federal money is often inadequate to the task, or the grants involved are tied to other requirements that end up imposing costs on states or localities.

In 2012, the Supreme Court blocked the Affordable Care Act’s requirement that states expand Medicaid or get cut off from traditional Medicaid funding, finding it unconstitutionally coercive.

Granted, Medicaid is the largest federal-state program. But in 1987, the court ruled that a law calling on states to increase the legal drinking age to 21 or lose 5 percent of their federal highway funding was OK.

Where is the line? How much money has to be on the table before the Supreme Court finds that a congressional grant putting demands on states or localities is unduly coercive?

“To my mind, that’s potentially much more significant than the unfunded mandates act,” Conlan says. “Changing Supreme Court doctrines are likely to have more profound implications for federal-state relations than incremental expansions of the scope of the unfunded mandates act.”