tiality in terms of what things you put in the rulemaking reord once it's certified from the negotiating committee.

We want to preserve the candor and the opportunity to float creative or even strange ideas that might be presented in the context of the negotiating committee, and not have them viewed as "a concession" or as something that might be used in a legal forum, such as in the regulatory rulemaking. We wanted to preserve that distinction.

So that was our line of demarcation.

Confidentiality has not been a problem. I believe where it was a concern were some private caucus groups established, but there was full disclosure of the ultimate basis of the negotiations. But there were some opportunities for some work groups to convene in private.

But I don't believe that confidentiality, as Mr. Harter said, has been a probelm for our industry groups.

Senator LEVIN. Okay. Any of you want to make any other comment before we close?

What we'll do is leave the record open for any additional comments that you have, and your statements will be made part of the record in full, as I think probably was indicated already.

We will have some additional statements for the record from Mr. John Dunlop, Professor of Economics at Harvard and former Secretary of Labor;1 Mrs. Margaret Seminario, Associate Director, AFLCIÓ, and a reg neg mediator; 2 Ms. Gale Bingham, who is Director of the Program on Environmental Dispute Resolution, the Conservation Foundation and a reg neg mediator; Mr. Frank Wilcher, Jr., who is President of the Industrial Safety Equipment Association,4 and perhaps a number of others.

We are very much indebted to our panelists this morning, and also to your patience with this panel. We had to come and go. We will stand adjourned.

[Whereupon, at 11:07 a.m., the Committee adjourned, subject to the call of the Chair.]

1 See p. 472.

2 See p. 460.

3 See p. 466.

4 See p. 481.

REGULATORY REFORM: FEDERALISM AND THE

REGULATORY FLEXIBILITY ACT

WEDNESDAY, SEPTEMBER 14, 1988

U.S. SENATE,

COMMITTEE ON GOVERNMENTAL AFFAIRS,

Washington, DC.

The Committee met, pursuant to notice, at 10 a.m., in room SD342, Dirksen Senate Office Building, John Glenn, Chairman, presiding.

Present: Senators Glenn, Levin, and Heinz.

OPENING STATEMENT OF CHAIRMAN GLENN

Chairman GLENN. The Committee will be in order.

The balance of power between Federal, State, and local governments determines how well and how fairly this country conducts its business of governance. Today, we will assess this balance as it is reflected in the conduct of our programs on environmental regulation.

Using environmental policy as a case study, this morning we will examine what the present balance of regulatory federalism looks like, review the problems with it, and consider some principles to guide us in our future decisions about how such responsibility should be distributed across the various levels of government.

This is the second in a series of hearings this Committee is holding on regulatory reform. Whether it is through the process by which agencies negotiate rules with affected parties-the topic of our first hearing-or the manner in which agencies coordinate their regulatory agendas-the topic of our next hearing-regulation is one of the most important means by which the Federal Government directs and affects State and local governments. Regulations establishes the balance of power and responsibility that defines our Federal system.

In 1981, President Reagan entered office promising the institution of a "new federalism." He advocated the return of decisionmaking power to State and local governments.

The evidence suggests that some aspects of President Reagan's agenda in this area have been carried out. There has been some transfer of power. But the evidence also points to a transfer of responsibility that has been neither considered nor orderly.

It is true, for example, that since 1979, the States have taken on increased funding responsibility for air, water, and hazardous waste environmental programs. But they have had to do this. Why?

(29)

Because their Federal grants have been cut almost in half over this period.

More generally, 9 years ago, the National Science Foundation found that local governments dealt with more than 1,000 Federal and State mandates annually. Today, we will hear witnesses tell us that the burdens on local governments have become even more onerous than that.

The idea of sharing decision-making responsibility for national programs with State and local governments is, in itself, a good one, and I have supported it. However, a policy of "New Federalism" cannot be supported if it is simply a blind for across-the-board cuts and the impostion of increased bureaucratic burdens on our local communities.

Today, we will do what it seems the Reagan administration has not: We will make an assessment of the present distribution of responsibility for implementing Federal regulations. We will examine the Federal procedure-instituted by the Regulatory Flexibility Act of 1980-for relieving the regulatory burden on our local governments. And we will ask-and I hope start to answer-a vital question: How should responsbility for environmental regulatory programs be distributed to ensure both that these programs succeed and that they succeed while benefiting as many as possible and burdening no one unjustly.

Now, that is a big order. But the bottom line is: has deregulation, the changes in the regulatory process, and the evolving relationship between Federal regulators and small governments mean that our Federal regulatory programs get carried out better or less well than they were a decade ago? In short, the bottom line is: does our Federal system of regulation work or does it not work? That is what we are trying to determine today.

Our first panel will discuss the current allocation of responsibility for environmental regulatory programs. Jonathan Lash, Secretary of Natural Resources for the State of Vermont, will present the view of the States.

Jeffrey Schiff, Executive Director of the National Association of Towns and Townships, and Joan Beardmore, Clerk of Warren Township in Ohio, will discuss environmental regulation from a local perspective.

And Jeffrey Leiter will use his experience working with small businesses to throw light on the procedures open to small businesses and local governments overburdened by Federal regulation.

