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Hearings of the Committee on Rules

Wednesday, July 16, 2003

The subcommittee met, pursuant to call, at 10:35 a.m. in Room H-313, The Capitol, Hon. John Linder [chairman of the subcommittee] presiding.

Present: Representatives Linder, Sessions, Dreier and McGovern.

Mr. Linder. Good morning.

This morning the Rules Subcommittee on Technology and the House is holding an original jurisdiction oversight hearing of 1995 Unfunded Mandates Reform Act. This important legislation, now Public Law 104-4, was originally enacted on March 22, 1995, when President Clinton signed the final version of the legislation into law.

By way of background, this is the third oversight hearing on UMRA I have chaired in the last several years. In 1999, the Subcommittee on Rules Organization of the House, which I chaired in the 106th Congress, held an oversight hearing on unfunded mandates, and in 2001 the subcommittee held a joint oversight hearing on UMRA with Mr. Ose's Government Reform Subcommittee.

Vigorous and consistent oversight hearings are very valuable to and for the Congress, and I am pleased to continue that tradition here today.

The purpose of today's hearing is to ask ourselves how effective was UMRA last year in raising the consciousness level of the House about unfunded mandates throughout the legislative process, and was its effectiveness in 2002 consistent with previous years or was it just an aberration?

There are many beneficial reforms contained within UMRA, but the focus of our oversight hearing this morning will be those sections of the act that fall within this subcommittee's purview. For example, under two different sections of UMRA, points of order can be raised against legislation on the House floor for a failure to comply with those requirements under certain circumstances.

For years before they enacted UMRA, State and local officials complained mightily about the Congress enacting legislation that mandated certain things be done, yet time and again Congress provided no funding to the State and local governments, in other words, to help achieve a given measure's public policy goal.

UMRA was groundbreaking legislation at the time. It represented a stark contrast from how the Congress legislated in the past. Back then the Congress briskly passed legislation into law without giving even the briefest consideration to the impact of such legislation's mandates on States and local governments. There is much greater awareness of the impact of the legislation on State and local governments and the private sector, thanks to UMRA.

The subcommittee's first witness this morning, our friend and colleague from the second district of Ohio, Congressman Rob Portman, played a critical role in crafting the Unfunded Mandates Reform Act and getting it through the House and eventually into public law. As such, his testimony this morning will be very helpful in reviewing its effectiveness and goals.

The subcommittee's second witness, CBO Director Douglas Holtz-Eakin, will talk about the critical role that CBO plays in comparing cost estimates and statements for legislation coming to the House floor with respect to intergovernmental and private sector mandates and any trends that CBO has noticed over the past 7 years. During those years the CBO has been reviewing hundreds and hundreds of measures every year to determine if there are any intergovernmental and/or private sector mandates. CBO works to decide how much these mandates cost and whether they exceed UMRA's limits. Obviously this is vital information and helps ensure UMRA's objectives are satisfied. Thus, Director Holtz-Eakin's testimony this morning will be very informative as well.

The third panel includes our colleague from the Second District of North Carolina, Congressman Bob Etheridge. We look forward to his comments also.

Before recognizing our first witness, Mr. Portman, I want to recognize the subcommittee's ranking minority member, Mr. McGovern, for any opening remarks that he may have.

Mr. McGovern. Well, thank you, Mr. Chairman, and thank you very much for holding this hearing today on the important topic of unfunded mandates and the effectiveness of the Unfunded Mandates Reform Act of 1995. I too believe that this is an important issue, and I hope that this hearing will help shed light on the problems facing our States and local communities as a result of the policies set by this Congress as well as the shortcomings of UMRA. I would like to welcome our colleagues Congressman Portman and Congressman Etheridge and also the new Director of the Congressional Budget Office, Douglas Holtz-Eakin, and I look forward to hearing their thoughts.

Mr. Chairman, we all recognize the financial burden the Federal Government can place on States, localities and private businesses with the inclusion of a provision in a bill or the requirements of a Federal regulation. The Unfunded Mandates Act established mechanisms to limit these burdens. UMRA keeps authorizing committees in check by allowing points of order to be raised on the floor against any provision designated an unfunded mandate by CBO. UMRA mandates a debate on the point of order.

The intention is quite clear. Congress should not pass unfunded mandates as defined by the act. The procedural hurdles that must be cleared in order for any unfunded mandate to be enacted into law are intended to act as a safeguard so that Congress and the American people are made fully aware through floor debate and votes of the existence and consequences of these provisions.

Now, of course that hasn't stopped this Congress, the Republican Congress and this administration from passing on unfunded mandates to our States and to our local communities. State and local governments are facing severe budget crises. They are slashing services, raising taxes and using creative accounting procedures in order to balance their budgets. Some of the challenges facing States may be different today than they were almost 10 years ago when UMRA was enacted, but the goal should be the same. The Federal Government should not be passing the buck to States and localities when the Federal Government has the responsibility to pay its fair share.

The National Conference of State Legislators lists four programs that they consider unfunded mandates that are imposed on State and local governments by the Federal Governments. They are, one, IDEA special education; two, No Child Left Behind; three, election reform; and four, homeland security. And, Mr. Chairman, I ask unanimous consent to insert the NCSL report into the record at this point.

Mr. Linder. Without objection. .

Mr. McGovern. The NCSL has determined that without full funding, these programs result in unfunded mandates totaling up to $82.5 billion. That is a staggering figure for States and communities to absorb.

Let's look at two of these programs: No Child Left Behind and homeland security. Let me read directly from this report published by the NCSL, and I quote, that the fiscal year 2003 recommended appropriations for implementation of the No Child Left Behind Act are approximately $5 billion under the authorized amounts for mandated activities that States must carry out. Data from a study of the actual costs to implement No Child Left Behind in New Hampshire indicate that for every dollar of existing Federal funding the State and local governments will need to provide $7 to meet the requirements of the bill. Nationwide this would indicate that $35 billion in annual funding would be required to fully fund the act.

Now, just think about it. The Federal Government rewrites and updates the education laws of this country. As a result, States and localities must make major changes in their educational system, but even though these changes are mandated by the Federal Government and the Federal Government promised the funding to implement these reforms, the Republican Congress and President Bush have ignored their responsibilities and are forcing States and communities to fund these changes on their own.

Now, what continues to amaze me is that President Bush, a former Governor who undoubtedly knows all about unfunded mandates, continues to submit budget requests that underfund No Child Left Behind, and the Republican majority of this body follows right along.

For example, the President's 2003 budget, the first education budget after he signed the No Child Left Behind act, proposed to cut No Child Left Behind programs by $90 million overall, leaving his programs far short of what was authorized under the bill.

The 2004 bill is even worse. Last week the House approved the fiscal year 2004 Labor and HHS and Education appropriations bill. For fiscal year 2004 No Child Left Behind is still underfunded. It is $334 million below what the Republicans promised the program in the fiscal year 2004 budget resolution.

