Washington Should Kick the Mandate Habit:

Executive Summary

Unfunded mandates from Washington pose a substantial challenge to both the budgets and the fiscal sovereignty of the 50 states. This report examines that challenge and presents data which illustrate the problem for state government in Michigan. It does not address that other vast arena of federal mandates – those imposed on private enterprise, from parental leave to plant closing laws – though in great measure, the critical appraisal presented here would undoubtedly apply there as well.

A mandate is a command – a requirement that the subject cannot ignore without penalty. When Congress imposes a mandate upon state governments and does not provide the resources to carry it out, the mandate is unfunded. State governments must then raise taxes, reduce other spending, or borrow – in every event, the mandate preempts and redirects state resources to satisfy the wishes of Congress.

The use of mandates at the federal level has increased markedly in recent years. Facing a chronic budget deficit and yet wanting to see new programs of government enacted or existing ones expanded, Congress has discovered that it can simply foist programs or policies upon the states and let them worry about the bills. By one count, there are currently more than 400 federal mandates in a broad range of policy areas – from health and safety to the environment.

The last two years have produced an explosion in mandates. In the 102nd Congress, which expired in December 1992, no fewer than 244 bills containing mandates were proposed. Fortunately, not all of them made their way into law, but by any measure, this problem is growing worse with each passing year.

Arizona Governor Fife Symington, in his State of the State Address in January 1993, had this to say on the matter: [The State of Arizona] "will continue to press the case that mandates from the .federal govemment have stripped us of our fiscal sovereignty ... and have stripped the people of their right to representative government at the state level."

President Clinton, as Arkansas Governor in February 1991, expressed similar sentiments when he said, "We need to get a handle on Medicaid mandates or else some of us are going to go broke."

Congress adopts mandates typically with little or no accurate estimates of their costs, The Congressional Budget Office, which is charged with calculating such costs, is hampered by ambiguous language in the mandates themselves, as well as time constraints that often prevent a thorough analysis. Congress has shown little concern for the impact of its directives on states and state government budgets.

Medicaid – the public sector health care program for the poor funded jointly by federal and state governments – provides a case study of the impact of federal mandates in Michigan. As part of Medicaid, Congress has imposed a growing list of unfunded requirements: to provide coverage of nurse-midwife services, to provide ambulatory services to children and prenatal and delivery services to pregnant women, and to establish preadmission screening programs for mentally ill and retarded citizens, to name a few from a lengthy list. Because of these mandates, state government has fewer resources to devote to matters it might regard as more pressing.

Among the findings this report reveals in the area of Medicaid mandates alone are these:

In 1993, $95.3 million – the equivalent of 30 percent of Michigan state government's revenue growth – will be consumed by the cost of Medicaid mandates.
That $95.3 million figure is larger than the combined General Fund appropriations for five entire state departments: Civil Rights, Civil Service, State, Attorney General, and Agriculture.
In Michigan, the cost of existing federal Medicaid mandates will grow at an annual rate of 49.1 percent through 1995, while the General Fund will likely grow at something close to its historic rate of 5.5 percent.

The problem with unfunded federal mandates goes beyond their burdensome expense to strike at the very heart of the state-federal relationship. The concept of federalism, a pillar of the U. S. Constitution, left to the states the lion's share of government powers and responsibilities. The gradual shift in recent years toward greater involvement by Washington in nearly all areas of public policy flouts the federalist spirit and threatens to make vassals of the 50 states. In one area after another, it has produced inferior policy results as well.

Action is needed to reverse this disturbing habit of the federal legislature. Among the several recommendations this report makes are these:

A mandate ombudsman – Michigan should create the nation's first official mandate ombudsman to track, forecast and disseminate information regarding mandates for the purpose of educating legislators and the general public.
A mandate database – To complement the work of the ombudsman, the Michigan Department of Management and Budget should create a computer database that would permit the generation of up-to-date cost estimates.
A state resolution – The Michigan Legislature should ask our state's federal representatives in Congress to appear annually before the legislature to explain and justify the mandates Congress is imposing on the state.
A renewed recognition on the part of all legislators – state and federal – of the proper roles and interrelationships of state and local governments.

Washington, ultimately, must step up to its responsibilities and kick the expensive and dangerous habit of foisting mandates upon the states.

#####

(The authors of Washington Should Kick the Mandate Habit: The Fiscal Impact of Federal Mandates on Michigan are Michael D. LaFaive, an Adjunct Scholar with The Mackinac Center for Public Policy, and Lawrence W. Reed, President of the Center.)

