Legislation introduced by Senator Rob Portman (R-OH) would strengthen the Unfunded Mandates Reform Act of 1995 by bringing the SEC, CFTC and other independent federal agencies within its mandate. UMRA was a bipartisan effort to prevent Congress and federal regulators from blindly imposing major economic burdens on the private sector and on state, local and tribal governments without weighing the costs and benefits, said Senator Portman. Signed by President Bill Clinton in 1995, the Unfunded Mandates Reform Act was bipartisan legislation that basically says that regulators have to evaluate a regulation's cost and find less costly alternatives before adopting a major rule. In 1995, noted Senator Portman, UMRA was imposed upon the executive agencies but not on independent federal agencies. Those independent agencies have grown, and so have their regulations. Based on information from the GAO, observed Sen. Portman, between 1996 and this year independent agencies issued nearly 200 regulations that had an impact of $100 million or more on the economy. Over 200 regulations were not subject to review under UMRA, he emphasized, because they were from independent agencies. He sees a need to extend UMRA to these independent agencies in order to close this loophole. Cong. Record, June 9, 2011, pps. S S3657-3658 As introduced by Sen. Portman, the Unfunded Mandates Accountabilty Act would require federal agencies to specifically assess the potential effects of new regulation on job creation or job loss; consider market-based and non-government alternatives to regulation; require agencies to choose the least burdensome regulatory option that achieves the policy goal set out by Congress; extend UMRA to independent agencies; and permit courts to review an agency's economic impact analysis under UMRA. Federal agencies would, for the first time, be required specifically to assess the potential impact of any new major regulation with an annual effect of $100M or more on job creation or job loss and quantify that impact to the extent feasible. It would also require the consideration of market‐based, flexible, and nongovernmental alternatives. UMRA requires agencies to consider a reasonable number of regulatory alternatives. This legislation would go further by specifically requiring agencies to consider reasonable alternatives that require no action by the federal government, use incentives and market‐based solutions, and/or permit the greatest flexibility in achieving the goals of the statute authorizing the regulation. UMRA now states that agencies must select the least costly, most cost effective or least burdensome alternative that achieves the objectives of the rule unless the agency head simply provides an explanation. The Portman bill eliminates that excessively broad exception to require an agency to follow the least onerous regulatory course to achieve the policy goals set out by Congress. Agencies will, however, continue to have latitude to interpret statutory objectives. This bill would apply the cost-benefit framework of UMRA to independent agencies. There is no basis for distinguishing between executive and independent agencies with respect to cost‐benefit analysis of new regulations. Given that rules issued by independent agencies are not reviewed by OMB's Office of Information and Regulatory Affairs, there is an even more compelling need to bring independent agencies within the basic cost‐benefit framework created by Congress for executive agencies. Currently, UMRA's cost‐benefit framework is triggered only by rules that require direct expenditures of $100 million or more, indexed for inflation. This focus on expenditures makes sense for intergovernmental mandates, reasoned the Senator, but it excludes a host of compliance costs borne by the private sector. The legislation would revise the economic threshold to include any rule that imposes an annual effect on the economy of $100 million or more. According to Senator Portman, the broader scope would capture rules that impose less direct, but no less tangible, costs on employers. It would also better align UMRA with the definition of a "significant regulatory action" contained in President Clinton's Executive Order 12,866 (1993). UMRA currently applies only to general notices of proposed rulemaking, which excludes rules hastily adopted without general notice. The Portman measure would expand UMRA to apply to any proposed or final rule. Courts have interpreted a handful of regulatory statutes to prohibit agencies from even considering costs when crafting certain rules. That approach does not accord with economic reality in a world of scarce resources, noted Senator Portman, and it often results in agencies considering cost in an undisclosed, back‐of‐the‐envelope manner. The bill would extend the cost‐benefit analysis to any new rule, while still recognizing that an agency can consider only regulatory alternatives within its discretion under the statute authorizing the rule. Finally, the legislation would permit judicial review of an agency's compliance with UMRA as part of any challenge to the rule brought under the Administrative Procedure Act. Each agency's cost‐benefit analysis, as well as its approach to less onerous regulatory alternatives, would be reviewed under the arbitrary and capricious standard. Review would be deferential, but it would require an agency to provide a reasoned explanation of how its adoption of a particular regulatory means is consistent with UMRA. An agency that relies on an irrational or otherwise deficient cost‐benefit analysis, or adopts a needlessly burdensome option, would risk remand or vacatur of its regulation.
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