Homeland security, Mr. Chairman, is no different. Since September 11th the Nation has demanded much from our local police officers and firefighters and first responders. Unfortunately, the Federal Government has not lived up to its responsibilities. The National Conference of State Legislators estimates that the new homeland security requirements have resulted in unfunded mandates totaling up to $17.5 billion. The funding in the fiscal year 2003 supplemental appropriations bill wasn't nearly enough to cover all the costs associated with the implementation of the current homeland security laws and regulations.

The fiscal year 2004 homeland security appropriations bill provides $29.4 billion in discretionary funding. That is only about 1.8 percent above the overall funding level provided to agencies and activities within the Department for fiscal year 2003.

Now, CBO forecasts that prices will increase during the current fiscal year by 2.3 percent. As a result, the bill actually provides funding for the coming year that in real dollar terms is about $150 million below current levels.

Mr. Chairman, homeland security isn't free. It takes resources, and at the very least Congress needs to provide enough money to keep up with inflation.

Mr. Chairman, over and over again the Republican-led House of Representatives has passed authorizing legislation that makes big promises of Federal funding, but after the press conferences are over and the attention is moved somewhere else Congress fails to live up to those promises. That is the very definition of an unfunded mandate, and as the champions of States rights led by a former Governor, I would think that the Republican Party would know better, which brings me back to UMRA.

Mr. Chairman, it may be necessary to expand UMRA, and I believe Director Holtz-Eakin will discuss many of the act's shortcomings. Perhaps we should look into expanding UMRA so that CBO should consider appropriations bills in the Appropriations Committee in addition to the authorizing committees when considering whether a program is an unfunded mandate. I don't pretend to be an expert on the technical aspects of this particular law. It was enacted before I was first elected, but I understand that this subcommittee will continue to explore this topic with future hearings, and I look forward to working with Chairman Linder.

But I do know this, the Federal Government must put its money where its mouth is and pay for these programs. We must live up to our promises. Unfortunately, as we can see by their action or inaction on the No Child Left Behind, homeland security bills, this Congress and the Republican leadership is not meeting that test.

So I thank you, Mr. Chairman, for holding these hearings, and I look forward to hearing the testimony from our distinguished witnesses.

Mr. Linder. Mr. Sessions, do you have an opening statement?

Mr. Sessions. Thank you, Mr. Chairman. I do not have a statement, but I just have a few things that are simply observations, and that is that in my opinion an unfunded mandate is not a difference between the budget amount and the amount that is traditionally appropriated. That is not an unfunded mandate in my mind, and the determination that the United States Congress makes as it relates to homeland security or No Child Left Behind is not necessarily an unfunded mandate because it does not fund all the money that we said it would take to fund the project. And so I am concerned, as the gentleman is from Massachusetts, that the United States Congress live up to those obligations and responsibilities that it has.

I also note with the same sense of optimism that I know that under homeland security many times the United States Congress asks for things that the administration does not ask for. For instance, for $500 million to high threat, high density urban areas. The Department of Homeland Security requested zero, but in the infinite wisdom of the United States Congress, we decided that we had a threat at home that was important. So there was $500 million that was given because we thought it was the right thing to do under homeland security.

In addition, $200 million for protection of critical infrastructure. Zero was requested by the Homeland Security Department. So I would just say that there is always give and some take balance that happens between our President of the United States and his administration and the United States Congress, and I am very open to hearing what our expert witnesses have to say today, and we will relish this opportunity to look into this further. And I yield back the balance of my time.

Mr. McGovern. Mr. Chairman, may I --

Mr. Linder. The gentleman yields back.

Mr. McGovern. For a point of clarification I just wanted to ask the gentleman from Texas a question if I could.

Mr. Linder. Mr. McGovern.

Mr. McGovern. I am trying to understand the definition of unfunded mandate as he put it forward. I mean, in the No Child Left Behind Act one of the complaints is that we actually mandate States to do testing, and there are standards that need to be implemented, and we require that. And what a lot of States are complaining is that we are not providing the money because it costs money to do testing and to meet these new standards. So I guess, why is that not an unfunded mandate?

Mr. Linder. The gentleman has yielded back.

Mr. Portman, welcome to the Rules Committee. We look forward to your testimony.


. Mr. Portman. Thank you, Mr. Chairman. It is good to be with you again, and Mr. McGovern, the ranking member, also Mr. Sessions. I appreciate, Mr. Chairman, your ongoing personal commitment to looking at the impact of UMRA and also the general question of unfunded mandates. You have been doing this now for 7 years, I believe.

Just for a little background, because Mr. Linder talked about it, Mr. McGovern talked about it. This was actually part of the Contract With America, and it was put in place because for decades the United States Congress was making requirements on State and local governments, areas like the environment, areas like labor policy, and not providing the funding that went with those requirements, and so Congress decided to try something new, and that was instead of a process relying heavily on this Rules Committee, to at least provide information and accountability with regard to unfunded mandates. And in my estimation it has worked extremely well. What we have seen since that period of time in 1995 is significant curtailment of unfunded mandates. I will talk about that if it is all right with you, Mr. Chairman, in my testimony in more detail.

The additional requirements in UMRA, as you all know, sets really three criteria. One is that the Congress now gets complete information, which we didn't get before, on what the costs are. And this is not just costs to the public sector but costs to the private sector, which is sometimes left out. We also ensure there will be a separate debate, and finally we assure there will be accountability with the vote on Members of Congress. It does not mean we are not going to issue unfunded mandates. We still do. We still have, many fewer. But it means you have to go through this process, which I think is a fair and open way to do it. It makes sure that Members understand the costs to governments and the private sector. With regard to the public sector again, we had this separate debate and a vote on whether we consider the legislation. It is a pretty simple concept and is providing more accountability and more debate on what are essentially hidden taxes to the State and local governments.

Over the last 7 years, including this last year, Mr. Chairman, it has had a very positive impact by increasing the knowledge and also encouraging Members to consider the impact early in the legislative process. That is significant. It was a new procedure. It was quite controversial at the time with Mr. McGovern, including the members of this committee, because we hadn't done this sort of thing before, by really leveraging the Rules Committee in this process to deal with a substantive issue.

In the House if the rule waives a mandate's point of order, which happens sometimes, a Member can then raise a point of the order against the rule, and that highlights the mandates issue. There is a 20-minute debate that is required.

The House votes and that is it. The rule can pass. Then the bill moves forward without the ability to raise the mandate's question again on the point of order. That is a Rules Committee decision. In most of the cases the Rules Committee does not waive that mandate's points of order, and when the rule does not waive the point of order, Members can then raise that point of order during general debate. And again, there is a debate and a vote just on the mandates issue.

