• It is overly broad and raises serious constitutional concerns. While parts of the bill would help to improve the management of grants (e.g., uniform applications) and may assist with program integration, its scope and general waiver authority make it a back door means for gutting public protections, including those already in law. A federal interagency council is given the authority to waive federal law without congressional review or agreement.
• The emphasis in the bill is on "flexibility and coordination," not improvement of services. The bill allows a locality to waive federal laws and regulations as long as goals and objectives are stated. There is no assurance of quality of services or specific measures of standards in specific programmatic areas;
• Despite the enormous policy and programmatic implications, there is very little opportunity for public input and no public accountability;
• There is no funding for enforceability; and
• The mechanism for developing flexibility and coordination plans is cumbersome and will not work.

The bill was originally introduced in the Senate by Mark Hatfield (R-OR) at the beginning of the 104th Congress as S. 88. The concept of providing flexibility to states and localities to propose plans for better coordination of funds and services, and to request waivers from laws and regulations that hinder a locality's ability to achieve results is supported by the Clinton Administration as indicated in the President's FY 97 budget request (see page 132). In a September 21, 1995 letter from Vice President Al Gore to Hatfield, Gore states that "[t]he Administration would like to support S. 88 if we can reach agreement on the certain issues that we believe are critical to the effectiveness of your legislation." The letter proceeds to identify seven issues that need revision in the Hatfield bill. The Shays bill only addresses a few of these concerns and actually moves in an opposite direction from the Administration on several other issues.

How the Shays Bill Would Work

The Shays bill permits a state or locality to submit "flexibility or coordination plans" that affect any domestic assistance programs, including any grant, contract, loan, and other form of assistance that is made directly or indirectly to state, local, or tribal governments or to charities covered under 501(c)(3) of the tax code. It does not cover assistance programs to individuals (e.g., education loans), benefits provided by the federal government directly to individuals, entitlement programs, and Food Stamps. However, administrative costs for entitlements can be covered. An interagency council, called a Community Empowerment Board (CEB) -- comprised of federal departments, Federal Emergency Management Agency, Environmental Protection Agency, Small Business Administration, General Services Administration, Office on National Drug Control Policy, and Office of Management and Budget -- would be established to approve or disapprove flexibility or coordination plans submitted by eligible applicants. There are no requirements that the CEB operate in the sunshine; nor are there requirements that the CEB obtain public comments. The model is very similar to the Vice President's Council on Competitiveness during the Bush Administration that reviewed regulatory proposals from agencies. Any state, local or tribal government or charity that qualifies as a 501(c)(3) organization under the tax code can submit a flexibility or coordination plan to the CEB. In addition, a qualified consortium can submit a plan to the CEB. A qualified consortium would consist of at least three organizations representing some combination of state agencies, local government agencies, or charities that are receiving federal funds in at least three of the following areas: education; Head Start; child care; family support and preservation; maternal and child health; job training; housing; nutrition; juvenile justice; drug abuse prevention and treatment; and community and economic development.

Prior to sending a flexibility or coordination plan to the CEB, the eligible applicant must submit the plan for comment to the governor, a state legislative official, or the chief executive officer of a local or tribal government if the entity is affected by the plan. If any of the governmental entities disapproves of the plan or does not plan on seeking the appropriate state waiver of law or regulation, the eligible applicant must acknowledge this in the plan submitted to the CEB. (If the governmental entity does not respond within 60 days, the applicant can proceed to submit the plan to the CEB, but indicate that it has not received comments from the affected governmental entity.) In addition, the eligible applicant must conduct at least one public hearing and obtain the comments of a community advisory committee. All comments received by the applicant must be submitted to the CEB. The CEB is required to review the first 50 flexibility or coordination plans it receives each year. Priority will be to those plans that help develop criteria for approving or disapproving additional plans the CEB receives. The CEB has 120 days -- with one 60 day extension -- in which to approve or disapprove the plan. The CEB is also given the authority to provide technical assistance to eligible applicants in order to encourage the submission of a plan. Those entities submitting a flexibility or coordination plan are to receive special priorities status when funding requests are reviewed by the agencies.

