Legislative Analyst's Office
Analysis of the 2003-04 Budget Bill
We recommend the Legislature adopt the general policy of either funding its mandate obligations—or eliminating the state's liability for the mandate. We recommend that some mandates be consolidated with the state-county realignment proposal and that all other mandates be repealed, modified, or suspended for the budget year.
The California Constitution requires the state to reimburse schools and other local agencies if it "mandates" a new program or higher level of service. Traditionally, the Legislature has funded ongoing mandates in the budget and "new" mandates (those recently identified by the Commission on State Mandates) in the annual claims bill. In addition, because funding in the budget act seldom has been sufficient to pay all local mandate claims, the Legislature usually appropriates funding for mandate deficiencies in the annual claims bill.
In 2002-03 due to the state's fiscal difficulties, the state did not fund noneducation mandates in the budget or claims bill, but deferred all mandate reimbursements to an unspecified date. (We discuss education mandates separately in the "Education" chapter of this Analysis.) Because the state did not repeal or suspend local governments' legal obligations, however, local agencies must carry out these mandated tasks despite the delay in reimbursement.
The budget proposes to continue deferring all general government mandate reimbursements in 2003-04. Given the requirements of the California Constitution and state law, these mandate deferrals essentially are a "loan" from local governments that the state eventually must repay with interest. We estimate that, by the end of the budget year, the state will owe California noneducation local agencies over $1.2 billion for mandate claims.
Given the state's fiscal difficulties, the administration's proposal to defer mandate reimbursements is not a wise strategy. Instead of allowing the mandate loan from local governments to grow, the Legislature should act to reduce its mandate liability. Accordingly, we recommend that the Legislature adopt the policy of either funding a mandate—or eliminating the state's liability for the mandate. The Legislature can eliminate its liability for a mandate by:
Currently, the state has fiscal responsibility for 59 ongoing general government mandates costing approximately $300 million annually, plus another 26 mandates that the state has suspended annually for a decade. Our review indicates that at least 13 of the ongoing mandates (seven mental health, three voting procedure, and three property tax administration mandates) could be consolidated and funded within the proposed state-county program realignment (see Perspectives and Issues, "Part V"). Such an action would provide counties with ongoing resources and eliminate the extensive paperwork associated with mandate claiming. Before including these mandates in state-county realignment, however, we recommend that the Legislature modify the underlying requirements of these 13 mandates to increase county flexibility and lower county compliance costs. The amount of realignment funding provided to counties should reflect these mandate changes.
While many of the 46 other ongoing general government mandates involve beneficial governmental procedures, we recommend that they be suspended or repealed in light of the state's fiscal difficulties. In addition, as we discuss later in this Analysis, we recommend that the Legislature modify the Regional Housing Needs Mandate and request the Bureau of State Audits to review Animal Control mandate claims.
In terms of the 26 mandates that have been suspended annually for a decade, we recommend that these mandates be permanently repealed. Most of these long-suspended measures impose relatively minor local government requirements—such as a duty to report on the number of Filipino employees—and their repeal would eliminate any potential confusion regarding local government obligations.