Underfunded-- State report on statutory mandates may prompt long overdue reforms

By Lynn Monson

Legal News

Recommendations by a state commission critical of unfunded mandates are forming the foundation for legislation taking shape in the Michigan Legislature.

Finished in the last week of December 2009, the report by the Legislative Commission on Statutory Mandates already has prompted several related bills in the Michigan House, and Senate leaders have said that chamber will soon follow on the initiative.

The bipartisan commission's charge was to put a dollar figure on the unconstitutional practice of the Legislature implementing new mandates but not authorizing money for Michigan villages, cities, counties and school districts to implement the changes. The problem has been around for 30 years, prompting lots of complaints from local units of government but not much progress in Lansing for fixing it.

The commission, aided by a newfound focus on the problem by numerous state municipal and education associations, quickly determined that it was impossible to calculate how much unfunded mandates cost local units of government during the last three decades. Although the Headlee Amendment to the Constitution, approved by voters in 1978, required mandate costs to be documented as part of the implementation of legislation, such reports were sporadic, incomplete or nonexistent.

The commission was able to determine, however, that in 2009 alone, unfunded mandates cost local governments at least $2.2 billion.

"We knew the underfunding would be quite substantial, but I'll admit that the range of $2.2 billion to $2.6 billion can take your breath away," said commission co-chair Amanda Van Dusen, an attorney with Miller, Canfield, Paddock, and Stone PLC in Detroit. "To put the number in context, it represents a conservative calculation of unfunded mandates which we could calculate. It does not include some big ticket requirements like environmental compliance.

"The projected state budget gap for 2010-11 is between $1.7 and $1.8 billion. We have been balancing the state budget on the backs of local governments for years."

Eager that their more than two years of work would not be wasted, commission members wrote that their "greatest concern is that (the report) will gather dust on a shelf and the 30-year practice of ignoring the plain words and purpose of (Article 9) of the Constitution will continue."

To encourage the legislature to address the issue quickly, the commission went so far as to include draft legislation. A section of the report used existing legislation marked up with strike-through changes and new clauses typed in bold capital letters--exactly the way a representative or senator would submit a new bill. To read the commission's final report, go to http://council.legislature.mi.gov/lcsm.html.

Using that as a template, several Republicans are sponsoring House Bill 5766, while several Democrats have sponsored House Bills 5799-5802, all directly addressing recommendations of the commission. Several commissioners were to meet this week with the Legislative Service Bureau and a bipartisan group of House members and staffers to discuss and tweak language in the bills, according to Van Dusen.

The bills would, among other provisions, require a fiscal note documenting the cost to local government to be attached to each piece of legislation prior to passage; would amend the Administration Procedures Act to prevent state administrative rules from taking effect if they would create new or expanded unfunded mandates; would amend the Revised Judicature Act to streamline legal remedies, such as when local governments file suits over unfunded mandates; and would remove penalties for local governments that do not comply with a mandate that is not funded.

Commission member Louis Schimmel of Waterford, an expert in municipal finance and municipal bonds who has worked throughout Michigan for many years, said he was initially pessimistic about quickly solving the problem that has languished in Lansing for so long. But he said he was pleasantly surprised by the publicity the report gained statewide and by the quick action so far in the legislature to remedy an unconstitutional practice.

"We've known about the abuses for years," Schimmel said. " ... We (commission members) all just sat there, shaking our heads and asking how could this happen, how could this just keep going on?"

He said part of the process of building momentum for change was as simple as educating local officials and less experienced representatives and senators who may not have been in the Legislature long enough to have learned of the long history of complaints about unfunded mandates violating the state constitution.

"After spending two years ... we put together a rather remarkable report," Schimmel said. "We had a wide range of people--conservative, liberal, Republicans to Democrats to independents--and we are all unanimous on these solutions."

In addition to Van Dusen and Schimmel, other commission members are co-chairman Robert Daddow, deputy county executive of Oakland County; Dennis Pollard, an attorney with Thrun Law Firm in Bloomfield Hills; and J. Dallas Winegarden Jr., an attorney with the Windegarden and Himelhoch firm in Flint.

Daddow, Pollard, and Van Dusen focused on drafting the sample legislation.

In addition to help from various government associations, such as the Michigan Association of Counties, the commission's research was assisted by the Citizens Research Council and Michigan State University.

"In a way, our report was issued at the right time," Van Dusen said, "because the effect of all this underfunding is really beginning to be more obvious to the general public. Up to this point, service to the public has not been visibly affected as the locals have absorbed the impact. That is no longer possible so the pressure to do something about the problem is much greater.

"In addition, our legislation does not require the state to spend more money. It would merely require the state to think more carefully before imposing a mandate and think about how to pay for it. And if the activity is really important, find a way to cover the cost."

Added Van Dusen: "I am not naive enough to believe this will solve the whole problem, but this legislation would go a long way toward that goal."

Published: Thu, Mar 11, 2010

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