Introduction

This report examines unfunded mandates imposed by Congress on the states, with special emphasis on their impact on state government in Michigan. It does not address that other vast arena of federal mandates – those imposed by Congress on private enterprise from parental leave to plant closing laws – though much of the same critical appraisal would certainly apply there as well.

The analysis here will include some historical background behind the use of mandates, as well as the inherent problems of tracking, estimating, funding, and executing each federal requirement. The cost of these unfunded federal mandates will be illustrated by examining the Medicaid program. The Michigan-specific numbers were secured by the authors in cooperation with officials and staff from the Michigan Departments of Management and Budget, Social Services, and Mental Health.

By definition, mandates are commands – requirements that the entities they are imposed upon cannot ignore. Unfunded mandates, the subject of this report, are those passed by Congress without accompanying appropriation to cover the expense the states must incur to carry them out. In the language used by governments, they exist in four basic forms: direct orders, crossover sanctions, cross cutting requirements, and preemptions.

"Direct orders" are those mandates whereby states are required to adhere to federal policy irrespective of whether there are federal funds available. The Americans with Disabilities Act (AWDA) of 1990, for example, forces local governments to provide access to public transportation for the handicapped, even if less costly modes of transportation are available.

In a 1980 paper, Ed Koch, then mayor of New York City, chastised the "mandate mandarins" in government for forcing local leaders to provide complete access to public transportation for the handicapped, rather than finding the cheapest way to move them around New York. Mayor Koch estimated that the cost of fixing the city's transportation system to comply with Section 504 of the Rehabilitation Act of 1973 would cost $38 per trip, per handicapped individual. It would have been cheaper to place each person that this bill was designed to assist in a taxicab.[1]

Today, cities face a similar dilemma with the AWDA. Aside from the initial costs of retro-fitting vehicles with wheelchair lifts, lock-down platforms, and special safety restraints, the able-bodied users of the public transportation system are inconvenienced as well. When a handicapped individual uses a student busing service, for example, the driver has to get out to operate the wheelchair lift, assist the individual into the lock-down platform, and still get all the passengers through the bus route on schedule.

"Crossover" sanctions force the implementation of federal requirements in one area or the states risk losing money in another, similar area. For instance, states may lose highway grants if they failed to follow certain health or safety requirements imposed by the federal government.

"Crosscutting" requirements are used to further social and economic goals and to ensure uniformity throughout the states. A popular example is the Davis-Bacon Act, which states that construction projects receiving federal monies must pay union-scale or "prevailing" wages, even if less expensive labor is available.

Occasionally, the federal government usurps state authority by using "preemptions" to overrule current state regulations. States may have the responsibility for programs delegated to them by the federal government; however, if they fail to meet specific requirements they risk having the federal government assume responsibility for the program. A preemption, though regarded as a kind of "mandate" in the public sector lexicon, is somewhat different from the other three far more frequently used mandate forms in that it tells states what they cannot do, as opposed to what they must do.

History

While no accurate compilation of all proposed federal mandates currently exists, many analysts agree that the use of mandates at the federal level increased markedly during the socially activist years of the 1960s and 1970s. It wasn't until the very late seventies, however, that federal grants-in-aid began their steady decline, to be replaced more and more by federal directives. That trend accelerated in the 1980s.

The National Conference of State Legislatures (NCSL) has been tracking mandates introduced in Congress since 1990. Many other mandates originate in regulatory agencies and judicial entities of government. Currently, there is no organization in place that adequately tracks all these on a regular basis.

The Advisory Commission on Intergovernmental Relations (ACIR) published a study of mandates and preemptions in a September 1992 paper entitled, Federal Statutory Preemption of State and Local Authority: History, Inventory, and Issues. According to ACIR, 27 new mandates and preemptions were enacted in the 1950s, 47 in the 1960s, and 100 in the 1980s. Currently there are more than 400 on the books. Those affecting health, safety and the environment – major concerns to state government – have more than tripled since the 1950s, from 9 to 32 in the 1980s. Likewise in the areas of commerce, banking, finance and taxes.[2]

The data contained in Table 1 reflects this explosion of mandates and preemptions. Significantly, relief statutes (modifying or voiding mandates) haven't come close to keeping pace with the mandates that have been introduced over the years as shown in column seven of Table 1.

