Regulatory Programs: Balancing Federal and State Responsibilities
for Standard Setting and Implementation (20-MAR-02, GAO-02-495).
There are many policy areas in which both federal and state
governments exercise regulatory authority. In enacting new
legislation in these shared areas, Congress must provide federal
protections, guarantees, or benefits while preserving an
appropriate balance between federal and state regulatory
authority and responsibility. State efforts can be directed
toward federal or nationally shared regulatory objectives through
a variety of arrangements, each of which reflects a mechanism for
defining and issuing regulations or standards and assignment of
responsibility for their implementation or enforcement.
Regulatory and standard-setting mechanisms for achieving
nationwide coverage include: (1) fixed federal standards that
preempt all state regulatory action, (2) minimum federal
standards that preempt less stringent state laws but permit
states to establish more stringent standards, (3) inclusion of
federal regulatory provisions in grants or other forms of
assistance, (4) cooperative programs in which voluntary national
standards are formulated by federal and state officials working
together, and (5) widespread state adoption of voluntary
standards formulated by quasi-official entities. The first two of
these mechanisms involve preemption. The other three represent
alternative approaches. Each represents a different combination
of federal and state regulatory authority. The mechanisms also
offer different options to implementation or enforcement.
Further, each standard-setting mechanism offers different
advantages and limitations, that reflect the key considerations
of federal-state balance in the context of a given national
regulatory objective. Shared implementation brings a number of
operational challenges. These include finding the appropriate
level of federal oversight, allocating costs between the federal
government and the states, potentially increasing the
vulnerability of federal agencies to sudden increases in
responsibilities and costs, handling variation in implementation
from state to state, and adjusting to the new federal-state
balance.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-02-495
ACCNO: A02913
TITLE: Regulatory Programs: Balancing Federal and State
Responsibilities for Standard Setting and Implementation
DATE: 03/20/2002
SUBJECT: Federal/state relations
Intergovernmental relations
Regulation
Regulatory agencies
EPA Clean Air Program
EPA Safe Drinking Water Program
FDA Retail Food Protection Program
FHwA Motor Carrier Safety Assistance
Program
FSIS Hazard Analysis and Critical
Control Point System
HHS Temporary Assistance for Needy
Families Block Grant
National Cooperative Highway Research
Program
National Shellfish Sanitation Program
Social Services Block Grant
Substance Abuse Prevention and Treatment
Block Grant Program
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GAO-02-495
a
GAO United States General Accounting Office
Report to the Chairman, Committee on Environment and Public Works, U. S.
Senate
March 2002 REGULATORY PROGRAMS Balancing Federal and State Responsibilities
for Standard Setting and Implementation
GAO- 02- 495
Page i GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities Letter 1
Results in Brief 1 Background 3 Scope and Methodology 4 Standard- Setting
Mechanisms, Implementation Roles Link States to
National Regulatory Objectives 7 Minimum Federal Standards Feature Shared
Regulation and
Implementation 11 Experience with These Mechanisms Suggests Considerations
for
Future Programs 25 Concluding Observations 36
Tables
Table 1: Programs Reviewed for This Report 6 Table 2: Standard- Setting
Mechanisms and Implementation
Patterns 8 Table 3: Division of Implementation Responsibility in Minimum
Standards Programs 13 Table 4: Standard- Setting Mechanisms and Federal-
State Balance
Factors 27
Figures
Figure 1: Defining the National Objective and Examining Background Questions
31 Figure 2: Selecting a Standard- Setting Mechanism 32 Figure 3: Examining
Implementation Options 34 Contents
Page 1 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
March 20, 2002 The Honorable James M. Jeffords Chairman, Committee on
Environment and Public Works United States Senate
Dear Mr. Chairman: In the American system of government there are many
policy areas in which both federal and state governments exercise regulatory
authority. In enacting new legislation in these shared areas, the Congress
faces a key challenge: how to provide federal protections, guarantees, or
benefits while preserving an appropriate balance between federal and state
regulatory authority and responsibility.
As you noted in your request letter, there is little information available
to guide the Congress in selecting or defining an approach to this
challenge. Accordingly, you requested that GAO undertake a study of programs
in which the federal government shares regulatory functions with the states.
Our objectives were to (1) identify major mechanisms and options for
achieving national regulatory purposes within the U. S. intergovernmental
system and (2) identify advantages, issues, and limitations associated with
each mechanism and option and determine how these considerations might guide
the choice among them.
State efforts can be directed toward federal or nationally shared regulatory
objectives through a variety of arrangements, each of which reflects (1) a
mechanism for defining and issuing regulations or standards and (2)
assignment of responsibility for implementing or enforcing the regulations
or standards. Regulatory and standard- setting mechanisms with the potential
for achieving nationwide coverage include:
* fixed federal standards that preempt all state regulatory action in the
subject area covered; minimum federal standards that preempt less
stringent state laws but
permit states to establish standards more stringent than the federal;
inclusion of federal regulatory provisions in grants or other forms of
assistance; cooperative programs in which voluntary national standards are
formulated by federal and state officials working together; and
United States General Accounting Office Washington, DC 20548
Results in Brief
Page 2 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
widespread state adoption of voluntary standards formulated by
quasiofficial entities.
The first two of these mechanisms involve preemption. The other three
represent alternative approaches. Each mechanism represents a different
combination of federal and state regulatory authority.
The mechanisms also offer different options with respect to implementation
or enforcement. Fixed and minimum federal standards permit three patterns of
implementation: (1) direct implementation by a federal agency, (2)
implementation by the states with some degree of federal oversight, and (3)
state implementation in some states and direct federal implementation in
others. The remaining three mechanisms- regulatory provisions in grants or
other forms of support, cooperatively set standards, and state adoption of
standards set by quasi- official entities- rely primarily on direct
implementation by the state under its own authority; they vary in the degree
of federal oversight they can accommodate.
Each standard- setting mechanism offers different advantages and
limitations, that reflect some of the key considerations of federal- state
balance in the context of a given national regulatory objective. Among these
considerations are:
Uniformity: Does this mechanism provide uniform standards and nationwide
coverage where essential to achieve the objective?
Flexibility: Does the mechanism allow for flexibility- in regulatory
content or implementation-- where appropriate to the objective?
Capacity: Does the mechanism assign responsibility appropriate to the
capacity of each level of government to do the job at hand, taking into
account breadth of jurisdiction, enforcement powers, resources, and
location?
Accountability: Can accountability to the federal government be
incorporated into this mechanism where deemed necessary to achieving the
objective?
The mechanisms vary considerably in terms of these factors. For example,
fixed federal standards apply to all states and can enlist state capacity
for implementation but offer relatively little flexibility. Cooperatively
set standards, which generally are not binding on states, offer flexibility
but not uniform coverage or accountability to the federal government. (See
table 4.)
Page 3 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
Shared implementation brings a number of operational challenges. These
include finding the appropriate level of federal oversight, allocating costs
between the federal government and the states, potentially increasing the
vulnerability of federal agencies to sudden increases in responsibilities
and costs, handling variation in implementation from state to state, and
adjusting to the new federal- state balance.
This report addresses these federal- state balance factors and operational
challenges by developing guiding questions that policymakers might use to
select a standard- setting mechanism and implementation arrangement
appropriate to a given federal regulatory objective and set of conditions.
This guidance is summarized in decision flow diagrams, figures 1- 3.
The United States Constitution established a union of states that provided
for national and state government and gave each its own authority and sphere
of power. However, it also allows for these spheres to overlap and thus
creates areas of concurrent power in which either level of government or
both may regulate. Examples include the power to regulate commerce and the
power to tax. Within these areas there may be situations in which laws
conflict. To resolve these conflicts, the Constitution?s Supremacy Clause
provides that federal law is ?the Supreme Law of the Land,? thereby
preempting state law. 1 Preemption occurs when the Congress enacts a statute
or a federal agency adopts a regulation in an area in which state
legislatures have acted or have the authority to act. The Congress?s
constitutional power to regulate interstate commerce has proven the source
of many preemptive statutes. 2
The balance between federal and state government in areas of concurrent
powers has been continuously debated and has shifted as political, social,
and economic conditions have changed over the years. 3 Within the 20th
century, for example:
1 U. S. Const., art. VI, cl2. 2 Congressional Research Service, Federalism
and the Constitution: Limits on Congressional Power (September 5, 2000). 3
See Congressional Research Service, American Federalism, 1776 to 2000:
Significant Events (November 30, 2000). Background
Page 4 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
The Great Depression of the 1930s led to an expanded federal role in
domestic affairs to deal with social and economic problems that states could
not respond to effectively on their own.
The Great Society programs of the 1960s brought further expansion of the
federal role in an effort to achieve socially desirable outcomes and to the
use of state and local governments as intermediaries to implement national
policies in areas that had previously been the purview of state or local
governments or the private sector.
