Executive Summary

Unfunded mandates from Washington pose a substantial challenge to both the budgets and the fiscal sovereignty of the 50 states. This report examines that challenge and presents data which illustrate the problem for state government in Michigan. It does not address that other vast arena of federal mandates – those imposed on private enterprise, from parental leave to plant closing laws – though in great measure, the critical appraisal presented here would undoubtedly apply there as well.

A mandate is a command – a requirement that the subject cannot ignore without penalty. When Congress imposes a mandate upon state governments and does not provide the resources to carry it out, the mandate is unfunded. State governments must then raise taxes, reduce other spending, or borrow – in every event, the mandate preempts and redirects state resources to satisfy the wishes of Congress.

The use of mandates at the federal level has increased markedly in recent years. Facing a chronic budget deficit and yet wanting to see new programs of government enacted or existing ones expanded, Congress has discovered that it can simply foist programs or policies upon the states and let them worry about the bills. By one count, there are currently more than 400 federal mandates in a broad range of policy areas – from health and safety to the environment.

The last two years have produced an explosion in mandates. In the 102nd Congress, which expired in December 1992, no fewer than 244 bills containing mandates were proposed. Fortunately, not all of them made their way into law, but by any measure, this problem is growing worse with each passing year.

Arizona Governor Fife Symington, in his State of the State Address in January 1993, had this to say on the matter: [The State of Arizona] "will continue to press the case that mandates from the .federal govemment have stripped us of our fiscal sovereignty ... and have stripped the people of their right to representative government at the state level."

President Clinton, as Arkansas Governor in February 1991, expressed similar sentiments when he said, "We need to get a handle on Medicaid mandates or else some of us are going to go broke."

Congress adopts mandates typically with little or no accurate estimates of their costs, The Congressional Budget Office, which is charged with calculating such costs, is hampered by ambiguous language in the mandates themselves, as well as time constraints that often prevent a thorough analysis. Congress has shown little concern for the impact of its directives on states and state government budgets.

Medicaid – the public sector health care program for the poor funded jointly by federal and state governments – provides a case study of the impact of federal mandates in Michigan. As part of Medicaid, Congress has imposed a growing list of unfunded requirements: to provide coverage of nurse-midwife services, to provide ambulatory services to children and prenatal and delivery services to pregnant women, and to establish preadmission screening programs for mentally ill and retarded citizens, to name a few from a lengthy list. Because of these mandates, state government has fewer resources to devote to matters it might regard as more pressing.

Among the findings this report reveals in the area of Medicaid mandates alone are these:

  • In 1993, $95.3 million – the equivalent of 30 percent of Michigan state government's revenue growth – will be consumed by the cost of Medicaid mandates.

  • That $95.3 million figure is larger than the combined General Fund appropriations for five entire state departments: Civil Rights, Civil Service, State, Attorney General, and Agriculture.

  • In Michigan, the cost of existing federal Medicaid mandates will grow at an annual rate of 49.1 percent through 1995, while the General Fund will likely grow at something close to its historic rate of 5.5 percent.

The problem with unfunded federal mandates goes beyond their burdensome expense to strike at the very heart of the state-federal relationship. The concept of federalism, a pillar of the U. S. Constitution, left to the states the lion's share of government powers and responsibilities. The gradual shift in recent years toward greater involvement by Washington in nearly all areas of public policy flouts the federalist spirit and threatens to make vassals of the 50 states. In one area after another, it has produced inferior policy results as well.

Action is needed to reverse this disturbing habit of the federal legislature. Among the several recommendations this report makes are these:

  • A mandate ombudsman – Michigan should create the nation's first official mandate ombudsman to track, forecast and disseminate information regarding mandates for the purpose of educating legislators and the general public.

  • A mandate database – To complement the work of the ombudsman, the Michigan Department of Management and Budget should create a computer database that would permit the generation of up-to-date cost estimates.

  • A state resolution – The Michigan Legislature should ask our state's federal representatives in Congress to appear annually before the legislature to explain and justify the mandates Congress is imposing on the state.

  • A renewed recognition on the part of all legislators – state and federal – of the proper roles and interrelationships of state and local governments.

Washington, ultimately, must step up to its responsibilities and kick the expensive and dangerous habit of foisting mandates upon the states.


(The authors of Washington Should Kick the Mandate Habit: The Fiscal Impact of Federal Mandates on Michigan are Michael D. LaFaive, an Adjunct Scholar with The Mackinac Center for Public Policy, and Lawrence W. Reed, President of the Center.)