Not as well known is that this review of unfunded mandates by CBO also extends to the private sector, as I said, the Mandates Information Act, which passed the House in 1999. It was designed to increase Congressional accountability for the hidden taxes imposed on consumers through the unfunded mandates we put on the private sector. So unfunded mandates impose a variety of requirements on business, higher prices, reduced job opportunities, more red tape, particularly on smaller businesses. We wanted to highlight that.

So UMRA requires Congress to make a stronger case on the merits of the bill and consider the effects on State and local government, consumers, workers and small businesses. It also requires us to work cooperatively with governments and the private sector to accomplish our public policy goals by bringing them into the process in the most efficient and effective manner.

I believe the most significant outcome of UMRA is the supply and demand of information. Over the last 7 years, I think we have increased both the demand for information by Members and committees and the supply of information on Federal mandates through the CBO assessments, and I am quite proud of the work the CBO is doing and I look forward to hearing what the CBO has to say.

Because I have to run back to the Budget Committee, my staff will be here to hear it, and I look forward to seeing the testimony.

In addition, of course we are just paying more attention to the issue, and every Member has to now when they author legislation or else be subject to this process, which can be sometimes embarrassing when you get a good bill to the floor and suddenly you find out it is not as good as you thought because it has got an unfunded mandate. The practical impact, frankly, has been to force the committees to deal with this issue. So rarely does the issue come to the floor, which is how we intended it to work. We expected the committee and the committee staffs to do their work and to bring bills to the floor that did not impose these mandates.

Between 1996 and 2002, Mr. Chairman, CBO identified 24 intergovernmental mandates over this threshold we have of $50 million. Of those 24, two were enacted into law, four were enacted after amendments to reduce their costs that fall below the $50 million threshold, and 18 were considered but never moved. On the private sector it is a little different. We had 64, 24 enacted into law. Five were enacted after amendments to cost, and 38 were considered but never enacted. But even on the private side, you can see we have had fewer mandates.

The bottom line is the number has helped to increase accountability in Congress, reduce costs before enactment and severely curtail unfunded mandates. First test case you remember, Mr. Chairman, was on the Telecommunications Act. It went to the floor, 13 years of work behind it, a very popular bill. We found out shortly after enactment of the legislation that there was an unfunded mandate in it. Knowing it was subject to a point of order on the floor that would highlight the mandates issue, in this case municipalities, the committee worked with us very hard, this committee, worked with the Rules Committee, local governments to address the concerns. The process worked, and without it the committee was poised to go forward with provisions that would have imposed under our Telco bill significant costs to local governments. So the first test case worked.

In other cases like the minimum wage, it has worked but it hasn't worked. You know, with the minimum wage increase when it came to the floor, a point of order was raised forcing a debate over that mandate because that is a mandate on the governmental sector, State and local government, with regard to their minimum wage workers. We acknowledged there were significant costs. I actually raised one of those points of order and remember being steam-rolled personally by this. We raised it, and the point of order failed. We had a clear debate, though, on it and we understood what we were doing, but in that case Congress made its decision based on a majority. The simple point is that we have given State and local governments a valuable tool to get the mandates issue considered and addressed at the committee level before they reach the floor; and if that fails, then we force that debate on the floor, and in most cases this is the result of the no mandate.

It is also flexible enough, as it was with regard to the minimum wage, to help Congress to work its will. It is ultimately about information and accountability, and CBO provides Members with more specific information on the impact it would have on all these different entities. It also allows Members who remain undecided on the pending legislation to be more informed through an additional 20 minutes debate, which has been very helpful in some of these cases.

The intent was to hold us accountable, and I think it has done that. And it is about accountability ultimately to the State and local governments, to consumers, small government, small businesses and to workers who are impacted by imposing mandates.

I want to conclude just by saying I appreciate the work of this committee. It has really now sort of shifted from the Government Reform Committee to your committee to implement this and to do it in a way with regard to individual bills that makes sense for our Congress. Whether you waive a point of order or whether you permit it in the legislation is a very important decision. I think also, though, through these hearings and through the reauthorization process, this committee is going to have a huge impact on what we do going forward.

I appreciate, Mr. Chairman, again your personal interest to this and commitment to it and look forward to continuing to work with you as we review the performance and reauthorize this very important legislation. Thank you for letting me testify.

Mr. Linder. Thank you. I would like you to expand, if you could, on one area that you just briefly touched on. I don't know if it is measurable, but it is my view that the committees, knowing that the point of order laid against the possible legislation, did an awful lot of work on their own to keep the unfunded mandates down. Is there any measure?

Mr. Portman. The best measurement will come from CBO, and I assume CBO is prepared to address that; but frankly, what happens is the committee staff goes to CBO and says, how do we work this out, because CBO issues a report on the legislation saying there is a mandate here, here is the cost to it. And, again, authors of legislation are not particularly interested in bringing their bills to the floor with these warts, which is the unfunded mandate. So it gets worked out at the committee level.

I think Mr. Holtz-Eakin will be able to give you some more data on that. I don't know if this is proprietary information as to what he does with the committees, but frankly, our understanding is that 80 or 90 percent of this is worked out between CBO and the committees before most of us who are not on these committees even see the issue, and that is the way it should work. That is what good legislation is about, I think. The people who are informed about how these bills work best, whether it is an education bill or whether it is a labor bill or an environmental bill, whatever the case may be, that those experts and committee staff working with CBO and working with the affected parties, local governments, State governments work this out in ways that make sense so that when it comes to you in the Rules Committee for the most part it is worked out. When it is not, then the Rules Committee has a --

Mr. Linder. Thank you.

Mr. McGovern.

Mr. McGovern. I also want to thank Mr. Portman for his testimony, and I appreciate his work on this issue, because it is an issue that, you know, I think the Republicans and Democrats alike are concerned about as we go home to our districts. We always hear about all these mandates that the Federal Government is passing along and not paying for, but I want to understand this. I mean, the way this is supposed to work is if we have an education bill or a labor bill or an environmental bill, that if we include in there mandates on States or local communities, that in fact in order to kind of get around this issue of whether there is an unfunded mandate, we need to authorize the appropriate money to be able to pay for these things. Otherwise it gets classified as an unfunded mandate. Am I correct on that?

Mr. Portman. Yeah. I think just briefly in terms of what we hear back home, a lot of it is, as you know, about existing mandates, and this legislation was intended to deal prospectively from 1995 up. So a lot of what I hear back home, frankly, is about existing legislation that predated the unfunded --

Mr. McGovern. The way this is -- the way we are supposed to proceed here is that to learn from our past mistakes, we are supposed to pass legislation --

Mr. Portman. Prospectively.

