MEMORANDUM FOR HEADS OF EXECUTIVE DEPARTMENTS AND
              AGENCIES, AND INDEPENDENT REGULATORY AGENCIES
 
 

FROM:	John T. Spotila
	Administrator, Office of
	Information and Regulatory Affairs
SUBJECT:	Guidance for Implementing E.O. 13132

        President Clinton issued Executive Order No. 13132, "Federalism," on August 4, 1999
(64 Fed. Reg. 43255 (August 10, 1999), the "Order").  The Order emphasizes consultations
with State and local governments and enhanced sensitivity to their concerns.  It establishes specific
requirements that the Federal government must follow as it develops and carries out policy
actions that affect State and local governments.  As the President stated, "[t]he Executive order
on federalism I signed will strengthen our partnership with State and local governments and
ensure that executive branch agencies are able to do their work on behalf of the American
people."

        The Order sets forth "Fundamental Federalism Principles" (Sec. 2), "Federalism
Policymaking Criteria" (Sec. 3), "Special Requirements for Preemption" (Sec. 4), "Special
Requirements for Legislative Proposals" (Sec. 5), and specific procedures for intergovernmental
consultation and increased flexibility for State and local government waivers (Secs. 6 & 7).
Please read the full text (see Appendix A).

        This guidance is directed to procedural requirements -- what agencies should do to
comply with the Order and how they should document that compliance to OMB.

1.  When does the Order take effect?

                E.O. 13132 becomes effective on November 2, 1999 (Sec. 10(c)).

2.  What agencies does it cover?

                E.O. 13132 applies to all Federal agencies, except for the independent regulatory agencies
(Sec. 1(c)).  It encourages independent regulatory agencies to comply voluntarily with its
provisions (Sec. 9).  E.O. 13132 adopts the definitions of "agency" and "independent regulatory
agency" used by the Paperwork Reduction Act of 1995.

 3.  What is the role of an agency federalism official and which agencies must have them?

        The federalism official has principal responsibility for the agency's implementation of the
Order (Sec. 6(a)).  Each federalism official must:

*  ensure that the agency considers federalism principles in its development of regulatory
    and legislative policies with federalism implications;

*  ensure that the agency has an accountable process for meaningful and timely
    intergovernmental consultation in the development of regulatory policies that have
    federalism implications; and

*  provide certifications of compliance to OMB.

4.  When does an agency need to designate its federalism official?

        Each agency should do so as soon as possible, preferably before November 2, 1999, the
Order's effective date.  No later than January 31, 2000, the head of each agency must designate
the agency federalism official, and that official must submit to OMB a description of the
agency's consultation process.  Each federalism official should promptly notify Stuart Shapiro in
the Office of Information and Regulatory Affairs (OIRA) (395-7316 and
SShapiro@OMB.EOP.GOV) of this designation.

5.  To what activities does the Order apply?

        Section 2 sets forth "Fundamental Federalism Principles" to guide agencies in
formulating and implementing policies that have federalism implications.  Section 3 sets forth
"Federalism Policymaking Criteria" to which agencies must adhere "to the extent permitted by
law."  These federalism principles and criteria apply to "regulations, legislative comments or
proposed legislation, and other policy statements or actions" that have "substantial direct effects
on the States, on the relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of government" (Sec. 1(a)).
The term "States" includes "units of local government and other political subdivisions established
by the states" (Sec. 1(b)).