The 1980s brought a shift of funds, authority, and responsibility to the
states through block grants, such as the Social Services Block Grant, which
allowed greater state and local autonomy and flexibility in fashioning local
strategies to address federal objectives.
The trend toward state flexibility continued in the 1990s, accompanied by
concern about ?unfunded mandates? (federal regulations that impose new
duties on states- duties that require state expenditures). 4 At the same
time, the emergence of the Internet and the increasingly national and
international nature of commerce created pressures for federal regulation.
Questions of federal and state responsibility in areas of common regulatory
concern continue to spark debate in the twenty- first century, as evidenced
by the examination of state- regulated voting procedures following the 2000
presidential election 5 and of federal and state homeland security
responsibilities following the terrorist attacks of 2001. 6 Such questions
are also likely to arise during reauthorization debates on existing
programs.
To identify mechanisms for focusing state efforts toward national regulatory
objectives, we reviewed the literature on federalism, intergovernmental
relations, preemption, and regulatory programs in a broad range of policy
areas. We then examined programs and approaches that combined federal with
state regulation or implementation. Our review
4 Unfunded Mandates Reform Act of 1995, P. L. 104- 4. 5 See U. S. General
Accounting Office, Elections: Status and Use of Federal Voting Equipment
Standards, GAO- 02- 52 (Washington, D. C.: October 15, 2001) and related GAO
reports cited therein.
6 See U. S. General Accounting Office, Homeland Security: Challenges and
Strategies in Addressing Short- and Long- Term National Needs, GAO- 02- 160T
(Washington, DC: November 7, 2001) and U. S. General Accounting Office,
Combating Terrorism: Key Aspects of a National Strategy to Enhance State and
Local Preparedness, GAO- 02- 473T (Washington, D. C.: March 1, 2002). Scope
and
Methodology
Page 5 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
included both programs that involved preemption and programs that used other
approaches to enlist state effort in support of federal or national
regulatory objectives.
Five major mechanisms emerged from our review. We classified programs in
terms of these mechanisms and selected two or more programs representing
each mechanism for more detailed examination and to serve as examples. We
selected examples from a broad range of regulatory agencies with the aim of
including major programs as well as a variety of approaches. (The programs
we selected are summarized in table 1). For the mechanism concerning grants,
we looked at grant programs but did not examine other forms of federal
support. Our study focused on the mechanisms and did not review the content
or strategic approaches of the regulations and standards involved or the
effectiveness of the programs as implemented.
To obtain descriptive material concerning each of these programs we reviewed
authorizing statutes, regulations, agency documents, and documents
concerning quasi- official standard- setting bodies. We also examined
reports from program studies conducted by the Congressional Research
Service, GAO, inspectors general, and other sources. We did not conduct new
analyses of these programs. Thus, our findings are based on available
information.
Page 6 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
Table 1: Programs Reviewed for This Report Standard setting mechanism
Program reviewed Federal agency involved in program
implementation
Employee Retirement Income Security Act (ERISA) Title I: regulation of
fiduciary, reporting, and disclosure practices in privately sponsored
employee benefit plans
Department of Labor (DOL), Pension and Welfare Benefits Administration
Federal fixed standards
Hazardous Materials Transportation: regulations governing transportation of
hazardous materials by motor vehicle Department of Transportation (DOT),
Motor Carrier Safety Administration (MCSA) Clean Air Act: minimum standards
for air quality Environmental Protection Agency
(EPA), Office of Air and Radiation Motor Carrier Safety: minimum safety
standards covering commercial vehicles and drivers DOT, MCSA Health
Insurance Portability and Accountability Act (HIPAA): minimum standards
concerning portability and renewability of health plan coverage
Department of Health and Human Services (HHS), Centers for Medicare and
Medicaid Services (CMS) Meat and Poultry Inspection: food safety standards
for plants that process meat and poultry Department of Agriculture, Food
Safety
and Inspection Service (FSIS) Occupational Safety and Health: minimum
standards for workplace safety DOL, Occupational Safety and Health
Administration (OSHA) Federal minimum
standards Safe Drinking Water: minimum standards for public drinking water
systems EPA, Office of Water Synar Amendment to Substance Abuse Prevention
and Treatment (SAPT) grant provisions: requires states to have and enforce a
law prohibiting the sale or distribution of tobacco products to persons
under 18
HHS, Substance Abuse and Mental Health Services Administration (SAMHSA)
Temporary Assistance to Needy Families (TANF) grant program: sets conditions
on state programs that receive federal funds HHS, Administration for
Children and
Families (ACF) Conditions of
grant program Title I, Education of the Disadvantaged grant program:
requires states to set and enforce minimum standards for content and
performance in education
Department of Education, Office of Elementary and Secondary Education
Retail Food Protection: guidelines for safe handling of food in retail
establishments such as grocery stores and restaurants Food and Drug
Administration (FDA),
Center for Food Safety and Applied Nutrition Federal/ state
cooperative standards
National Shellfish Sanitation: voluntary standards for safe production and
processing of shellfish FDA, Center for Food Safety and
Applied Nutrition, Federal/ State Programs National Conference on Uniform
State Laws: uniform and model state acts in subjects that benefit from a
common approach None. Members are state- appointed
and organization receives funds from states. National Association of
Insurance Commissioners (NAIC): develops model state- level insurance laws
and regulations Works with CMS and other agencies
that deal with insurance. State adoption of
externally set standards
Other recognized standard- setting bodies All agencies are encouraged to
contribute to and adopt standards.
Source: Program documents.
It should be noted that each of the mechanisms we describe represents an
ideal type- that is, the elements listed for each mechanism are
characteristic of that mechanism and define a ?pure case? to which specific
programs can be compared. In the real world, few, if any,
Page 7 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
programs will match the ?pure case? completely, and a complex program may
incorporate more than one mechanism.
We conducted our work between June 2001 and February 2002 in accordance with
generally accepted government accounting standards. Because our work drew
only on already available materials, we did not seek agency comments on our
findings.
We identified five regulatory or standard- setting mechanisms and four
patterns of implementation or enforcement that characterize areas in which
the federal government and the states share regulatory objectives and
responsibilities. The five mechanisms are:
fixed federal standards that preempt all state regulatory action in the
subject area covered;
federal minimum standards that preempt less stringent state laws but
permit states to establish standards more stringent than the federal;
inclusion of federal regulatory provisions in grants or other forms of
assistance;
cooperative programs in which voluntary national standards are formulated
by federal and state officials working together; and
widespread state adoption of voluntary standards formulated by
quasiofficial entities.
The first two mechanisms involve preemption. The other three represent
alternative approaches. The mechanisms differ in terms of which level of
government sets standards and whether application of the standards within a
state is voluntary or mandatory.
The mechanisms also offer different options with respect to implementation
or enforcement. Fixed federal standards and minimum federal standards permit
three patterns of implementation: (1) direct implementation by the federal
agency, (2) implementation by the states, approved by and under some degree
of oversight by the federal agency, and (3) a combination of federal agency
and federally approved state implementation. Grants follow the second of
these patterns. The remaining two mechanisms follow a fourth pattern, direct
implementation by the state under its own authority. These three mechanisms
vary in the degree of federal oversight they can accommodate.
Standard- setting mechanisms and implementation options in the programs we
reviewed form combinations as illustrated in table 2. We will discuss
Standard- Setting
Mechanisms, Implementation Roles Link States to National Regulatory
Objectives
Page 8 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
each mechanism, implementation options associated with that mechanism, and
operational issues that have arisen in the programs we reviewed.
Table 2: Standard- Setting Mechanisms and Implementation Patterns
Implementation pattern Standard setting mechanism
Origin of standard or regulation Direct federal
Assumed by states under federal oversight
Combination of direct federal and state- assumed
State implemented under state authority
Fixed federal standards Federal
(mandatory) a ERISA HAZMAT motor vehicle
Federal minimum standards
Federal (mandatory) and state
Clean Air Safe Drinking Water Motor carrier safety
OSHA Meat and Poultry HIPAA
Federal (voluntary) b and state
TANF Synar Grant conditions
State (must set) Title I Education standards Cooperative programs Federal/
state
(voluntary) Retail food Shellfish
State adoption of externally set standards
State and private standard- setting entities (voluntary)
Model laws and regulations
Source: GAO analysis based on program documents. a ?Mandatory? indicates
that the standard applies in every state.
b ?Voluntary? indicates that acceptance of the grant or standard is up to
the state.
The federal government sometimes assumes sole regulatory authority over a
specified subject area, either by prohibiting states from regulating or by
issuing federal regulations that states must follow. Both statutes and
treaties can preempt in this way. When federal statutes indicate that
Congress intended the federal government to assume sole regulatory authority
over a specific subject area, states cannot establish either stricter
standards or standards that are less strict than the federal. A program
under federal regulatory authority may involve (1) no state role, (2) a
parallel state regulatory and implementation role, or (3) state
implementation of the federal regulatory provisions or standards.