What's In A Flexibility or Coordination Plan

A flexibility or coordination plan would permit an eligible applicant to:

• Consolidate funding under two or more programs. There are no constraints on the ability to shift the use of funds. For example, an eligible applicant could propose shifting funds for a locally unpopular education program to the repair of roads. While the community advisory committee is asked to comment on the impact on low-income individuals, there is no requirement that the plan target vulnerable populations;
• Consolidate state or local plans for program services. For example, a state plan on developmental disabilities might be merged with another plan addressing another issue, such as mental health needs. While the intent may be to coordinate service delivery, those constituencies with less political clout may no longer receive the attention and services they need. There will be little opportunity to challenge the state or local action, except through a public hearing;
• Change eligibility requirements under a program. For example, age eligibility under Head Start could be changed without virtually any public input beyond one hearing.
• Waive law and regulation at any level of government. The bill places certain restrictions on areas in which waivers can be proposed at the federal level (see below). But the applicant can propose waiving virtually any local, state, or federal law. Thus, a local education agency could propose building a school and waive environmental impact statements; a group of hospitals receiving federal grants could propose waiving OSHA requirements; or a city could waive targeting provisions under the Community Development Block Grant or change the process used under the Comprehensive Housing Assistance Strategy. If a charity that receives federal funds under a financial assistance program is affected by the plan, but does not agree to the plan, the CEB cannot approve that portion of the plan.

Waivers of Law and Regulation

The CEB may not approve waivers that enforce any constitutional or civil rights, including titles VI and VII of the Civil Rights Act, section 504 of the Rehabilitation Act, the Americans with Disabilities Act, the Age Discrimination Act, the Age Discrimination in Employment Act, title IX of the Education Amendments of 1972, the Fair Housing Act, and the Equal Pay Act. In addition, the CEB may only approve waivers that will maintain or advance national goals, standards, or protections in the following areas:

• Establishing or enforcing labor relations or labor protections;
• Establishing or enforcing environmental standards or protections;
• Establishing or enforcing educational equality or opportunity; and
• Protecting public health or safety.

There is no description of criteria to guide the CEB in deciding whether a waiver will maintain or advance national priorities, nor are there resources for the CEB to use to investigate such matters. It is also unclear why waivers would be permitted when it pertains to issues dealing with national priorities that have been publicly debated and enacted into law. The bill does requires the applicant to identify methods for collecting data to measure performance and evaluate the impact of the plan on the community. However, two problems arise. First, there is no assurance that the local or state data collection methods will be consistent with national standards for data collection or that the data will be comparable with data collected in other communities that seek waivers. Thus, it is possible that as a result of the waiver and consolidation process, it will impair our ability to draw comparable national data sets for evaluations and conclusions. Second, while the approved applicant must submit annual reports describing activities and comparing achievements to the goals and performance criteria specified in the plan, there are no resources allocated for the CEB or agencies to review the data that is supposed to be collected and maintained by the state or local entity. As a result, if a plan is approved it will difficult for the federal government to truly monitor its effectiveness, thereby limiting enforceability of critical national standards and protections.

Other CEB Functions

Beyond reviewing flexibility and coordination plans and monitoring the implementation of the plans, the CEB is given other responsibilities. The CEB is given the power to eliminate, rewrite, or coordinate regulations in any federal agency. Special authority is granted to identify more efficient operation of financial assistance programs that affect: education, Head Start, child care, family support and preservation, maternal and child health, job training, housing, nutrition, juvenile justice, drug abuse prevention and treatment, and community and economic development. The power to eliminate or rewrite agency regulations is quite unique, since nearly all authorizing legislation delegates such power to agencies, where the expertise is. Since the CEB has no resources allocated to it, it is likely that an agency, such as the Office of Management and Budget, will provide the staff work. During the Bush Administration, the Council on Competitiveness operated in a nearly identical manner, using OMB to staff its work. Like the Council on Competitiveness, the CEB has no requirements to make its activities accountable to the public. Finally, the CEB is given various responsibilities dealing with grants and contracts management. For example, the CEB is given the authority to create a uniform application form for federal financial assistance, as well as a release form about program beneficiaries that can be shared with multiple organizations addressing the needs of the beneficiary (as long as it is consistent with confidentiality requirements). The CEB is also instructed to evaluate performance standards and evaluation criteria used in federal programs and make recommendations for any changes.