Document Name: Chapter 1 -- Cutting Red Tape Part III
Date: 09/07/94
Owner: National Performance Review
Title:Chapter 1 -- Cutting Red Tape Part III

Author: Vice President Albert Gore's National Performance Review

Date:7 September 1993 10:00:00 EST

Content-Type: text/ascii charset=US ASCII

Content-Length: 106599

Under the act, some agencies may apply for waivers from

federal regulations if they meet specific performance targets. In

other words, they will be exempt from some administrative

requirements if they do their jobs better. The law applies only

to internal regulations and government agencies, but it also

urges wider waivers authority to test the potential benefits. In

the spirit of that legislation, we seek to expand the concept of

greater flexibility for greater accountability.

The President should direct each federal agency to establish

and publish,in a timely manner, an open process through which

other federal agencies can obtain waivers from that agency's

regulations--with an expedited appeals process. Rules adopting

this new waiver process would state that all future agency

regula-tions would be subject to the waiver process unless

explicitly prohibited. We will also ask Congress to specify that

legislation would be subject to waivers unless explicitly


Action: Reduce the burden of congressionally mandated reports.45

Woodrow Wilson was right. Our country's 28th president once

wrote that "there is no distincter tendency in congressional

history than the tendency to subject even the details of

administration" to constant congressional supervision. One place

to start in liberating agencies from congressional

micromanagement is the issue of reporting requirements. Over the

past decades, we have thrown layer upon layer of reporting

requirements on federal agencies, creating an almost endless

series of required audits, reports, and exhibits.

Today the annual calendar is jammed with report deadlines.

On August 31 of each year, the Chief Financial Officers (CFO) Act

requires that agencies file a 5-year financial plan and a CFO

annual report. On September 1, budget exhibits for financial

management activities and high risk areas are due. On November

30, IG reports are expected, along with reports required by the

Prompt Payment Act. On January 31, reports under the Federal

Civil Penalties Inflation Report Adjustment Act of 1990 come due.

On March 31, financial state-ments are due and on May 1 annual

single-audit reports must be filed. On May 31 another round of IG

reports are due. At the end of July and December, "high-risk"

reports are filed. On August 31, it all begins again. And these

are just the major reports!

In fiscal year 1993, Congress required executive branch

agencies to prepare 5,348 reports.46 Much of this work is

duplicative. And because there are so many different sources of

information, no one gets an integrated view of an agency's

condition--least of all the agency manager who needs accurate and

up to date numbers. Meanwhile, trapped in this blizzard of

paperwork, no one is looking at results. We propose to

consolidate and simplify reporting requirements, and to redesign

them so that the manager will have a clear picture of the

agency's financial condition, the condition of individual

programs, and the extent to which the agency is meeting its

objectives. We will ask Congress to pass legislation granting OMB

the flexibility to consolidate and simplify statutory reports and

establishing a sunset provision in any reporting requirements

adopted by Congress in the future.

Step 6: --Empower State and Local Governments

What we usually call "government" is, in fact, a tangle of

different levels of government agencies--some run from

Washington, some in state capitals, and some by cities and towns.

In the United States, in fact, some 80,000 "governments" run

everything from local schools and water supply systems to the

Defense Department and overseas embassies. Few taxpayers

differentiate among levels of government, however to the average

citizen, a tax is a tax--and a service a service--regardless of

which level of government is responsible. To reinvent government

in the public's eyes, we must address the web of

federal-state-local relations.

Washington provides about 16 percent of the money that

states and localities spend and shapes a much larger share of

such spending through mandates. Much of Washington's domestic

agenda, $226 billion to be precise, consists of programs actually

run by states, cities, and counties. But the federal government

doesn't always distribute its money--or its mandates--wisely.

For starters, Washington allocates federal money through an

array of more than 600 different grant programs. Many are small:

445 of them distribute less than $50 million a year nationwide;

some 275 distribute less than $10 million. Through grants,

Congress funds some 150 education and training programs, 100

social service programs, and more than 80 health care programs.

Considered individually, many categorical grant programs

make sense. But together, they often work against the very

purposes for which they were established. When a department
operates small grant programs, it produces more bureaucracy, not

more services. Thousands of public employees--at all levels of

government--spend millions of hours writing regulations, writing

and reviewing grant applications, filling out forms, checking on

each other, and avoiding oversight. In this way, professionals

and bureaucrats siphon money from the programs' intended

customers: students, the poor urban residents and others. And

states, and local governments find their money fragmented into

hundreds of tiny pots, each with different, often contradictory

rules, procedures, and program requirements.


Were we directed from Washington when to sow and when to reap, we

should soon want for bread.