The Last Two Years

A January 1992 study from the Cato Institute revealed the results of a survey that included 118 past and present governors. The survey found that, among other concerns, almost nine out of ten governors believe that the federal government should be required to reimburse state and local governments for the cost of mandated legislation. As the reader will see, their concerns are well founded.[3]

The last two years have seen an unprecedented explosion in the use of federal mandates.

The last two years have seen an unprecedented explosion in the use of federal mandates. The 102nd Congress convened on January 3, 1991. In the first 16 days of the session, lawmakers introduced 45 pieces of legislation containing federal mandates.[4] By the time the 102nd Congress adjourned at the end of its first year, it had introduced 120 bills that carried federal mandates, almost one mandate-laden bill for every one of the 126 days that the 102nd was in session. By December 1992, members of the 102nd Congress had proposed its 244th bill containing mandated directives.[5]

As illustrated in Figure 1 below, health, justice, and the environment dominated the list of proposed mandates. There were 83 pieces of mandated legislation in the health arena, while justice and the environment finished a not too distant second and third with 50 and 25 bills introduced, respectively. The combined legislation of these three categories alone amounted to 65% of mandates proposed by members of the 102nd Congress.

Several states, including Maryland Tennessee, and Michigan, have calculated the percentage of projected state revenue required to meet the cost of mandates imposed on the states by the federal government. In 1991, Maryland acknowledged that "at least 24.2 percent of all General Fund spending is dictated by federal legislative, regulatory, and judicial mandates." In the January 1992 issue of State Legislatures, Martha Fabricus revealed that Tennessee would have to set aside as much as 27 percent of forecasted revenue growth to meet the requirements of mandated legislation.

It appears that Congress has embraced mandates with a vengeance – and why not? This technique allows federal representatives to have their cake and eat it too – without cutting programs or raising taxes, while taking credit for the legislation they're not responsible for funding.

An aide to then Senator (now Treasury Secretary) Lloyd Bentsen dismissed critics' complaints regarding the use of mandates by saying: "Mandates wouldn't be necessary if [states] were doing what they should have been doing in the first place."[6] The truth is that Congress has no room to talk about legislative bodies not doing their job. In fact, if it was doing its own job, it would be more accountable for funding programs its members are only too willing to take credit for, instead of shifting the burden of such programs to state legislatures and the taxpayers they represent.

This issue goes beyond the fiscal impact of such legislation. The states were not meant to be handmaidens of the federal government. Mandates strike at the very heart of the state-federal relationship. The concept of federalism, a pillar of the U. S. Constitution, left to the states the lion's share of government powers and responsibilities. The gradual shift in recent years toward greater involvement by Washington in nearly all areas of public policy flouts the federalist spirit and threatens to make vassals of the 50 states. In one area after another, it has produced inferior policy results as well.

It would serve our policy makers well to be reminded of the Tenth Amendment: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people."[7]

Calculating the Costs

Perhaps the biggest problem associated with curbing the use of expensive federal mandates is the difficulty in preparing cost estimates for decision makers in Washington. The 1981 Local Government Cost Estimate Act attempted to alleviate this problem by requiring the Congressional Budget Office (CBO) to forecast estimated costs for all legislation containing mandates exceeding $200 million. The purpose of this act was to heighten the awareness of legislators as to the cost of each new bill. Unfortunately, the difficulty of tracking legislation that contains mandates makes accurate fiscal impact estimations a challenging assignment.

Authors of several papers have attempted to describe all the variables that must be taken into account when deciphering the impact of federal mandates. A handful of the most important examples are listed below.

Fiscal impact studies are not performed by the CBO until after the bill leaves full committee.
The CBO employees are often required to calculate cost estimates in a time period of 3-5 days, thus making it difficult to gather pertinent data for accurate cost estimations.
Many bills preclude the use of standard estimating techniques.
A lack of accurate data sources exist that CBO analysts could readily draw information from for use in their estimates.
Regulations for the implementation of bills are often not written for up to two years after the law is passed.
The language used in drafting legislation is often ambiguous. The CBO therefore has no way to calculate exactly what the impact of final regulations will be.
Currently, cost estimates are not made on amendments to legislation or tax and appropriation bills containing mandates. Therefore, the aggregate cost of unfunded mandates to the states is underestimated.
The number of lower level governments affected increases the difficulty in estimating costs. This is best illustrated by the effects of the Fair Standards Act which was, according to Theresa Gullo as quoted in Coping with Mandates, applicable to "7 million public employees in 50 states and approximately 3,000 counties, 19,000 municipalities, 17,0P0 townships, 15,000 school districts, and 29,000 local special districts."[8] This is from just one piece of legislation! When estimating units like the CBO are required to calculate such costs, in a limited period of time, with a real shortage of accurate data, it is likely that the true cost of mandated legislation will be grossly underestimated.
Federal policy debates usually concern only the federal costs of legislation, not the impact of legislation on state and local government.
Compounding the problem is that there is no established, systematic way of tracking the fiscal impact of mandates once they have been placed into law. When such a serious lack of data exists, it is difficult for state and local officials, special interest groups, and the general public to react effectively to the increased burdens imposed by the federal government.

