So It’s a Mandate! Whattaya Goin’ to Do About It?
By far the loudest complaint heard at any level of government, below the federal level, is that some action or expenditure they are being required to undertake is a “mandate". Either the Feds are requiring something of the states and/or local governments, or the State is requiring something of local governments. Invariably, these requirements necessitate raising and expending tax revenues.
The grassroots rebellion against mandates in New Hampshire came at the New Hampshire Constitutional Convention of 1984. The Convention is a forum for examining the New Hampshire Constitution and determining if any amendments should be proposed to the electorate. By a provision of the Constitution, the voters are asked every ten years if they support the convening of a Constitutional Convention. If they vote “yes", a non-partisan election of delegates is held using the same districts as the New Hampshire House of Representatives, and a Constitutional Convention is convened. The Convention operates pretty much like the House with the election of a President, the adoption of rules, the formation of committees by subject matter, the introduction of “bills" called a Constitutional Amendment Concurrent Resolution or CACR, public hearings and, yes, lobbying by various interests. Not surprisingly many of the delegates elected to the Convention are also state legislators who are familiar with the lawmaking process. As an aside, the New Hampshire voters declined to convene a Constitutional Convention in both 1994 and 2004.
In the 1984 Convention, a varied group of delegates coalesced to draft, sponsor, lobby for, and pass to the voters a proposed amendment prohibiting unfunded State mandates on New Hampshire local governments. This coalition included conservatives and liberals, current and former local officials, aspirants for higher office and a few ordinary citizen/delegates. When a subcommittee was formed to work out the precise language of the amendment, virtually every delegate on the main committee wanted to serve. In the forefront of this effort was the New Hampshire Municipal Association, a statewide association of all the cities and towns in New Hampshire.
Without painting delegates with too broad a brush, the motivations behind support for an amendment banning mandates were as varied as the ideologies of the Delegates supporting passage of the amendment: conservatives wanted state government off the backs of local government; liberals saw it as a way to force the State to be responsible for raising the money required to pay for programs it mandated, leading, perhaps, to tax reform; and local officials were just sick and tired of taking the heat for raising local property taxes to pay for programs and responsibilities foisted upon them by “the State", both legislatures and agencies.
These disparate viewpoints came together in the “Perfect Storm" to propose the most sweeping Constitutional prohibition against unfunded State mandates that exists anywhere in the United States. The proposed amendment passed the Convention by a wide margin and was placed on the ballot at the November 1984 election. Before long, it became clear that many organizations and institutions whose members or ideological fellow travelers supported the amendment would come to oppose it.
For It…Against It: Vox Populi
The New Hampshire Municipal Association had limited resources to commit to a statewide campaign in support of what was called “Question 2" on the November 1984 ballot. However, it did commit about $5,000 from its reserves, and the New Hampshire School Boards Association and a few individuals contributed approximately $2,500. Along with a few strategically purchased radio and newspaper ads during the week and weekend before the vote, the campaign consisted primarily of press releases and appearances on radio talk shows and other free media. Strangely, there wasn’t much opposition to the amendment until the last six weeks before the election.
A few voices began to rise in opposition. One prominent opponent was the Commissioner of Education, who told a series of regional forums that passage of the amendment would prohibit the promulgation of new or enhanced education standards. A few legislators and a couple of municipal officials took public positions against the amendment, based primarily on a concern that its passage would “hamstring" the State in addressing statewide problems that required funding—that is, costs could not be downshifted to the property tax.
Almost every newspaper in the state editorialized in support of the amendment except for the Manchester Union Leader. The only newspaper with a statewide circulation, the Union Leader was against the amendment because they believed it would inevitably lead to the adoption of a broad-based income and/or sales tax. Its editors devoted numerous editorials and guest columns to the defeat of Question 2. The board of the New Hampshire taxpayers group, headed by former Governor Meldrim Thomson, a lifelong foe of “big government" and taxes, voted to oppose the amendment the week before the election because of the danger that it might lead to a broad-based tax. This was a seemingly incongruous position for the newspaper, Governor Thomson and for the tax fighters in New Hampshire. One would have intuitively assumed they would most certainly support an amendment to prohibit anything so onerous as the state legislature requiring citizens to increase property taxes, the most regressive of New Hampshire taxes.
The amendment passed and became Part I, Article 28-a of the New Hampshire Constitution.
The Lawsuit: What Else Did You Expect?