Mr. McGovern. -- and pay for it. And I guess it goes back to what I was saying in my opening statement. I appreciate the concept, and I appreciate your efforts to try to ease the burden on States and local communities, but there seems to be something missing here, because when I go home right now, quite frankly when I talk to my school supporters or my school principals, they give me an earful about the No Child Left Behind bill. They say you have passed all these mandates and you have authorized the money to pay for it, but we don't get it because you don't appropriate the money. And so in one respect we are kind of getting around this issue by saying, look, we authorized the money, but the Appropriations Committees are not obligated to follow suit; and so what ends up happening is that we have new mandates on testing or standards to be implemented, not only on that but also on the homeland security stuff, and I have got a letter from my Governor, Governor Romney, complaining about unfunded mandates on homeland security. But the money doesn't -- the money is not following, and so, I guess I am interested in your thoughts on how do we fix this. If we really want to stop unfunded mandates, how do we put our money where our mouth is so that we just don't take care of it in the authorizing process, that in fact the Appropriations Committee follows; and if it is not going to follow, then we are not allowed to authorize that kind of money that we say that we are going to put forward?

Mr. Portman. That is a good question. I think one thing to look at in the reauthorization is the application to the appropriations process and whether we have got that right. This was quite controversial at the time, and again we kind of pushed the envelope as far as we could at the time, but you could apply it more directly to the appropriations process.

I will say there is also an issue of definition, what is an unfunded mandate, and we have left that up to CBO. We have not tried to put that in a committee structure per se. In other words, we have to live by what the CBO says. So homeland security, you mentioned, for instance, we have provided, as you know, additional funding under homeland security. Clearly, whether the funding we have provided is adequate to cover whatever the new requirements are legislatively, I don't know the answer to that.

I think what Mr. Holtz-Eakin will say is that we have provided more than enough funding for what we have required legislatively.

Now, what Governor Romney and maybe Governor Taft in my State would say is, gee, when you raise the terror level, the alert level, then we do certain things in our State that we think are appropriate, and we don't get those costs covered by the Federal Government. That is a tough issue, because it is a subjective decision on their part, I suppose by my Governor or yours, as to what they do exactly. We don't mandate I don't think through any legislation or even through any Federal requirement exactly what they do, but some States spend more. Some States spend less. I think that is what Mr. Holtz-Eakin will tell you, but we leave it up to him and CBO to decide what that definition is.

On education, same issue pertains obviously, what are the real costs. We increased funding for education, as you know, every year, and the question is whether this funding where we have increased it is money that is fungible enough that could be used for other things, but this is a definitional issue in part.

Mr. McGovern. Let me ask you about education and the No Child Left Behind Act particularly. What is your opinion as to whether or not the No Child Left Behind Act is adequately -- I mean, obviously we authorized more than we appropriated. So there is a disconnect there, but wouldn't you agree that that is -- we could disagree to the extent, but wouldn't you agree that that is an unfunded mandate on a lot of the States, because we have all these new requirements, and we obviously anticipated that it will cost some money, because we authorized money to a certain level but yet we haven't appropriated it? And I am sure you are hearing in your district what I am hearing in my district from some of the local school officials that -- and you hear it now with regard to that, but also with regard to IDEA and others that you promised you would pay 40 percent of IDEA, and you are not. Yet you are paying more, but the bottom line is we are still stuck making up the difference, and we can say we are getting better, we are getting better, but the bottom line is wouldn't you agree that on the No Child Left Behind Act that we haven't lived up to what our goal is here, and that is to not be thrusting unfunded mandates on States and communities?

Mr. Portman. You know, I hate to say this, but I think I am probably not the right witness to respond to that because I just don't know the answer. When we took up the No Child Left Behind legislation, we inquired about the unfunded mandates. There was not a point of order raised. And my recollection of that, and Mr. Holtz-Eakin will remember it better than I do, is that there was not an unfunded mandate identified in the authorization. I think that is accurate. So then the question becomes how do you deal with the appropriations side of it, and again, Mr. Holtz-Eakin can talk about the compromises we worked out on that, and that is again something to look at in the reauthorization. But I don't believe an unfunded mandate point of the order was offered, because it wasn't identified by CBO.

Mr. McGovern. Let me just read data from -- a study of the actual costs to implement the No Child Left Behind in New Hampshire indicates that for every dollar of existing Federal funding the State and local governments will need to provide $7 to meet the requirements of the bill. That is an unfunded mandate, I think anyway, but maybe we can talk to the --

Mr. Portman. Yeah. I would like to hear what he says about that, because my recollection again was it was not a considered one under our definition.

The other issue you raised on IDEA, that was a big issue at the time. I suppose if you were to ask educators what the biggest unfunded mandate is, they would all say IDEA. If you look in aggregate terms, it is obviously a huge amount of money which would dwarf anything else we do probably in any area here, including education.

That was an issue we talked about at the time I recall, and we frankly didn't have the votes to go back retroactively and apply this to, again, environmental laws. I remember stormwater discharge was a big one at the time, and what we have tried to do in Congress, as you know, is since that period of time provide more funding every year, which we have done, but we have never reached the 100 percent mark or close to it, 40 percent or something. But that is a question to look at under reauthorization, do you go back and look retroactively rather than just prospectively at these things?

Now, you have an opportunity under the Unfunded Mandate Act when we reauthorize IDEA, if under the reauthorization there are additional requirements put in, we made clear in the legislation that was new legislation which was a big controversy at the time. In other words, you can't authorize the Clean Air Act or IDEA without subjecting yourself to this. So it would apply prospectively I believe to, which I think is coming up, an IDEA reauthorization.

Mr. McGovern. I appreciate your comments. Let me just say by way of closing, this is an issue that I hear a lot about. I think every single Member of this House does when they go back home, but I would just kind of respectfully suggest that before we pat ourselves on the back and say that we get it, I would argue with you that we are not getting it with regard to the No Child Left Behind Act and even some of these homeland security issues that there are real costs that are being shifted onto the States, and during these very difficult fiscal times for all of our States they can't deal with them. And so I think we need to figure out a way to make sure that whatever we talk about in terms of authorizing that there is some connection to what the appropriators are ultimately going to do, especially when we are requiring more mandates on the States.

So I thank you very much for your testimony.

Mr. Portman. Thank you.

Mr. Linder. Thank you. Thank you very much, Rob.

Mr. Portman. Thank you, Chairman.

Mr. Linder. Our next witness will be the new Director of the Congressional Budget Office, Mr. Douglas Holtz-Eakin. Welcome. Thank you for coming.


. Mr. Holtz-Eakin. Mr. Chairman, Congressman McGovern, thank you for the chance to be here today and to discuss CBO's experience under the Unfunded Mandates Reform Act, UMRA. We have submitted for the record our written testimony, which documents the experience in greater detail. What I thought I would do is spend a couple minutes hitting the highlights, and then I would be happy to answer your questions.