Nonetheless, the issue of mandates has prompted people in many of the 50 states to investigate the costs and the burden those costs are imposing on state budgets. One of the authors of this report (LaFaive) worked with officials within three departments of Michigan state government in an effort to do just that with a specific focus on unfunded mandates in the Medicaid program. Medicaid is the principal public sector health care program for the poor and is jointly funded by state and federal governments. As the following section indicates, the magnitude of mandate costs to Michigan in this single area is staggering.

Michigan: The Impact of Medicaid Mandates

[The State of Arizona] will continue to press the case that mandates from the federal government have stripped us of our fiscal sovereignty . . . and have stripped the people of their right to representative government at the state level. – Arizona Governor Fife Symington, State of the State Address, January 1993.

We need to get a handle on the Medicaid mandates or else some of us are going to go broke. – Arkansas Governor (now President) Bill Clinton, National Governor's Association, February 3, 1991.

Mr. Clinton's prophetic words speak volumes as to the danger of mandated legislation – particularly in the Medicaid arena where program costs for federal legislation like the 1987 Omnibus Budget Reconciliation Act (OBRA), or the Medicare Catastrophic Health Insurance Act of 1988 are increasing dramatically.

The 1987 Omnibus Budget Reconciliation Act included a nursing home reform section that stipulated the need for states to adjust the requirements by which they evaluate the care offered. They include, but are not limited to, preadmission screening, nurse aide training, and review of mentally retarded residents.

In Table 2, the dramatic increase in the cost of such federally mandated legislation relative to Medicaid is illustrated. From 1990 to 1995 the General Fund/General Purpose (GF/GP) cost of Medicaid mandates to Michigan is expected to increase by over 245 percent (column two) – an average annual rate of increase of 49.1 percent – while Michigan's General Fund revenues will likely grow at their historical rate of five percent or so as inflation averages three percent.

Sample Medicaid Mandates

A full compilation of specific mandate examples would take pages of print and explanation. Below is a substantial but partial listing secured by the author from the General Accounting Office, categorized by the particular legislation which created them:

Omnibus Reconciliation Act of 1980

Required Medicaid coverage of services furnished by licensed nurse-midwives

Omnibus Budget Reconciliation Act of 1981

Required that states with medically needy programs provide, at a minimum, ambulatory services to children and prenatal and delivery services to pregnant women
Imposed sanctions on states related to Medicaid error rates. States affected had federal financial participation rates reduced by 3 percent for FY82, 4 percent for FY83 and 4.5 percent for FY84

Deficit Reduction Act of 1984

Requires coverage of all children born after 9/30/83 meeting state AFDC income and resource standards, regardless of family structure
Requires coverage from date of medical verification of pregnancy, providing 1) the woman would qualify for AFDC once child was born, or 2) they would qualify for AFDC-UP once child was born, regardless of whether state has AFDC-UP program
Requires automatic coverage for one year after birth if mother already is receiving Medicaid and remains eligible, and infant resides with her
Mandates limited extension of Medicaid coverage if AFDC eligibility is lost due to earnings

Consolidated Omnibus Budget Reconciliation Act of 1986

Requires coverage if family income and resources are below state AFDC levels, regardless of family structure
Requires 60-day extension of coverage postpartum if eligibility was pregnancy-related
Requires coverage even if adoption/foster agreement was entered into in another state
Requires coverage regardless of income/resources of adoptive/foster parents

Omnibus Budget Reconciliation Act of 1986

Requires continuation of eligibility (for those who otherwise would become ineligible) if they are hospital inpatients when age limit is reached
Establishes new mandatory categorically needy coverage group for qualified individuals under age 65
Requires provision of emergency services if otherwise eligible (financially and categorically)

Immigration Reform and Control Act of 1986

Requires provision of emergency and pregnancy-related services for newly legalized aliens and requires full coverage for eligibles under age 18