When they woke up the morning after the election and saw how the voters had altered the traditional state-local relationship of “We Mandate; You Pay", the legislative leadership wasn’t too pleased. The Senate President and Speaker of the House filed a lawsuit seeking to have the courts set aside the voters’ adoption of Article 28-a on the grounds that the question was confusing and the voters didn’t sufficiently understand its effect to make an informed decision.
There actually was precedent for this type of lawsuit in New Hampshire. In 1967, the New Hampshire Supreme Court set aside the voters’ approval of an amendment providing for annual legislative sessions [they were then biennial] and to limit mileage payments, finding that the questions were so confusing that the amendments “were not effectively approved by the voters." Gerber v. King (1967) 107 N.H. 495, 225 A.2d 620.
Other than the Attorney General, whose office is obligated to defend such actions, the only entity to defend the voters’ wisdom in adoption of Article 28-a was the New Hampshire Municipal Association. The defense was successful, resulting in a lengthy Superior Court opinion that soundly dismissed all of the petitioners’ points. This opinion was never appealed to the New Hampshire Supreme Court and the amendment stands as adopted in 1984.
Where’s the Bogeyman?
The very first thing that should be noted is that the broad-based tax bogeyman never appeared from under the bed. Contrary to the dire predictions of the Union Leader and the anti-tax groups, the State was never forced to adopt a broad-based personal income or general sales tax to fund all the programs and responsibilities that the State would mandate on local governments. After 20 years experience governing under Article 28-a, it can fairly be stated that should the Legislature ever adopt either or both types of taxes, the blame cannot be placed on Article 28-a; it has simply been too many years since voter passage of the amendment; too many intervening State budget crises; and too many State tax hikes to fault Article 28-a.
The second point that can be made is that no one will ever be able to quantify the cost of mandates that might have been enacted absent Article 28-a. The amendment has had, first and foremost, a preventive effect on the enactment of mandates. Very few new or expanded programs or responsibilities live long enough in either the legislature or the bureaucracy to be challenged. The credit for that goes to statutes and legislative rules that require each bill or proposed regulation that has a fiscal impact on local governments to carry a fiscal note estimating that impact. In addition, the legislative process itself, under the watchful eye of local government advocacy groups and the usual foes of any proposed law, tends to “red flag" bills whose enactment would impose a mandate.
The First 20 Years of Interpretation
The inherent protection of Article 28-a doesn’t mean that mandates haven’t been enacted and challenged, or that local governments and their property taxpayers shouldn’t remain ever vigilant.
The very first challenge to new legislation came in the case of New Hampshire Municipal Trust Workers Compensation Fund v. Flynn 133 N.H. 17, 573 A.2d 439 (1990). The Legislature enacted an amendment to the workers’ compensation law to create a presumption that cancer in firefighters and former firefighters was work-related. The Trust successfully challenged this law citing Article 28-a. The successful challenge did not nullify the law per se, but it did mean that in order for it to take effect either the State of New Hampshire would have to pay all the costs of implementation—administration, medical claims and lost time indemnification—or the voters or legislative bodies of each municipality would have to vote to appropriate such funding from local property taxes.
In 1992, the Supreme Court was asked for an opinion on the constitutionality of a proposed law regulating “Materials in the Solid Waste Stream", prohibiting certain materials from being deposited in local landfills and requiring alternate disposal provisions. The Court opined that the proposed law would not violate Article 28-a because a finding of a constitutional prohibition against an unfunded mandate required both a mandate of responsibility to the political subdivision and a requirement of additional political subdivision expenditure to pay for the mandate.
Perhaps indicative of the prohibitive effect of Article 28-a on the legislative/administrative process, the second court challenge based on the amendment was decided five years later in a challenge to an amendment to the special education law. The legislature amended the law to require that sending districts be responsible for the costs of special education students placed in a residential facility. The Supreme Court ruled that this did not impose a new, expanded or modified responsibility on the district in such a way as to necessitate additional local expenditures—that is, the responsibility for payment existed regardless of where the student was placed. Nashua School District v. State 140 N.H. 457, 667 A.2d 1036 (1995).
