Under the bill, agencies would have to develop an "expedited" process to waive a state's statutory or regulatory requirements under a federal grant program if another state has recieved a "similar" waiver. On Nov. 4, 1999, the House Government Management, Information and Technology Subcommittee marked up H.R. 2376, a bill that addresses waivers of regulatory and statutory requirements. It is expected that the bill will be considered by the full Government Reform Committee during the next session of Congress, followed by expedited floor consideration. In its current form the bill raises many questions about its impact on human needs programs, worker protections, environmental safeguards, education programs, and civil rights. Until these questions are satisfactorily resolved, H.R. 2376 should be opposed. The bill has three main requirements:

• Agencies would have to establish a streamlined 120-day review process to respond to states that request waivers of regulatory or statutory requirements of federal grant programs. This requirement is similar to an existing Executive Order implemented in August, 1999. But unlike the Executive Order, this requirement would be judicially reviewable. The actions taken by the agencies must be published quarterly in the Federal Register.
• Agencies would have to develop an "expedited" review process to waive a state's statutory or regulatory requirements under a "capped grant program" if a "similar" waiver has already been approved for another state. This, too, would be judicially reviewable.
• OMB, HHS, and USDA would have to develop � "in consultation with the National Governors' Association and the National Conference of State Legislatures" � common approaches and requirements for states to demonstrate budget neutrality with regard to programs operated by HHS and USDA.

These three requirements appear to be discrete. For example, the first requirement applies to waivers in all grant programs; the expedited review of waivers only applies to capped grant programs; and the budget neutrality section does not link back to the review of waivers. Yet all three requirements create a new philosophical underpinning that vastly changes the nature and purpose of federal waivers. Budget neutrality, for example, is a general policy objective that must be demonstrated by states before an agency will grant a waiver affecting an entitlement program, such as Medicaid or Food Stamps. Establishing common approaches and requirements � especially when there are differences in programs and state implementation � may reduce the ability of the federal agencies to receive assurances of quality care and accountability. In a practical sense, these three requirements are inextricably intertwined, establishing a waiver process that favors "flexible policy approaches" over other priorities, such as stronger program performance and expanded care. Federal agencies grant waivers to stimulate experimentation and innovation, not to change program or regulatory requirements. The extent to which innovative efforts should be extended universally to other states or localities is a congressional decision that should not be left to executive branch discretion. Such discretion could allow agencies to circumvent congressional intent or desire. Details of the Bill Just before the Nov. 4 mark up of H.R. 2376, a revised bill was presented by Rep. Steve Horn (R-CA), chairman of the subcommittee, which added two new requirements to the original legislation introduced by Rep. Mark Green (R-WI) (originally the bill just contained the section dealing with expedited review). All of the requirements apply only to state waiver requests. The following is an analysis of each of the bill's requirements. Streamlining the Waiver Process The bill would codify part of Section 7 of Executive Order 13132, Federalism, which was signed by President Clinton on Aug. 4, 1999. This part of the bill applies to all "grant programs," which is not defined, but presumably would apply to discretionary and entitlement programs throughout the government. And it applies to all waivers � regulatory or statutory � that are within an agency's discretion to grant. Waivers can affect program eligibility, benefit levels, quality of care, procedures, even regulatory safeguards. Federal agencies testified at a September 30th hearing that waiver authority can be expressly or generally permitted through statutes, thereby giving agencies significant discretion. In other words, this part of the bill can be quite broad. More specifically, this part of the bill:

• Requires every grantmaking agency to review and streamline procedures for reviewing applications for waivers from states;
• Encourages agencies to consider waivers that would utilize "flexible policy approaches" at the state level where the waiver is "consistent with applicable Federal policy objectives and is otherwise appropriate." This language comes directly from the Clinton executive order, but was never intended to be put into law. Putting this language into law raises at least four issues. First, it establishes a new legislative criteria � "flexible policy approaches" � as the basis for reviewing waivers. Even states such as Oregon that have experimented with flexibility through its Oregon Options program have more stringent criteria for waiving federal requirements. Second, waivers need not be consistent with federal law, only with federal policy objectives. While this language may make sense for an Executive Order, where a President is attempting to achieve consistency with his or her policies, it is hardly suitable for legislation. Third, unlike the executive order, these new, vague standards would become judicially reviewable. Law suits � even just the threat of them � will greatly influence how agencies approach state waiver requests. Fourth, and most fundamentally, it presupposes that legislation is needed to encourage agencies to consider more state waiver requests. This is just wrong. Waivers should be highly selective and carefully considered for programmatic impact with a fundamental goal of achieving greater program performance. Again, waivers are primarily opportunities to experiment, which can lead to new ideas for Congress to consider. They are not, however, meant to create wholesale changes in programs without public debate and consideration.
• Limits review of waiver requests from states to 120 days (to the extent practicable and permitted by law). If the waiver application is not approved, the agency must indicate in writing the reason for denial. Although this 120-day time limit is required by the Clinton executive order, it is not currently judicially reviewable. Under this bill, states could sue if an agency fails to meet the deadline. This would make agencies more likely to grant approval, possibly without careful review, to avoid potential law suits; or, alternatively, agencies could develop legally grounded reasons for denying a request, instead of taking the necessary time to assess its potential for experimentation and innovation. Ironically, the Clinton E.O. � which was supported by the National Governors' Association (NGA) and other organizations representing state and local governments � has already answered many concerns about the waiver process. Testifying at a recent House hearing, William Pound, the executive director of the National Council of State Legislators (NCSL), commended President Clinton on the development of the federalism executive order, and said, "[T]he experience of state legislators regarding waivers leads me to suggest that we need a more thorough review of waiver application experiences before proceeding with legislation."
• Requires agencies to publish the final waiver decision (either a complete approval or denial) in the Federal Register on a quarterly basis. While the notion of disclosure is supportable, the approach taken by the bill is extremely rigid. Some agencies already post their waiver actions to their web sites, thereby making the Federal Register notice redundant. Also some agencies have pointed out that they receive most, if not all, waiver requests at the beginning of a program year. Thus, quarterly notices may not be meaningful. Finally, there is a concern that the requirement for quarterly notices in the Federal Register would link to the expedited waiver review process (described below) and encourage other states to pursue "similar" waivers.