Anti-Drug Abuse Act of 1986

Requires state to provide proof of eligibility for homeless individuals otherwise eligible but having no permanent address

Omnibus Budget Reconciliation Act of 1987

Requires states to establish preadmission screening programs for mentally ill and retarded

Family Support Act of 1988

Increases required period of Medicaid coverage if AFDC cash assistance is lost due to earnings

Omnibus Budget Reconciliation Act of 1989

Requires coverage if income is below 133 percent of poverty line
Requires interperiodic screenings when medical problem is suspected

Omnibus Budget Reconciliation Act of 1990

Requires states to receive and process applications at convenient outreach sites for pregnant women and children

The external mandates imposed on Michigan force state legislators to make tough choices among extremely important programs – ensuring the availability of health care for pregnant women, providing food for infants and children in low-income families, improving education – and for funding the programs for which the states are wholly responsible. Consider the fiscal impact on Michigan as the federal government foists its Medicaid mandates on state taxpayers:

The Omnibus Budget Reconciliation Act of 1987, the 1989 Health and Human Services requirements and other Medicaid mandates cost Michigan $40 million in fiscal year 1990 alone, and that figure is expected to rise to .$137 million by Fiscal Year 1995.
As the reader can see from the list below, the total GF/GP costs of Medicaid mandates for 1993 will exceed the combined expenses of live state departments.

Civil Rights	$11.0 Million
Civil Service	$11 .0 Million
State	$14.7 Million
Attorney General	$24.7 Million
Agriculture	$26.6 Million
Total:	$88.0 Million

Even when aggregated, these departments have a combined budget $7.3 million less than that of the $95.3 million GF/GP total that will be needed to meet the requirements of mandated legislation in just the Medicaid arena. Individually, the Military, Labor, Education, Management and Budget, Treasury, and Commerce departments are operating on Fiscal Year 1993 budgets ranging from only $28 to $61.6 million – considerably less than the aforementioned $95.3 million needed to cover the costs of federally mandated Medicaid legislation.

The State of Michigan, in effect, will have to devote 30 percent of its growth in General Fund/General Purpose revenue for 1993 to pay the cost of Medicaid mandates alone.
Medicaid mandates consumed 3.2 percent of 1990 Medicaid General Fund/General Purpose (GF/GP) expenditures and are expected to increase to 6.4 percent of the Medicaid GF/GP base by fiscal year 1993 before continuing in their seemingly unending ascent.
Federal Medicaid mandate costs increased from .5 percent of the total General Fund budget in Fiscal Year 1990 to 1.2 percent in Fiscal Year 1993.
Federal Medicaid mandates will grow at an annual rate of 49.1 percent through Fiscal Year 1995. When juxtaposed against the historical growth rate of the entire state general fund budget of 5.5 percent (1981-1990), and anticipated Fiscal Year 1993-1994 growth of 4.5-5.0 percent, it is easy to see why many legislators are growing alarmed with the situation.

Unfortunately, mandates pervade all aspects of state government. The effects of these mandates on the functions of government include, but are not limited to, the overlapping of regulation, duplication of services and the increased burden o( their implementation, the need to shift important resources from one priority to another and the huge increase in the amount of paperwork, red tape, the administrative- procedural -regulatory burden, and all of the additional costs associated with compliance.

Mandate Relief

"The way to stop it is to make it clear to Congress that we are serious about long-term structural reform." – Arkansas Governor (now President) Bill Clinton, National Governor's Association, February 3. 1991.

Throughout the term of the 102nd Congress, legislators introduced 21 mandate relief bills – from general to category-specific. These bills reflected, however symbolically, a growing concern over the damage that mandated directives inflict on state and local government.

Ironically, the mandate issue is drawing so much attention that even federal legislators who have introduced mandate-laden bills are also proposing laws designed to curb their use. Representative Olympia Snowe (R-Maine), for instance, introduced three bills containing mandates as well as two mandate relief bills: one issue-specific, the other general. The more important of these two bills is HR 2338, which is one of only a handful of relief packages designed "to provide that no state or local government shall be obligated to take any action required by federal law...unless all [emphasis added] expenses are fully funded by the United States." (Mandates of the 102nd Congress, pp. 32-33)

Two of the most unique and extensive of the 21 relief bills come from Representative Frank Horton (R-N.Y.) and George Hochbrueckner (D-N.Y.). The Mandate and Community Assistance Reform Act (HR 5591) introduced by Representative Horton provides for a major relief package for state and local governments. It also provides for increased cost estimations, service integration opportunities, and studies to identify mandated legislation that would duplicate services. This bill also requires the suspension of a block of mandates after the country enters a recession and reinstates them after exiting.

