Q: AND A:

State and local governments say they are buckling under the weight of unfunded mandates, the policy requirements that Congress imposes on them without providing adequate funds.

But Gary D. Bass, executive director of OMB Watch, says the mandates show that the federal government is living up to its responsibilities. After all, he says, setting national drinking water standards or requiring equal access to public buildings is part of the government's job of protecting the public.

The problem with unfunded mandates is the money, not hte mandate, Bass says. He opposes proposed legislation to curb unfunded mandates, but believes that the federal government could start paying for them if it cut down on so-called tax expenditures, which he says are often just huge giveaways to special interests. One such expenditure that Congress could consider eliminating is the tax exemption for municipal bonds, Bass says.

This past year Congress considered two measures dealing with unfunded mandates: One would have banned unfunded mandates out-right, while the other would have set up safeguards to control their use. Congress had acted on neither measure when it adjourned last month.

Many influential groups supported the anti-mandate bills, and they intend to push hard for action next year. But they face stiff opposition from a coalition of 75 to 100 nationwide organizations that contends such legislation would jeopardize basic programs.

Bass views the debate from the vantage of OMB Watch. Founded in 1983, the nonprofit group monitors Office of Management and Budget activities that affect nonprofit, public interest, and community groups. He discussed his opposition to the unfunded mandates legislation and how the federal government can raise revenues without increasing the budget deficit in a recent interview with staff reporter Heather Ann Hope.

Q: Why does OMB Watch and the coalition it leads oppose the unfunded mandates legislation ?

A: The definition of mandates is so broad and vague that it's unclear what actually gets caught up in the bill and what does not. There are no protections for the core rights of citizens.

A second concern is that there are procedural mechanisms in the bill that will have the effect of stymying government operations. These are procedural mechanisms that allow the Congress to stop a legislative initiative from going forward until a specific vote on that procedural issue.

Thirdly, there will be jurisdictional problems in Congress, in addition to concerns about the appropriateness of one committee, with knowledge of one subject, making decisions affecting another area in which they have no knowledge. That would enormously complicate legislation moving through Congress.

The other concern with the bill is the private-sector amendment Sen. Byron L. Dorgan [D-N.D.] attached to the Senate bill that extends to the private sector the mandate analysis that the Congressional Budget Office would do. The amendment would potentially slow up or stop legislation moving to the floor unless this analysis had been done. According to the CBO, it would be very difficult to do and the analysis would produce information of limited usefulness to the Congress.

The "no money, no mandates" approach is an effort that is really intended to stop legislation and regulations from moving forward. We oppose that because it will hurt public protections and in the long run will be a disservice because it will mean less money to state and local governments to carry out the services citizens want.

Q: What is the underlying issue behind the unfunded mandates legislation ?

A: The bottom-line issue is money and getting money in a flexible manner to the state and local governments.

The public-interest community could work hand-in-hand with the state and local groups to find the appropriate kind of funding mechanism that provides the flexibility to address these needs, instead of efforts that are simply antigovernmental. If the Clinton Administration were extremely creative in developing its fiscal 1996 budget, it might consider ways of reducing or cutting tax expenditures and dedicating a portion of or all of that reduction to an earmarked fund designed for state and local governments' use.

Q: That sounds like general revenue sharing. Is that what you advocate?

A: Congress historically has resented the concept of general revenue sharing. We're talking about a 1990s version of general revenue sharing. It would seem to make sense today to put some guidelines or constraints around it, but to allow states the ability to shift funds from one area to another.

For example, if localities were given an environmental block grant, the government could shift the moneys to safe drinking water needs or to clean air needs or to clean water needs -- whatever the specific need facing the locality.

Q: Is it reasonable to think Congress would adopt such a provision considering they just repealed a more liberal version in the 1980s?

A: The state and local governments are screaming that they need money. They were successful in getting a community partnership provision in the crime bill that added flexibility. However, the same proponents of the unfunded mandates legislation, who are largely the conservatives in the Congress, were the same ones decrying the community partnership provisions in the crime bill as pork. It will be very difficult to find a mechanism that is both workable and politically passable.

Q: The federal government is suffering through as much of a fiscal crisis as the state and locals, so what do you think the financial solution is?

A: The CBO has given many examples of both cutting tax expenditures and raising revenues. One example they give is to do something with the home mortgage deduction -- like eliminating it or going after the second mortgage deduction.

A third approach is to incorporate a combination of those; the home mortgage deduction could be limited to homes of up to roughly $250,000 in value so that it's a targeted tax expenditure for those in the upper middle income level on down. You want to look at a tax expenditure that would not hurt the economy and simultaneously would not hurt middle- and lower-income Americans.

The truth of the matter is, whatever you do to try to change tax expenditures will create an enormous war .... Whatever we do today requires great political risk to those who propose it and potentially great political consequences to those who move it.

Q: Would you advocate ending the tax-exempt status of municipal bonds ?

A: I don't think there should be any sacred cows. But, rather than going after the tax structure of municipal bonds, I'd be more interested in the creative uses of the moneys that are being made available from municipal bonds. In certain areas the interest made on the reserves are sizable. They are drawing interest on those reserves, so in essence they are making money on the money. The suggestion I would have, is to start using that interest-bearing money for local services.

Q: Is it the federal government's responsibility to dictate policy to the state and local governments, and if so shouldn't they be financially responsible ?

A: There are arguments that the federal government has no right to dictate how a state government operates. A similar legal question is raised by local governments to the state governments. We do need to have a strong federal government. Part of what makes the United States united is having common policies that cut across the states.

When we have a standard for safe drinking water it is adhered to throughout the states. You shouldn't be able to go to state X and find that the services are inadequate. You have to have a strong federal government setting common standards. In addition, it's good for business. While it protects business, it also protects the rights of citizens. You wouldn't be able to have your civil rights protections. Your voting right protections, disability protections, you name it, could not be uniformly done if the federal government wasn't capable of enforcing a common standard throughout the land.

Q: What kind of legislation, if any, would you support to help deter the federal government from passing on unfunded mandates ?

A: I'm hesitant to identify specific items that would garner a yes or no vote on the legislation because we haven't sat at the table with the groups. This struggle that was stimulated in pan by the U.S. Conference of Mayors after the Clinton stimulus plan failed [in May 1993] is less than two years old. Throughout that period there has been no room for dialogue and negotiation between the public-interest community and the "group of seven" [lobbyists] representing the state and local governments. We've got to have that before we can start identifying what can and cannot be done.

Q: You mentioned tax reform in connection with unfunded mandates. That would require a big overhaul of the tax system. Is that what OMB Watch advocates ?

A: The public-interest community would like to reinvigorate the investment agenda without raising the deficit. Which means that the solution is either spending cuts, tax increases, or cutting out tax breaks. Fairness is a critical question, and those entities that have been receiving tax breaks may, for the good of the country, have to give up some of those tax breaks.

Unfortunately, the structure in which Congress addresses these issues is so fractionated that you can't package a bill that deals with unfunded mandates and tax expenditure cuts. The legislation would have to go to four different committees on the House and Senate sides ....

It's almost impossible, because of the power of special interests in Washington, to bring [legislation] back together once it's broken into pieces. If there were a comprehensive plan it would be extremely difficult, if not impossible, to move it through a Congress that is going to be increasingly conservative and hostile to the Clinton administration. All of this is to say it doesn't look good.

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