Citizens Research Cch Cch Council of Michigan

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Board of Directors

Chairman Eugene A. Gargaro, Jr.

Vice Chairman Jeffrey D. Bergeron

Treasurer Nick A. Khouri

Joseph R. Angileri Deloitte. Jeffrey D. Bergeron Ernst & Young LLP Beth Chappell Detroit Economic Club Rick DiBartolomeo Rehmann Terence M. Donnelly Dickinson Wright PLLC Randall W. Eberts W. E. Upjohn Institute David O. Egner Hudson-Webber Foundation W. Frank Fountain Chrysler LLC

Eugene A. Gargaro, Jr. Masco Corporation Ingrid A. Gregg Earhart Foundation Marybeth S. Howe National City Bank of Michigan Nick A. Khouri DTE Energy Company Daniel T. Lis Kelly Services, Inc. Aleksandra A. Miziolek Dykema Gossett PLLC Paul R. Obermeyer Comerica Bank Bryan Roosa General Motors Corporation

Lynda Rossi Blue Cross Blue Shield of Michigan Jerry E. Rush ArvinMeritor, Inc. Michael A. Semanco Hennessey Capital LLC Terence A. Thomas, Sr. St. John Health Amanda Van Dusen Miller, Canfield, Paddock and Stone PLC Kent J. Vana Varnum, Riddering, Schmidt & Howlett LLP

Advisory Director

Board of Trustees

Chairman Patrick J. Ledwidge

Louis Betanzos

Vice Chairman Mark A. Murray

Terence E. Adderley Kelly Services, Inc. Jeffrey D. Bergeron Ernst & Young LLP Stephanie W. Bergeron Walsh College David P. Boyle National City Bank Beth Chappell Detroit Economic Club Mary Sue Coleman University of Michigan Keith E. Crain Crain Communications Inc Matthew P. Cullen Rock Enterprises Tarik Daoud Long Family Service Center Stephen R. D'Arcy PricewaterhouseCoopers LLP James N. De Boer, Jr. Varnum, Riddering, Schmidt & Howlett LLP John M. Dunn Western Michigan University David O. Egner Hudson-Webber Foundation David L. Eisler Ferris State University W. Frank Fountain Chrysler LLC David G. Frey Frey Foundation

Mark Gaffney Michigan State AFL-CIO Eugene A. Gargaro, Jr. Masco Corporation Ralph J. Gerson Guardian Industries Corporation Eric R. Gilbertson Saginaw Valley State University Roderick D. Gillum General Motors Corporation Allan D. Gilmour Alfred R. Glancy III Unico Investment Company Thomas J. Haas Grand Valley State University James S. Hilboldt The Connable Office, Inc. Paul C. Hillegonds DTE Energy Company Mark A. Hoppe Cole Taylor Bank David L. Hunke Detroit Free Press Dorothy A. Johnson Ahlburg Company F. Martin Johnson JSJ Corporation Elliot Joseph Hartford Hospital Daniel J. Kelly Deloitte. Retired David B. Kennedy Earhart Foundation

Patrick J. Ledwidge

Keith A. Pretty

Dickinson Wright PLLC

Northwood University

Edward C. Levy, Jr.

Michael Rao

Edw. C. Levy Co.

Central Michigan University

Daniel Little

Douglas B. Roberts

University of Michigan-Dearborn

IPPSR- Michigan State University

Sam Logan

Irving Rose

Michigan Chronicle

Edward Rose & Sons

Arend D. Lubbers

Gary D. Russi

Grand Valley State University, Emeritus Oakland University

Alphonse S. Lucarelli

John M. Schreuder

Susan W. Martin

First National Bank of Michigan

Eastern Michigan University

Lloyd A. Semple

William L. Matthews

Dykema

Plante & Moran PLLC

Lou Anna K. Simon

Kenneth J. Matzick

Michigan State University

Beaumont Hospitals

Gerard L. Stockhausen

Paul W. McCracken

University of Detroit Mercy

University of Michigan,

S. Martin Taylor

Emeritus

Amanda Van Dusen

Patrick M. McQueen The PrivateBank

Miller, Canfield, Paddock and Stone PLC

Robert Milewski Blue Cross Blue Shield of Michigan Glenn D. Mroz Michigan Technological University Mark A. Murray Meijer Inc. Jay Noren Wayne State University Donald R. Parfet Apjohn Group LLC Philip H. Power The Center for Michigan

Kent J. Vana Varnum, Riddering, Schmidt & Howlett LLP

Gail L. Warden Henry Ford Health System, Emeritus

Jeffrey K. Willemain Deloitte.

Leslie E. Wong Northern Michigan University Betty J. Youngblood Lake Superior State University, Emeritus

Citizens Research Council of Michigan is a tax deductible 501(c)(3) organization

Citizens Research Council of Michigan

Reforming the Process for Identifying and Funding Section 29 Mandates on Local Governments

July 2009 Report 355

This CRC Report was prepared for the Legislative Commission on Statutory Mandates

CITIZENS RESEARCH COUNCIL OF MICHIGAN M A I N O F F I C E 38777 West Six Mile Road, Suite 208 ? Livonia, MI 48152-3974 ? 734-542-8001 ? Fax 734-542-8004

L A N S I N G O F F I C E 124 West Allegan, Suite 1502 ? Lansing, MI 48933 ? 517-485-9444 ? Fax 517-485-0423

CITIZENS RESEARCH COUNCIL OF MICHIGAN

June 9, 2009

The Honorable Members Legislative Commission on Statutory Mandates

Commission Members: Pursuant to your request there is transmitted herewith the Citizens Research Council of Michigan report on reforming the legislative and judicial processes related to Article IX, Section 29, of the 1963 Michigan Constitution. The work of your Commission has illustrated that this section of the Headlee Amendment has been disregarded by all branches of state government in Michigan. CRC takes a strong interest in the proper functioning of our State Constitution and we hope that your work, as supported by this report, helps to achieve that end. As requested, CRC has looked at all aspects of the process and this report offers alternatives and options to reform the process. This report looks at practices in other states related to the funding of state mandates on local governments and existing literature that analyzes why these local government protections work better in some states than in others. We hope this report helps to fulfill your mission.