6.  What are the Order's preemption requirements?

        Under Section 4, "Special Requirements for Preemption," agencies must act in strict
accordance with governing law in taking action that preempts State law.  Agencies must:

*  construe Federal statutes to preempt State law only where the exercise of State authority
    directly conflicts with the exercise of Federal authority under the Federal statutes or there
    is other clear evidence that Congress intended to preempt State law;

*  construe Federal statutes to authorize the issuance of regulations that preempt State law
    only where the exercise of State authority directly conflicts with the exercise of Federal
    authority under the Federal statutes or there is other clear evidence to conclude that
    Congress intended the agency to have the authority to preempt State law through
    rulemaking;

*  restrict regulatory preemption of State law to the minimum level necessary to achieve the
    objectives of the applicable Federal statute;

*  consult, to the extent practicable, with State and local officials if the agency foresees the
    possibility of a conflict between State law and Federally protected interests; and

*  provide all affected State and local officials notice and an opportunity to participate in the
    proceedings when an agency proposes to preempt State law through agency adjudication
    (for example, a regulatory permitting process) or a rulemaking,

        OIRA will require such certifications beginning on November 2, 1999, for all draft final
rules with federalism implications submitted for OIRA review under E.O. 12866.  (See Appendix
B for a recommended certification format.)  We understand that a final rule to be submitted for
review beginning on November 2, 1999, may have been promulgated as a Notice of Proposed
Rulemaking (NPRM) prior to August 4, 1999 (the date E.O. 13132 was signed).  To the extent,
for example, that the intergovernmental consultation process had not occurred as called for by
E.O. 13132, the certification should so state.  Agencies must publish a copy or summary of the
certification in the preamble to the final rule.

7.  What does the Order require concerning agency development of proposed legislation?

        Under Section 5, "Special Requirements for Legislative Proposals," agencies must not
submit to the Congress legislation that would:

*  directly regulate the States in ways that would interfere with functions essential to the
    States' separate existence;

*  attach to Federal grants conditions that are not reasonably related to the purpose of the
    grant; or

*  otherwise preempt State law, unless such preemption is consistent with the federalism
    principles and policymaking criteria stated in Sections 2 and 3 of the Order (see Question
    6, above).

8.  What does the Order require concerning agency development of regulations?

        Agencies must have "an accountable process to ensure meaningful and timely input by
State and local officials in the development of regulatory policies that have federalism
implications" (Sec. 6(a)).  The consultation process must involve "State and local officials" (Sec.
6(a)).

*  E.O. 13132 defines this phrase to mean "elected officials of State and local governments
    or their representative national organizations" (Sec. 1(d)).  We understand that many
    agencies consult routinely with their professional counterparts in State and local
    governments (often civil servants, not elected officials).  The agencies must include
    elected State and local government officials or their representative national organizations
    in the consultation process.  We also encourage agencies to continue to work with their
    professional counterparts.

*  E.O. 13132 supplements, but does not supersede, the requirements contained in E.O.
    12372. "Intergovernmental Review of Federal Programs" (Secs. 3(a) & 10(a)).  E.O.
    12372 seeks to improve the intergovernmental partnership between the Federal
    Government and the States.  It asks Federal agencies to rely on State and local processes
    for consultation with elected State and local government officials that would provide the
    non-Federal funds for, or that would be directly affected by, proposed Federal assistance
    or direct Federal development.  It allows States to design their own review process and
    calls for Federal agencies to communicate with State officials in the project planning
    cycle, make efforts to accommodate State concerns, and explain Federal decisions.

        The Order establishes specific procedures for intergovernmental consultation in two
circumstances -- if a rule imposes unfunded mandates or if a rule preempts State law.

*  Subsection 6(b) establishes the specific procedures for unfunded mandates.  Subsection
    6(b) defines a mandate as "any regulation that has federalism implications, that imposes
    substantial direct compliance costs on State and local governments, and that is not
    required by statute."  Subsection 6(b)(1) permits an agency not to follow the specific
    procedures if the Federal government funds the direct costs of complying with the
    mandate.

*  Subsection 6(c) establishes the specific procedures for "any regulation that has federalism
    implications and that preempts State law."

*  Each agency must consult, to the extent practicable and permitted by law, with State and
    local officials "early in the process of developing the proposed regulation" (Secs.
    6(b)(2)(A) & (c)(1)).  These consultations should seek comment on compliance costs or
    preemption as appropriate to the nature of the rulemaking under development.  The
    timing, nature, and detail of the consultation involved should also be appropriate to the
    nature of the regulation involved.