Expedited Review of Similar Waivers The bill establishes an expedited review process for states that request waivers under a "capped grant program," which are "similar" to other waivers already approved. This requirement is extremely vague. The definitions of "expedited review" and "similar" waivers are not provided. And the definition of "capped grant program" � "a grant program for which an appropriation act fully determines the budget authority" � is less than clear. Although HHS was responding to a proposal for expedited review of all waivers in its reaction to the bill, the same objections still apply when discussing a capped grant program. HHS notes that it has fiduciary and programmatic responsibilities. "Our paramount concern is ... to ensure the protection of the children and families we serve. Waivers that change benefits or make large programmatic changes must be carefully assessed to assure families and children are protected." In other words, waivers should not be expedited solely because they are "similar." HHS also points out that programs operate differently in each state, making it inappropriate to expedite reviews for "similar" requests. For example, EPA operates Project XL which permits experimentation with new approaches to environmental protection, including waiver of important regulatory controls. One project in Florida (at the Jack M. Berry facility) proposed to consolidate various regulatory requirements into one operating permit. Today, EPA is evaluating the results of this experiment. It would be a huge problem if other states received expedited reviews solely because one state received an opportunity to experiment. Furthermore, this bill would make review of "similar" waiver requests a priority over new and innovative waiver requests. Agencies have limited resources and would attempt to address the priorities identified in the bill � "similar" waivers � first, especially since the priority would be judicially reviewable. This would cause EPA and other agencies to become increasingly cautious about any experimentation or innovation for fear that one waiver would lead to a rash of waiver requests that must be expedited. Since this review process would be judicially reviewable, it is more than likely that agencies would begin to err on the side of approving waivers, even when they should not, because of the expedited timetable and the potential of law suits. Although misguided, an expedited review process has been sought by the National Governors' Association, among others. Yet the provision does not address the NGA objective. According to NGA Executive Director Raymond Schepach, the expedited review section "has a relatively narrow scope since it focuses on discretionary programs. Our major problem rests with the entitlements of food stamps and Medicaid." H.R. 2376's expedited review does not cover entitlement programs. What, then, is captured by the bill's definition of a "capped grant program"? Presumably this covers such programs as Head Start, Vocational Rehabilitation, Child Welfare, OSHA grants for state plans, various environmental programs, and most discretionary grant programs. But the bill's definition is vague, covering programs where an "appropriation act fully determines the budget authority." (emphasis added) Since most authorizing acts set limits on spending, it can be argued that it is not actually the appropriations act that "fully determines" spending, leaving the question of what is covered in a muddle. Equally as troubling, there is no limitation on the types of waivers that can be considered by the agency. Under the bill's first requirement to streamline the waiver process, the scope of waivers are limited "to statutory or regulatory requirements that are discretionary and subject to waiver by an agency." Even though this language should be clarified, there is no such limitation placed under the expedited review requirements of the bill. Particularly since one part of the bill expressly limits the type of waivers, it suggests that any type of waiver request would be appropriate for expedited review. Budget Neutrality The bill requires OMB, HHS, and USDA to develop an interagency memorandum of understanding (MOU) to specify "a common approach and common requirements" for calculating budget neutrality, with respect to states, for programs operated by HHS and USDA. The MOU must include a provision to allow multiple-year cost analysis when determining whether the state proposal is budget neutral (or in other words, does not require additional spending). The MOU is to be developed "in consultation" with NGA and NCSL. This requirement has significant policy implications. First, budget neutrality is often the first test an agency weighs before looking at the merits of a state waiver request. Thus, the MOU would have a major impact on agency consideration of state waiver requests, particularly for entitlement programs. Second, the requirement that the MOU allow multi-year cost analysis would make it increasingly easy for states to demonstrate budget neutrality in waiver requests. This one-size-fits-all approach to calculations affecting budget neutrality and cost effectiveness presents major problems. These issues are best resolved program-by-program and state-by-state. Because each state operates programs differently (e.g., different Medicaid eligibility standards), the method for calculating budget neutrality is different. Moreover, requiring multi-year analysis skews the results automatically towards neutrality, particularly because of difficulties in predicting out-year costs. Third, the requirement to develop the MOU "in consultation with" two organizations, NGA and NCSL, is troubling. Does this mean that more than these two organizations could give comments (particularly since there is no limit on judicial reviewability)? If not, why just these two organizations? Shouldn't the public or the beneficiaries of government programs be part of the process? Fourth, the MOU would be one basis for judicial review. Since the bill's first requirement is to establish a waiver process that favors "flexible policy approaches" at the state level, budget neutrality would be a linchpin. Again, since all of the requirements of this bill are judicially reviewable, it is likely that once a state achieves budget neutrality and demonstrates a flexible policy approach, it would be difficult for an agency to deny the waiver request. Conclusion The sponsors of H.R. 2376 have yet to demonstrate a need for this bill. And indeed, with the implementation of the Clinton executive order on federalism, which followed the bill's introduction, the case for going forward is diminished even further.