Mr. Linder. That is an excellent idea. Without objection, the entire statement will be made a part of the record.

Mr. Holtz-Eakin. Thank you. As has been mentioned earlier today, the purpose of UMRA was to highlight in the budgetary process the resource cost imposed on State and local governments, tribal governments, and/or the private sector from the legislation under consideration, and to do this, UMRA imposed several hurdles, one of which was that a bill would not be considered to be in order during floor consideration without a CBO mandate statement.

Intergovernmental mandates also face those hurdles when their costs reach a threshold of $50 million in 1996 dollars, which has gone up to about $59 million now. There would be a point of order against such legislation or the rule governing such legislation, as the Congressman mentioned. For private-sector mandates, the threshold is $100 million, now up to about $117 million.

What I want to spend the bulk of my time doing is documenting CBO's experience under that particular structure in the 7 years that we have had it, and to do that, I am going to point to three different displays that we have got, which really summarize, I think, the facts in a pretty succinct fashion.

Before turning to that, let me respond to a couple of the specifics that you, Mr. Chairman, asked about. The first is that I am going to focus on the overall experience over the last 7 years, but the experience in the most recent years is not particularly different in any way. Indeed, there has not been a dramatic trend in one direction or the other in terms of the kinds of numbers that you are going to see. All the numbers are contained in the written testimony.

I guess what I would point to, to begin with, is that mandates are relatively rare. Starting with the intergovernmental mandates, out of the over 4,000 bills we identified 465 bills, or 11 percent, which contained a mandate at all; for the private sector, it has been higher: 561 out of the nearly 4,000, or 14 percent [see figure].

Even more rare is a mandate that exceeds the cost threshold. In the case of intergovernmental mandates, only 42 bills contained mandates that exceeded the threshold, or 1 percent. For the private sector, only 3 percent of the bills reviewed had mandates that exceeded their threshold. And so the experience has been on the whole that there are not many mandates which exceed the thresholds out of all the bills that we have reviewed over the 7 years.

Now, if we turn to the next chart, you can experience a little bit of what goes on with the bills that do exceed the thresholds [see figure]. You can see that for those that are above the thresholds, 18 of the intergovernmental mandates were not enacted, 4 were amended prior to enactment to reduce costs below the threshold, and then 2 were actually enacted with the mandate above the threshold -- those being Food Stamp legislation and the minimum wage legislation that Congressman Portman mentioned.

With respect to the private sector, you can see that the frequency of enactment of mandates with costs above the threshold is a bit higher [see figure]. Twenty-one such bills were enacted, 5 were amended prior to enactment to get the costs below the threshold.

What these figures do is document the experience that you see on paper. The thing that is very difficult to quantify, although Congressman Portman promised I would -- I don't want to disappoint you -- is the interaction with committees and CBO staff prior to the enactment or even the introduction of a bill. There is now a steady stream of phone calls to inquire as to whether a mandate would be present, and if present, if it was likely to exceed a threshold. And so at the very informal level, it is true that the law itself, UMRA, has had an impact on the development of legislation. However, those informal interactions wouldn't be reflected in this particular kind of measurement that we have presented today.

Now, that summarizes our experience under UMRA, but it really very much reflects the targeted nature of the statute. The definition of UMRA has been talked about a little bit this morning. One thing to stress is that conditions of grants are not mandates. For example, the requirements on State and local governments in the No Child Left Behind Act are conditions for receiving Federal grant money. States do indeed have the option of simply forgoing the grant money, and as a result the requirements do not qualify as a mandate under the UMRA statute.

Costs as measured under UMRA are only the direct costs to those governments or private-sector entities facing the mandate, and broader economic costs from such mandates are not included as a measure of costs under UMRA. Certain bills are excluded entirely, as you mentioned, appropriations bills, bills associated with constitutional rights, for example, the voting acts, the voting act legislation of 2001, simply do not fall within the scope of UMRA.

For those reasons, if Congress felt that this record was not something it was satisfied with and wanted to proceed further in thinking about UMRA-like legislation, there are really three possibilities. One possibility would be that you could make the existing law work better by further clarifying the definitions of mandates and their costs. From a CBO perspective it is not very easy in many cases to estimate the costs. Indeed, despite the fact that we spend about $2 million a year and devote 16 FTEs, 16 bodies, to this enterprise, it is in many cases very difficult for a variety of reasons to estimate the costs and whether they exceed the threshold. In some cases the ultimate cost will depend on the way in which the mandate is implemented and the regulation cannot be observed at the legislative stage of the process. In some cases the affected parties don't even know what the costs would be to them, and that makes it difficult for CBO to estimate those costs.

And in some cases we can't even tell if there is a mandate. While Congressman Portman suggested that the definition of a mandate was left up to CBO, I can tell you that we do our best to implement the statute as it was passed by the Congress, and as a new Director to CBO, one of the great joyous moments in the job was getting briefed on the many principles that one must understand in trying to identify a mandate. I would suggest that that reflects the difficulty in really understanding what mandates are under the law.

As a second possibility, you could add some teeth to the existing law, for example, by adding a point of order on private-sector mandates that exceed the threshold, similar to the one for intergovernmental mandates, and then of course the third possibility is to broaden the scope of the law in some way. You could have it apply to more types of legislation, as I mentioned. You could have it apply to more costs, a broader measure of economic costs. The Mandates Information Act, for example, would apply to both direct and indirect costs, impacts on wages and consumers, and that would expand the scope tremendously.

And finally, you could lower the threshold so that, de facto, more bills would fall within the scope of the existing law and broaden its impact.

With those brief remarks, I will close and be happy to answer your questions.

Mr. Linder. I thank you. I want to clarify something. The numbers that you give us here, the 4,097 and the 3,983, those are bills that actually get to the floor?

Mr. Holtz-Eakin. Those are statements that CBO issued on mandates, and so in each case --

Mr. Linder. What is the status of that bill? That doesn't include the informal conversations you had back with --

Mr. Holtz-Eakin. No. It excludes the informal conversations, but it includes bills that may never have reached the floor for a vote, but on which CBO did do an analysis and for which we issued a mandate statement.

Mr. Linder. They have been introduced?

Mr. Holtz-Eakin. Yes.

Mr. Linder. They are in the process?

Mr. Holtz-Eakin. Yes.

Mr. Linder. The informal discussions are not measured in any other way?

Mr. Holtz-Eakin. They are not measured in any other way other than to talk with the staff, who can document that in the 7 years that CBO has done this, those drafting legislation are aware of the existence of UMRA and check to see whether their bill will in fact be affected by its provisions.

Mr. Linder. And it has had a positive impact on drafting that legislation?

Mr. Holtz-Eakin. It has certainly had an impact, and bringing the awareness and information I believe is the original goal, so in that respect it has been quite positive.