Representative Hochbrueckner's National Commission on Intergovernmental Mandate Reform Act (HR 3344) would establish the nation's first commission on mandates, Its duties would include tracking mandated programs, identifying costs, and making recommendations for reducing, eliminating or relieving the financial burden of mandates on the states.[9]

While the attempts made at the federal level to relieve the burden of unfunded mandates are encouraging, it remains that real relief will not come without action taken at the state and local levels of government. Only when state representatives and the taxpayers they represent make their outrage known to Congress in no uncertain terms might the burden of unfunded mandates be lifted from the shoulders of state government.

One common thread of agreement among specialists in the mandate arena is the need for accurate cost estimations.[10] They are necessary to provide taxpayers, state and local lawmakers, and special interest groups with the ammunition necessary to give federal legislators something to be concerned about.

State Level

Mandate ombudsman: Michigan should create the nation's first official federal-state mandate Ombudsman to track, forecast, disseminate, and distribute information regarding mandated legislation. This position will serve a multitude of purposes, all designed to increase the awareness of taxpayers, lawmakers, and special interests at every level of government as to the fiscal impact of mandated legislation.
Mandate database: The Michigan Department of Management and Budget (DMB) should create a computer database so that the Mandate Ombudsman could generate reports that provide up-to-date total cost estimates to government entities as a function of appropriated funds. The database would also provide reports that break costs down by program and agency within the state and be made available to the governor, director of the DMB, the Michigan legislature and federal delegation, as well as the media and the general public.

This position would also be a tremendous asset to budget officers in Washington who are required to make impact estimates of all legislation containing mandates expected to cost over $200 million. Currently, many programs preclude the use of standard budgeting processes. This forces CBO employees to do extensive research in order to comply with the 1981 Local Government Cost Estimate Act. A mandate liaison in state budget offices would provide them with a quick source of accurate data that federal legislators could use in their decision making process.

Peter Denton, of the Idaho Legislative Budget office, has taken the first step toward creating a state level mandate computer tracking system. The concept behind this system is to enable budget officers in Idaho to make data queries available to state legislators via a Local Area Network with a gateway to a central mainframe computer. Currently, all data is input manually to a Paradox database,

In the future, such a computer system could access a national bulletin board, such as LegisNet, so that mandate updates could be made in every state. Each state could electronically receive mandate updates from the federal government. The reason for these "real-time" updates would be so that budget officers could have as much time as possible to accurately predict the cost impact of federally mandated legislation.

State resolution: The consensus of opinion among analysts is that relief from the burden of unfunded federal mandates will occur only when federal legislators are themselves concerned with the impact mandated legislation has on the states. In order to facilitate a greater awareness of unfunded programs that Congress requires Michigan to implement, we suggest that a resolution be adopted calling upon the Michigan delegation to the United States Congress to appear before the Legislature (or a special joint committee thereof), oil an annual basis to provide an account of how they have fulfilled their constitutional responsibilities in representing One people of this state. At such an occasion, they should be invited to explain and justify the particular mandates the federal Congress has imposed. The Governor should use the weight of his office to encourage our representatives and senators to participate. He should ask the Michigan Legislature to adopt a resolution expressing, its desire to see this happen.

In the fall of 1992, both houses of the Alabama Legislature approved arid the state's governor signed just such a resolution. Alabama's federal representatives will be appearing before members of the state legislature On April 6, 1993 – the first meeting of its kind in the nation. Michigan ought to follow suit.

Federal Level

Biennial reports: A major report, prepared every two years by the General Accounting Office (GAO) or Congressional Budget Office (CBO) for each new session of Congress, would provide exhaustive information regarding the long-term impact of mandated legislation. At the very least, this report would put the impact of such bills in perspective by drawing a larger picture for federal representatives.
Cost estimations: Currently, fiscal impact studies on proposed legislation that imposes costs on state governments are. not required at the federal level. Ignoring the cost of mandates at their inception results in their aggregate impact being unknown or understated, an open invitation for Congress then to blindly pass them. Congress should adopt rules requiring a thorough fiscal assessment of its proposed mandates on the states.
Clearly-defined state-federal roles: Alice Rivlin, former Brookings Institution Senior Fellow and now Clinton Administration official, outlines the current relationship between the states and the federal government in her book Reviving the American Dream: The Economy, the States & the Federal Government. Rivlin says that Americans have "lost confidence in their ability to control their own destiny."[11] Her solution is to create a new federalism whereby there are clearly defined roles for the state and federal governments.

