Proposed legislation: Three ways to evaluate the cost;

              PROPOSED LEGISLATION
Three ways to
evaluate the cost
by A. ALAN POST
What will it cost private business to
implement state requirements for
separate eating and working facilities
for smokers and non-smokers?
What are the costs to industry and
citizens of installing government
required smog control devices on cars?
What will it cost the state to expand
state-supported medical care programs
for the indigent?
Questions such as these arise over
and over when legislation is dis­cussed
on any government level.
Opponents offer widely differing
projections of costs and benefits to
bolster their positions. Which side is
the voter or legislator to believe?
Unfortunately, recent history is full
of examples of programs whose
actual costs far exceeded original
estimates. This is especially true for
health, welfare, and social services
programs. Similarly, costs of govern­mental
regulations imposed on other
levels of government or on the
private sector are staggering. Yet
attention is seldom paid to such
costs, because they are passed on to
someone else.
Recent developments are further
compounding the problem:
• Because government services
are highly labor intensive, costs for
these services are among the fastest
growing in our inflationary economy
and, therefore, more difficult to
predict.
• Growing taxpayer revolt is limit­ing
the money available to state and
local governments to comply with
requirements mandated, but not
paid for, by other levels of govern­ment.
• The soaring costs of regulating
the private sector may be
counterproductive to national
programs designed to spur the econ­omy
and constrain inflation.
Clearly, accurate cost estimates of
new laws and regulations are essen­tial
if officials are to make sound
decisions on what programs should
be passed and how they will be paid
for. And since the cost estimates
must be accurate, those doing the
estimating should be not only
qualified but also independent.
A growing number of state and
local governments are responding to
this challenge by creating an inde­pendent
office within the govern­ment
to analyze costs of new or
expanded legislation or regulations.
California was the first state to do
so. The Office of Legislative Analyst
for the state was set up in 1941.
Since then, most states have estab­lished
a similar function, and a
number of local governments and
special districts are exploring similar
possibilities.
What exactly is the role of the
analyst? Basically he analyzes three
types of legislative costs:
—Those incurred by the sponsoring
governmental unit.
—Those passed on to some other
level of government.
—Those passed on to private indus­try
and consumers.
Cost to Sponsor
Analyzing the cost to the sponsoring
level of government is the most
common function of these offices,
and the one for which most were
originally created. This level of analy­sis
is generally the easiest to con­duct,
because the language of pro­posed
legislation or regulations gen­erally
spells out the role of the
sponsoring unit. However, there are
still numerous problems in develop­ing
data bases and arriving at cost
estimates.
• The impact of inflation in future
years on government services is
difficult to predict, as noted earlier. A
major problem in estimating costs of
Medicare and Medicaid, for exam­ple,
was the unforeseen explosion of
health care costs.
• The number of persons to be
served by a new program may be
difficult to determine in advance.
Thus, accurate data may not be
available on the number of people
who meet the eligibility criteria for a
new human services program.
• Some proposals may involve
new actions or initiatives, for which
there is not prior experience or
comparable data to draw on.
• Required data may be available,
but difficult or costly to collect.
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