Mr. Linder. I would like you to comment on Mr. McGovern's point that I think is very well made, and that is should the appropriation process be included in some kind of unfunded mandate issue?

Mr. Holtz-Eakin. I don't know if the appropriations process per se is something that ought to be singled out. I think the broader issue is the scope of this act -- the way it was passed was fairly targeted and then whether Congress would desire to have a greater UMRA-like oversight in the legislative process. It could apply in the appropriations process. It could apply to some bills which are currently excluded. For example, title II of the Social Security Act is excluded from UMRA consideration.

As I mentioned earlier, the Voting Rights Act of 2001 is excluded, as it contains issues of constitutional rights. National security issues are excluded. So I think if you step back, it is not just appropriations, but in what context do Members of Congress wish to highlight the information that there is an unfunded mandate imposed on the private sector or State and local governments.

Mr. Linder. Mr. McGovern.

Mr. McGovern. Thank you for your testimony. I guess I will go back to what I was saying to Congressman Portman. When I go back to my district, and we can kind of finesse this all we want about what kind of constitutes an unfunded mandate, but they seem to know it, because they end up having to pay bills and they end up having to follow rules and laws that we pass here, and going back to the No Child Left Behind Act, for example. Let me just ask you, do you consider that at this particular point given what the Appropriations Committees have appropriated for these educational programs, would you consider that an unfunded mandate on States and local communities?

Mr. Holtz-Eakin. There are really two answers. I will give you an example to elucidate this. Under the narrow interpretation, the interpretation of the law as passed, it is not an unfunded mandate, because it is a condition of Federal aid. States have the option to simply decline the Federal aid, and as a result not be subject to any of the requirements. They even have flexibility within that to modify the testing requirements and a way to minimize the costs, and for that reason it is not considered a mandate under UMRA.

Now, the example I am aware of is this: At the time UMRA was passed, the Congress authorized $4.5 million each year for CBO to conduct its work under UMRA. We received $1.1 million. That has subsequently lapsed. We have built it into our ongoing budget. It costs us about $2 million a year. So we have been able to display the flexibility and to meet, I hope to the satisfaction of the Members, our responsibilities under the act. The question is, does that constitute an unfunded mandate? I leave that to you. I know it is not exactly a clear answer, but it is our interpretation that the No Child Left Behind Act gives the States the flexibility to decline the aid, and as a result it does not constitute a formal mandate.

Mr. McGovern. And again you are doing what -- CBO is doing what we are telling you to do I guess and following the rules, but I tell you if I went back to Massachusetts and spoke to the superintendents in the Commonwealth of Massachusetts or principals or teachers and said that the No Child Left Behind Act is not an unfunded mandate, they would laugh me out of the hall, to be honest with you. And there is a consequence of not taking Federal aid and losing -- depending what the law is, losing Federal aid. I mean, you can totally ruin your education system. It is not a viable option, because all States want to make sure that they have the finest education system they can provide, but I guess it seems to me that if the definition of what an unfunded mandate is does not include the No Child Left Behind Act, I think we need to figure out a way to broaden what the definition is, because I will tell you it is a huge issue. And as I said in my opening remarks on the National Conference of State Legislators, they issued a report in which they say that unfunded -- which they list unfunded mandates has underfunded national expectations imposed on State and local governments. They mention IDEA, for example, No Child Left Behind, election reform, homeland security. This is not so much a reflection on the work that you are doing, which I am not necessarily criticizing. I think we should give you some wider parameters to work with, but my concern here is that we pass bills that have expectations for States and local communities. In many cases we even authorize the money to cover some of these expectations or these challenges, but then when it comes to the appropriations process, the money is not there.

So States are operating on the assumption that in fact this is a good idea; we know you know it is a good idea; you are actually authorizing the money, but then when the checks come, it ain't anywhere near what we were promised, and it is that kind of disconnect that I think is troublesome, and I think that is -- when I go back home, that is what they call unfunded mandates, and so I think we should include the Appropriations Committees, and I think some of these other areas that you have talked about as well in how we analyze this, because I think that is an important link. If you don't appropriate the money, then what are you doing? You are passing the buck on to the States and local communities, and that is not fair.

But anyway, I thank you very much for your testimony, and I hope you will be willing in the coming weeks as we think more about this to entertain questions in writing from members of the panel, and maybe we can test some ideas on you and get your input on that.

Mr. Holtz-Eakin. I would be happy to do that. I look forward to it.

Mr. Linder. Thank you very much for being here.

Our final witness is the gentleman from North Carolina, Mr. Etheridge. Welcome.


Mr. Etheridge. Thank you, Mr. Chairman. Let me read a portion of it, and then I will submit it, Mr. Chairman, for the record.

Mr. Linder. Without objection.

Mr. Etheridge. And I thank you for allowing me the opportunity to be here and to Mr. McGovern for this really important subject of unfunded Federal mandates, and I really must say to you I have enjoyed listening to the testimony this morning, and hopefully in our Q and A we will have a chance to cover some of that, because now as Congress goes through about 13 appropriations bills, I think the local impact of the Federal policy and decisions we make is becoming clearer and clearer to everyone.

And let me just share with you what the Washington Post reported in yesterday's paper. It said, Washington and the States have pushed fiscal crisis of historical proportions down to the next level of government. While cutting Federal taxes, President Bush and Congress left behind billions of dollars of Federal education, health care and homeland security obligations to the States. Governors and legislators already struggling to fix record budget deficits, mostly without raising taxes, cut spending deeply in almost every area, including local aid. With nowhere else to send the bill, local governments are cutting services, and in many cases they are raising local property taxes.

And I would say to you the problem with these decisions that are being created on the States and at the local level is very real and will become more so in the weeks, months and maybe even years to come.

Let me just share with you my experience before I came to Congress 6-1/2 years ago. I think it gives me a little bit of a unique perspective on this Federal-State relationship. When I was first elected to this body, I was finishing my 8th year as State superintendent of the schools of the public schools in North Carolina. That job is a little different than some States, in that North Carolina has a State school system, not a system of schools. By that I mean the State has a State curriculum, State funding. We pay the teachers. The State puts up somewhere between 68 and 70 percent of the dollars depending on -- the Federal Government puts somewhere in the neighborhood of about 7 percent, and that varies by local LEA; that is, local education agency, depending on the number of children who are in Title I and the number of children with special needs.

So I would modestly submit to you that coming from the State that is the 10th largest State in this country, that few Members of this Congress have that perspective, because in addition to doing that, prior to serving as chief -- and I will talk about that more later -- I served as a State legislator for 10 years where I chaired the Appropriations Committee. Prior to that I was a county commissioner where I chaired the appropriations process for 2 years as a chairman of local county commissioners. So when we talk about actions at the Federal level, short-changing local governments, I can tell you it is real, and we talk about No Child Left Behind, it does have an impact. And I know firsthand the pain of these actions that it will create on real people in communities, certainly that I represent but more importantly across this country.