The third challenge was to an administrative action of the New Hampshire Department of Transportation when it decided that a stretch of state-maintained highway in Nelson should no longer be part of the state system—therefore, it would become part of the local road system that the town maintains. Nelson challenged this administrative action under Article 28-a and lost. The Supreme Court ruled that the responsibility of maintaining a highway that was part of the town’s “system" was not a new responsibility in spite of the fact that it wouldn’t be part of the town’s “system" but for the state’s administrative decision. Town of Nelson v. New Hampshire DOT 146 N.H. 75, 767 A.2d 435 (2001).
More problematic in sorting out when a mandate has been created is a line of Opinions of the Attorney General interpreting extant statutes for state agencies in light of Article 28-a. There are three cited in the annotations to the Article, however others surely exist. These opinions consistently adopt a permissive view of Article 28-a. In Op.Atty.Gen. No. 86-10 (March 20, 1986), the Attorney General opined that any amendments to or new rules adopted by the Police Standards and Training Council would not violate Article 28-a. Op.Atty.Gen. No. 86-43 (May 13, 1986) opined that the Article applied only to future acts of the legislature and not existing laws at the time of its adoption. Op.Atty.Gen. No. 86-75 opined that Article 28-a doesn’t abrogate the authority of the State Board of Education to amend or adopt regulations, nor does it absolve school districts from complying with them. In 1994, the Legislature amended RSA 541-A, the Administrative Procedures Act, to clearly apply Article 28-a to state agency rulemaking; to clearly prohibit expansion of any federal mandate by administrative rule; and, to require any rule that is based upon a federal law or rule to specify the law or rule upon which the state rule is based.
In looking to the opinions of the Attorney General for guidance, one must always keep in mind that these are opinions and carry, for persons and entities outside of state government, no more or no less weight than the opinion of any other attorney. State officials and agencies are, however, bound to follow the legal guidance and opinions of the Attorney General. This means that just because the Attorney General issued an opinion in 1986 does not mean that amendments to the rules and regulations of the State Board of Education that impose new requirements on school districts which require additional expenditures are not prohibited unfunded mandates.
How Do You Tell if it’s an Unfunded Mandate?
It’s important to break down the text of Article 28-a to make a judgment as to whether or not an action is an unfunded mandate:
1.The state shall not.
Article 28-a governs the fiscal relationship between the State of New Hampshire and its political subdivisions only—the counties, cities, towns, village districts/precincts and school districts. No other entity such as a corporation or individual is protected by the prohibition against unfunded mandates. Similarly, no political subdivision is protected by Article 28-a from the effect of an action by another political subdivision, such as city from county, school from town, etcetera.
This means to require, or to impose a requirement upon, another to do some act, to provide some service or confer some benefit.
3 or assign any.
This carries its plain meaning: assign, as in assign something to another regardless of how that assignment is made.
This also carries its plain meaning: something not heretofore done by the political subdivision. An example might be to offer a course in Mandarin Chinese in all high schools.
This means a mandate to perform more of some activity that is currently being conducted, such as to service more people, to build more space or to assign more personnel to an activity. An example might be to staff each piece of fire apparatus with a minimum of four persons when the current locally budgeted management practice provides for two or three staff to be assigned.
6 or modified.
This means a mandate to change something that is being done, that is, to do it in a manner different from that in which it is currently being done. An example might be to require each county to have two guards accompany a prisoner to visit to the jail’s nurse rather than one.
This refers to actual, identifiable services or programs currently conducted or mandated to be conducted by local government units, such as, library, assessing, general assistance, police, solid waste, education, jails, recreation or fire.
8 or responsibilities.
This refers to responsibilities that might now fall within the scope of local governments generally even if, for example, particular local governments do not currently fund such programs. An example might be to mandate that a local government begin to provide police services or build a solid waste facility. It also means the wholesale conferring of a responsibility upon local governments when those responsibilities did not exist prior to the mandate. For example, decreeing that after a certain date local governments would be responsible for the care of all mentally ill persons within their boundaries. The inclusion of “responsibilities" in the amendment was intended by the drafters as a “safety net" to prohibit virtually any type or kind of mandate regardless of how general it may seem.
9 to any political subdivision.
“Political subdivisions" include cities, towns, school districts, counties and village districts. The term also includes any special district or authority such as a utility district, transit district or housing authority.
in such a way as to necessitate.
This means that regardless of how a mandate is proposed—by legislation, by administrative rule, or by proclamation—as long as it is a requirement that necessitates the following phrase:
additional local expenditures.