In some instances, the federal government both regulates and assumes
responsibility for enforcement or implementation- states do not perform
either function. In addition to establishing uniform standards nationwide,
Fixed Federal Standards
Can Involve State Responsibilities
Programs Based on Fixed Standards May Involve No State Role
Page 9 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
this approach establishes a single locus of accountability and program
direction. The federal agency that administers the program provides the
resources and bears the costs.
Regulation of employer- based pension plans, pursuant to the Employee
Retirement Income Security Act of 1974 (ERISA), provides an example. Federal
standards were viewed as needed in light of the importance of these plans to
interstate commerce and the need to protect employees and their
beneficiaries from loss of benefits due to unsound or unstable plans. ERISA
established, among other requirements, fiduciary, reporting, and disclosure
requirements that apply to private employee pension plans in the United
States. ERISA supersedes all state laws that relate to ERISA pension plans.
The Pension and Welfare Benefits Administration (PWBA) of the Department of
Labor is responsible for administering and enforcing these ERISA provisions,
and states do not have an enforcement role.
In other instances, regulatory authority is divided between the federal
government and the states. States retain the power to establish and
implement regulations for their portion of the sector but are precluded from
applying them within the federal portion. Regulation of health coverage
under ERISA provides an example. The federal government regulates all
employee health plans. If an employer chooses to provide coverage through an
insurance policy, that policy is subject to state regulations. Approximately
60 percent of individuals participating in employer sponsored plans are
covered by state regulated insurance policies.
This division of authority can lead to potential differences in coverage
requirements, uncertainty, and litigation. As a result, individuals in
similar plans may have different rights and remedies. Federal legislation in
certain health coverage standards in recent years has set federal minimum
standards that generally apply to all health plans. 7
In some program areas, states implement or enforce federal standards that
preempt state laws or regulations. The Hazardous Materials Transportation
Act, as it applies to motor vehicles, illustrates this approach. 8 In order
to provide adequate nationwide protection against the
7 Examples include the Mental Health Parity Act of 1996 and the Newborns?
and Mothers? Health Protection Act of 1996, both included in P. L. 104- 204.
8 The Hazardous Materials Transportation Act, as amended, is codified at 49
U. S. C. sect.sect. 5101- 5127. Regulatory Authority May Be
Divided between the Federal Government and the States
States Can Assume Responsibility for Implementing Federal Provisions
Page 10 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
risks to life and property inherent in the transportation of hazardous
materials, this act authorizes the Secretary of Transportation to regulate
the transportation of such hazardous materials not only in interstate and
foreign commerce but also in intrastate commerce. The act and federal
regulations prescribed under the act generally preempt state requirements
that are not substantively the same as the federal. 9 However, most of the
roadside commercial vehicle inspections applying hazardous material (HAZMAT)
regulations are done through state programs. Under the Motor Carrier Safety
Assistance Program (MCSAP), states that meet grant requirements can take
responsibility for enforcing these regulations for both intrastate and
interstate vehicles, and nearly all states have done so. 10 These
requirements include adopting state HAZMAT transportation regulations
identical to the federal regulations for commercial vehicles and having the
legal authority and resources to enforce them. In return, the states receive
federal grants to cover a portion of their program costs.
Enlisting the efforts of state agencies greatly expands the resources
available for implementation or enforcement. In each of the programs we
examined, activities to support federal regulations built upon activities
that states already performed. However, this strategy also raises some major
operational issues or questions, for example:
Who will carry out enforcement activities in states that are unwilling or
unable to do so?
What share of state program operation costs, if any, should the federal
government cover?
Which level of government is accountable for ensuring that state
performance is adequate, and for taking action if it is not?
Is uniformity of enforcement important, and if so how can it be achieved?
State implementation was an option under each of the five standardsetting
mechanisms we examined. We discuss this option with respect to each
mechanism, and include a summary discussion of its advantages and
limitations in the final section of the report.
9 States can apply for a waiver of preemption of a requirement, which the
Secretary may grant provided that the state provision provides at least as
much protection as the federal and is not an unreasonable burden on
commerce.
10 The MCSAP also provides for states to implement the federal minimum
standards for commercial motor carrier safety, discussed in a later section
of this report.
Page 11 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
Under minimum federal standards, the federal government, through statutory
or regulatory means, establishes a minimum national standard that preempts
less stringent and conflicting state laws and regulations. Minimum standards
are often designed to provide a baseline of consumer protection in areas
such as environmental protection, health care, food supply, vehicle safety,
and working conditions. This mechanism supports the achievement of a
national objective while at the same time permitting states that wish to set
higher standards to do so. States typically participate in enforcing the
federal regulations, as well as any regulations of their own, and share in
the cost.
Although states may not enforce standards less stringent than the federal
minimum, they may generally establish standards that are stricter than the
federal standards (as long as they do not unduly burden interstate
commerce). Some of the minimum standards programs we examined offered states
considerable scope in this regard, preserving in part the leadership role
that states had performed before the federal government stepped in. For
example, under the Occupational Safety and Health Act (OSHA) states may, and
many do, set standards for hazards, such as ergonomic injury, for which no
federal standard has yet been established. 11
For example, states regulate hazards not covered by federal OSHA standards.
Ten states have state- specific standards on logging practices. Alaska
also developed safety codes for highline, tractor, and helicopter logging.
California adopted the first repetitive- motion injury standard in the
nation in 1997. Washington state?s ergonomic rule, which differs from
California?s, followed in 2000.
Several states adopted needlestick standards to guard against injuries
from bloodborne pathogens before there was an OSHA standard. Pursuant to the
Needlestick Safety and Prevention Act, an updated OSHA standard for
bloodborne pathogen standards was published and made effective in April
2001. 12
11 These examples are taken from Grassroots Safety & Health in the
Workplace, the 19992000 State Plan Activities Report of the Occupational
Safety and Health State Plan Association.
12 66 Fed. Reg. 5318- 01, January 18, 2001. Minimum Federal
Standards Feature Shared Regulation and Implementation
States Can and Some Do Regulate Beyond the Federal Minimum
Page 12 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
In addition, state requirements exceed OSHA?s.
New Mexico developed a standard for public sector firefighters that state
officials describe as ?more effective? than OSHA?s standard on firefighting.
Some states require employers to prepare a workplace safety and health
plan, which OSHA regulations do not require.
Each of the minimum standards programs we examined provide for state
implementation or enforcement of federal regulatory provisions, with the
federal agency contributing funds and/ or oversight to varying degrees.
States could assume responsibility for program implementation if they met
certain requirements. In every case we examined, states had to show that
they had regulations no less stringent than the federal standards and the
legal authority necessary for enforcement. Some programs added other
requirements, such as having adequate funding and personnel, having
enforcement procedures, and participating in certain data systems. OSHA
requires a state to demonstrate the adequacy of its enforcement operations
for a year before granting final approval for the state to operate the
program.
Table 3 illustrates the divisions of implementation responsibility we
encountered. As this table illustrates, the federal government, the states,
or both may be involved in implementing a particular program in a given
state. The state implementation role may encompass the entire regulated
sector (as in Motor Carrier Safety), only the intrastate portion (as in
Meat/ Poultry), or be transferred provision by provision as states are ready
to assume responsibility (as in the Clean Air program). Programs also differ
in the inducements offered to states to assume responsibility and in
provisions for federal oversight. Federal and State Governments
Share Implementation Responsibilities
Page 13 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
Table 3: Division of Implementation Responsibility in Minimum Standards
Programs Federal minimum standards program Federal implementation
responsibility State implementation responsibility Federal grant as
percentage of state cost
Meat and poultry inspection: regulates plants that process meat and poultry
Primary responsibility for all plants in interstate commerce and plants that
sell only within a state, where state has not assumed responsibility.
Oversees state programs.
States can assume responsibility for implementation in plants that sell only
within the state.
Up to 50 Occupational safety and health: regulates workplace hazards
Primary responsibility for the federal program, which covers private
employers.
States can assume responsibility for operating the federal program; those
that do so must cover state and local government employees as well.
Up to 50 Safe Drinking Water: regulates public drinking water systems
Oversees state implementation; can enforce directly if state performance is
deemed inadequate.
Gives primacy in enforcement of federal regulations and standards to states
that meet certain requirements.
Up to 75 Clean Air: regulates air quality Oversees state implementation;
can assume responsibilities if state performance is deemed inadequate.
Act recognizes states? primary responsibility for pollution control, gives
primacy in enforcement of federal standards to states that submit an
acceptable plan .
Up to 60 HIPAA: regulates portability and renewability of health plan
coverage
CMS, DOL enforce for health plans under their jurisdiction
CMS enforces for state regulated plans if state does not do so.
Primary responsibility enforcing for health insurance plans within state
jurisdiction if state standards conform to or exceed the federal standards.