For example, the Bush administration has underfunded No Child Left Behind now for nearly $20 billion in just the first 3 years, and the appropriations bill that we are looking at this year is roughly $8 billion short for 2004 alone. And in tandem with these cuts, the U.S. department is moving forward with the new standards of accountability measures.

My State will report its figures for annual yearly progress later this month, and early estimates are that as many as 50 percent of our State schools may fail to meet the grade on annual yearly projects, and in some States it is going to be substantially higher than that, and I will tell you why in just a moment. And that is despite the fact that North Carolina is leading the Nation in terms of improvement in education. I know, because I was there and they had just put out the NAPE numbers on reading and math scores, and North Carolina was among the top three in the United States in terms of growth and where they positioned themselves.

So I can tell you right now that the combination of massive education cuts and poor test results will have a devastating impact on morale in our schools, and ultimately that will be transferred to communities, and you can be assured that people are going to feel that and they are going to see that and we are going to hear from them.

And let me state for the record -- and I will submit it in my testimony -- that I voted for No Child Left Behind, because I think and I thought at the time that I strongly support, always have, education reform and improvement and accountability, but reform without all the resources of a massive Federal unfunded mandate is really a crushing burden on our local schools and our children. And as a result of that, I have introduced legislation to require full funding of No Child Left Behind.

Now, whether that passes or not I don't know, because I think it is a punitive provision if it is not fully funded and implemented. And I think this bill should serve as a model for the way that the Federal Government makes good on its responsibilities to the States, to localities and taxpayers. And let me tell you just why, because you have talked about it already.

Under the current implementation of education reform, we are headed down the same road, I fear, that was adopted a number of years ago in the failed model of IDEA, or Individuals With Disability Education Act.

Now, let me state right now for the record that I think Congress should have passed that act, but it should have funded it. There were a lot of children who would have never had the opportunity in our public schools had it not been for the Federal requirement to do it. Some schools wouldn't have done it, and yet they picked up the cost, and that is a tremendous unfunded mandate that is falling on the shoulders of States but more importantly on local government. Congress promised at the time 40 percent funding. They finally got to 13. I think this year we are going to get somewhere close to 18 percent, still woefully underfunded and still the largest unfunded mandate in my opinion in the educational budget. And all you have to do is talk to principals, teachers and local school folks, and they can tell you what the burden does and how it crowds out other programs that they would like to be using money for.

. Mr. Etheridge. Whether IDEA covers a small portion of our Nation's students -- and it is a small portion that it covers, but in some school systems it is disproportionate, depending on where you are in the country and even where you are within sometimes even local LEAs, certainly in my State. And No Child Left Behind covers almost -- does cover every child. It is not just disproportionate groups. It covers every child. And I respectfully disagree with our friend who was here previously saying States can elect not to take the money. I am here to tell you States cannot elect not to take that money because if they do they are in deep trouble. When we are talking about No Child Left Behind we are talking about -- local governments tend to follow where the Federal Government sets the target. I think that is healthy. I think it is good for our republic.

Why? Because I think education -- I have always believed this -- is as much a part of our national defense as protecting our borders against our enemies who would do us harm, because if we do not educate the next generation of young people then we have done a great injustice to them.

In addition to my service, as I said earlier, as a chief State school officer and cabinet officer at the State level, I served as a legislator and chaired the Appropriations Committee for 4 years, wrote four balanced budgets. That is required in North Carolina by Constitution. So I understand what it means and I learned firsthand what limited options are available. And when you become a county commissioner, you find out very quickly, as it travels down to that level, you have even less options available other than in most cases property taxes when things come to you without funding.

And I think the same thing is happening today with homeland security in the war against terrorism. In the aftermath of September the 11th, Federal officials of every stripe, all of us in this room, Democrats and Republicans alike, vowed that never again would we be caught again so unprepared, and I think rightly so. But if there is a new resolve to fight the terrorism threat to our hometowns, there is also a recognition that our local first responders are our front line troops in this battle. I don't think there is any question about that. Unfortunately, we have learned that we can't secure the heartland on the cheap. The Federal responsibility to secure the Nation from attack from foreign aggressors is clearly spelled out in Article II of the United States Constitution. Yet funding to bolster our first responders remains woefully inadequate in my opinion. I have met with first responders throughout the Second District of North Carolina, really outside the district, in two of the other districts that adjoin, and I can tell you that they are frustrated by the lack of support for their new responsibilities in the war against terrorism. For example, every time the DHS Secretary, Tom Ridge, changes our alert status code, it costs local governments precious dollars in overtime, manpower and other resources. We know we face threats of attacks using sophisticated weapons potentially deploying chemical, biological or radiological agents. But my local governments do not have the funds to buy protective gear to handle them. And when a multi-jurisdictional incident happens, we are lucky if police, fire and rescue and emergency personnel can communicate with one another over the radio. This is a problem all across America.

Our needs are many and growing, and support from the Federal Government has been sorely lacking in many of these areas. Earlier this week the Hart-Rudman Commission estimated that we need an additional $98.4 billion over the next 5 years to secure the homeland to an adequate degree that is necessary. And with virtually every State in the midst of a crisis in this awful economy, we know these funds can only materialize through aid from the Federal Government. Otherwise, it will mean cuts in services, increased income and property taxes, or some combination thereof at the State and local level.

Again quoting from yesterday's Washington Post, "Faced with total deficits approaching $100 billion this budget season, Governors and legislators in more than half of our States have pared the once-sacred State role of aiding local governments," which is true in North Carolina, "with cash for everything from policing to patching potholes, mowing ball fields, lighting streets, even zapping mosquitoes. Since poorer cities tend to rely more on State aid, the burden in many cases is landing on those" who are "least able to pay" the very heaviest.

Finally, Mr. Chairman, I am pleased that this committee is examining this important issue because we must stop once and for all all of the practices of Federal officials passing the buck through unfunded mandates. I think it is a moral responsibility, we have to live up to our obligations on important priorities of educational reform and homeland security. And today's hearing is a beginning of that process, and I would be happy to answer whatever questions you may have.

Mr. Linder. I thank you, Mr. Etheridge, for your testimony and I guess the only question I would like to run by you is to have you comment -- you have been sitting through the whole hearing -- on Mr. McGovern's notion of including appropriators under this umbrella.

Mr. Etheridge. Do I think they should be?

Mr. Linder. Yes.