*  When an agency submits a draft final regulation to OMB for review under E.O. 12866
    prior to promulgation of the final regulation, the agency must include in "a separately
    identified portion of the preamble to the regulation" a "federalism summary impact
    statement" (Secs. 6(b)(2)(B) & (c)(2)).

*  The "federalism summary impact statement" must include --

-- "a description of the extent of the agency's prior consultation with State and local
    officials;

-- "a summary of the nature of their concerns and the agency's position supporting
    the need to issue the regulation; and

-- "a statement of the extent to which the concerns of State and local officials have
    been met" (Secs. 6(b)(2)(B) & 6(c)(2)).

*  To the extent that an agency has carried out intergovernmental consultations prior to
    publication of the Notice of Proposed Rulemaking (NPRM), we strongly recommend that
    the agency help State and local governments, and the public as a whole, by including a
    "federalism summary impact statement" in its preamble to the NPRM.

*  When submitting a draft final regulation to OMB for review, each agency must provide a
    copy of any formal policy-related correspondence from State and local officials, and
    must, on request, make available a copy of  any other written communications submitted
    to the agency by State and local officials (Secs. 6(b)(2)(C) & 6(c)(3)).

        No.  The exemption to the Federal Advisory Committee Act provided in Section 204(b)
of title II of P.L. 104-4, the "Unfunded Mandates Reform Act of 1995" (UMRA), remains in
effect.  As OMB stated in its guidelines for implementing Section 204(b):

In accordance with the legislative intent, the exemption should be read broadly to
facilitate intergovernmental communications on responsibilities or administration.

 This exemption applies to meetings between Federal officials and employees and State,
local, or tribal governments, acting through their elected officers, officials, employees,
and Washington representatives, at which "views, information, or advice" are exchanged
concerning the implementation of intergovernmental responsibilities or administration,
including those that arise explicitly or implicitly under statute, regulation, or Executive
order.  The scope of meetings covered by the exemption should be construed broadly to
include any meetings called for any purpose relating to intergovernmental responsibilities
or administration.  Such meetings include, but are not limited to, meetings called for the
purpose of seeking consensus; exchanging views, information, advice, and/or
recommendations; or facilitating any other interaction relating to intergovernmental
responsibilities or administration.  ("Guidelines and Instructions for Implementing
Section 204, 'State, Local, and Tribal Government Input," of Title II of Public Law 104-
4," OMB Memorandum 95-20 (September 21, 1995), pp. 6-7, 60 Fed. Reg. 50651, 50653
(September 29, 1995); see Delegation of Authority To Issue Guidelines and Instructions
to Federal Agencies on Consulting With State, Local, and Tribal Governments, President
Clinton's Memorandum to the Director of the Office of Management and Budget (August
25, 1995), 60 Fed. Reg. 45039 (August 29, 1995)).

        The waiver provisions in Section 7 are substantially identical to those stated in Section 2
of E.O. 12875.  The Order directs agencies to "review the processes under which State and local
governments apply for waivers of statutory and regulatory requirements and take appropriate
steps to streamline those processes" (Sec. 7(a)).  It also sets forth the circumstances under which
agencies must consider an application by a State for a waiver of statutory or regulatory
requirements.  It encourages flexibility in granting waivers, but does not change applicable
Federal waiver review criteria, including the principle of budget neutrality.  It also sets a target
completion date of 120 days after the filing of a complete waiver application for an agency
decision.  These provisions apply "only to statutory or regulatory requirements that are
discretionary and subject to waiver by the agency" (Sec. 7(d)).

11.  When will OMB report on agency implementation of this order to State and local officials?

        No later than Friday, May 1, 2000, the OMB Director and the Assistant to the President
for Intergovernmental Affairs plan to confer with State and local officials to ensure that this
Order is being properly and effectively implemented (Sec. 8(c)).