The threshold question to determining if some action may be an unconstitutional mandate is whether or not compliance necessitates additional local expenditures. If it does, it needs to be treated as an Article 28-a issue. It should be noted that “additional local expenditures" is not a quantifiable measure. It does not matter if the action requires a significant amount—or a de minimis amount—of local expenditure, as long as it is an additional amount over and above whatever is being currently expended.
by the political subdivision.
This is self-explanatory.
unless such programs or responsibilities.
This phrase introduces the first of two exceptions by which a mandate can be found to be constitutional.
are fully funded.
This means 100 percent of any direct and indirect costs of complying with a mandate. It leaves no room for partial funding or an imposed cost-sharing arrangement; it means what it says—fully funded.
by the state.
The State must be the level of government from whose revenue sources the funds are provided to comply with a mandate. Legislation cannot, for example, state that “school district tax rates shall be increased by the Department of Revenue Administration (DRA) to fund this mandate" or that “municipalities are authorized to charge fees to pay the costs of this new responsibility." The revenues to fully fund the costs of a mandate must come from State revenue sources, collected by the State and used to pay the entire costs of the mandate incurred by local government(s).
or unless such programs or responsibilities.
This phrase introduces the second exception by which a mandate can be found to be constitutional.
are approved for funding by a vote.
This means that the projected costs of a mandate may be approved by a vote. [See next.]
of the local legislative body of a political subdivision.
The “local legislative body" is, by legal definition, the City Council or Board of Aldermen in cities; the Town Council in towns without Town Meeting or Budgetary Town Meeting [Derry and Durham]; in all other towns the Town Meeting or Budgetary Town Meeting, including the voters in Official Ballot Voting Districts [so called “SB2 units"]; the School District Meeting, including the voters in SB2 units; the Village District Meeting; and, the County Delegation.
Have the Exceptions Been Used?
The first exception—that of the State providing the funding to pay the costs of a mandate—has been used over the years, however sparingly, due to the State’s fiscal situation. For example, the Legislature appropriated funds to reimburse cities and towns for the costs of modifying their property tax billing programs, forms and procedures to levy the State Property Tax in 1999. Similarly, the State funded mandated testing of school children in various grades.
The second exception, however, is the most interesting one, for it has been utilized in only one instance in this writer’s memory. This occurred when former Department of Health and Human Services Commissioner Terry Morton proposed a new Medicare cost sharing formula and program to the State’s ten counties. At the time, the Medicare cost sharing formula called for the costs of nursing home care of the elderly to be split 50 percent Federal; 32½ percent State; and 17½ percent County. This program only covered care delivered to patients who were actually residing in nursing homes—the most expensive sites for care.
Commissioner Morton’s plan called for the State to receive waivers from the federal government to allow it to expend Medicare money not only for in-patient care [in nursing homes] but also for community-based care that would provide services to patients who were able to stay in their own homes or in some other type of care setting that was less intense and expensive than in-patient care. This was envisioned to save money for both the State and the counties as New Hampshire’s elderly population continued to steadily expand, in anticipation of the increased numbers of people that would need, and be eligible for, care.
The quid pro quo from the counties was their agreement to accept a change in the cost sharing formula to 50 percent Federal; 25 percent State; and 25 percent County. The projection by the Commissioner’s office was that this would save money for both the State and the counties because the federal share could now be diverted to less expensive forms of care.
The problem for this plan was the recognition that Article 28-a prohibited the change in formula, “unless such programs or responsibilities are approved for funding by a vote of the local legislative body of a political subdivision." This meant that every local legislative body—the County Delegation—in each of the ten counties had to approve the plan. The way in which it was presented was that if one County Delegation voted not to approve the formula change, the entire plan, statewide, was dead. All ten County Delegations approved “funding" the plan.
As an aside, the plan has not saved money for counties. In fact, it has cost all of the ten counties millions of dollars in additional property tax levies on the citizens in their cities and towns, and created much animosity and ill-will in both the State-County relationship as well as the County-Local relationship.
The original plan automatically expired after a set period of time unless reenacted. It was reenacted in 2005 by the Legislature; however, the counties were not required to vote again to “approve for funding by a vote of the local legislative body". Among the questions that could have been raised, but were not, about this reenactment include:
1. Can one legislative body bind another without some sort of “super majority" vote, for example, two-thirds vote? Is a 2005 County Delegation bound by a vote taken by a 2000 County Delegation to approve a state mandate?
2. Should the ten County Delegations have been required to re-approve the cost sharing formula that was scheduled to automatically expire, especially since the state legislature was required to adopt it again?