Over the last five or six decades the federal government has taken upon itself greater responsibility for solving problems that once fell under state jurisdiction.

In his 1980 book, Free to Choose, Milton Friedman outlines the change that has taken place in the relationship between local, state, and federal governments:

From the founding of the Republic to 1929, spending by governments at all levels, federal, state, and local never exceeded 12 percent of the national income except in time of major war, and two-thirds of that was state and local spending. Federal spending typically amounted to 3 percent or less of the national income. Since 1933 government spending has never been less than 20 percent of national income and is now over 40 percent and two-thirds of that is spending by the federal government.[12]

Has the increased intrusion in state and local matters (with or Without the use of mandates) by the federal government improved the condition of Michigan's citizens? Rivlin suggests that the answer is no and the solution is to restructure the federal-state relationship so that the federal government would remove itself from most programs in "housing, highways, social services, economic development, and job training." The federal government would retain its duties in the international arena and those that require consistency throughout the states.

A recent study by the Advisory Commission on Intergovernmental Relations entitled Changing Public Attitudes on Governments and Taxes suggests that the public would support such changes. Respondents agreed that certain responsibilities are best handled by state and local units of government: low income housing, the sale of insurance, and the use of pesticides were considered state-local issues while other responsibilities, such as health risk labeling for food products and the regulation of banking, should be left up to the federal government. A full 49 percent of the public listed the federal government as giving citizens the least for their tax dollars versus only 16 percent who listed state government. Forty-one percent of respondents also said that they did not have very much faith in the federal government to carry out its responsibilities as opposed to 36 percent expressing the same sentiments for the state level. [13]

Despite the general lack of faith in the federal government, Congress continues to impose its will on the states by using the mandate tool. To limit, if not end, the use of unfunded mandates we must first ask ourselves what is best for the people of Michigan. Are the 535 members of Congress and the Senate, with each member simultaneously fighting to ensure that his/her state receives its "fair-share" while trying to appease both national and international special interest groups, better equipped to solve Michigan's problems, than are the state representatives who are focused squarely on Michigan's problems? The answer would seem to be an emphatic no.

Constitutional Amendment: In February 1992, Michigan State Representative Michael Nye (R-Litchfield) joined with 24 legislators from other states to amend the U.S. Constitution. Nye's proposal was designed around this portion of the 1978 "Headlee Amendment" to the Michigan Constitution:

The state is hereby prohibited from reducing the state financed proportion of the necessary costs of any existing activity or service required of units of Local Government by state law. A new activity or service or an increase in the level of any activity or service beyond that required by existing law shall not be required by the legislature or any state agency of units of Local Government, unless a state appropriation is made and disbursed to pay the Local Government for any necessary increased costs . . .[14]

Nye's 1992 effort to amend the federal Constitution languished in a busy and highly-charged election year. He intends to try again in 1993 by pushing to put Michigan on record in favor of such an amendment.

Interest group involvement: According to a General Accounting Office (GAO) study prepared for Senator Dave Durenberger (R-Minnesota), the involvement of special interest groups is vital to making committees more responsive to state and local concerns. The GAO also noted that interest group participation made committee members more likely to use the prepared cost estimates in the evaluation of legislation.

If local, state, and federal institutions from the Oakland County Taxpayer's Association to the Taxpayers United for a Michigan Constitution to the National Taxpayers Union had access to public information about unfunded federal mandates, Michigan would develop a natural constituency in opposition to these "hidden taxes." The cost information produced and made available if certain of the above recommendations were implemented should be utilized by grass roots interest groups to help educate the public.

Fortunately, the early days of the new 103rd Congress (convened in January 1993) have brought forth more than a dozen mandate relief bills which, if passed, would implement many of the above recommendations. A compilation of these relief bills secured by the authors from the National Conference of State Legislatures includes the following:

HR 140 – No state or local government would be required to comply with federal requirements unless all funds necessary to pay the direct costs are provided by the federal government. The bill is not retroactive; that is, it would not apply to federal mandates enacted prior to its passage. Another bill, HR 369, would accomplish much the same as this one.
HR 886 – Cost estimation requirements for legislation and regulations of the federal government would be strengthened. The bill also addresses "the resorting of federal-state responsibilities." Similar to this bill, HR 1006 would also expand existing requirements that legislation be accompanied by cost estimates of impact on state and local governments.
HR 894 – The Congressional Budget Office would be required to prepare estimates of the costs incurred by state and local governments in carrying out or complying with new legislation. The Rules of the House would be amended to require the inclusion of such estimates in committee reports on bills and joint resolutions. Like HR 140 and HR 369, this bill would also ensure that federal laws requiring activities by state and local governments would not apply unless all amounts necessary to pay their direct costs are provided by the federal government.
HR 1088 – Analysis and estimates of the likely impact of federal legislation and regulations on both the private sector and state and local governments would be required.
HR 1295 – The Congressional Budget Office would be required to conduct an impact assessment on legislation that is reported out of committee for action on the House floor. This legislation would also require agencies prior to the implementation of any rule or any other major federal action affecting the economy to perform an assessment of the economic impact of the proposed rule or action and seek public comment on the assessment. It requires, furthermore, that whenever there is more than one option, an agency must adopt the option with the least adverse economic impact or provide a statement of reasons why the agency's failure to do so is consistent with the purposes of the legislation.
HCRes 51 – This resolution would express the sense of Congress that unfunded mandates should be rescinded unless they are accompanied by sufficient funds to pay for them.
S 81 – Federal legislation and regulations would have to be accompanied by economic and employment impact statements assessing their impact on the private sector and state and local governments.
S 563 – Congressional Budget Office analysis would be required of each bill or joint resolution reported in the Senate or in the House to determine the impact of any federal mandates in the bill or resolution.

Given the urgency of the matter to the states, these and other pending mandate relief bills deserve to be top priority for Congress. It is time for Congress to act!

At the state level, legislators are continually struggling to meet the growing demands made upon them by Washington. If Michigan is to be anything more than a puppet of Congress, its leaders must demand that clearly defined roles for each level of government be established, and that mandates from Washington be either funded by Washington or abandoned altogether.

Restoring such a balance would not only safeguard the taxpayer's resources, but would help re-establish a healthy federalism as a pillar of our constitutional system.

Endnotes

Andrew J. Cowin, "How Washington Boosts State and Local Budget Deficits," The Heritage Foundation Backgrounder, July 31, 1992, p. 12.
U. S. Advisory Commission on Intergovernmental Relations, Federal Statutory Preemption of State and Local Authority: History, Inventory, and Issues September, 1992, pp. 1-4.
Stephen Moore, "How Governors Think Congress Should Reform the Budget: Results of a Survey of U.S. Governors and Former Governors^," Cato Institute Policy Analysis,December 9, 1992, pp. 1-2.
Martha Fabricus, "The 102nd's Multiplying Mandates," State Legislatures, January 1992, p. 17.
National Conference of State Legislatures, Mandates of the 102nd Congress, November 1992, pp. 1-33.
Julie Rovner, "Governors Ask Congress For Relief From Burdensome Medicaid Mandates," Congressional Quarterly, February 16, 1991, pp. 416-417,
U. S. Constitution, Tenth Amendment.
Michael Fix and Daphne A. Kenyon, Editors, Coping with Mandates, What Are the Alternatives.? Urban Institute Press, Washington, D.C., 1989, pp. 8-9.
Christine Wnuk, "State Federal Issue Brief," National Conference of State Legislatures, Vol. 5, No. 4, November 1992, pp. 2-3.
United States General Accounting Office, "Legislative Mandates: States Experiences Offer Insights for Federal Action," September 1988, p. 2.
Alice Rivlin, Reviving the American Dream: The Economy, The States & The Federal Government, Brookings Institution, 1992, p. 177.
Milton & Rose Friedman, Free to Choose: A Personal Statement, Harcourt, Brace Jovanovich, 1990, p. 92.
"Changing Public Attitudes On Governments and Taxes," Advisory Commission on Intergovernmental Relations, 1992, pp. 15-17.
Michigan Constitution, Article IX, Section 29.

About the Authors

Michael D. LaFaive is an Adjunct Scholar with the Mackinac Center for Public Policy Policy.

Lawrence W. Reed is President of The Mackinac Center for Public Policy.

Acknowledgments

For their invaluable advice and consultation, the authors wish to express appreciation to the Michigan Department of Social Services, the Michigan Department of Management and Budget, the Michigan Department of Mental Health, Public Sector Consultants (Lansing), Christine Wnuk of the National Conference of State Legislatures, Peter Denton of the Idaho Legislative Budget Office, and the staff of the Mackinac Center for Public Policy.