Thomas Jefferson



Henry Cisneros, Secretary of Housing and Urban Development,

likens federal grants to a system of pipelines spreading out

across the country. The "water," says Cisneros, reaches states

and localities through hundreds of individual pipelines. This

means there is little chance for the water to be mixed, properly

calibrated to local needs, or concentrated to address a specific

problem, geographic area, or population.

In employment and training, for example, Washington funds

training programs, literacy programs, adult education programs,

tuition grant programs, and vocational education programs.

Different programs are designed for different groups--welfare

recipients, food stamp recipients, displaced homemakers, youth in

school, drop-outs, "dislocated workers," workers displaced by

foreign trade, and on and on.

At a plant in Pittsfield, Massachusetts, General Electric

recently laid off a large group of workers. Some workers could

get Trade Adjustment Assistance benefits, because their jobs were

lost to foreign competition. Others could not; their jobs fell to

defense cutbacks. Because they have a union, people working in

one area began exercising their seniority rights and bumping

people in other areas. Some workers bumped from trade-affected

jobs to defense contracting jobs, then lost those a few weeks

later. Under federal regulations, they could no longer get Trade

Adjustment Assistance. Thus, friends who had spent years working

side by side found themselves with very different benefits. Some

got the standard 6 months of unemployment checks. Others got 2

years of unemployment checks and extensive retraining support.

Try explaining that to people who have lost the only jobs they've

ever held!

People who run such programs struggle to knit together funds

from three, four, or five programs, hoping against hope that

workers get enough retraining to land decent new jobs. But the

task is difficult; each program has its own requirements, funding

cycles, eligibility criteria, and the like. One employment center

in Allegheny County, New York, has tried hard to bring several

programs together and make them appear as seamless as possible to

the customers. At the end of the day, to accommodate reporting

requirements, the staff enters information on each customer at

four different computer terminals: one for Job Training

Partnership Act (JTPA) programs, one for the JOBS program, one

for the Employment Service, and one for tracking purposes.

When Congress enacted JTPA, it sought to avoid such

problems. It let local areas tailor their training programs to

local needs. But federal rules and regulations have gradually

undermined the good intentions. Title III, known as the Economic

Dislocation and Worker Adjustment Assistance Act (EDWAA), helps

states respond immediately to plant closings and large layoffs.

Yet even EDWAA's most flexible money, the "national reserve

fund," has become so tangled in red tape that many states won't

use it. As Congress's Office of Technology Assessment put it,

"the process is simply too obstacle ridden. ... many state EDWAA

managers cannot handle the complexities of the grant application,

and those that do know how are too busy responding to clients'

urgent needs to write demanding, detailed grant proposals."

When Congress amended JTPA in 1993, targeting more funds to

those with "multiple barriers" to employment, homeless advocates

thought the change would help their clients. After all, who has

more barriers to employment than someone without an address or

phone number? But the new JTPA formula also emphasized training

over job search assistance. So a local program in Washington,

D.C. that had won a Labor Department award for placing 70 percent

of its clients in jobs--many of them service sector jobs paying

more than the minimum wage--lost its JTPA funding. Why? It didn't

offer training. It just helped the homeless find jobs.47

But federal programs rarely focus on results. As structured

by Congress, they pay more attention to process than outcomes--in

this case, more to training than to jobs. Even in auditing state

and local programs, federal overseers often do little more than

check to see whether proper forms are filed in proper folders.

The rules and regulations behind federal grant programs were

designed with the best of intentions--to ensure that funds flow

for the purposes Congress intended. Instead, they often ensure

that programs don't work as well as they could--or don't work at


Virtually every expert with whom we spoke agreed that this

system is fundamentally broken. No one argued for marginal or

incremental change. Everyone wants dramatic change--state and

local officials, federal managers, congressional staff. As in

managing its own affairs, the federal government must shift the

basic paradigm it uses in managing state and local affairs. It

must stop holding programs accountable for process and begin

holding them accountable for results.

-- The task is daunting; it will take years to accomplish.


propose several significant steps on the journey:

-- Establish a Cabinet-level Enterprise Board to oversee new

initiatives in community empowerment;

-- Cut the number of unfunded mandates that Washington


-- Consolidate 55 categorical grants into broader "flexible


-- Increase state and local flexibility in using the

remaining categorical grants;

-- Let all agencies waive rules and regulations when they

conflict with results; and

-- Deregulate the public housing program.

The likely benefits are clear: administrative savings at all

levels; greater flexibility to design solutions; more effective

concentration of limited resources; and programs that work for

their customers.

Action: The President should establish a Cabinet-level Enterprise

Board to oversee new initiatives in community empowerment.48

The federal government needs to better organize itself to

improve the way it works with states and localities. The

President should immediately establish a working group of

cabinet-level officials, with leadership from the Vice President,

the Domestic Policy Council, and the National Economic Council.