N/ A Motor carrier safety: regulates commercial vehicles and drivers
Complementary to states. Conducts compliance reviews of carriers. Can
inspect only vehicles in interstate and foreign commerce.
Required of states that accept the grant. Inspects vehicles in both
interstate and intrastate commerce. Can also conduct compliance reviews of
carriers.
Up to 80 Source: Program documents.
The minimum standards programs we reviewed induced state participation
through (1) statutory language concerning state responsibility for the
regulatory area concerned, (2) offering grant funds to states that
participate, and (3) providing for direct federal enforcement in states that
do not participate. Statutory language may imply that state participation is
voluntary or that it is a state responsibility. To illustrate:
The OSHA statute encourages ?states to assume the fullest responsibility
for the administration and enforcement of their occupational safety and
health laws? and provides for any state that ?desires to assume
Page 14 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
responsibility? for enforcing federal standards to submit a state plan, 13
while
The Clean Air Act specifies, ?Each State shall have the primary
responsibility for assuring air quality within the entire geographic area
comprising such State by submitting an implementation plan for such State
which will specify the manner in which national primary and secondary
ambient air quality standards will be achieved.? 14 Federal financial
incentives to states also vary considerably. As table 3 indicates, all but
one of the minimum standards programs we reviewed included federal grants
that contributed a portion of state implementation costs, ranging from up to
50 percent of state program costs (OSHA and Meat/ Poultry) to up to 80
percent (Motor Carrier Safety). The actual amount of the federal
contribution depends on the funds available in a given year and may be less
than the percentage shown. The Clean Air Act provides for the state to
retain permit fees, and the Safe Drinking Water program includes a revolving
loan fund in each state that helps support local infrastructure projects.
Funding for two of the programs we studied (safe drinking water and motor
carrier safety) was increased substantially in reauthorizations during the
1990s. However, EPA has reduced the funding for Clean Air grants, perhaps in
consideration of the availability of permit fees. 15
All programs provided for direct enforcement by the federal agency in states
that did not take on implementation responsibility or that did not
adequately carry out their responsibilities. This provision is necessary to
avoid gaps in the protection afforded by the federal regulations or
standards. State officials may view federal enforcement as a threat or as an
opportunity, depending on the regulatory function concerned and the
importance and cost of keeping the function under state control.
Participation rates varied considerably among these programs. Twentyone
states and 2 territories operate OSHA plans 16 and 27 states operate a meat
and poultry inspection program for intrastate processors. These
13 29 U. S. C. sect.sect. 651( b)( 11), 667( b). 14 42 U. S. C. sect.7407( a). 15 See U.
S. General Accounting Office, Air Pollution: Status of Implementation and
Issues of the Clean Air Act Amendments of 1990, GAO/ RCED- 00- 72,
(Washington, D. C.: April 17, 2000).
16 Three additional states have state OSHA plans that cover only public
sector employees.
Page 15 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
programs are directly implemented by the federal agency in the remaining
states. The other minimum standards programs in this study have enlisted
universal or nearly universal state participation.
Once states have accepted responsibility for implementing federal standards,
primary accountability for state agency performance rests with state
officials and they in turn are accountable to the federal level and subject
to various degrees of federal oversight. Oversight tools available to the
federal agency include disapproving a state?s application for grant funds
and withdrawing authorization for the state to implement the program. Some
of the programs we examined require performanceoriented annual plans and
reports- a relatively new development that reflects the expectations placed
on agencies by the Government Performance and Results Act (GPRA). 17 This
and other oversight and performance management tools found in these programs
are illustrated below.
Performance- oriented plans: States implementing federal OSHA regulations
must submit 5- year strategic plans and annual performance plans that are
comparable to OSHA?s GPRA plans and that adopt OSHA?s strategic goal of
improving workplace safety and health for all workers. 18 Beyond that,
states select their own goals. Under the Motor Carrier Safety Assistance
grant program, state plans must include quantifiable performance objectives
and measures and strategies and specific activities for achieving the
objectives.
Overfiling: EPA can file its own enforcement actions if it concludes that
a state?s enforcement action under the Clean Air Act was inadequate.
Financial incentives: The Motor Carrier Safety grant program includes
incentive funds for states that achieve reductions in fatal accident rates
for commercial motor vehicles.
Sanctions: Under the Clean Air Act, EPA can impose sanctions- including
the withholding of certain federal highway funds- on states that have not
submitted or not implemented adequate plans to attain air quality standards.
A ?conformity? provision bars federal departments and agencies from
approving or supporting transportation
17 Government Performance and Results Act of 1993, P. L. 103- 62. 18 As
stated in the OSHA State Plan Policies and Procedures Manual, the goal is to
?improve
workplace safety and health for all workers, as evidenced by fewer hazards,
reduced exposures, and fewer injuries, illnesses and fatalities.?
Page 16 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
improvements in geographic areas that have not attained air quality
standards, unless the improvements conform with the State Implementation
Plan. 19
Grant programs or other forms of support can also be used to direct state
efforts toward federal regulatory purposes. Under this mechanism, the grant
or other instrument requires recipients to perform federally specified
regulatory or enforcement activities as a condition of eligibility to
receive support. These requirements apply only in states that voluntarily
accept the support. However, if the grant in question is a significant
source of funds for a state, then nonparticipation may not be a practical
alternative.
Historically, conditions of the type described above have been incorporated
in federal grants to states that focused on a particular purpose and
population- termed categorical grants. Such grants also included
administrative and reporting requirements to help ensure both financial and
programmatic accountability. Categorical grants can be contrasted to block
grants, which are aimed at achieving a broad national purpose, afford states
considerable flexibility, and have limited administrative and reporting
requirements.
In practice, the line between ?categorical? and ?block? grants has become
blurred, and many programs include features of both. 20 We examined several
recent examples that illustrate how regulatory components aimed at directing
states? efforts toward specific national objectives have been incorporated
into grants that otherwise give states the broad flexibility of a block
grant. The Synar Amendment to the Public Health Service Act (Synar
Amendment) illustrates the use of grant conditions to induce states to have
and enforce laws consistent with a federal regulatory purpose- restricting
access to tobacco by underage youth. In another example, the Temporary
Assistance for Needy Families (TANF) block grant illustrates the use of
performance- oriented federal regulatory provisions in a program that
otherwise gives states new flexibility in welfare program operation.
Finally, the Elementary and Secondary Education Act (ESEA)
19 For a discussion of these sanctions and their use, see Congressional
Research Service,
Highway Fund Sanctions and Conformity Under the Clean Air Act, CRS, Updated
October 15, 1999.
20 See U. S. General Accounting Office, Grant Programs: Design Features
Shape Flexibility, Accountability, and Performance Information, GAO/ GGD-
98- 137 (Washington, D. C.: June 22,1998). Grants or Other Forms of
Support May Require States to Undertake Regulatory Activities
Page 17 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
amendments of 1994, Public Law 107- 110, exemplify an effort to achieve
comparably challenging standards nationwide by requiring each state that
accepts a Title I ESEA grant to set and enforce its own standards.
The Synar Amendment, passed in 1992, added regulatory conditions to the
Substance Abuse Prevention and Treatment (SAPT) block grant with the
national objective of reducing underage youths? access to tobacco products.
In order to receive a SAPT block grant, a state must have and enforce a law
prohibiting the sale or distribution of tobacco products to any individual
under the age of 18. The state is required to report annually on enforcement
activities and on the extent to which the availability of tobacco products
to underage youth has been reduced. A state?s grant funds can be reduced if
the state fails to meet a target compliance rate negotiated with the
Department of Health and Human Services (HHS).
The use of the grant mechanism to regulate underage access to tobacco
reflects the status of tobacco regulation at the time the Synar Amendment
was passed. HHS had authority, through the SAPT block grant, to fund
activities aimed at preventing abuse of alcohol and other drugs. Adding the
Synar Amendment requirements to the grant enabled the Congress to make use
of existing state authority to ensure that states? substance abuse
prevention activities were directed toward achieving a particular national
public health objective.