        Under UMRA Section 208, OMB must publish an annual report on agency compliance
with the requirements of Title II, including agency compliance with Section 204, "State, Local,
and Tribal Government Input."  Our request next year for a description of your UMRA
Section 204 consultations will include a request for a summary of your efforts to comply with this Order
as well.

12.  With whom should we consult when we have questions concerning E.O. 13132?

        If your staff have questions concerning this Order, please contact Stuart Shapiro in OIRA
(395-7316 and SShapiro@OMB.EOP.GOV).

EXECUTIVE ORDER NO. 13132
FEDERALISM

Section 1.  Definitions.  For purposes of this order:

        (a) "Policies that have federalism implications" refers to regulations, legislative
comments or proposed legislation, and other policy statements or actions that have substantial
direct effects on the
States, on the relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of government.

        (b) "State" or "States" refer to the States of the United States of America, individually
or collectively, and, where relevant, to State governments, including units of local government
and other political subdivisions established by the States.

        (c) "Agency" means any authority of the United States that is an "agency" under 44
U.S.C. 3502(1), other than those considered to be independent regulatory agencies, as defined
in 44 U.S.C. 3502(5).

        (d) "State and local officials" means elected officials of State and local governments or
their representative national organizations.

Sec. 2.  Fundamental Federalism Principles.  In formulating and implementing policies that
have federalism implications, agencies shall be guided by the following fundamental
federalism principles:

        (a) Federalism is rooted in the belief that issues that are not national in scope or
significance are most appropriately addressed by the level of government closest to the people.

        (b) The people of the States created the national government and delegated to it
enumerated governmental powers.  All other sovereign powers, save those expressly
prohibited the States by the Constitution, are reserved to the States or to the people.

        (c) The constitutional relationship among sovereign governments, State and national,
is inherent in the very structure of the Constitution and is formalized in and protected by the
Tenth Amendment to the Constitution.

        (d) The people of the States are free, subject only to restrictions in the Constitution
itself or in constitutionally authorized Acts of Congress, to define the moral, political, and
legal character of their lives.

        (e) The Framers recognized that the States possess unique authorities, qualities, and
abilities to meet the needs of the people and should function as laboratories of democracy.

        (f) The nature of our constitutional system encourages a healthy diversity in the public
policies adopted by the people of the several States according to their own conditions, needs,
and desires.  In the search for enlightened public policy, individual States and communities
are free to experiment with a variety of approaches to public issues.  One-size-fits-all
approaches to public policy problems can inhibit the creation of effective solutions to those
problems.

        (g) Acts of the national government -- whether legislative, executive, or judicial in
nature -- that exceed the enumerated powers of that government under the Constitution violate
the principle of federalism established by the Framers.

        (h) Policies of the national government should recognize the responsibility of -- and
should encourage opportunities for -- individuals, families, neighborhoods, local governments,
and private associations to achieve their personal, social, and economic objectives through
cooperative effort.

        (i) The national government should be deferential to the States when taking action that
affects the policymaking discretion of the States and should act only with the greatest caution
where State or local governments have identified uncertainties regarding the constitutional or
statutory authority of the national government.

Sec. 3.  Federalism Policymaking Criteria.  In addition to adhering to the fundamental
federalism principles set forth in section 2, agencies shall adhere, to the extent permitted by
law, to the following criteria when formulating and implementing policies that have
federalism implications:

        (a) There shall be strict adherence to constitutional principles.  Agencies shall closely
examine the constitutional and statutory authority supporting any action that would limit the
policymaking discretion of the States and shall carefully assess the necessity for such action.
To the extent practicable, State and local officials shall be consulted before any such action is
implemented.  Executive Order 12372 of July 14, 1982 ("Intergovernmental Review of
Federal Programs") remains in effect for the programs and activities to which it is applicable.