On our second panel, we are honored to have Frank Swain, Chief Counsel for Advocacy of the Small Business Administration, and Richard Morganstern, Director of the Environmental Protection Agency's Office of Policy Analysis. They will explain to us what is being done by Federal agencies to implement the Regulatory Flexibility Act.

Our third panel is led by Elliot Schwartz, Acting Assistant Director for the Natural Resources and Commerce Division of the Congressional Budget Office, CBO. He will present an interim report on a Congressional Budget Office study requested by the Committee earlier this year. The study focuses on the present allocation of responsibility for environmental regulatory programs across levels

of government and the economic criteria by which that allocation can be judged.

We would now like to have our first panel come up to the table, please: The Honorable Jonathan Lash, Secretary, Agency of Natural Resources, State of Vermont; Mr. Jeffrey Schiff, Executive Director, National Association of Towns and Townships; Ms. Joan Beardmore, Clerk of the Warren Township, Ohio; and Mr. Jeffrey Leiter, Small Business Legal Representative, from Collier, Shannon, Rill and Scott.

Welcome to our hearing this morning; we look forward to your testimony. Mr. Lash, if you will lead off with any comments you may have. I know that some of you have lengthy statements. We would appreciate your abbreviating them, if they are long. In any event, your entire statements will be included in the Committee record.

We welcome all of you this morning.

TESTIMONY OF JONATHAN LASH, SECRETARY, AGENCY OF NATURAL RESOURCES, STATE OF VERMONT 1

Mr. LASH. Thank you, Mr. Chairman.

I am very happy to have the opportunity to appear before the Committee this morning, representing the National Governors' Association. Governor Madeleine Kunin of Vermont chairs the National Governors' Association Panel on Energy and Environment and the relationship between the Environmental Protection Agency and the States is an almost constant focus of that Committee.

I would like, if I may, to begin by placing the issue in context. It is only recently that environmental policy has been set at the Federal level. Historically, environmental issues were treated as private rights and dealt with through the courts, as were other private rights.

It was only in the second half of this century that the Federal Government even began to address large-scale environmental pollution issues, and only in 1970, witnessing the failure of States and local governments to effectively address environmental pollution problems, that the Federal Government began to enact tough mandatory standards.

As everyone who works in the field knows, in doing so, Congress tried an experiment in which the environmental policies are set by the Congress, basic standards are promulgated by the Environmental Protection Agency, but the States are given the opportunity to take delegation of those programs and to implement them at the State level.

At the time that the initial clean air and clean water legislation was passed in the early 1970's, that was a unique form of FederalState partnership, one that represented an experiment.

Part of the Federal commitment was not only to set minimum standards, but to provide assistance to the States who were, in essence, implementing Federal policy. That partnership has flourished and, despite frequent tensions between Federal administra

1 See p. 242 for Mr. Lash's prepared statement.

tors and State administrators, has worked well. Virtually all of the programs have been successfully delegated to the States for implementation, and the States have proven to be innovative and generally effective administrators of the programs.

It is important to recognize some of the reasons that standards are set at the Federal level. First and most importantly, pollution does not recognize jurisdictional boundaries, and if we ever needed evidence of that, we have had it this summer, as the evidence of global warming, of the ozone hole, and of acid rain seems to become stronger almost every day. States and localities cannot deal with national and international problems by themselves.

Secondly, in the absence of Federal minimum standards, States face the problem of dealing with economic competition. Compliance with environmental requirements is often expensive for the regulated community, and it is simply a fact of life that if compliance is less onerous in one jurisdiction and more onerous in another, there are economic pressures for the industries affected to locate in the jurisdiction where it is cheaper to comply.

Many States have enacted standards more stringent than Federal standards. We feel we can justify that because our public demands it; we feel we can justify it because it is good policy, and we often feel that we can convince industries that the quality of life that we provide is of benefit to their employees that more than offsets the costs of compliance. But, nevertheless, in the absence of Federal standards, States and localities would be under tremendous pressures to fall to the least common denominator in order to attract the industry that we all need to survive.

Thirdly, most of the problems we now deal with are problems associated with national industries and national markets. It is very difficult and very inefficient for each State to deal with those problems separately resulting in sharply different standards for one jurisdiction to another.

Finally, the issues are of such technical complexity that few States have the resources in the absence of Federal support to make the technical decisions that are necessary.

State programs have flourished. One of the reasons the State programs have flourished is the States are in a position to respond to, to listen to, and to understand the industries that are being regulated, the local governments that are affected by national environmental programs. The States are often in a position to innovate more quickly than the Federal Government is. We are often able to develop new programs more quickly and to change them more quickly than the Federal Government can.

One example has been the State response to the problem of leaking underground storage tanks. EPA has just proposed regulations that would require testing and monitoring of the existing tanks. Numerous States already have programs in place.

Vermont, for example, has for 2 years had a comprehensive program in place that requires double-walled, cathodically protected surface monitored tanks, and provides cleanup and tank replacement assistance to tank owners. Our program is an illustration of the fact than when there is a serious problem, States are often able to ace quickly and decisively and meet the needs or their own constituency, while the EPA simply cannot move that quickly.