Reviewing Old Unfunded Mandates Could Help NJ Officials Follow the Money

A 1995 constitutional amendment barred new state mandates without funding but left those already on books untouched — and they could be costing communities plenty

New Jersey voters amended the state constitution two decades ago to keep state government from passing laws that require spending by local governments. The ban on what are known as unfunded mandates was hailed as a key property-tax reform, but it didn’t rescind mandates that were already on the books or apply to those passed at the federal level.

Today, however, little is known about the cost of those older mandates, and more importantly, policymakers aren’t sure exactly what role they may be playing as local governments struggle to contain property-tax bills that are at an all-time high in New Jersey.

A bill that’s been advancing with bipartisan support in Trenton this year seeks to address that information gap by requiring state officials to begin compiling a list of all state and federal unfunded mandates.

The measure, which recently cleared the Assembly Appropriations Committee, would also require state officials to come up with an estimate of how much spending the mandates have added to the budgets of county and local governments, which rely heavily on local property taxes to cover costs.

The legislation would also require that the list of mandates and their estimated costs be posted online at the state Department of Community Affairs website so government leaders and taxpayers can easily review the data. And the bill also calls for the list to be updated on an annual basis.

New Jersey voters amended the state constitution to prohibit unfunded mandates in 1995, and the prohibition went into effect a year later. West Caldwell Mayor Joseph Tempesta, the president of the New Jersey League of Municipalities, wrote in NJ Spotlight earlier this year that there was widespread frustration at the time with a state law that required local governments to employ a paid elevator inspector even if no buildings in their town had any actual elevators. By some estimates, such unfunded mandates were costing taxpayers as much as $225 million annually.

In addition to enacting the ban, New Jersey voters also created a new agency, the Council on Local Mandates, to determine whether any new laws were establishing unfunded mandates. Since then, the council has flexed its authority more than a dozen times, including in recent years when it determined an anti-bullying law and a police body-camera law were passed by Trenton without the funding needed to ensure they could be adopted at no cost to local governments.

But mandates that were in place before the constitutional amendment was passed were grandfathered, and the state’s prohibition and the Council on Local Mandates have no authority over mandates that come down from the federal level.

A review of the unfunded mandate issue that was released last year by the Congressional Budget Office found that nearly 10 percent of the 537 bills that were studied by the agency had incorporated some type of unfunded intergovernmental mandate. The National Conference of State Legislatures has also estimated as much as $131 billion in costs were shifted to the states by the federal government between 2004 and 2008.

With property tax bills now at a record-high average of $8,353 in New Jersey, the sponsors of the bill seeking more information about the costs of the unfunded mandates say it’s time to determine exactly how much they’re affecting local and county government spending.

“Taxpayers deserve to know the costs of programs and regulations that are forced upon municipalities but paid for through local property taxes,” said Assemblyman Jay Webber (R-Morris). “This measure increases transparency on these expenses that municipal and county governments cannot control.”

“This bill brings to light some of the cost drivers to local governments that they cannot control through these mandates,” said Assemblyman Troy Singleton (D-Burlington).

The two lawmakers didn’t identify a specific unfunded mandate that led them to support the bill, but instead cited concerns about the mandates that they have heard repeatedly from local leaders in their legislative districts.

“This creates a direct financial burden on the backs of our state taxpayers,” Singleton said.

The state already lists a host of information about local property taxes on the Department of Community Affairs’ website, including a breakdown of the average property tax bill paid in each community in New Jersey. Singleton has sponsored legislation that would require the state to once again post a breakdown of the net property-tax bill for taxpayers in each community after Gov. Chris Christie removed that information following a decision during his first term to reduce Homestead property-tax relief-credits.

If the bill seeking more information about the impact of the unfunded mandates is eventually passed, it would require the DCA to compile a list of all ongoing mandates that are not adequately funded by the state or federal government by July 1 of each year. The list would also have to include a best estimate of the cost of each unfunded mandate imposed on county and local governments.

A review of the fiscal impact conducted by the nonpartisan state Office of Legislative Services noted that the bill itself won’t play a direct role in lowering local property taxes. But it should help government leaders and taxpayers better understand the cost of the mandates and possibly lead to discussions about whether something can be done to reduce their impact.

“Too often, federal and state government passes the buck to local government, directing the implementation of costly laws or policies without consideration of how the directive will be funded,” Webber said.

The OLS fiscal-impact statement also pointed out that the measure doesn’t include any new appropriation for the Department of Community Affairs, meaning there would be no additional funding to help the agency take on the new responsibility of compiling and updating the list of unfunded mandates.

“Consequently, staff time currently devoted to executing other department functions may have to be redirected to produce and update the annual unfunded mandates list,” the OLS statement said.

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