1. Unfunded mandates: Directing subnational governments Nico Steytler, Jaap de Visser & Robert Williams International Association of Centers for Federal Studies Speyer, 1 October 2011

2. Unfunded mandates terminology terminology ‘governing from the centre’ ‘governing from the centre’  reduce policy space  limit expenditure choice and accountability  establish hierarchy compare United States, Australia & South Africa compare United States, Australia & South Africa

3. What is an ‘unfunded mandate’? US: “enforceable duty imposed on states, local authorities…or reduction or elimination of prior funding for compliance with such a duty” (1995 Unfunded Mandates Reform Act) US: “enforceable duty imposed on states, local authorities…or reduction or elimination of prior funding for compliance with such a duty” (1995 Unfunded Mandates Reform Act) RSA: “duty, falls outside of constitutional powers and has financial implications” (Municipal Systems Act) RSA: “duty, falls outside of constitutional powers and has financial implications” (Municipal Systems Act)

4. What is an ‘unfunded mandate’? depends who you ask depends who you ask methods to define: methods to define:  US/RSA: statute  AU: refrain from defining, use intergovernmental agreement challenge of definitions challenge of definitions  AU: history of ALGA/HoR debate towards 2006 IGR agreement  US: critique UMRA definition  RSA: statutory definition uncertain/unused

5. What is an ‘unfunded mandate’? explicit transfer of duty by legislative / executive act explicit transfer of duty by legislative / executive act some areas of contention required to continue service provided/funded by ‘senior’ govt. (included in US) required to continue service provided/funded by ‘senior’ govt. (included in US) required to provide innovative service / fill policy gaps required to provide innovative service / fill policy gaps limiting revenue authority / lack of indexing (debated in AU) limiting revenue authority / lack of indexing (debated in AU)

6. Areas of contention compliance activity (excluded in US/RSA/AU) compliance activity (excluded in US/RSA/AU) minimum service standards (excluded in RSA/AU) minimum service standards (excluded in RSA/AU) enforcing constitutional rights enforcing constitutional rights  US: excluded by UMRA  RSA: debated (who provides alternative housing for evictees?) below threshold? below threshold?  US: UMRA: > $50 Million

7. How are unfunded mandates possible? US? New York v United States (1992): “federal govt. may not commandeer state govts. into service of federal regulatory purpose” New York v United States (1992): “federal govt. may not commandeer state govts. into service of federal regulatory purpose” but federal pre-emption: law within federal competence displaces state law (despite state competence) but federal pre-emption: law within federal competence displaces state law (despite state competence)  US Supreme Court disposed to find conflict, sometimes leading to unfunded mandates ‘strings attached’ to receipt of federal funds for functions in state competence ‘strings attached’ to receipt of federal funds for functions in state competence  Underfunding / matching funds, combined with political pressure result in unfunded mandate

8. South Africa highly centralised federal system, very few limitations on national govt. to legislate on prov/local powers highly centralised federal system, very few limitations on national govt. to legislate on prov/local powers LG regulated by both national and provincial govts. LG regulated by both national and provincial govts. Const. allows shifting functions to provinces and LG Const. allows shifting functions to provinces and LG no incentive for national-provincial mandates (provinces derive 97% of income from grants) no incentive for national-provincial mandates (provinces derive 97% of income from grants) But widespread complaint in LG But widespread complaint in LGAustralia LG within domain of states LG within domain of states increasing federal interference in LG, including imposition of unfunded mandates increasing federal interference in LG, including imposition of unfunded mandates South Africa / Australia

9. Management and control of unfunded mandates legal sanctions legal sanctions political sanctions political sanctions

10. Legal sanctions Prohibitions, reimbursement, delay, qualified majority etc. Prohibitions, reimbursement, delay, qualified majority etc. Early US state laws contained restrictions Early US state laws contained restrictions  problem: legislature can’t bind future legislature  US State constitutions  US State constitutions  litigation (  some unintended results e.g. New Hampshire)   political solutions (e.g. New Jersey)

11. Political sanctions US: federal Unfunded Mandate Reform Act of 1995 US: federal Unfunded Mandate Reform Act of 1995 No ban but compel Congress to consider cost No ban but compel Congress to consider cost  “stop, look and listen” Congressional Budget Office Congressional Budget Office Device: unfunded mandate is out of order but may be overruled by simple majority Device: unfunded mandate is out of order but may be overruled by simple majority  ‘weak’, not self-executing  relies on commitment of Congress  but provides access to information for states to lobby around

12. Experience over 10 years 12% of Bills contained unfunded mandate 12% of Bills contained unfunded mandate 9% of that exceeded threshold 9% of that exceeded threshold point of order raised 12 times (HoR) point of order raised 12 times (HoR) works best when states’ interests are similar works best when states’ interests are similar

13. South Africa: ‘consult, assess impact, then support when necessary’ statutory rules, applicable to explicit transfer of duty to local govt. statutory rules, applicable to explicit transfer of duty to local govt. by executive: LG may say no by executive: LG may say no by legislation?  by legislation?   advice of Financial and Fiscal Commission  consult key ministries and LG association  three-year projection of financial impact funding, capacity building must follow if necessary funding, capacity building must follow if necessary assignment “has no force” unless Commission’s advice was considered assignment “has no force” unless Commission’s advice was considered  bind future legislature?

14. Experience never formally used/invoked (yet, Bill with unfunded mandates passed) never formally used/invoked (yet, Bill with unfunded mandates passed)  uncertainty over ‘trigger’ / application  absence of parliamentary protocol/rules deterring effect? deterring effect?

15. Australia defining responsibilities and funding arrangements in intergovernmental agreement defining responsibilities and funding arrangements in intergovernmental agreement consider consequential impact consider consequential impact respect right to say no respect right to say no consultation consultation

16. In sum definitions / magnitude contested definitions / magnitude contested LG often ‘victim’ LG often ‘victim’ two responses: two responses:  binding, legal (unintended consequences, judicial management, interpretational difficulties)  political, intergovernmental (subnational govt. relegated to ‘interest group’) policy concerns may outweigh federalism / decentralisation concerns but debate is essential policy concerns may outweigh federalism / decentralisation concerns but debate is essential