Bill Text: MI HB5353 | 2023-2024 | 102nd Legislature | Introduced
Bill Title: State management: other; state financing of activities or services required of local units of government; provide for. Implements sec. 29, art. IX of the state constitution & repeals 1979 PA 101 (MCL 21.231 - 21.244).
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced) 2023-12-31 - Bill Electronically Reproduced 11/14/2023 [HB5353 Detail]
Download: Michigan-2023-HB5353-Introduced.html
HOUSE BILL NO. 5353
the people of the state of michigan enact:
Sec. 1. (1) This act may be cited as the "Headlee unfunded mandates prohibition act".
(2) As used in this act, the words and phrases defined in sections 2 to 4 have the meanings ascribed to them in those sections.
Sec. 2. (1) "Activity" means a specific and identifiable administrative action of a local unit of government.
(2) "Consultation" means to seek information from a representative sample of local units of government affected by a state requirement in a manner that is reasonably expected to result in a fair estimate of the statewide cost of compliance with the state requirement.
(3) "Court requirement" means a new activity or service or an increase in the level of activity or service beyond that required by existing law that is required of a local unit of government to comply with a final state or federal court order arising from the interpretation of the Constitution of the United States, the state constitution of 1963, or a federal statute, rule, or regulation. Court requirement includes a state law whose enactment is required by a final state or federal court order.
(4) "De minimis cost" means a net cost to a local unit of government resulting from a state requirement that does not exceed $300.00 per claim.
(5) "Department" means the department of technology, management, and budget.
Sec. 3. (1) "Existing law" means a public or local act enacted before December 23, 1978, a rule promulgated or state agency regulation implemented before December 23, 1978, or a court order concerning a public or local act or rule described in this subsection. A rule initially promulgated after December 22, 1978 implementing for the first time an act or amendatory act in effect before December 23, 1978 is also considered as existing law except to the extent that the public or local act or administrative rule or state agency regulation being implemented for the first time imposes on a local unit of government a new activity or service or an increase in the level of an existing activity or service beyond that required by existing law.
(2) "Federal requirement" means a federal law, rule, regulation, executive order, guideline, standard, or other federal action that has the force and effect of law and that requires this state to take action or provide a service affecting a local unit of government.
(3) "Fiscal agencies" means the house fiscal agency or the senate fiscal agency as described in the legislative council act, 1986 PA 268, MCL 4.1101 to 4.1901.
(4) "Implied federal requirement" means a federal law, rule, regulation, executive order, guideline, standard, or other federal action that has the force and effect of law and that does not directly require this state to take action or provide a service affecting a local unit of government, but will, according to federal law, result in a loss of federal funds or federal tax credits if state action is not taken or service is not provided to comply with the federal law, rule, regulation, executive order, guideline, standard, or other federal action.
(5) "Legislature" means the house of representatives and the senate of this state.
(6) "Local unit of government" means a political subdivision of this state, including local school districts, community college districts, intermediate school districts, cities, villages, townships, counties, and authorities, if the political subdivision has as its primary purpose the providing of local governmental activities and services for residents in a geographically limited area of this state and has the power to act primarily on behalf of that area.
(7) "Necessary cost" means the cost of an activity or service provided by a local unit of government. The necessary cost is determined as follows:
(a) Unless subdivision (b) applies, necessary cost is the actual cost to this state if this state were to provide the activity or service mandated as a state requirement, unless otherwise determined by the legislature when making a state requirement.
(b) If a lack of experience by this state in providing the activity or service results in this state being incapable of providing a reliable cost estimate for actual cost determination purposes without resorting to unfounded cost speculation, necessary cost is the actual cost to a local unit of government to provide the activity or service mandated as a state requirement.
(c) This state shall determine whether the means of establishing necessary cost under subdivision (a) or (b) applies, and this state's determination is conclusive.
(d) Necessary cost does not include either of the following:
(i) The cost of a state requirement if it does not exceed a de minimis cost.
(ii) The cost of a state requirement if the state requirement will result in an offsetting savings to an extent that, if the duties of a local unit of government that existed before the effective date of the state requirement are considered, the requirement will not exceed the cost of the preexisting requirements.
(8) "New activity or service or increase in the level of an existing activity or service" does not include either of the following:
(a) A state law, or administrative rule promulgated or state agency regulation under existing law, that provides only clarifying nonsubstantive changes to an earlier, existing law or state law.
(b) The recodification of an existing law or state law, or administrative rules promulgated under a recodification, that does not require a new activity or service or does not require an increase in the level of an activity or service above the level required before the existing law or state law was recodified.
Sec. 4. (1) "Service" means a specific and identifiable program of a local unit of government that is available to the general public or is provided for the citizens of the local unit of government.
(2) "State agency" means a state department, bureau, division, section, board, commission, trustee, authority, or officer that is created by the state constitution of 1963, by statute, or by state agency action, and that has the authority to promulgate rules pursuant to the administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328. State agency does not include an agency in the judicial branch of state government, an agency having direct control over an institution of higher education, or the state civil service commission.
(3) "State financed proportion of the necessary cost of an existing activity or service required of local units of government by existing law" means the percentage of necessary costs specifically provided for an activity or service required of local units of government by existing law and partially or totally funded by this state on December 23, 1978.
(4) "State law" means a state statute, rule, or state agency regulation.
(5) "State requirement" means a state law that requires a new activity or service or increase in the level of an existing activity or service beyond that required of a local unit of government by an existing law. State requirement does not include any of the following:
(a) A requirement imposed on a local unit of government by a new amendment to the state constitution of 1963.
(b) A court requirement.
(c) A federal requirement.
(d) An implied federal requirement.
(e) A requirement of a state law that applies to a larger class of persons or corporations and does not apply principally or exclusively to a local unit or units of government.