The Board will look for ways to empower innovative

communities by reducing red tape and regulation on federal

programs. This group will be committed to solutions that respect

"bottom-up" initiatives rather than "top-down" requirements. It

will focus on the administration's community empowerment agenda,

beginning with the 9 Empowerment Zones and 95 Enterprise

Communities that passed Congress as part of the President's

economic plan.


Sometimes we need to start out with a blank slate and say, "hey,

we've been doing this for the last 40, 50 years. It doesn't

work." Let's throw out everything, clear out minds...Let's have

as a goal doing the right thing for the right reasons, even if it

entails taking risks.

Vincent Lane, Chairman, Chicago Housing Authority, Reinventing

Government Summit Philadelphia, June 25, 1993

In participating communities, for example, federal programs

could be consolidated and planning requirements could be

simplified; waivers would be granted to assure maximum

flexibility; federal funding cycles would be synchronized; and

surplus federal properties could be designated for community use.

Action: The President should issue a directive limiting the use

of unfunded mandates by the administration.49

As the federal deficit mounted in the 1980s, Congress found

it more and more difficult to spend new money. Instead, it often

turned to "unfunded mandates"-- passing laws for the states and

localities to follow, but giving them little or no money to

implement those policies. As of December 1992, there were at

least 172 separate pieces of federal legislation in force that

imposed requirements on state and local governments. Many of

these, such as clean water standards and increased public access

for disabled citizens, are unquestionably noble goals.

But the question remains: How will state and local

governments pay to meet those goals? We recommend that Congress

refrain from this practice and that the President's directive

establish that the executive branch will similarly limit its use

of unfunded mandates in policies, legislative proposals and


The directive would narrow the circumstances under which

departments and agencies could impose new unfunded burdens on

other governments. It also would direct federal agencies to

review their existing regulations and reduce the number of

mandates that interfere with effective service delivery. OMB's

Office of Information and Regulatory Affairs (OIRA) should review

all major regulations or legislation proposed by the executive

branch for possible adverse impacts on states and localities.

Finally, OIRA's director should create a forum in which federal,

state, and local officials could develop solutions to problems

involving unfunded mandates.

Action: Consolidate 55 categorical grant programs with funding of

$12.9 billion into six broad "flexible grants"--in job training,

education, water quality, defense conversion, environmental

management, and motor carrier safety.50

This proposal came from the National Governors Association

(NGA) and National Conference of State Legislatures (NCSL), which

describe it as "a first step toward broader, more ambitious

reforms." It would consolidate some 20 education, employment and

training programs, with a combined $5.5 billion in fiscal year

1993 spending; roughly 10 other education programs ($1.6

billion); 10 small environmental programs ($392 million); six

water quality programs ($2.66 billion); and six defense

conversion programs ($460 million).


How Much Do You Get for a 1983 Toyota?

What does the price of a used car have to do with the

federal government's family policies?

More than it should. Caseworkers employed by state and local

government to work with poor families are supposed to help those

families become self-sufficient. Their job is to understand how

federal programs work. But as it turns out, those caseworkers

also have to know something about used cars. Used cars? That's

right. Consider this example, recounted to Vice President Gore at

a July 1993 Progressive Foundation conference on family policy in

Nashville, Tennessee:

Agencies administering any of the federal government's

programs for the poor must verify many details about people's

lives. For instance, they must verify that a family receiving

funds under Aid to Families with Dependent Children (AFDC) does

not own a car worth more than $1,500 in equity value. To give a

poor family food stamps, it must verify that the family doesn't

own a car worth more than $4,500 in market value. Medicaid

specifies a range that it allows for the value of a recipient's

car, depending on the recipient's Medicaid category. But under

food stamp rules, the car is exempt if it is used for work or

training or transporting a disabled person. And under AFDC, there

is no exemption for the car under any circumstances.

Recounting that story to a meeting of the nation's governors,

the vice president asked this simple question: "Why can't we talk

about the same car in all three programs?"


Action: Congress should allow states and localities to

consolidate separate grant programs from the bottom up.51

Recognizing the political and administrative obstacles to

wholesale reform of more than 600 existing categorical grants in

the short term, the National Performance Review focused on an

innovative solution to provide flexibility and to encourage

result-oriented performance at the state and local levels.

Our proposal calls for Congress to authorize "bottom-up"

grant consolidation initiatives. Localities would have authority

to mix funding from different programs, with simple notification

to Washington, when combining grants smaller than $10 million

each. For a consolidation involving any program funded at more

than $10 million, the federal awarding office (and state, if

applicable), would have to approve it before implementation. In

return for such consolidation, the state and local governments

will waive all but one of the programs' administrative payments

from the federal government.