        (b) National action limiting the policymaking discretion of the States shall be taken
only where there is constitutional and statutory authority for the action and the national
activity is appropriate in light of the presence of a problem of national significance.  Where
there are significant uncertainties as to whether national action is authorized or appropriate,
agencies shall consult with appropriate State and local officials to determine whether Federal
objectives can be attained by other means.

        (c) With respect to Federal statutes and regulations administered by the States, the
national government shall grant the States the maximum administrative discretion possible.
Intrusive Federal oversight of State administration is neither necessary nor desirable.

        (d) When undertaking to formulate and implement policies that have federalism
implications, agencies shall:

(1) encourage States to develop their own policies to achieve program
objectives and to work with appropriate officials in other States;

(2) where possible, defer to the States to establish standards;

(3) in determining whether to establish uniform national standards, consult
with appropriate State and local officials as to the need for national standards and any
alternatives that would limit the scope of national standards or otherwise preserve
State prerogatives and authority; and

(4) where national standards are required by Federal statutes, consult with
appropriate State and local officials in developing those standards.

        (a) Agencies shall construe, in regulations and otherwise, a Federal statute to preempt
State law only where the statute contains an express preemption provision or there is some
other clear evidence that the Congress intended preemption of State law, or where the exercise
of State authority conflicts with the exercise of Federal authority under the Federal statute.

        (b) Where a Federal statute does not preempt State law (as addressed in subsection (a)
of this section), agencies shall construe any authorization in the statute for the issuance of
regulations as authorizing preemption of State law by rulemaking only when the exercise of
State authority directly conflicts with the exercise of Federal authority under the Federal
statute or there is clear evidence to conclude that the Congress intended the agency to have the
authority to preempt State law.

        (c) Any regulatory preemption of State law shall be restricted to the minimum level
necessary to achieve the objectives of the statute pursuant to which the regulations are
promulgated.

        (d) When an agency foresees the possibility of a conflict between State law and
Federally protected interests within its area of regulatory responsibility, the agency shall
consult, to the extent practicable, with appropriate State and local officials in an effort to avoid
such a conflict.

        (e) When an agency proposes to act through adjudication or rulemaking to preempt
State law, the agency shall provide all affected State and local officials notice and an
opportunity for appropriate participation in the proceedings.

Sec. 5.  Special Requirements for Legislative Proposals.  Agencies shall not submit to the
Congress legislation that would:

        (a) directly regulate the States in ways that would either interfere with functions
essential to the States' separate and independent existence or be inconsistent with the
fundamental federalism principles in section 2;

        (b) attach to Federal grants conditions that are not reasonably related to the purpose of
the grant; or

        (c) preempt State law, unless preemption is consistent with the fundamental federalism
principles set forth in section 2, and unless a clearly legitimate national purpose, consistent
with the federalism policymaking criteria set forth in section 3, cannot otherwise be met.

Sec. 6.  Consultation.

        (a) Each agency shall have an accountable process to ensure meaningful and timely
input by State and local officials in the development of regulatory policies that have
federalism implications.  Within 90 days after the effective date of this order, the head of each
agency shall designate an official with principal responsibility for the agency's implementation
of this order and that designated official shall submit to the Office of Management and Budget
a description of the agency's consultation process.

        (b) To the extent practicable and permitted by law, no agency shall promulgate any
regulation that has federalism implications, that imposes substantial direct compliance costs
on State and local governments, and that is not required by statute, unless:

        (1) funds necessary to pay the direct costs incurred by the State and local
governments in complying with the regulation are provided by the Federal
Government; or

        (2) the agency, prior to the formal promulgation of the regulation,

        (A) consulted with State and local officials early in the process of
developing the proposed regulation;

        (B) in a separately identified portion of the preamble to the regulation
as it is to be issued in the Federal Register, provides to the Director of the
Office of Management and Budget a federalism summary impact statement,
which consists of a description of the extent of the agency's prior consultation
with State and local officials, a summary of the nature of their concerns and the
agency's position supporting the need to issue the regulation, and a statement of
the extent to which he concerns of State and local officials have been met; and

        (C) makes available to the Director of the Office of Management and Budget
any written communications submitted to the agency by State and local
officials.