In 1996, welfare reform legislation, known as the Personal Responsibility
and Work Opportunity Reconciliation Act, Public Law 104- 193, replaced
previous assistance programs with a single block grant called Temporary
Assistance for Needy Families (TANF). TANF was expressly intended to
increase states? flexibility in welfare program operation. TANF gives states
broad flexibility to determine eligibility, methods of assistance, and
benefit levels as long as funds are directed to achieving the purposes of
the legislation. 21 Unlike the classic block grant, however, TANF couples
this flexibility with federal regulatory provisions that states must apply,
such as a 60- month limit on a parent?s receipt of assistance. TANF also
includes
21 These purposes include assisting needy families so that children can be
cared for in their own homes; reducing needy parents? dependence on
government benefits by promoting job preparation, work, and the formation
and maintenance of two- parent families; and reducing the incidence of out-
of- wedlock pregnancies. For more information see U. S. General Accounting
Office, Welfare Reform: Challenges in Maintaining a Federal- State Fiscal
Partnership, GAO- 01- 828 (Washington, D. C.: August 10, 2001). The Synar
Amendment Ties
Grant Eligibility to State Legislation
TANF Block Grant Combines Federal Conditions with Increased State
Flexibility
Page 18 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
accountability requirements that link state performance to the purposes
expressed in the legislation, among them
detailed, results- oriented state reporting requirements;
financial penalties for failure to submit timely reports, meet certain
financial requirements, or achieve minimum work participation rates; and
bonuses for performance. These requirements, like those in the Synar
Amendment, are similar to those that states must meet under preemptive
regulatory programs. However, there is an important difference between
federal fixed and minimum standards and those mechanisms based solely on
assistance. Federal fixed and minimum standards apply to and must be
implemented in every state, with the federal agency implementing the program
directly if the state does not do so. Regulatory conditions imposed by means
of acceptance of grants or other forms of assistance apply only to states
that accept the assistance. If a state elects not to participate in the
grant program, the federal standards contained in the grant do not apply in
that state and the federal agency that administers the grant program does
not step in to implement them. Thus, the condition- of- assistance mechanism
may lead to gaps in coverage. Federal interest in avoiding such gaps gives
states some leverage to negotiate for acceptable conditions or for limiting
the existence and application of federal sanctions.
Amendments to Title I of the Elementary and Secondary Education Act (ESEA)
of 1994 illustrate the use of grant conditions to induce states to establish
their own standards in the interest of achieving a national objective. That
objective is to ensure that students served through the grant (which is
targeted to the disadvantaged) are offered the same challenging content as
students in the state generally and are held to the same performance
standards. 22 Under the 1994 law, states that received grant funds were
required to develop and implement challenging content standards that apply
to all students; develop assessments aligned to those standards; and, based
on these assessments, develop procedures for
22 Standards were to be developed in at least two subjects, mathematics and
reading or language arts. Education Grant Requires
States to Set Standards
Page 19 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
identifying and assisting schools that fail to make adequate progress toward
helping students meet these standards. 23
The notable feature here is that while the requirement to develop and
implement standards was federal and induced states to adopt a federally
designated approach to school reform, the standards themselves were to be
set by each state. There was no expectation of national uniformity and no
federal minimum- only the criterion that every state?s standards should, in
its own judgment, be ?challenging.? Similarly, the legislation included
federal accountability requirements, reflecting concern that federal funds
spent on education had not sufficiently narrowed the gap between
disadvantaged students and others in the past. However, it provided for each
state to set its own definition of what constitutes
?adequate yearly progress? (AYP), which is key to identifying low performing
schools and districts that are targeted for improvement.
Experience to date with these grant provisions illustrates the dilemmas-
from the federal perspective- of relying on state- developed standards.
While nearly all states had established content standards by January 2001,
24 outside groups that reviewed these standards observed that they varied
considerably in clarity and specificity and that some could not be
considered rigorous. 25 In addition, states differed in how they defined and
measured ?low performing schools.? This led to substantial differences in
the numbers and percentage of schools identified as needing improvement,
such that schools with comparable levels of student performance could be
targeted for improvement in one state but not in another. These variations
directly reflect the kinds of flexibility that were
23 Content standards describe what students should know and be able to do.
Performance standards define partially proficient, proficient, or advanced
levels of mastery of the material in the content standards.
24 Two states- Iowa and Nebraska- found it difficult to set statewide
standards and attempted to develop hybrid systems that rely on state
guidelines for locally selected standards.
25 The Council for Basic Education, the American Federal Teachers, and the
Fordham Foundation conducted separate reviews of the standards.
Page 20 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
built into the Title I legislation. However, the variations- and states?
slowness in devising adequate assessments- generated concerns. 26
The ESEA reauthorization in the winter of 2002 incorporated new or expanded
requirements for the Title I program, many of them aimed at strengthening
accountability for results. 27 In addition to requiring states that accept
grant funds to conduct annual assessments in mathematics and reading or
language arts in grades 3 through 8 by the 2005- 2006 school year, the law
specifies how states must define AYP, details the steps that states and
local education agencies must take with respect to schools that fail to make
adequate progress, and lists the options they must offer to students in such
schools. The law also requires states to develop a plan to ensure that, by
the end of the 2005- 2006 school year, all teachers teaching core academic
subjects within the state are highly qualified. Although it significantly
expanded the federal role in education, the 2001 legislation also
acknowledges the state role. It prohibits federal mandates, direction, or
control over a state, local education agency, or school?s instructional
content, academic achievement standards and assessments, curriculum, or
program of instruction, and it gives states and school districts greater
flexibility in how they use federal funds. In addition, the law establishes
a negotiated rulemaking process, directing the Secretary of Education to
obtain advice and recommendations from state and local administrators, board
members, education professionals, parents, and others involved in
implementation before issuing proposed federal regulations for the program.
We found examples within the Food and Drug Administration (FDA) of programs
in which national standards for food safety are developed by agency and
state officials acting together. The general mechanism is a cooperative body
that develops proposed standards. Those that are approved are incorporated
as guidance to states in carrying out inspection and enforcement procedures.
Such nonbinding guidance does not preempt state law or have the binding
force of federal law or regulation. States
26 Technical difficulties in the assessment process are a contributing
factor. Devising assessments that are of adequate technical quality, aligned
to standards, and appropriate for students with disabilities or limited
English proficiency is a challenge that only a few states were able to meet
by June of 2001, and states? systems for identifying schools in need of
improvement were still in transition.
27 The reauthorization is known as the No Child Left Behind Act of 2001, P.
L. 107- 110. Cooperative Programs Set
Standards Jointly, Limit Agency Oversight Role
Page 21 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
conduct enforcement activities under their own authority, and FDA provides
training, program evaluation or audits, and technical assistance to state
agencies.
Within this general design, there are variations. For example:
In the Retail Food Protection Program, guided by FDA?s Food Code, the
standards development body is the Conference for Food Protection, a
nonprofit organization that brings together federal, state, and local
regulators, academics, and representatives of industry and consumer groups.
28 The conference submits recommendations on Food Code issues to the FDA;
the FDA then reviews the recommendations and either accepts or turns back
for further discussion. States are encouraged (but not required) to adopt
the Food Code as the basis for their own regulation of retail food
establishments such as grocery stores, restaurants, cafeterias, and vending
machines. Adoption by a significant number of jurisdictions generally has
taken 3 to 5 years.
The National Shellfish Sanitation Program (NSSP) reflects policies
developed by the Interstate Shellfish Sanitation Conference (ISSC), whose
members represent states, the industry, and several federal agencies (FDA,
EPA, and the National Marine Fisheries Service). All representatives
participate in developing standards, but only the states vote in the general
assembly, and FDA must sometimes compromise to get an issue approved or
accept defeat of its proposals. FDA must concur with ISSC?s proposed policy
changes before they are incorporated into the program?s catalogue of safety
procedures, referred to as the model ordinance. States agree to enforce the
requirements of the model ordinance through their participation in the NSSP
and ISSC. 29 The FDA conducts program audits to ensure compliance with NSSP
policy and applicable federal regulations, but its oversight activities are
subject to resource, data, and other limitations. 30
28 The FDA also works with the Codex Alimentarius Commission, an
international food standard- setting organization of the Food and
Agriculture Organization and the World Health Organization.
29 Four foreign countries also have signed memorandums of understanding with
the FDA to abide by NSSP?s shellfish safety policies. 30 U. S. General
Accounting Office, Food Safety: Federal Oversight of Shellfish Safety Needs
Improvement, GAO- 01- 702 (Washington, D. C.: July 9, 2001).
Page 22 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
The cooperative programs are unlike others within FDA in that they reflect
FDA?s statutory authority under the Public Health Service Act, which directs
FDA to assist states in the prevention of communicable diseases and advise
them on the improvement of public health.
Under the cooperative program mechanism, as under the grant mechanism,
states have the primary responsibility and authority for implementing
federally approved standards- and a key role in framing them as well.
Adoption of the standards is voluntary unless states have bound themselves
to adopt, as in the shellfish program. There are two major drawbacks to this
mechanism from a federal perspective. First, voluntary adoption does not
necessarily provide nationwide application of a common standard, as some
states may choose not to adopt. Second, the federal agency?s limited role
gives it little leverage over states that do not adequately protect their
citizens. There is the added challenge of how to apply crosscutting food
safety regulations such as the Hazard Analysis and Critical Control Points
(HACCP) process control system, which the Department of Agriculture now
requires for meat and poultry processing. FDA has mandated HACCP for all
seafood production, including molluscan shellfish. 31 Although seafood
retailers are exempt from the HACCP regulations, the 1997 edition of the
Food Code encourages them to apply HACCP- based food safety principles.