When different grants' regulations conflict, the

consolidating agency would select which to follow. States and

localities that demonstrated effective service integration

through consolidation would receive preference in future grant

awards. Each of the partners in the intergovernmental system must

work collaboratively with others--federal, state, and local--to

refine this recommendation.

The details of this proposal will be negotiated with

important state and local organizations, such as the NGA, the

NCSL, U.S. Conference of Mayors, and the National League of

Cities, before legislation is drafted. Bottom-up consolidation

will be given a high priority by the administration. It

represents a way to improve state and local performance without

tackling the thorny political problem involved in consolidating

600 grant programs, reconciling thousands of rules and

regulations, and anticipating every possible instance when

flexibility might be necessary. It puts the burden of identifying

obstacles and designing the best solution where it belongs--on

those who must make the programs work.

Action: Give all cabinet secretaries and agency heads authority

to grant states and localities selective waivers from federal

regulations or mandates.52


The National Performance Review is not intended to be the final

word on reinventing government but rather a first step. This long

overdue effort will require continuing commitment from the very

top to truly change the way government does business.

U.S. Rep. John Conyers (D. Mich.)

August 28, 1993


For federal grant programs to work, managers must have

flexibility to waive rules that get in the way. Some departments

have this authority; others don't. Federal decisions on most

waivers come very slowly, and states often must apply to a

half-dozen agencies to get the waivers they need. Florida, for

example, has a two-year waiver allowing it to provide hospice

care to AIDS patients under Medicaid. Its renewal takes 18

months. So state officials have to reapply after only six months.

Waiver legislation should grant broad waiver authority, with the

exception of fair housing, non-discrimination, environmental, and

labor standards. We will ask Congress to grant such authority to

Cabinet officers. These waivers, should be granted under limited

circumstances, however. They must be time-limited and designed to

include performance measures. When each experiment is concluded,

the granting agency should decide whether the new way of doing

things should be included in standard practice.

Action: Give control of public housing to local public housing

authorities with histories of excellent management and

substantially deregulate the rest.53

Public housing is a classic story of good intentions gone

awry. When the program began in the 1930s, it was hailed as an

enlightened response to European immigrants' squalid living

conditions in cities across the country. Through an enormous

bureaucracy stretching from Washington into virtually every city

in America, the public housing program brought clean, safe,

inexpensive living quarters to people who could not afford them


Now, however, public housing is even more troubled than our

categorical grant programs. With its tight, centralized control,

it epitomizes the industrial-era program: hierarchical,

rule-bound, and bureaucratic. HUD's Washington, regional, and

local offices rigidly control local public housing authorities,

who struggle to help the very poor. Frustrated by the failure of

public housing, innovative state and local governments began to

experiment with new models of developing, designing, financing,

managing, and owning low-income housing. Successful efforts

tailored the housing to the characteristics of the surrounding

community. Local public housing authorities began to work with

local governments and non-profit organizations to create

innovative new models to serve low-income people.

HUD recognizes that local authorities with proven records of

excellence can serve their customers far better if allowed to

make their own decisions. We and the secretary recommend that

Congress give HUD authority to create demonstration projects in

which local housing authorities would continue to receive

operating subsidies as long as they met a series of performance

targets, but would be free from other HUD control. Individual

demonstrations could vary, but all federal rules would be open

for waivers as long as HUD could measure performance in providing

long-term, affordable housing to those poor enough to be eligible

for public housing.

In addition, HUD should work closely with local housing

authorities, their national organizations, public housing tenant

organizations, and state and local officials to eliminate

unnecessary rules, requirements, procedures, and regulations. In

particular, HUD should replace its detailed procurement and

operating manuals and design and site selection requirements with

performance measures, using annual ranking of local housing

authorities to encourage better service and greater

accountability. It should eliminate the annual budget review, an

exercise in which HUD field staff spend thousands of hours

reviewing and approving detailed budgets from local housing

authorities --even though the reviews do not influence federal

funding decisions. And it should work with Congress to change

current rent rules, which create strong incentives for people to

move from public housing as soon as they find jobs. Conclusion


The changes described above are ambitious. They will take

enormous effort and enormous will. It will be many years before

all of them take root. But if they succeed, the American people

will have a government capable of attacking their problems with

far more energy, and far less waste, than they can today imagine.

We must move quickly because the bureaucracy, by its nature,

resists change. As Tom Peters wrote in Thriving on Chaos, "Good

intentions and brilliant proposals will be dead-ended, delayed,

sabotaged, massaged to death, or reversed beyond recognition or

usefulness by the overlayered structures...."54

But the changes we propose will produce their own momentum

to overcome bureaucratic resistance. As the red tape is being

cut, federal workers will become more and more impatient with the

red tape that remains. They will resist any reversal of the

process. And they will be strengthened in their resistance by the

steps we propose in the next chapters.


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