3. As continuation of the plan required a new legislative enactment, including gubernatorial approval, is it a new mandate that should have been voted on again by each County Delegation?
Q. As a local official or administrator, am I free to simply ignore any state action that I believe is an unfunded mandate?
A. Yes—and No. In the first instance you are not required to conform to a mandate simply because it now exists. If you are faced with what you believe to be an unfunded mandate, inquire to the state agency responsible for it; to the New Hampshire Local Government Center; and to your peers, to be sure your perception is accurate and to find out what others may be doing about it. Second, as a courtesy you should formally notify the state agency that is responsible for it, or in whose arena it most closely belongs, of your position. This notice should be in writing and sent by Certified Mail, Return Receipt Requested.
Q. Then what do we do?
A. Next, you need to determine if there has been any funding provided for the mandate. If there has not, you should calculate the projected cost of meeting the mandate, including all direct and indirect costs, such as salaries and fringe benefits of existing staff whose time is required or any new staff required to meet the mandate; the cost of hiring consultants such as engineers or attorneys; the cost of computer programming or reprogramming; and other costs such as printing of forms or travel expenses.
A. No. Only the local legislative body is authorized by Article 28-a to “approve for funding" any mandate. This does not mean that they can simply vote to ignore or reject the mandate. The valid action is to reject the appropriation of funds to pay for the mandate. In other words, the local legislative body must be given the cost projection and must vote on the dollars required to fund the mandate. The cost projection must be presented to the “local legislative body" for an appropriations vote; the exception is in cities, in two towns and in the Concord School District, where the “governing body" is also the “local legislative body".
Q. What rules apply to the appropriation of money to “approve for funding" a mandate?
A. The basic rule is that money to fund a mandate must be appropriated in the same way that all legal appropriations of property tax monies are made, following the local charter, if one exists, and state law.
Q. Does this mean that an appropriation to “approve for funding" a State mandate can only be made at an annual meeting?
A. Yes—But. Towns, school districts and village districts may only appropriate money at the annual meeting—unless appropriations at a special meeting have been approved by the court or a specific number of voters participate in the meeting. In cities, the two towns with Town Councils and no budgetary meeting, and the Concord School District, the ability to appropriate funds is a little less restricted; however, each is governed by local charter provisions in addition to state law.
Q. How should a request for funding of a mandate be presented to the voters at a town, school or village district meeting?
A. It should be presented by a warrant article. An example of the wording of such an article might be: To see if the Town will raise and appropriate the sum of $267,300 to pay the cost of a state legislative mandate that municipalities must employ at least one full-time police officer for every 1,500 population or portion thereof?
Q. Does this article have to be voted on at every subsequent meeting or does passage approve the mandate forever?
A. Generally speaking, one legislative body cannot bind a future legislative body unless specifically authorized to do so by law, such as a bond issue that requires passage by a “super majority" vote. For example, in a non-mandate situation, a town meeting could approve a specific warrant article appropriating funds to expand the police department by one officer and in subsequent years could include that cost in the regular budget instead of presenting it in a separate warrant article. However, nothing in the law prohibits the voters from cutting the funds necessary for that position out of future budgets because one legislative body can’t bind a future legislative body. The question is open as to whether or not the funding of a mandate by one legislative body can be rescinded by a subsequent legislative body.
Q. If the State acknowledges that a particular act is a mandate and provides money to local governments to pay for it, do local governments have to implement the mandate?
A. Yes. In this instance, the mandate would not be an unfunded mandate and local governments would have to comply. However, local governments are constitutionally entitled to payment of all costs of implementation, and should keep careful proof of their actual costs and send the State a bill for any cost in excess of the funding provided.
Q. What if the State didn’t pay the bill?
A. It would then become an unfunded mandate and you would have to go through the local appropriation process to see if the legislative body would “approve for funding" the costs of the mandate.
Q. Would the State be required to provide the funding to implement a mandate in advance or would it reimburse after the actual costs have been paid?
A. That situation has not yet arisen. Given the wording of Article 28-a—“unless such programs or responsibilities are fully funded by the state"—a good case can be made that the drafters of the amendment and the voters intended for the funding to be provided in advance of implementation of the mandate, with later adjustments to insure that the costs “are fully funded by the state."
John B. Andrews is Executive Director of the New Hampshire Local Government Center.