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Unfunded Federal Mandates: California's budgeting nightmare

by Chad Peace, published

In 1995, Congress addressed this issue with the Unfunded Mandates Reform Act, sponsored by Republican Senator Kempthorne of Indiana and signed into law by Democratic President Bill Clinton.  The purpose of the bill was “to curb the practice of imposing unfunded Federal mandates on States and local governments..." and "to end the imposition, in the absence of full consideration by Congress, of Federal mandates on State, local, and tribal governments…”  The problem: the Act so narrowly defined what is considered an “unfunded mandate” that it is largely, and obviously, ignored.  

Today, the State of California spends over $12 billion dollars a year to comply with unfunded federal mandates alone.  The Clean Air Act, the Clean Water Act, the Homeland Security Act, the Individuals with Disabilities Act and the No Child Left Behind Act contain just a few of the tens of thousands of regulations imposed on our state and local governments by our representatives in Washington DC. More than 12% of California’s state budget goes toward paying for compliance with unfunded or underfunded mandates.

Some State representatives are taking steps to bring the issue into the public dialogue.  The following excerpt is taken from Governor Schwarzenegger’s letter to the California Congressional Delegation on January 13th:

“As you know, Congress pays California a lower rate for its share of the federal Medicaid program than it pays most other states under the flawed Federal Medical Assistance Percentage (FMAP) formula. The federal government covers half the cost in California, while it pays 75 percent in Mississippi, 65 percent in Arizona and 71 percent in New Mexico, Utah and Arkansas. In fact, 38 states receive a higher reimbursement rate for Medicaid than California does – which means California taxpayers are subsidizing the Medicaid program in 38 states. If Congress simply treated states equally, more than $1.8 billion in California tax dollars could be spent here at home to balance our budget instead of being sent to Florida, New Mexico and Texas to balance theirs.”

In 1997, the Supreme Court held that, “The federal government may neither issue directives requiring the states to address particular problems, nor command the states’ officers, or those of their political subdivisions, to administer or enforce a federal regulatory program.” Yet, more than a decade later, the federal government continues to tighten its leash on states like California.  

Instead of looking to those within our communities, who understand our values, and appreciate the uniqueness inherent in any community, we increasingly generalize our problems, accept over-simplified solutions, then complain when Washington’s square peg doesn’t fit into the round hole back home. 

Whether it is the current debate on health care reform, legal and illegal immigration, or the more mundane everyday mandates on state and local governments, the cumulative impacts of the federal government’s failure to pay for the cost of its own policy decisions are steadily eating away at the quality of life in “donor” states like California.

For Californians, the math is particularly onerous. The $12.3 billion unfunded mandate deficit is less than a quarter of the total “excess tax” Californians pay to Washington each year. This is largely due to the impact of the Alternative Minimum Tax, which also hits California disproportionately.

No state pays a bigger price than California for unfunded federal mandates. It only seems logical that the California Congressional delegation would lead the way on reform. The only question is why they haven’t done so to date.


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