Respectfully Submitted

Earl M. Ryan President

BOARD OF DIRECTORS

Eugene A. Gargaro, Jr., Chair Masco Corporation

Jeffrey D. Bergeron, Vice Chair Ernst & Young LLP

Nick A. Khouri, Treasurer DTE Energy

Joseph R. Angileri Deloitte.

Beth Chappell Detroit Economic Club

Rick DiBartolomeo Rehmann

Terence M. Donnelly Dickinson Wright PLLC

Randall W. Eberts W. E. Upjohn Institute

David O. Egner Hudson-Webber Foundation

W. Frank Fountain Chrysler LLC

Ingrid A. Gregg Earhart Foundation

Marybeth S. Howe National City Bank of Michigan

Daniel T. Lis Kelly Services, Inc.

Aleksandra A. Miziolek Dykema Gossett PLLC

Paul R. Obermeyer Comerica Bank

Bryan Roosa General Motors Corporation

Lynda Rossi Blue Cross Blue Shield of Michigan

Jerry E. Rush ArvinMeritor, Inc.

Michael A. Semanco Hennessey Capital LLC

Terence A. Thomas, Sr. St. John Health

Amanda Van Dusen Miller, Canfield, Paddock and Stone PLC

Kent J. Vana Varnum, Riddering, Schmidt & Howlett LLP

Earl M. Ryan, President

Main Office

38777 West Six Mile Road Suite 208 Livonia, MI 48152-3974 734-542-8001 Fax 734-542-8004

L ansing O ffice 124 West Allegan Suite 620 Lansing, MI 48933-1738 517-485-9444 Fax 517-485-0423



REFORMING THE PROCESS FOR IDENTIFYING AND FUNDING SECTION 29 MANDATES ON LOCAL GOVERNMENTS

Contents

Introduction ..............................................................................................................................................................1 Article IX, Section 29, of the Michigan Constitution................................................................................. 2 Shortcomings in the Legislative Implementation ..................................................................................... 3

The Failure of Act 101 .................................................................................................................................................... 3 Definition of State Requirements .................................................................................................................... 3 Joint Rules ................................................................................................................................................................. 4 Fiscal Notes for Administrative Rules ............................................................................................................ 8 Local Government Claims Review Board ..................................................................................................... 8 The Fate of Act 101 ................................................................................................................................................. 9

Executive Branch ............................................................................................................................................................ 9 The Challenges Caused by Article IX, Section 32 ........................................................................................... 10

An Unwilling Court of Appeals ...................................................................................................................... 10 A "Prolonged Recalcitrance" ............................................................................................................................ 10 Other Section 29 Cases ..................................................................................................................................... 11 Alleged Mandates Enacted Since 1979 ........................................................................................................ 12 Local Governments ..................................................................................................................................................... 12 K-12 School and Community College Districts ............................................................................................... 13 Other States' Requirements to Fund Mandates ....................................................................................... 15 A Process for Identifying Laws that Constitute State Requirements ............................................... 19 Determining Whether Laws Constitute State Requirements .................................................................... 20 The Processes Used in Other States ............................................................................................................ 20 A Determination Process for Michigan ......................................................................................................... 21 Where Should Local Governments go for Declaratory Judgments? ..............................................22 Post Declaratory Judgment..............................................................................................................................27 Strengthen the Powers of Local Governments ............................................................................................... 29 Force a Process to Implement Section 29 ................................................................................................. 29 Optional Compliance when State Requirements Are Not Funded ................................................. 29 Options to Strengthen Local Governments ............................................................................................. 30 A Process for Appropriating and Disbursing State Funds ...................................................................... 31 Appropriating Funds for State Requirements .................................................................................................... 31 Disbursing Funds for State Requirements ...........................................................................................................32 De Minimus Costs ....................................................................................................................................................... 33 Options for Michigan.................................................................................................................................................. 33

Contents (continued)

A Process for Estimating the Cost of Proposed Laws ........................................................................... 35 Triggering Preparation of a Fiscal Note ............................................................................................................... 35 The Fiscal Note Content .......................................................................................................................................... 37 Sampling Local Governments ................................................................................................................................ 37 Options for Michigan.................................................................................................................................................. 39 Identifying Bills Subject to Fiscal Notes ..................................................................................................... 39 Sampling Local Governments ........................................................................................................................ 40

Conclusion............................................................................................................................................................. 42 Appendix A ............................................................................................................................................................ 47 Appendix B ............................................................................................................................................................. 49

Tables

Table 1: Attorney General Opinions Regarding Section 29, Article IX of the 1963 Michigan Constitution ............................................................................................................ 6

Table 2: States with Restrictions on State Mandates on Local Governments ........................................ 15

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