We found federal- state cooperation in framing highway design standards as
well. Through the National Cooperative Highway Research Program (NCHRP),
DOT?s Federal Highway Administration (FHWA) cooperates with the American
Association of State Highway and Transportation Officials (AASHTO)- an
organization of state officials in which DOT is a nonvoting member- to
support highway research. 32 Drawing on these results and on task force
efforts, AASHTO produces manuals, guidance, and specifications regarding
highway design, safety, maintenance, and materials. FHWA supports the
cooperatively produced materials. In contrast to the FDA, FHWA does not
itself issue the guidance documents- they are published by AASHTO and
incorporated into federal
31 FDA is responsible for ensuring the safety of seafood under the Federal
Food, Drug, and Cosmetic Act. See 21 U. S. C. sect. 376. 32 The NCHRP is state-
sponsored. Support is voluntary and funds are drawn from states? federal-
aid highway funds. The Transportation Research Board of the National
Research Council, a unit within the National Academies of Science,
administers the research program.
Page 23 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
regulations by reference. Thus, the highway design example falls on the
border between a cooperative program and our next category, reliance on
standards produced by nonfederal entities.
Our discussion thus far has focused on regulatory standards that are
developed by the federal government itself or in cooperation with states.
However, a variety of other entities also develop standards and model
ordinances covering subject areas within federal and state regulatory
authority. Some of these entities focus on producing model state laws or
regulations. When adopted by a sufficient number of states, these standards
may provide a uniform approach and virtually national coverage without
federal regulation. In addition, numerous private organizations such as
Underwriters Laboratories and the National Fire Protection Association set
national or international standards for a given material, product, service,
or practice. These standards are available for voluntary adoption by
industry, states, or federal agencies. When incorporated into a U. S.-
ratified treaty or adopted by a federal agency such as OSHA, these
externally developed standards have the status of federal law.
State officials long ago recognized that certain areas within their
jurisdiction would benefit from a uniform approach. The National Conference
of Commissioners on Uniform State Laws (Uniform Law Commissioners, or ULC),
a nonprofit unincorporated association consisting of commissioners appointed
by the states and supported by state appropriations, has worked for uniform
laws since 1892. 33 The ULC drafts uniform or model state acts in subject
areas in which uniformity will produce significant benefits (such as
facilitating commerce across state lines through the Uniform Commercial
Code) or will avoid the disadvantages that arise from diversity of state
laws (such as the Act on Reciprocal Enforcement of [child] Support). While
the ULC generally avoids taking up areas in which no legislative experience
is available or that are controversial among the states, it does address
emergent needs. For example, ULC proposed model laws on electronic
signatures and health care privacy before there was federal legislation on
these subjects.
Once a uniform or model law is drafted, commissioners take it back to their
states for consideration. Some (including the model electronic
33 Although some commissioners serve as state legislators, most are
practitioners, judges, and law professors. They serve for specific terms and
receive no pay for their services. Standards Set by Other
Entities Can Become National in Effect
Uniform State Laws Can Provide National Coverage
Page 24 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
signatures law) have been adopted by most states. Others (such as the model
health information law) have been adopted by relatively few. Implementation
is left to each state. There is no federal role unless the Congress
determines that federal legislation on the subject is needed. The same is
true when states adopt standards developed through private standards
development organizations.
Uniform state laws or regulations are also developed by entities that
address a particular regulatory area, such as insurance. The National
Association of Insurance Commissioners (NAIC), an organization of insurance
regulators from the states, is such an entity. It was founded to address the
need to coordinate regulation of insurers that operate in a number of
states. The NAIC develops model laws, regulations, and guidelines and
reviews the activities of state insurance departments as part of its
accreditation program. 34 Model laws have addressed issues such as capital
and surplus requirements and risk limitation. The NAIC?s model regulation
that sets minimum standards for Medicare supplemental insurance policies
(known as ?medigap? policies) has been incorporated by reference into
federal Medicare legislation and regulations. The Gramm- Leach- Bliley Act
of 1999 (P. L. 106- 102) involves NAIC in a different way. That act, which
deals with the financial services industry, encourages states to adopt
uniform laws and regulations governing licensure of individuals and entities
authorized to sell insurance within the state and providing for cross- state
reciprocity in licensure. The act directs NAIC to determine whether at least
a majority of the states have achieved uniformity within 3 years of the
legislation?s enactment. This target was met- by January 2002 the model act
adopted by NAIC had been adopted by 39 states. If the target had not been
met, the Act specified that a new nonprofit corporation, subject to NAIC
supervision, be established to provide for state adoption of uniform
insurance licensing laws.
In the United States, private sector standards are the product of a
decentralized, largely self- regulated network of more than 620 private,
independent standards- development organizations and testing laboratories. A
private nonprofit organization, the American National Standards Institute,
establishes rules for developing standards on the basis of the consensus of
the parties represented in the technical committees.
34 For a review of this program, see U. S. General Accounting Office,
Insurance Regulation: The NAIC Accreditation Program Can Be Improved, GAO-
01- 948 (Washington, D. C.: August 30, 2001). Federal Regulations May
Incorporate Private- Sector or International Standards
Page 25 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
The federal government directs agencies to use standards developed through
this system except where inconsistent with law or otherwise impractical, and
it encourages them to participate where appropriate in standards- setting
organizations. 35 The Occupational Safety and Health Act contains similar
direction, and the OSHA Administration and other federal regulatory agencies
have incorporated privately developed standards into their own agency
regulations.
Hazards addressed through federal- state regulation in the United States may
also be of international concern and become the subject of international
agreements. For example, criteria for classifying dangerous chemicals in
transportation have been internationally harmonized through the United
Nations? Recommendations on the Transport of Dangerous Goods. DOT uses these
criteria in developing U. S. HAZMAT regulations, which in turn are
translated into state regulations for HAZMAT transportation as discussed
previously in this report. Similarly, the FDA works with the Codex
Alimentarius Commission, an international food standard- setting
organization, thus helping ensure consistency of the Food Code (which states
can adopt) with international standards. Thus, regulation through the
mechanisms discussed above serves to align state as well as federal
standards to those set internationally.
Our review indicates that regulations or standards consistent with federal
objectives can be formulated through a variety of mechanisms and implemented
through various combinations of state and federal efforts. Each standard-
setting mechanism offers different advantages and limitations, as do the
various patterns of implementation. We discuss these advantages and
limitations in terms of federal- state balance and in terms of operational
challenges. Drawing on this discussion, we suggest how findings from our
review could guide decisions regarding future programs.
35 These directions are found in Office of Management and Budget Circular A-
119, Federal Participation in the Development and Use of Voluntary Consensus
Standards and in Conformity Assessment Activities, and in the National
Technology Transfer and Advancement Act of 1995, P. L. 104- 113. Experience
with
These Mechanisms Suggests Considerations for Future Programs
Page 26 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
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The standard- setting mechanisms we reviewed can be compared in terms of
factors that the U. S. Advisory Commission on Intergovernmental Relations
and other students of federalism have considered to be key in examining
issues of federal- state balance. 36 As the body of literature from these
authors suggests, the factors apply on a case- by- case basis, taking into
consideration the particular national objective concerned and circumstances
relevant to its achievement. Key factors include:
Uniformity: Does this mechanism provide uniform standards and nationwide
coverage if essential to the national objective?
Flexibility: Does it allow for flexibility where appropriate to that
objective?
Capacity: Does the mechanism assign responsibility appropriate to each
level of government?s capacity to do the job at hand, taking into account
breadth of jurisdiction, enforcement powers, resources, and location?
Accountability: Can accountability to the federal government be
incorporated into this mechanism if essential to achieving the national
objective?
Table 4 compares the five mechanisms in terms of these factors. This
presentation reveals more clearly how the mechanisms differ in terms of the
factors that a policymaker may consider critical to a particular objective.
The table also highlights program design choices that can be made within
each mechanism. For example, while flexibility is inherently limited under
federal fixed standards, grant conditions can be written to give as much or
as little flexibility as is appropriate to the federal objective concerned.