        (1) consulted with State and local officials early in the process of developing
the proposed regulation;

        (2) in a separately identified portion of the preamble to the regulation as it is to
be issued in the Federal Register, provides to the Director of the Office of
Management and Budget  a federalism summary impact statement, which consists of a
description of the extent of the agency's prior consultation with State and local
officials, a summary of the nature of their concerns and the agency's position
supporting the need to issue the regulation, and a statement of the extent to which the
concerns of State and local officials have been met; and
        (3) makes available to the Director of the Office of Management and Budget
any written communications submitted to the agency by State and local officials.

        (a) Agencies shall review the processes under which State and local governments
apply for waivers of statutory and regulatory requirements and take appropriate steps to
streamline those processes.

        (b) Each agency shall, to the extent practicable and permitted by law, consider any
application by a State for a waiver of statutory or regulatory requirements in connection with
any program administered by that agency with a general view toward increasing opportunities
for utilizing flexible policy approaches at the State or local level in cases in which the
proposed waiver is consistent with applicable Federal policy objectives and is otherwise
appropriate.

        (c) Each agency shall, to the extent practicable and permitted by law, render a decision
upon a complete application for a waiver within 120 days of receipt of such application by the
agency.  If the application for a waiver is not granted, the agency shall provide the applicant
with timely written notice of the decision and the reasons therefor.

        (d) This section applies only to statutory or regulatory requirements that are
discretionary and subject to waiver by the agency.

Sec. 8.  Accountability.

        (a) In transmitting any draft final regulation that has federalism implications to the
Office of Management and Budget pursuant to Executive Order 12866 of September 30, 1993,
each agency shall include a certification from the official designated to ensure compliance
with this order stating that the requirements of this order have been met in a meaningful and
timely manner.

        (b) In transmitting proposed legislation that has federalism implications to the Office
of Management and Budget, each agency shall include a certification from the official
designated to ensure compliance with this order that all relevant requirements of this order
have been met.

        (c) Within 180 days after the effective date of this order, the Director of the Office of
Management and Budget and the Assistant to the President for Intergovernmental Affairs shall
confer with State and local officials to ensure that this order is being properly and effectively
implemented.

 Sec. 9.  Independent Agencies.  Independent regulatory agencies are encouraged to comply
with the provisions of this order.

Sec. 10.  General Provisions.

        (a) This order shall supplement but not supersede the requirements contained in
Executive Order 12372 ("Intergovernmental Review of Federal Programs"), Executive Order
12866 ("Regulatory Planning and Review"), Executive Order 12988 ("Civil Justice Reform"),
and OMB Circular A-19.

        (b) Executive Order 12612 ("Federalism"), Executive Order 12875 ("Enhancing the
Intergovernmental Partnership"), Executive Order 13083 ("Federalism"), and Executive Order
13095 ("Suspension of Executive Order 13083") are revoked.

        (c) This order shall be effective 90 days after the date of this order.

Sec. 11.  Judicial Review.  This order is intended only to improve the internal management of
the executive branch, and is not intended to create any right or benefit, substantive or
procedural, enforceable at law by a party against the United States, its agencies, its officers, or
any person.

/s/  WILLIAM J. CLINTON

THE WHITE HOUSE
August 4, 1999

            RECOMMENDED FORMAT FOR SECTION 8(a) CERTIFICATION
 

I certify that              [agency]               complied with the requirements of E.O. 13132 for the attached draft final regulation,              [title, RIN #]          .
 

             [date]                              [name]
                                                     [title]
 

APPENDIX C:

                RECOMMENDED FORMAT FOR SECTION 8(b) CERTIFICATION
 

I certify that          [agency]           has complied with the requirements of E.O. 13132 for the attached draft proposed legislation,              [title]          .
 

             [date]                              [name]
                                                     [title]