Unfunded Mandates: The View from the States

Abstract

Unfunded mandates continue to dominate state-local relations. The greatest change in the issue of mandates is the amount of information that is brought to the discussion. For a decade, localities pressed for institutional solutions to unfunded mandates in the form of reimbursement requirements and fiscal noting, or the estimation of mandate costs prior to the enactment. They were encouraged toward these solutions by the available literature, almost all of it the product of national level organizations. Today state and local governments are learning more about mandates through their own studies and analyzing alternatives based on real experience, theirs and that of other states. They are rejecting conventional solutions and devising innovative approaches that may ultimately prove more useful in slowing the enactment of unfunded state mandates. This essay reviews new thinking about an old problem from the perspective of the states and localities themselves. The topical divisions are based on the common conclusions reached by the state mandate studies reviewed. They are referenced in alphabetical order by state in Appendix A What We Don't Know About Mandates One of the greatest sources of frustration and misunderstanding that surrounds the mandates issue is the problem of cost. Localities complain about the cost of mandates to their state legislatures and are invariably asked to identify these costs. However, the impact of mandates cannot be quantified definitively for several reasons. First, each mandate has a different cost in each locality affected by it. Second, while any one mandate may have a very low cost, several hundred of them may have a very high cost, and that cost increases over time. Third, most mandates can be accommodated by using existing resources, especially personnel, more intensively; therefore the mandate can be asserted to have no cost. The mandates most easily quantified are usually called restrictive mandates. They prevent the locality from raising revenue by certain means, from taxing certain bases or limit tax rates. Many states, however, limit their definition of mandates to only those requirements that compel action, leaving these restrictions uncounted. These are just some of the reasons why the studies reviewed here are less descriptions of mandate costs and more discussions of mandate policies and their political and fiscal ramifications for local governments. Some studies have used careful methodology to assess the cost of certain mandates for a group of localities and have reached some conclusions about cost. All of the studies have avoided the fool's errand of trying to estimate total mandate costs. Total mandate cost estimates are technically possible only via site studies of hundreds of mandates in hundreds of local governments, but the results would be questionable. Cost dam would not be generalizable and no compensation would follow. State studies aim at answering impact questions such as what is the burden of mandates and what are the consequences for localities. Fiscal Stress The extent of fiscal stress caused by mandates cannot be determined any more precisely than the cost of mandates, but the consequences are no less real. Mississippi (1992) described the impact of mandates on local taxes and local programs. The general finding of rising taxes and declining local services is expected, but the extent to which mandate impacts are unequal in localities of different sizes and tax resources is remarkable. New Jersey's (1984) experience with the combined effect of state imposed mandates and state imposed limitations on local property taxes demonstrated the tradeoffs localities must make between services provided at local option and those required by mandate. The state of Georgia is not particularly sensitive to these tradeoffs and may see restricted local flexibility as desirable. Campbell (1984) suggests that state limitations on Georgia localities might be driven by the perception that localities lack the competence to manage their own fiscal affairs. …