Whose Mandate Is It? and Who Pays for It? Recent Developments in State-local Government Funding Disputes

• Jurisdiction: California,United States
• Author: By Gary Hook
• Publication year: 2017
• Citation: Vol. 40 No. 2

Whose Mandate Is It? And Who Pays for It? Recent Developments in State-Local Government Funding Disputes

By Gary Hook

MCLE SELF-STUDY ARTICLE

(Check end of this article for information on how to access 1.0 self-study credit.)

INTRODUCTION

Article XIII B of the California Constitution, adopted by the voters through Proposition 4 in 1979, sets limits on state and local government spending derived from the proceeds of taxes. To prevent the state from getting around its spending limits by shifting fiscal burdens to local government, section 6(a) of Article XIII B provides that if the state legislature mandates a new program or higher level of service on a local government, then the state must provide a subvention of funds to the local government to compensate it for the associated costs. However, California Government Code section 17556 ("Section 17556") contains important exceptions to these rules for state reimbursement claims.¹ These procedures entail submission of local agency claims to the quasi-judicial Commission on State Mandates ("Commission"), with review of Commission decisions in state courts through writ of mandamus.

Two recent cases shed further light on the exceptions to state reimbursement in Section 17556. In Department of Finance v. Commission on State Mandates,² the California Supreme Court addressed the rule in subsection (c), which provides that state reimbursement is not required in the case of federal law mandates. In County of San Diego v. Commission on State Mandates,³ the Fourth District Court of Appeal addressed the rule in subsection (f) that state reimbursement is not required where a voter-approved ballot initiative is the source of the required local government program or service. Both cases reveal a tendency of the courts to be wary of state efforts to hide behind Section 17556 to avoid local government subvention obligations. But both cases also illustrate how difficult it can be to unravel public programs to determine where the source of a mandate really lies.

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I. FEDERAL MANDATES AND LOS ANGELES COUNTY WATER PERMITS

California has a long history of being in the vanguard of significant legislative programs in advance of federal programs, and this is no more evident than in the environmental law arena. In 1969, the California legislature adopted the Porter-Cologne Water Quality Control Act,⁴ which established the State Water Resources Control Board and regional water boards, along with a comprehensive program for controlling water quality through a system of discharge permits. The federal Clean Water Act (CWA),⁵ the main federal environmental statute dealing with water quality, came into being three years later in 1972.

The CWA authorizes the federal Environmental Protection Agency (EPA) to issue permits for the discharge of pollutants. But the CWA also allows a state to issue its own permits if it is so authorized by the EPA. California was the first state authorized to issue its own permits.

In 2001, Los Angeles County, acting on behalf of 84 southern California cities and its own County Flood Control District, applied for and obtained permits from the Regional Board to operate storm drainage systems. The permits included four specific requirements relevant to the state subvention issue. The permits required the local agencies to:

• Conduct inspections of commercial and industrial facilities at least twice during the five-year permit terms.
• Implement programs to control run-off from construction sites.
• Inspect each construction site of one acre or greater at least once during each wet season.
• Install trash receptacles at all transit stops.

Los Angeles County and the other local agencies thereafter filed claims with the Commission asserting that the costs of the permit requirements were state-mandated new programs or higher levels of service for which state subvention was required.

A. Lower Level Proceedings

The Department of Finance and the State and Regional Boards advanced slightly different arguments before the Commission and lower courts. The Department of Finance argued that the EPA had delegated its federal permitting authority to the Regional Board, and that the Regional Board acted as an administrator of the EPA in ensuring compliance with the CWA. The State and Regional Boards took a slightly different tack, asserting that the CWA required the Regional Board to impose the permit conditions at issue, as part of the federal mandate included in the CWA.⁶

The local agencies' key argument was that none of the permit conditions were required by the CWA. Because there was nothing in the CWA itself or the associated EPA regulations that required the inspections or the trash receptacles described in the permits, none of those requirements could be considered mandated by federal law.⁷

The Commission ruled that the local agencies were entitled to state reimbursement of the costs of the trash receptacles. However, the Commission also ruled that the local agencies were not entitled to state reimbursement for the costs of the inspections because the local agencies were allowed to levy fees to cover the costs of those inspections. Under one important exception in Section 17556(d), state reimbursement is not required if the local agency has the authority to levy service charges, fees or assessments sufficient to cover the costs of the mandated program or service. Although the Commission found the permit requirements to be state-mandated, it concluded that Section 17556(d) excluded state...