The Unfunded Mandates Reform Act — which was enacted on March 15, 1995, following intense pressure from the National Governors Association and others — sets up procedural mechanisms that aim to prevent Congress from imposing costs on states without providing federal funds.

Specifically, the measure requires the Congressional Budget Office (CBO) to do an analysis of all bills that are expected to cost state, local and tribal governments $50 million or more, or the private sector $100 million or more. House and Senate committees reporting out bills containing such mandates are required to show that CBO did the necessary analyses of cost. And for mandates on state, local and tribal governments of over $100 million, committees must also show where the necessary authorizations of appropriations will come from (whether or not the programs are in that committee's jurisdiction) in order to offset the costs to the public sector. If a committee does not provide this information, the bill is subject to a point of order on the House or Senate floors, preventing its consideration. A majority vote can override the point of order.

In addition, the Act requires federal agencies to consult with state, local and tribal governments — prior to the public notice and comment period — about any rulemaking that contains an unfunded mandate, and then conduct assessments of such mandates for final and proposed regulations. Regulations where these analyses are not performed are subject to judicial review.