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Unfunded mandates: Directing subnational governments

Unfunded mandates: Directing subnational governments. Nico Steytler , Jaap de Visser & Robert Williams International Association of Centers for Federal Studies Speyer, 1 October 2011. Unfunded mandates. terminology ‘governing from the centre’ r educe policy space

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Unfunded mandates: Directing subnational governments

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  1. Unfunded mandates: Directing subnational governments NicoSteytler, Jaap de Visser & Robert Williams International Association of Centers for Federal Studies Speyer, 1 October 2011

  2. Unfunded mandates • terminology • ‘governing from the centre’ • reduce policy space • limit expenditure choice and accountability • establish hierarchy • compare United States, Australia & South Africa

  3. What is an ‘unfunded mandate’? • US: “enforceable duty imposed on states, local authorities…or reduction or elimination of prior funding for compliance with such a duty” (1995 Unfunded Mandates Reform Act) • RSA: “duty, falls outside of constitutional powers and has financial implications” (Municipal Systems Act)

  4. What is an ‘unfunded mandate’? • depends who you ask • methods to define: • US/RSA: statute • AU: refrain from defining, use intergovernmental agreement • challenge of definitions • AU: history of ALGA/HoRdebate towards 2006 IGR agreement • US: critique UMRA definition • RSA: statutory definition uncertain/unused

  5. What is an ‘unfunded mandate’? • explicit transfer of duty by legislative / executive act some areas of contention • required to continue service provided/funded by ‘senior’ govt. (included in US) • required to provide innovative service / fill policy gaps • limiting revenue authority / lack of indexing (debated in AU)

  6. Areas of contention • compliance activity (excluded in US/RSA/AU) • minimum service standards (excluded in RSA/AU) • enforcing constitutional rights • US: excluded by UMRA • RSA: debated (who provides alternative housing for evictees?) • below threshold? • US: UMRA: > $50 Million

  7. How are unfunded mandates possible? US? • New York v United States (1992): “federal govt. may not commandeer state govts. into service of federal regulatory purpose” • but federal pre-emption: law within federal competence displaces state law (despite state competence) • US Supreme Court disposed to find conflict, sometimes leading to unfunded mandates • ‘strings attached’ to receipt of federal funds for functions in state competence • Underfunding / matching funds, combined with political pressure result in unfunded mandate

  8. South Africa / Australia South Africa • highly centralised federal system, very few limitations on national govt. to legislate on prov/local powers • LG regulated by both national and provincial govts. • Const. allows shifting functions to provinces and LG • no incentive for national-provincial mandates (provinces derive 97% of income from grants) • But widespread complaint in LG Australia • LG within domain of states • increasing federal interference in LG, including imposition of unfunded mandates

  9. Management and control of unfunded mandates • legal sanctions • political sanctions

  10. Legal sanctions • Prohibitions, reimbursement, delay, qualified majority etc. • Early US state laws contained restrictions • problem: legislature can’t bind future legislature •  US State constitutions • litigation ( some unintended results e.g. New Hampshire) •  political solutions (e.g. New Jersey)

  11. Political sanctions • US: federal Unfunded Mandate Reform Act of 1995 • No ban but compel Congress to consider cost • “stop, look and listen” • Congressional Budget Office • Device: unfunded mandate is out of order but may be overruled by simple majority • ‘weak’, not self-executing • relies on commitment of Congress • but provides access to information for states to lobby around

  12. Experience over 10 years • 12% of Bills contained unfunded mandate • 9% of thatexceeded threshold • point of order raised 12 times (HoR) • works best when states’ interests are similar

  13. South Africa: ‘consult, assess impact, then support when necessary’ • statutory rules, applicable to explicit transfer of duty to local govt. • by executive: LG may say no • by legislation?  • advice of Financial and Fiscal Commission • consult key ministries and LG association • three-year projection of financial impact • funding, capacity building must follow if necessary • assignment “has no force” unless Commission’s advice was considered • bind future legislature?

  14. Experience • never formally used/invoked (yet, Bill with unfunded mandates passed) • uncertainty over ‘trigger’ / application • absence of parliamentary protocol/rules • deterring effect?

  15. Australia • defining responsibilities and funding arrangements in intergovernmental agreement • consider consequential impact • respect right to say no • consultation

  16. In sum • definitions / magnitude contested • LG often ‘victim’ • two responses: • binding, legal (unintended consequences, judicial management, interpretational difficulties) • political, intergovernmental (subnational govt. relegated to ‘interest group’) • policy concerns may outweigh federalism / decentralisation concerns but debate is essential

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