Proposition 42 and the Death of Mandated Cost Reimbursement

In 1979, California voters added section 6 to Article 13B of the State Constitution, which specifies that if the state imposes any “new program or higher level of service” on any local government (including a school district), the state must reimburse the locality for the costs of the program or increased level of service. (Clovis Unified School District v. Chiang (2010) 188 Cal.App.4th 794, 798-799.) This enactment led to decades of reimbursable “mandated costs” — any increased costs a local agency must incur as a result of compliance with a statute that mandates a new program or higher level of service of an existing program. (Government Code § 17514.) Beginning in 2012, with the passage of Proposition 30, the State no longer had to reimburse local governments for costs associated with compliance with the Ralph M. Brown Act. Under Proposition 42, approved by voters in June 2014, the State is no longer required to reimburse local governments for the costs of fulfilling requests under the California Public Records Act.

Proposition 42 amends the State Constitution in two ways. It nominally requires all local governments and agencies to comply with the Public Records Act and the Brown Act and with any subsequent changes to these laws. However, compliance with the PRA and Brown Act has always been mandatory; Proposition 42 imposes no new requirements on local agencies under either law, despite their enshrinement in Article 1, section 3 of the State Constitution. Second, Proposition 42 amends Article 13B, section 6, to include compliance with the PRA and the Brown Act in the mandates subject to permissive funding by the State. Thus, the Legislature may, but need not, provide a subvention of funds to reimburse local agencies for compliance with the PRA and the Brown Act.

The Legislative Analyst predicted passage of Proposition 42 would result in reduced state payments to local governments in the tens of millions of dollars annually, and concomitant increased local government costs. We anticipate this same result, which means Proposition 42 merely shifts these costs to local agencies such as cities, counties, school districts, and community college districts.

Local agencies’ efforts to collect mandated costs have met with mixed results. In California School Boards Association v. Brown (2011) 192 Cal.App.4th 770, multiple school districts represented by CSBA unsuccessfully sued the State for reimbursement of various mandated costs resulting from compliance with laws. The lawsuit alleged the State engaged in a routine practice of appropriating $1,000 for each mandate imposed on the districts, rather than appropriating the full amount of the program costs as required under the California Constitution. The districts sought, among other forms of relief, an order requiring the State to reimburse them for more than $900 million in costs incurred complying with prior mandates. The court concluded the State’s payment of a nominal amount for mandates imposed on local school districts, with an intention to pay the remaining cost at an unspecified time, did not comply with Article 13B, section 6. According to the court:

This practice violates the language and intent of the constitutional and statutory provisions. By attempting to pay for the new programs with a “credit card” with no fixed date for full payment, the State is shifting the actual costs of these mandates to the local school districts. The fact that the State takes the position (without any specific legislation to this effect) that it intends to pay the full cost with interest does not eliminate the cost burden. Unless it is excused from implementing the program, each school district will have a current cost for the program or increased level of service. Under article XIIIB, section 6, if the State wants to require the local school districts to provide new programs or services, it is free to do so, but not by requiring the local entities to use their own revenues to pay for the programs. (192 Cal.App.4th at p. 787.)

Handing the districts a hollow victory, the court nevertheless held the constitutional separation of powers doctrine prohibited it from compelling the Legislature “to appropriate funds or to pay funds not yet appropriated.” Thus, the districts’ legal arguments prevailed but the ruling left them unable to collect any State reimbursement.

Proposition 42 relieves the State from any obligation to reimburse local agencies for mandated costs they incur by complying with the PRA and the Brown Act. However, Proposition 42 does not impose on local agencies any new requirements under the PRA or the Brown Act.

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