In the 1980s, state regulation required that every municipality hire an elevator inspector –regardless of whether any buildings in the town had elevators. Taxpayers had a problem with that, and so did local elected officials. Yet that was the way things were until the people of New Jersey voted to amend their constitution to stop the flood of those unfunded mandates.
This year marks the 20th anniversary of the state-mandate state-pay constitutional amendment. By limiting the state’s ability to pass laws and regulations that impose costs or unfunded mandates on local government, the amendment was a significant victory for fairness, common sense, and fiscally responsible government. But before we can celebrate it, we have to know what it limits. What is an unfunded mandate?
Every person who receives an unauthorized charge on their credit card knows what an unfunded mandate is. It’s a charge for something they didn’t buy. An unfunded mandate is this concept, applied to government. It’s when state government buys something and puts it on the local property taxpayer’s credit card. Unfunded mandates are laws or regulations that set statewide policies, implemented through requirements on local government, which local property taxpayers pay for.
Until 1996, the state was able to impose unfunded mandates on local property taxpayers. A 1995 analysis estimated these mandates annually cost property taxpayers $225 million dollars. If the state had to come up with those dollars, it would have had an incentive to carefully balance costs with perceived benefits. Thus some policies may never have been started. If the Legislature had to pay for such policies; it may not have passed them.
The state-mandate state-pay amendment did two things. First, it made it unconstitutional for the state to impose unfunded mandates on local government. Second, and perhaps more importantly, it created a Council on Local Mandates to resolve disputes regarding unfunded mandates. Admittedly, this victory has not fixed our property-tax problems. Instead, it has kept it from becoming much worse. State-mandate state-pay is a necessary, but not sufficient, victory for New Jersey’s property taxpayers.
Why was it important that the constitution be amended to prohibit the state from imposing unfunded mandates? For the same reason that cookie jars are placed on the highest shelf. They’re harder to get to. It’s important to understand that state policy makers are under great pressure to implement new policies that don’t strain the state’s budget.
Why was it important to create a Council on Local Mandates to resolve disputes about which mandates were unfunded? Because the political branches of state government couldn’t be counted on to police themselves, or each other. And requiring expensive litigation would have defeated the amendment’s goal to unburden taxpayers. Unlike the courts, the Council on Local Mandate’s determinations are final. The Council on Local Mandates was included in the constitutional amendment to provide a quick, independent and cost effective way to invalidate unfunded mandates.
Oftentimes legislators, when confronted with the prospect that their new policy proposal is an unfunded mandate, will argue how important and necessary their proposal is. To be clear, many unfunded mandates are good proposals and they may be necessary. But state-mandate state-pay doesn’t prohibit only mandates that are bad policy, it prohibits all unfunded mandates. The great wisdom of this amendment is that if a statewide policy is worth being implemented, its cost must be put on the state’s credit card, not the local property taxpayer’s.
The individuals to whom we owe gratitude for this amendment are too many to list. While the amendment’s simple wisdom is self-evident, it strongly disturbed the status quo. The League of Municipalities, and many elected officials, worked hard to move this proposal. The amendment gathered bipartisan support and passed unanimously through the legislature. Ultimately, the voters overwhelmingly passed the amendment.
As we look forward for ways to solve New Jersey’s property tax woes, it is worthwhile to look back. Unfunded mandates were one part of our state’s property tax problem. Eliminating them was a real victory, and a partial solution. More remedies are needed. But, today we should celebrate the state-mandate state-pay amendment for the good that it has done.