TOTALING UP THE TAB
FOR UNFUNDED MANDATES

By NICHOLAS GREIFER, Northwest Municipal Conference

In Washington, D.C. the U.S. Conference of Mayors, National League of Cities and other groups joined together in late October to urge an end to unfunded mandates. In Illinois meanwhile, the Suburban Mayors Action Coalition (SMAC) — representing over 2 million residents in suburban Cook County — also called for ending burdensome mandates.

SMAC mayors showed the burden of mandates was high. The "tab" for state and federal mandates is expected to cost $145 million in 1993-1995, for the 32 municipalities who participated in a survey on mandate costs. For all the villages belonging to the coalition, the extrapolated cost would be $379 million.

Why Mandates Matter
Mandates hurt local government for several reasons. Above all, mandates force local governments to divert scarce municipal dollars to federal and state priorities. For every dollar devoted to a federal or state program like the Safe Drinking Water Act, one dollar is taken away from municipal services like policing or fire fighting. Moreover, it forces up the cost of local services so that city governments must pass on the cost to its residents through higher user fees and higher property taxes — when the state and federal government could instead use its larger resources to pay for mandates. Finally, mandate costs are hard to predict, creating havoc in municipal budgeting. For example, LaGrange is expecting state-mandated recycling to jump from $751,000 to $876,000 next year, but the federally mandated Underground Storage Tank program will fall from $206,000 to $46,300 next year.

The Costs of Unfunded Mandates
The Suburban Mayors Action Coalition found that mandates will cost nearly $150 million in 1993-1995. While mandates will drop from $54 million to $39 million next year, costs are expected to rise again to $52 million in 1995. Clearly the burden of mandates is not going away, at least in the near future. What's more, these figures assume that the state and federal governments will not add to the mandatory programs already in place. The state and federal government may in fact pass new unfunded mandates.

What are the most expensive mandates? The coalition reported that the top three state mandates this year will cost the following:

(1) Illinois Municipal Retirement Fund — $8.4 million;
(2) Emergency Telephone/911 requirement —$5.0 million; and
(3) Police pensions — $3.7 million.

The top three federal mandates are:

(1) Clean Water Act requirements — $10.1 million;
(2) Fair Labor Standards Act — $2.4 million; and
(3) Underground Storage Tanks requirements —$2.3 million.

When compared to the revenues that municipalities can draw on, the burden of mandates is clear. For a sample of 14 northern suburban Chicago villages, state and federal mandates will cost $39 million in 1993. This amounts to 51% of the villages' property tax revenue and 19% of their general revenue fund. Mandates will amount to 10% of its operating budget — that is, before a municipality can decide how to spend its resources, 1/10 has already been set aside for federal and state priorities. (This assumes that all mandates appear as expenses in the budget. Some municipalities may elect not to put mandated programs like recycling in its budget, instead creating a user fee outside the budget. In those cases, mandates are a smaller percentage of the budget but still a cost to village residents.)

Outlook
What is the prospect for mitigating mandates? This is difficult to predict but there are some positive signs. First, federal and state policy makers recognize mandates are a legitimate problem. Various U.S. senators and representatives have introduced legislation that would make it more difficult to impose new mandates. Second, just before National Unfunded Mandates Day President Clinton issued an executive order to limit new mandates. According to the National Conference of State Legislatures, the order states that "to the extent feasible and permitted by law" a federal agency may not impose a mandate on a state or locality unless (a) the direct costs of a mandate are funded, or (b) the agency documents its discussions with state and local officials on the need for the mandate and justifies to the Office of Management and Budget the need for the mandate. While this would limit federal agencies' mandates, Congress could still enact new laws mandating local action. The order also requires federal agencies to give state and local governments the opportunity to comment on proposed regulations that would impose new mandates.

Finally, at the state level the Director of the Department of Commerce and Community Affairs Jan Grayson announced the revival of the State Mandates Board of Review. This long dormant board met in early November in an introductory meeting. It will be charged with reviewing municipalities' appeals for relief from
state mandates. •

December 1993 / Illinois Municipal Review / Page 5