Passing the buck thru unfunded mandates

By Ron Basso

The Legislative Commission on Unfunded Mandates established by the Michigan legislature in 2007 by Public Act 98, as amended, MCL 4.1781 et seq., and charged with the task of identifying the costs of complying with funded and unfunded mandates imposed by the state on local units of government, and to make determinations and recommendations relating to those mandates, issued its final report on December 31, 2009.

The cornerstone of the Commission’s work revolved around Article IX, §§25 through 34 of the Michigan Constitution of 1963, the so called Headlee Amendment (Headlee), adopted by a referendum of the voters in 1978. Article IX, §25 states: “The state is prohibited from requiring any new or expanded activities by local governments without full state financing, from reducing the proportion of state spending in the form of aid to local governments, or from shifting the tax burden to local government.” Article IX, §30 states: “The proportion of total state spending paid to all units of Local Government, taken as a group, shall not be reduced below that proportion in effect in fiscal year 1978-79.”

The Commission found it impossible to determine the base year 1978-1979 proportion of total state spending paid to local units of government as records did not exist. Therefore, there is no way to determine the amount of underfunding which has occurred since the passage of Headlee. The Commission was able to estimate, however, that the underfunding for 2009 mandates on local units of government fell between $2.5 billion and $2.9 billion. This figure gives one an idea of the enormity of the issue.

Asking the state to reimburse local units for costs associated with unfunded mandates imposed since the passage of Headlee may not be feasible but mandating future legislatures and executives to begin to comply with Headlee seems not only reasonable but absolutely necessary!

A mechanism for compliance already exists: 1979 PA 101. This statute was passed by the legislature in response to the passage of the Headlee amendment and is known as the “State Disbursements to Local Units of Government” law.

The Commission points out that 1979 PA 101 details how state government was supposed to implement Headlee, the key requirements being:

• requiring annual appropriations for each mandate imposed on a local unit of government,
• requiring the governor to include in the budget all amounts needed to make disbursements to the locals for each state requirement, and
• requiring supplemental appropriations to fully fund any state requirement imposed on the locals.
• The list goes on and on. Unfortunately, this law has not been followed in any of the intervening years since passage of Headlee.

The Commission offered a series of recommendations, including:
• repealing 1979 PA 101 since it has been ineffective and ignored for some 30 years and replacing it with new legislation to implement §29 of Headlee and to make it clear that state funds must be appropriated before any new or increased activity can be imposed on a local unit of government;
• amending the Administrative Procedures Act to prohibit any rule being promulgated which would impose any new or increased activity on a local unit of government unless state funding is forthcoming,
• amending the Revised Judicature Act to provide that the Court of Appeals has jurisdiction over all suits brought under Headlee,
• providing for legislation which would shift the burden of proof to the state in suits brought under Headlee,
• providing for legislation which would establish an on going process to monitor the state’s compliance with Headlee,
• providing for legislation which would require the state to examine all existing statutes and regulations which impose requirements on local units of government to determine their necessity, and
• providing for a new court rule to be adopted by the Supreme Court consistent with the Commission’s legislative recommendations.

During February 2010, House Bills 5797 through 5802, House Bill 5836, and Senate Bills 1141 through 1143, were introduced to implement the Commission’s recommendations. The legislature is interested and concerned about this issue. The time is ripe for concerned citizens to communicate their support to their legislators.

The impact of the Commission’s report is wholly dependent upon the legislature’s actions during the remainder of this legislative session. If the recommendations are adopted, local units will be spared unfunded mandates. Furthermore, the state will be required to examine all legislation requiring an appropriation prior to implementation, a requirement that should prove helpful to minimize spending. Savings to taxpayers and relief to local units of government are Headlee mandates and may also prove to be government’s most effective aid to communities suffering from the current recession.

Note: Ron Basso is a partner in Basso & Basso Consulting Services in Iron River in the Upper Peninsula.