36 A congressionally chartered organization, the commission examined
federalism issues from 1959 to 1996. Differences among
Mechanisms Reflect Key Factors for Considering Federal- State Balance
Page 27 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
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Table 4: Standard- Setting Mechanisms and Federal- State Balance Factors
Factor Federal fixed
standards Federal minimum standards Grant conditions Cooperative
standards External standards
Uniformity Establishes uniform standards
Ensures coverage in all states
Establishes uniform minimum standards; beyond that, standards may vary
across states
Ensures coverage in all states
Can provide for uniform, uniform minimum, or statespecific standards
Coverage limited to participating states
Provides uniform model standards; states can adopt in entirety or in part
Coverage limited to states that adopt the standards
Provides uniform model standards; states can adopt in entirety or in part
Unless incorporated into federal regulation, coverage limited to states that
adopt Flexibility None, unless there is
provision for waiver States can establish standards more
stringent than the federal
Varies: as specified in each grant Unless otherwise
bound by their participation, states are free to adopt these standards or
use others of their own choosing
Except where incorporated into federal regulation, states are free to adopt
these standards or use others of their own choosing Capacity Can tap federal
resources, enlist state resources in implementation
Division of costs an issue
Can tap federal resources, enlist state resources in implementation
Division of costs an issue
Can tap federal resources, enlist state resources in implementation
Division of costs an issue
Relies primarily on state capacity but can be augmented through federal
grants
Division of costs an issue
Unless incorporated into federal regulation, relies primarily on state
capacity
Accountability Federal agency unless states implement; can incorporate
provisions holding states accountable
Federal agency unless states implement; can incorporate provisions holding
states accountable
Can incorporate provisions holding states accountable
Rests with state agencies, accountable to state officials
Unless incorporated into federal regulation, rests with state agencies
accountable to state officials
Source: GAO analysis.
Although direct implementation by a federal agency can be advantageous in
certain situations, this approach presents its own set of challenges and
limitations. In this study, we focused on the operational challenges that
arise in shared federal- state implementation. First, shared implementation
raises delicate issues of federal- state agency relations, oversight, and
accountability. Legislators and agencies may have difficulty finding a level
of oversight that is sufficient to protect against the harm that could come
from inadequate state action while providing states the authority and
flexibility needed to do the job effectively. Oversight tools such as the
performance incentives and sanctions illustrated in our discussion of
Implementation Brings
Operational Challenges
Page 28 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
federal minimum standards programs can be designed with this purpose in
mind. Another approach is the use of performance partnerships. 37
Second, while overall resource adequacy may be an issue under any pattern of
implementation, reliance on states to implement federal standards also
raises questions about allocating costs between the federal government and
the states. If federal funds are provided, the issue of fiscal substitution
(use of federal funds to replace state funds) may also arise. Options for
addressing these issues include the following:
The state?s share can be preserved through the use of fiscal provisions
such as maintenance of effort or matching requirements. 38
The federal share may be provided through grants to participating states
or by permitting states to retain payments generated through program
operation and enforcement. Grant payments may be ?up to? a specified
percentage of state program cost, but actual payments depend on funds
available and have sometimes been substantially less.
If both levels of government participate in administering federal
regulations, both levels contribute toward the cost. However, if the state
does not participate, the federal agency administers the program at no cost
to the state, which leads to a third challenge.
The third challenge is that implementation arrangements that give the
federal agency a back- up role can leave it vulnerable to sudden increases
in responsibility and costs. This can happen when states drop their
participation, as has happened in the OSHA and Meat and Poultry programs. It
can also happen when states are judged by the agency to have failed to meet
their responsibilities. The federal government may also bear the cost of
enforcement temporarily when new provisions need enforcement before states
are ready to assume this responsibility. We saw examples of each of these
circumstances in the programs we reviewed.
Fourth, shared implementation tends to produce variation in program
implementation because states? approaches may differ from each other
37 See, for example, U. S. General Accounting Office, Environmental
Protection: Collaborative EPA- State Effort Needed to Improve New
Performance Partnership System,
GAO/ RCED- 99- 17 (Washington, D. C.: June 21, 1999). 38 U. S. General
Accounting Office, Federal Grants: Design Improvements Could Help Federal
Resources Go Further, GAO/ AIMD- 97- 7 (Washington, D. C.: December 18,
1996.)
Page 29 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
and from the federal agency?s. For example, states may prefer to emphasize
assistance while the federal agency relies more on enforcement actions to
induce compliance. 39 The variation may be appropriate and reflect a need
for flexibility in light of differing conditions and to target limited
resources to the problems that pose the greatest risk. If variation is not
deemed appropriate- for example, if the national objective requires that
enforcement actions as well as standards be uniform- federal requirements
and oversight can be strengthened to provide uniformity.
Finally, change can be cumbersome under federal- state implementation. Every
time a federal statute or regulation changes, each state must make a
corresponding change to its own statute or regulation before it can
implement the new provision. This can lead to substantial delays, and states
have observed that frequent change can become a burden. For example, the
Association of Food and Drug Officials have noted the difficulty of amending
regulations to keep up with changes in the Food Code every two years.
Our review led us to conclude that setting up a regulatory program involves
three stages of decision making and to develop questions to guide those
decisions based on the observations summarized above. The three stages are
identifying the national regulatory objective and reviewing pertinent
background information,
selecting a standard- setting mechanism appropriate to that objective, and
designing appropriate federal and state roles in implementation. The last
two stages are intertwined. For example, cooperative standard setting or
reliance on states? adoption of externally set standards usually means
little or no federal role in implementation. However, other mechanisms leave
considerable choice with respect to implementation arrangements. We
illustrate this overall decision process, as guided by questions reflecting
key factors, below.
39 Such differences in philosophy may also exist between regional offices of
the federal agency. See U. S. General Accounting Office, Environmental
Protection: More Consistency Needed Among EPA Regions in Approach to
Enforcement, GAO/ RCED- 00- 10 (Washington,
D. C.: June 2, 2000). Questions Derived from
These Observations Can Guide Future Program Decisions
Page 30 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
The national objective provides the starting point for selecting the
mechanism for enlisting state efforts toward that objective. Assuming that
the objective itself is consistent with the Constitution, factors to be
considered include
the nature of the hazard or practice to be regulated, for example,
how widely it is distributed geographically and whether it is cross- state
in nature,
the risks it poses, and
whether protection against these risks is needed immediately or within a
period of years;
existing federal statutory authority and capacity that could form the
basis for setting and implementing standards;
the extent to which state or other standards and enforcement are already
in place and the resources and capacities available to support them; and
the resources and capacities that are likely to be needed to formulate and
implement or enforce new standards in this area.
This background information can be expressed in the form of questions that
will help in assessing the extent to which federal action is or is not
needed and what form it might take (see figure 1). For example, the
information may indicate that states are already handling the problem. The
review of existing statutory authority will help policymakers determine
whether new authority would be needed to establish federal standards.
Finally, background information will provide a foundation for examining the
objective in terms of federal- state balance factors and for proceeding to
consider the choice of standard- setting mechanism. The discussion and
figures that follow assume that policymakers have concluded that federal
action is warranted and are contemplating designing a new program or
rethinking an existing program. The National Objective Shapes
the Choice of Standard- Setting Mechanism
Page 31 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
Figure 1: Defining the National Objective and Examining Background Questions
For the next stage of decision making, selection of a mechanism for pursuing
the national objective, we depict the decision process as a series of
questions or gates in order to make explicit what are often implicit
considerations in decision making (see figure 2). We start with the question
of whether- pursuant to the national objective in question- federal fixed or
minimum standards would be acceptable in terms of federal- state balance.
Our presentation does not imply that federal standards are the best choice
but only that if they raise difficult issues consideration must move
immediately to other options.
Starting point for decision
Define the national regulatory objective
Background questions
Is the hazard or practice to be regulated national in scope?
Is the need for protection immediate?
To regulate this hazard, would the federal government need statutory
authority beyond what is currently available?
Are effective regulatory and enforcement activities already being carried
out by states or other entities?
Would substantial additional federal and/ or state resources (human and
financial capital and technical capacity) be needed to achieve the desired
protection?
Proceed to selection of a standard setting mechanism
Considerations
Hazards or practices that occur in only a few states could perhaps be
handled at the state or regional level. Voluntary state adoption, which may
take several
years or more, may be a viable option. If authority already exists, the
objective might be met by broadening an existing program. If state efforts
are achieving the national regulatory objective, federal action may not be
needed.
Resource considerations may be especially important to decisions on
implementation options.
Yes Yes
Yes Yes
Yes No
No No No
No
Page 32 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
Figure 2: Selecting a Standard- Setting Mechanism
If federal standards would likely be unacceptable, the next question (to the
right on figure 2) is whether uniform regulations and nationwide coverage
are essential to attaining the national objective. If not, policymakers may
explore what could be achieved through state adoption of externally
developed standards or by cooperating with states to set voluntary
standards. This exploration should bear in mind that these mechanisms rely
wholly on states for implementation and may not provide for central
monitoring and uniform reporting. It is important to review the potential
need for these practices and how they could be provided in the absence of
direct federal oversight. If uniformity and nationwide coverage are
essential, incorporating a federal standard into grant conditions could
enlist the efforts of nearly all states.
Decision questions
Is federal regulation acceptable in terms of federal- state balance?
Would minimum federal standards provide adequate protection and would
stricter state standards be workable?
Is a fixed nationwide standard essential to achieving the national
objective?
Reconsider information and options.
Does the objective require that common standards be in place in every state?
Does the objective require that common minimum standards be in place in
every state?
