The Headlee Amendment: Alive and Well

In 1978, the voters of Michigan approved the "Headlee Amendment" to the state constitution. That decision expressed a strong desire to place limits on the growth of state and local government and to provide important protections to taxpayers.

The effectiveness of the Headlee Amendment over the past fifteen years was exhaustively reviewed recently by a commission appointed by Governor John M. Engler. The bottom line should be encouraging for the people of Michigan: overall, the amendment has worked reasonably well, especially in preventing total state taxation from outpacing the growth in personal income.

In conducting its background research for its report, the commission was reminded that the Headlee Amendment was rather moderate in its focus. Its intent was not to reduce state government, but rather to make sure state government did not become an ever larger part of the state's economy. It did not attempt to reduce local property taxes; instead, it sought to make future local taxation subject to the will of the majority by way of the ballot box. And it was designed to protect local governments from being strapped with unfunded mandates from the state legislature. People who believe that the Headlee Amendment "failed" because it did not reduce the state's tax burden, even though such a reduction is arguably a good idea, are asking more of the amendment than was originally intended.

Prior to 1978, state government was absorbing an ever-larger share of personal income. Since the adoption of the amendment, the state's revenue as a percentage of the personal income in Michigan has not exceeded the maximum 9.49 percent that the amendment allows. When the Governor and the Legislature crafted school finance reforms late last year, they were constrained by this binding limitation of the Headlee Amendment.

The amendment anticipated efforts in Lansing to evade the revenue limit by mandating that local governments provide certain services and pick up the tab. It forbids unfunded mandates, asserting that, if the state requires it, the state must pay for it. That's an idea that now is gathering momentum at the federal level in Washington. Legislators from all across the country are beginning to call, as Governor Engler has on several occasions, for a version of the Headlee Amendment to the U.S. Constitution that would stop the Congress from foisting unfunded programs upon the states.

While the amendment's anti-mandate provision has generally served its purpose, the commission found one major problem: the state has argued that mandated costs within any service which itself is not technically "required" of local governments do not qualify. For example, state-mandated overtime compensation for firefighters was determined not to fall under the amendment's requirement for state funding because local units of government are not actually mandated to provide firefighting services.

Court cases on this issue have dragged on for years as local governments have sought state reimbursement for these mandated costs. The commission recommends that the Legislature provide cost estimates for all the services or expenses it requires of local governments before it imposes them and that claims be settled more speedily by reviving a moribund review board that was supposed to handle such state-local disputes under Headlee.

The most controversial portion of the commission's report concerns the use by local governments of mandatory so-called "user fees" to circumvent the amendment's requirement that all increases in local taxation be submitted to a vote of the people. Some communities, for instance, have imposed charges on residents for recycling programs. By mislabeling these charges as "user fees" instead of "taxes," they have claimed that the voters do not have to give approval. A minority of the commission argues that there are some legitimate cases of mandatory fees that are not the same as taxes, but the commission as a whole found a need for the Legislature to clarify the distinction between a user fee and a tax to prevent wholesale evasions in the future.

The establishment of a commission to review the implementation of a critically important amendment to the state's constitution is a model which the federal government ought to follow. The liberty of each of us depends upon the effectiveness of our written law and our elected authorities to remain faithful to it. Examining the actions of our governments at every level in the context of the constraints which bind it for our protection is an exercise so important that it is surprising that we do not engage in it more often.

Though certain changes are needed to clarify the law and ensure enforcement, the Headlee Amendment has worked well for the people of Michigan. In an age of cynicism and distrust, that ought to be encouraging to all people of good will.