(f) A requirement of a state law that does not require a local unit of government to perform an activity or service but allows a local unit of government to do so as an option, and by opting to perform that activity or service, the local unit of government must comply with certain minimum standards, requirements, or guidelines determined by state law.
(g) A requirement of a state law enacted under section 18 of article VI of the state constitution of 1963.
Sec. 5. (1) The legislature shall appropriate and disburse each year an amount sufficient to pay each local unit of government the necessary cost of each state requirement pursuant to section 29 of article IX of the state constitution of 1963.
(2) The legislature shall appropriate and disburse each year an amount sufficient to pay each local unit of government the state financed proportion of the necessary cost of an existing activity or service required of local units of government by existing law, and shall appropriate and disburse each year an amount sufficient to pay each local unit of government for the full costs of new activities or services or increases in the level of activities and services required by state law after December 23, 1978.
(3) Notwithstanding any provision of law to the contrary, a local unit of government is not obligated to provide a new activity or service or increase in the level of an existing activity or service required by state law after the effective date of this act unless a fiscal note has been prepared in accordance with this act, and this state has appropriated and provided for payment of the amounts sufficient based on the fiscal note analysis to fund the necessary cost to the local unit of government of providing the new activity or service or increase in the level of an existing activity or service. If legislation is enacted, a rule is promulgated, or a state agency regulation is imposed after the effective date of this act imposing a requirement on local units of government without following the fiscal note process described in this act, a local unit of government is not required to comply until that time that the fiscal note process described in this act is followed through completion.
Sec. 6. (1) A fiscal note process is created that consists of all of the following:
(a) Before legislation affecting a local unit of government is scheduled for third reading in the legislative chamber in which it was introduced, or a state agency adopts a rule or imposes a state agency regulation proposed to become a future requirement on a unit of government, the fiscal agencies shall conduct a review to determine whether any new or increased level of activities or services is likely to be required of a local unit of government by that legislation, rule, or state agency regulation if it becomes effective.
(b) If the fiscal agencies determine under subdivision (a) that a new activity or service or increase in the level of an existing activity or service is likely to occur, the fiscal agencies shall develop a written estimate of the increased necessary costs, if any, including both direct and indirect costs, that will result to local units of government if that legislation, rule, or state agency regulation becomes effective. In developing the written estimate of the increased necessary costs, the fiscal agencies shall work in consultation with representatives of local units of government affected by the proposed legislation, rule, or state agency regulation and shall report their findings to the speaker of the house, the majority leader of the senate, the chairpersons of the house and senate appropriations committees, and, if legislation, the sponsor of the legislation and the chairperson of the committee that reported the legislation or, if a rule or state agency regulation, the director of the state agency proposing the rule or state agency regulation. If the legislation is later modified by either house of the legislature or the rule or state agency regulation is later modified by the director of the state agency, the fiscal agencies shall, in consultation with representatives of local units of government affected by the proposed legislation, rule, or state agency regulation, modify their written estimate of increased necessary costs.
(c) In the case of legislation, the fiscal agencies shall promptly inform the legislature in writing of their determination under subdivision (a) before the legislation is scheduled for third reading.
(d) In the case of a rule or state agency regulation, the fiscal agencies shall promptly inform the director of the state agency proposing the rule or state agency regulation in writing of their determination under subdivision (a) before the rule or state agency regulation becomes effective.
(e) The disbursement process must pay or disburse funds to local units of government on a current basis or as costs to provide the required activity or service are being incurred by the local units of government.
(2) Not later than 1 year after the effective date of this act, the department of treasury shall develop a standard accounting system in a searchable format to assist the fiscal note process.
(3) Working from the cost data provided by local units of government using a standard accounting format, the department shall adjust the funding necessary to meet this state's funding responsibility under section 29 article IX of the state constitution of 1963 applied in accordance with this act for each subsequent fiscal year and issue a report to the legislature of the required funding for each year in sufficient time to allow for the adjustment of the annual appropriations by the legislature for this purpose. The amounts determined to be payable to local units of government under this act are not intended to be static but rather to be adjusted on an ongoing basis as continuously reported data warrants.
Sec. 7. This state shall not impose a penalty on, withhold funds, or impose any other form of monetary or other sanction on any local unit of government for failing to comply with a state requirement under any of the following circumstances:
(a) This state has failed to fully follow the fiscal note process provided in section 6 for that new activity or service or increase in the level of an existing activity or service or has failed to make timely payments or disbursement to local units of government to fund the costs identified in the fiscal note process provided in section 6 for that new activity or service or increase in the level of an existing activity or service.
(b) This state has prepared a fiscal note in connection with the enactment of the state law and 1 of the following applies for that new activity or service or increase in the level of an existing activity or service:
(i) A taxpayer or local unit of government has filed a suit as authorized under section 32 of article IX of the state constitution of 1963 through the filing of a complaint as provided under section 308a of the revised judicature act of 1961, 1961 PA 236, MCL 600.308a, asserting that the state law imposes a mandate under section 29 of article IX of the state constitution of 1963 and that the cost of compliance has not been fully funded by this state.
(ii) The court of appeals or other court having jurisdiction has either failed to issue an order within 6 months after the complaint was filed and served ruling whether the state law imposes a state requirement and whether this state has underfunded the cost of compliance or, alternatively, ruled in favor of the complainant.
Sec. 8. Funds received by a local unit of government under this act shall be separately accounted for by the local unit of government to reflect the specific state requirement for which the funds are appropriated.
Sec. 9. (1) This act does not prohibit the legislature from enacting state laws to provide for other forms of dedicated state aid, cost-sharing agreements, or specific methods of making disbursements to a local unit of government for a cost incurred pursuant to state laws to which this act applies.
(2) This act may not be applied retroactively.