Options
Consider encouraging a state- based or other external group to develop and
promote a model standard.
Consider working with states to develop standards cooperatively.
Consider offering grants to states to encourage efforts that support the
national objective.
Consider preemption accompanied by a federal minimum standard.
Consider preemption accompanied by fixed federal standards.
Comments
Since adoption is voluntary, coverage may not be national and standards may
vary from state to state. It may be useful to explore reasons for
nonadoption and to examine standards and outcomes in states that do not
adopt.
Consider asking states to commit to adoption as a condition of
participation. Can achieve national coverage if the grant
sets acceptable conditions and is one that states cannot realistically
refuse.
May need to prohibit state actions inconsistent with the objective, such as
those that would burden interstate commerce.
May need to provide for waivers or exceptions under special circumstances.
If portions of the sector are regulated by different entities, consider
whether uniformity across all portions of the sector is needed and how it
might be achieved.
No No No
No Yes
Yes Yes
Yes No
Yes
Page 33 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
The next step is to consider whether federal minimum standards- which
provide a baseline of protection but also allow variation from state to
state above the minimum- or fixed federal standards would best achieve the
national objective in question. For purposes of illustration (one could
start with either option) our diagram first asks whether minimum standards
would be appropriate. If so, and if that objective does not demand full
national coverage, each of the alternative mechanisms would again be an
option. However, if national coverage were essential, federal minimum
standards would be the mechanism of choice.
If federal standards are allowable and minimum standards are not
appropriate- or if a common, unvarying nationwide standard is essential to
attainment of the objective- fixed federal standards and the possible need
to allow waivers should be considered. In considering the coverage needed
for the standards to be effective, it is useful to think in terms of sector
coverage as well as geographic scope. As the ERISA health plan example
illustrates, uniformity will not be attained if standards cover only the
federally regulated portion of a divided sector.
It may happen that when all mechanisms have been considered, none seems
truly appropriate. Such an outcome suggests that something has been missed
along the way and that it would be useful to gather additional information
and to revisit earlier steps in the decision process. The final step is to
ensure that the mechanism chosen and the purpose are consistent with
Congress?s authority to regulate under the Constitution.
Fixed federal standards and minimum federal standards offer a choice between
(1) direct federal implementation, (2) assumption of implementation
responsibility by all states, and (3) assumption by some states, with direct
federal administration in others. Whenever implementation by states is
selected (under federal standards or through grants) there are choices to be
made regarding the design of accountability, funding, and flexibility
provisions. We now discuss factors to be considered in selecting and
designing implementation options, as illustrated in figure 3. Some
Mechanisms Offer
Options for Implementation
Page 34 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
Figure 3: Examining Implementation Options Decision Questions
Is there a need for direct federal administration, in light of the risks
addressed and capacity and accountability considerations?
Is implementation by all states desirable and a realistic option, in terms
of state and federal capacity?
Are some states currently willing and qualified to assume responsibility for
implementation?
Reconsider information and options.
Options
Consider direct administration by the federal agency.
Consider inducing all states to implement.
Continue to design questions.
Consider actions to increase capacity in states not currently qualified.
Consider inducing qualified states to implement.
If standards are preemptive, provide for direct administration where states
do not assume responsibility.
Design provisions for state withdrawal that allow for an orderly transition
for both the state and the federal agency.
Continue to design questions.
A. Accountability
1. Does federal interest in attaining particular results require that states
be held accountable for their performance in this regard?
2. Are agency back- up or oversight powers needed to avert risk if state
does not perform adequately?
B. Funding
1. Will federal funds be needed to cover added state responsibilities or
ensure that overall resources are sufficient for program operation?
2. Will the estimated federal share be sufficient to induce state
participation?
3. Are maintenance of effort or related provisions needed to preserve
states? contribution?
C. Flexibility
1. Would varied approaches to implementation impede the effectiveness of the
program?
Design Questions Followup Actions
Provide for collection of performance information. Design accountability
provisions for those specific goals.
Leave unspecified or direct each state to set its own performance goals.
Provide appropriate agency back- up and oversight powers and procedures for
corrective action. Monitor for increases in potential
risk; provide for technical assistance if needed.
Estimate federal cost of direct implementation and/ or federal share of
state costs.
Reexamine federal share or increase other inducements.
Design the provisions. Make adherence to uniform procedures a condition of
state implementation.
Permit state choice in this regard and/ or encourage innovation.
Yes Yes Yes Yes
Yes Yes
Yes No
No No
No No Yes
No No No
No Yes
Page 35 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
In this figure, we begin the decision process by asking whether the national
objective and related considerations suggest a need for direct federal
administration. Direct federal administration might be appropriate when
centralized accountability and central direction are critical given the
nature of the hazards that the standards address;
states do not currently have, and the federal government has or can
develop, the capacity needed to operate the program;
uniformity of implementation will enhance or variance will undermine the
effectiveness of the regulatory approach; and
state and local involvement is not critical to achieving the objective.
While we did not study in depth the option of direct federal administration
in the regulatory area for this report, experience certainly suggests that
this option has its own set of challenges and limitations. For example, the
federal government may not have the personnel in place to carry out a
program of national concern while state and local governments may have
sufficient staff with the right kind of expertise to provide the needed
services. Another challenge with this approach is overcoming any reluctance
of state and local governments to accept the dictates of the federal
government in a given policy area. It is also important to note that direct
implementation and enforcement by a federal agency is not a selfexecuting
decision and that there could be design and implementation challenges that
might prove sufficiently problematic as to require rethinking the decision
to use the direct federal administration option.
If direct federal administration is not essential, the next question for a
federal regulatory program is whether assumption of implementation
responsibility by all states is desirable and is feasible in terms of their
capacity. This question arises both under federal standards programs and
under grants or other forms of support. The background information mentioned
in figure 1 will likely be of assistance here, but additional inquiry may be
needed to ascertain states? capacity to implement the standards and their
likely willingness to do so. If assignment to all states appears feasible,
the next step is to consider more detailed questions of design in areas such
as federal- state accountability arrangements, funding, and flexibility that
arise under this option, and to take follow up action as needed. Note that
while our figure shows only actions for clear ?yes? or
?no? answers, in reality both the answer and the appropriate follow up may
fall in between or be a mix of the actions shown.
Page 36 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
If many states, but not all, are prepared to accept responsibility for
implementation of federal standards, the first step might be to consider
actions to increase capacity in states not currently qualified, so as to be
able to enlist participation by all states in implementation at some future
point. The other option would be to consider inducing currently willing and
qualified states to assume responsibility, as in the OSHA program or the
meat and poultry inspection program. To ensure national coverage, the
program design will need to provide for direct administration by the federal
agency in the remaining states. We suggest that the design provide for an
orderly transition in case of state withdrawal from participation. Again,
the next step will be to consider the various design questions. The funding
question is of particular importance for any approach that relies largely on
financial inducements for state participation.
The remaining two regulatory mechanisms- cooperative programs and state
adoption of externally set standards- rely solely on states to implement
standards under their own authority. States are not accountable to the
federal government and the federal agency does not oversee their activities,
although it may perform monitoring functions such as collecting and
reporting performance data. Because the federal role is so limited, the
design questions we have listed for shared- implementation approaches are
not directly applicable. However, the accountability and flexibility
questions can be adapted to this context. For example, some purely state
regulatory programs include provision for monitoring and oversight by a
central body, such as the NAIC. The accountability questions could be
applied to its functions.
This study of a broad range of existing programs illustrates the rich
variety of ways in which the federal government and the states can work
toward achieving shared regulatory objectives. Each variation reflects
circumstances and sensitive issues specific to the program concerned, and
each program is unique in some way. But comparative analysis reveals both
underlying features of program design and trade- offs between the various
options available. Explicitly considering these features and tradeoffs could
help guide decisions about how to structure future federal- state regulatory
programs.
The decision framework we have developed displays the range of options
available, identifies the major choice points in the decision process, and
alerts policymakers to trade- offs and key follow- up actions associated
with each choice. The framework is a neutral tool and does not favor any
particular program design option or division of federal and state Design
Questions Can Be
Adapted to Purely State Programs
Concluding Observations
Page 37 GAO- 02- 495 Regulatory Programs: Balancing Federal and State
Responsibilities
responsibilities. Rather, it is intended to help policymakers select a
program design in keeping with the regulatory objective they seek to attain.
As agreed with your office, we are sending copies of this report to
appropriate congressional committees and other interested parties. We will
also make copies available to others upon request.
If you or your staff have any questions about this report, please contact me
on (202) 512- 9573 or Thomas James on (202) 512- 2996. Individuals making
key contributions to this report included Gail MacColl, Andrea Levine,
Thomas Phan, and Mary Reintsma.
Sincerely, Paul L. Posner Managing Director, Federal Budget and
Intergovernmental Relations Strategic Issues
(450048)
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