Mr. Etheridge. Well, certainly there has to be a linkage. I was an appropriator at one time and chaired the appropriation process. Appropriators obviously will not want to do it, I can assure you of that, at the State level because they have a wide swath in which to operate and knowing at the State level we did a lot of policy obligations outside of that. But I think at the local level, one of the problems that I see is I think people sit here and talk as if everybody understands when you pass a bill that has an authorization and you are a local school superintendent or you are a local police officer they don't know the difference between an authorization and an appropriation. And we sit up here and talk as if everybody understands that, and then we argue in the little fine print that it makes a difference. That is a crock of bull. Those folks out there have obligations to protect life and property. Teachers and principals are educating children and they don't -- they only know what they get and they know it is not adequate to meets the needs. And if a child shows up multi-handicapped, you know, you have got an obligation to help that child. And in some schools it is absolutely overwhelming and yet we say to them, well, you know, really it is not really a mandate. You know you can take the money. You don't have to take it. No, you have to assess those children or else the public opinion will kill you. And I think we have an obligation here to be honest in what we say and not play games with, you know, shuffling the deck, because I think that is beneath a great democracy.

Mr. Linder. Mr. McGovern.

Mr. McGovern. Thank you, Mr. Chairman, and I want to thank my colleague Mr. Etheridge for his testimony, and I think he is right on and I appreciate everything you have said. You know, the reason why I kind of raised the issue of whether appropriators should be part of this is simply because there seems to be a disconnect, and I am not sure if that is the way to resolve it through adding them to this act or not. But the fact of the matter is it is like one hand doesn't know what the other hand is doing. And you are right. You get up and you have a No Child Left Behind Act and everybody does a big press conference and the President is on the White House lawn signing this and promises all this stuff to our States and local community, and you are right. A lot of local officials aren't following this process each and every day because they are doing their jobs, and they don't know that the appropriators are going to come in far less -- with far less money than was originally promised or touted. And so they are always kind of shocked when they are moving to implement some of these programs and the money is not there. Essentially when we get up with some of these authorizations and some of these press conferences we are essentially putting a bad check in front of our State and local officials. We are saying here is the money, but if they bring it to the bank it will bounce because there is not enough money that could be forthcoming. And there needs to be some way of coordinating what authorizers and appropriators do here so that in fact what the intent of the No Child Left Behind Act is actually gets followed through with.

And so that is what I am getting at. And I am not quite sure how to do it, but if we are talking about unfunded mandates, to say that the No Child Left Behind Act is not an unfunded mandate when in fact there is not a superintendent in your district or a State official who won't laugh in your face if you tell them that, something is not right here.

Mr. Etheridge. Let me comment on that if I may because I think -- let me talk about the No Child Left Behind and then come back to the piece on appropriators and otherwise. Because I think we really kid ourselves when we say it is not an unfunded mandate, I mean really kid ourselves, because local officials don't know the difference. At the State level, if you have ever served at the State level -- and I am going to try to tie these together this way. When I chaired the appropriations committee, I guess that is sort of the framework I can come from, I could stop any bill passing if it affected the budget prior to the main budget bill passing. In other words, if it obligated the budget you couldn't pass it. You couldn't pass a piece of No Child Left Behind if it had a budget implication, if it was not within the budget numbers.

Here, it is different. There is a disconnect, and I think the public is concerned. Let me help, if I may, on this as it relates to education. And I think it affects a lot of other areas, certainly education probably more than any others. We would not dare, we would not dare, Democrat or Republican, liberal or conservative, to send our men into Iraq or Iran or any other war zone without putting the resources behind them. If we commit we are going to do the money, we are going to give them that plus more. We are going to do it. We would not do otherwise. And I think we would be derelict in our responsibility and our constitutional duties. And yet we will pass a piece of legislation that has, in my opinion, as much to do with the future of this country in helping every child get to where they need to get to in education, and then we are going to do it on the cheap.

Now, it is easy to say money is not the total answer, and I have said that many times too. But if you give not enough -- if you give just enough to do something and not enough to really make it happen, because when you start talking about assessment, you are talking about a very complicated piece and a very expensive thing to develop if you are going to be fair to children and help them gain rather than play gotcha. That is expensive, but it is cheap in the long run because it helps you do a better job of teaching.

And North Carolina is an example. To explain that, we have a State system. And I would say to you a lot of No Child Left Behind was modeled after what we have done in North Carolina. We have an assessment system that assesses the curriculum. We started in 1990. I went in as superintendent in 1989, took a lot of -- I have got a lot of scars to show it. But it made a difference. Our scores have gone up dramatically. We didn't have the peak. We had the gradual growth, and that is what you want. And you have got to bring all children with you, and we are doing that now. Our children of color, all those are doing much better and above the Southeast average and now above the national average. But you have got to be able to fund it, and you can't have your start and stop.

I was amused when I heard this issue about grants. Grants don't work in public schools. Why? Because you can't hire a teacher this year on a grant and say you are not going to be here next year. The children are still going to be there. They have still got the need. Now, you can play that game and say, well, it doesn't really matter. It matters. People in education aren't stupid. You know, last time I checked most of them require a four-year degree and they are pretty bright people and they understand the game plan. And they will learn to play a game. But we don't need them playing games. We need them to understand we are committed to this, we are committed for the long haul. We are going to fund it and we are going to be there with them and it isn't where we are playing gotcha.

It is we are all committed to improving the quality of education for every child in this country wherever they live and we are going to help them do better because our future depends on their futures.

Mr. McGovern. Well, I agree with you. I also agree with you that you know we talk about national security, that education needs to be front and center because our national security does depend in very large part upon the education of our young people.

Mr. Etheridge. That is how we got the Child Nutrition Program in public schools as part of the National Defense Act of World War II.

Mr. McGovern. Absolutely. But again, I will go back to what I was saying in the beginning. We have to figure out a way to bring some honesty and candor into this process. And if the appropriators were here today they would be saying to us, well, you know, we are under budget caps and we can only put X amount of money on the table. Well, but then there is something wrong and there is something inherently dishonest then about getting up and touting a No Child Left Behind Act and promising all these benefits to local communities and then later on saying, oh, I am sorry. You know, we are not going to have the money. Well, if you are going to make that promise you find the money. And if it means going without a tax cut, then so be it. If it means that you are going to have to find other ways to find additional revenues, then you are going to have to do it. But it is just not right and it is not fair and especially when it comes to education. It is just wrong to make these proclamations and to not follow up on them. And again my State of Massachusetts, like your State and other States, education is a huge deal. And there is not a parent out there, whether they are Democrat or Republican or Independent or Green or whatever, who doesn't want their kids to get a good education and they expect us to deliver the goods, to deliver the resources. And money is not everything, but if you are going to mandate new testing, if you are going to mandate new standards, if you are going to mandate smaller class sizes or if you are going to mandate these special programs, you have got to get the money.

Mr. Etheridge. Costs money, sure. I don't disagree with that.

Mr. McGovern. I thank you very much for your --

Mr. Linder. Thank you very much for being here. Thank you all. This meeting is adjourned.

[Whereupon, at 11:50 a.m., the subcommittee was adjourned.]