Politics & Policy

What Unfunded Mandates?

The state budget mess should be blamed on the states.

States have successfully secured a $20 billion bailout from Washington to close their expanding budget deficits. Never mind that they created their own fiscal crises by increasing spending nearly twice as fast as Washington has since 1990. Refusing to accept responsibility for their own reckless spending, states won the media’s sympathy by instead blaming a new wave of “unfunded mandates” in education and homeland security imposed on them by Washington.

Now, such mandates are clearly unfair. States should have control over how they spend their own tax dollars — rather than be forced by Washington to fund unwanted programs. Any federal mandate on the states should be accompanied with federal dollars to implement it.

Unfunded mandates, however, didn’t cause the current state budget messes. Only two significant mandates have been enacted since the 1995 Unfunded Mandates Reform Act, according to a new report from the Congressional Budget Office. They are the 1996 minimum-wage increase, and the 1998 limit on federal reimbursements for state food-stamp administrative costs. (The funding status of a third mandate, the 2001 port-security bill, is still undetermined.) These two mandates cost the states, on average, a combined $9 million per year, or less than one-tenth of 1 percent of the general-fund budget for most states. Not exactly a budget-busting amount. What about those expensive new education and homeland-security programs? Contrary to sympathetic media reports, these are more accurately classified as “programs that states don’t want to pay for.” An unfunded mandate, after all, must be both unfunded and mandated. And nearly all recent federal education and homeland-security programs are either voluntary or fully funded. Take the No Child Left Behind Act. Washington hasn’t mandated that any state implement this law. It merely suggested a model, and offered to subsidize states willing to implement it. States that dislike the federal model, or find the funding insufficient, are free to opt out and run their own programs. Some call these programs “de facto mandates” because no rational state would opt out of the federal programs. Why is it irrational to opt out? Because the federal money more than justifies the federal strings attached. States don’t unanimously enroll in these programs because they’re required to — they enroll because the deals are too good to pass up. Then why are states still so angry with Washington? Because they want that money with no strings attached. They’ve come to consider themselves entitled to the $400 billion they receive annually from Washington. They demand federal dollars, yet they bristle at Washington’s insistence on influencing how its own money is spent. Consider again the education example. In 1965, Washington offered money to states that volunteered to implement the federal model for educating disadvantaged children. Participating states were given wide latitude to spend this money on their own education programs — latitude that states now take for granted. Then, the 2001 No Child Left Behind Act required participating states to more closely align their spending with the program’s federal goals. The free lunch of Washington subsidizing pet education programs in the states was over. States may label this reassertion of federal authority over how federal money is spent an “unfunded mandate,” but the No Child Left Behind Act is neither unfunded nor mandated. If the program’s funding was insufficient to justify the increased federal meddling, states would have opted out. So far, none have. True, states are still burdened by pre-1996 unfunded mandates. The largest and least fair is Medicaid — this $200 billion annual cost is only half-funded by Washington. Yet states aren’t blameless either, as 60 percent of Medicaid spending is for populations and treatments that states voluntarily added to their own Medicaid programs. Other pre-1996 unfunded mandates, such as special education and many environmental regulations, should either be funded or removed. But how can states blame 30-year old unfunded mandates for budget crises that suddenly began in 2001? Note the irony: States demand total control over the spending of their own tax money. Yet by acting as if they’re entitled to federal dollars with no strings attached, they challenge Washington’s equal right to control how its tax revenues are spent. Now who is trying to impose an unfunded mandate on whom? — Brian M. Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs in the Roe Institute for Economic Policy Studies at The Heritage Foundation.

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